A small non-pbgc plan terminates December 31, 2010 with benefits that are slightly less than the value of assets. The plan was to allocate plan assets per ERISA 4044. They are now ready to distribute but have had an unexpected major increase in the value of plan assets within the past month and now have excess assets of about $30,000.

They would like to allocate excess assets in a non-discriminatory manner rather than pay the 50% excise tax. However, it is now after the plan termination date. Is it possible to have them adopt an amendment allocating excess after the termination date? We will be applying for a determination letter soon but don't want to wait to distribute benefits.

Back about 10 years ago we had a similar scenario and the IRS let the plan sponsor adopt an amendment allocating the excess.

Anyone have any experience with this?

Thanks.

OK so small client had one tiny $500 distribution that they were supposed to send $400 to part and $100 to feds. They were just going to send $100 with 945 on the under $2,500 exemption. Staff person (now gone, isn't that always the case?) accidentially sent full $500 to part.

Is the correct thing to do still send in the $100 with the 945, show the withholding on the 1099-R and request the $100 pack from the part? That seems like the way to do it but wanted to know if anyone else has run into this before.

Client currenlty provide $2000 medical reimbursement (not FSA) and pays all of individual coverage and 1/2 of family coverage. It also has a premium only cafeteria plan. However, HCEs are not allowed to defer the full non-employer cost of health insurance because of testing issues. Also, it cannot offer a dependent care FSA due to testing issues. I would like to utilize the new simple cafeteria plan to allow HCEs to contribute the entire non-employer cost of health insurance and offer dependent care FSA. My thought is to eliminate the medical reimbursement, add a health FSA and dependent care FSA, and contribute $2200 to the plan. The $2200 is 2% of $110,000 (the HCE comp number). Therefore, we guaranty that all NHCEs get at least a 2% contribution. Client does not want to contribute 2% for everyone becuase the HCEs would get too much and the NHCEs would be losing benefits (they have $2000 medical reimbursement now and 2% would be less than this amount). However, §125(j)(3) says it has to be "a uniform percentage (not less than 2 percent) of the employee's compensation."

It seems to me that my plan should work because client would be giving NHCEs more than what is required and HCEs less than what is required. However, it does not work according to the language of the code.

Any suggestions or ideas?

Because I was almost caught off guard, I thought someone else out there might appreciate a reminder that if any of your clients elected funding relief for plan years ending in 2009 or 2010 you need to have their formal elections in hand, and the PBGC notified on or before 1/31/2011. This includes 2010 EOY vals that you may not even have data for - gotta love the IRS.

What is the timing requirement to amend the definition of allocation compensation in a defined contribution plan.

The plan document uses 415 compensation, however, operationally excluded auto allowance and health club reimbursement (taxable fringe benefits?)

Anyone remember how to create an import map in Relius 1099-R?

These once-a-year tasks are hard to remember, and I can't make sense of the user guide.

Besides the plan document is there another source that lists out what a 401K / Profit Sharing Plan is allowed to invest in? I've been asked a lot lately about participants being able to invest in everything from gold to buying a farm inside a 401K plan. The plan document does not seem to be very specific in identifying what types of investments are permissable. I know the annual valuation requirement can cause some problems for some types of investments but is there anything published by the IRS or DOL that discusses what types of investments are generally allowed/disallowed in a 401K plan?

Thanks!!

An over-funded not-for-profit plan will undergo a spinoff-termination to capture excess plan assets. The sponsor understands that only so much of the assets must be legally transferred to the spunoff plan (for actives). Suppose the sponsor wants to study transferring more than the minimum requirement. Since transferring more than minimum requirement can be construed as benefiting the participants, is it justifiable for the cost of this study to be paid by the plan rather than the plan sponsor?

A 501©(3) entity maintains a defined benefit plan. For purposes of determining whether "compensation" is an "excess benefit transaction" (i.e. has appropriate "comparability), vested retirement benefits are included for a defined benefit plan. Is the benefit included in "compensation" at retirement or is it determined based on the present value of the accrued benefit? Is it based on a straight life annuity (the normal form) or a lump sum? How can an older participant fund for maximum benefits without violating the private inurement rules?older

Participant terminated last month and has submitted his paperwork for distribution. The plan is daily valued with Nationwide, and we release the distributions online.

this guy has Roth deferrals and safe harbor non-elective. He is requesting that both be rolled into a Roth IRA. Tag has told me that this can be done, so I just went on Nationwide's site and processed the Roth portion of the distribution. Here are my questions:

The distribution is automatically coming up with a code of BG. Is that because the Roth has only been in there since 2008?

What code should the SHNEC portion of the distribution be? There are so many darn codes now...He'll need to pay some kind of taxes on that money at some point, probably sooner rather than later. Can you tell this is my first Roth distribution?

The 10 percent penalty tax/age 59 1/2 rule does not apply to withdrawals made from a pre-tax 457(b) Plan. Does the rule apply to a Roth 457(b) account?

I am testing a Controlled Group that consists of two employers: one contains about 50% HCE's and 50% NHCE's and provides a FAP formula under a DB plan of 1.6% of pay. The other group is mostly NHCE (about 90%) and just recently froze their DB plan and replaced with a 3% profit sharing contribution. The group that is 90% NHCE has about 10,000 employees, while the group with the DB plan has roughly 3,000 employees.

Is there any way for a structure like this to satisfy the DB/DC gateway? Several of the older HCE's in the DB plan have allocation rates greater than 9%, meaning the 1/3 rule won't work. And the primarily DB in character won't work either since the majority of the NHCE's in the CG only receive a PS contribution. Can I use Accrued-to-Date Testing to satisfy the Gateway (i.e. use the frozen DB benefit for the 10,000 ee group that is mostly NHCE's to generate an equivalent allocation rate)?

Any help anyone can think of?

After the plan year end it was determined a partial plan termination had occurred. Some of the affected participants had been paid out during the plan year. I am assuming when the forfeitures are restored no earnings adjustment needs to be calculated correct?

Any thoughts would be appreciated.

Employer enters into a "Deferred Compensation Agreement" with employee, whereby after employee ceases working for the employer, employee will receive 15% of any collections received from any business the employer does with clients the employee brought to the company. The arrangement lasts for 61 months after the employee ceases working for the employer. Payments are made by the 15th day of the month following the calculation of the billings for that month. For example, Employee ceases employment in December, in January Employer bills and collects $1000 for work done on clients brought in by former employee while he was employed, by Feb 15 of the same year Employer would pay former employee $150. This arrangement would continue for another 60 months. I don't believe that this arrangement is subject to 409A because of the short term deferral exception, the amount being paid out within 1 month of when the right to the compensation arises. Please give me your thoughts. Greatly appreciated!

IRC 6045 "Returns of Brokers" imposes certain information reporting requirements upon "brokers" who are defined by the statute to be:

The term "broker" includes--

(A) a dealer,

(B) a barter exchange, and

© any other person who (for a consideration) regularly acts as a middleman with respect to property or services.

But the regulations, Treas. Reg 1.6045-1(a) include in the definition of broker the statement that "A broker includes ..... or a corporation that regularly redeems its own stock."

Beyond this, there is very little guidance from the IRS or otherwise as to what constitutes "regularly" - particularly in the context of private companies that offer liquidity via redemption/put right - either in the context of mandatory ESOP stock redemptions, or redemption of stock acquired by emplyees via options or purchase. Are 1-3 redemptions a year "regularly" - what about annual redemptions based upon the annual ESOP valuation? What is more relevant - the number of times redemption is available? the number of shareholders redeemed on each occasion? or simply is an annual "redemption/put" opportunity sufficient to constitute "regularly?"

I'd be interested in the view taken by others..particularly in light of the dramatically increased penalties for failure to file. (which can now be into 6 or 7 figures)

Further, if, as in many cases for smaller private companies outside the ESOP context, the redemption is not for cash but rather via a note that is payable over a period of time (usually with interest at the AFR).

In my view, this does not seem to be the type transaction envisioned by the term "broker," but in light of the increased penalties, reporting seems to be the prudent course of action (although that then raises the question of whether or not you report the full purchase price when the note is delivered, or report as and when principal payments are made (interest obviously has always been a reported item).

If an employer (ABC Co.) pays into the union pension fund (Local 123) for an employee, is that person an active participant for purposes of the ABC Co. W-2??? From a theoretical standpoint, I would think "yes" because how else will that employee know his IRA contributions should be subject to deduction limitations, but from a technical standpoint, he is not an active participant in the ABC Co.'s retirement plan.

due to an acquisition, the plan sponsor of a safe-harbor 401(k) plan aquired a non-safe harbor 401(k) plan. Both plans are calendar year plans. The sponsor did not freeze benefits in the non-safe harbor plan prior to beginning of plan year. If they freeze the non safe harbor plan mid-year and merge with the SH plan, does the SH plan lose the SH treatment and have to be tested?

I was wondering if anyone can cite to an article that summarizes the process for a leveraged ESOP in bankruptcy, or if someone can provide a general summary of the process.

What is the correction for not timely processing a distribution from a NQ deferred compensation plan?

The election form stated distribution to be processed January 31, 2010. Distribution was not processed.

Can the 414(s) definition exclude pre-eligibility compensation for purposes of applying the ADP and other nondiscrimination tests?