I am researching how to a manual calculation for an Integration with Social Security allocation.

Does anyone have a good example that they could show me?

Can a majority owner who is in pay status "forego" benefits in connection with a defined benefit plan termination?

Several of my clients have received IRS notices stating that they did not file a 2008 Form 945. For all of these clients, no Form 945 was required for 2008 because no tax with withheld from any distributions. Just wondering if others are having this same problem with the notices.

I am hoping that a poster could clarify a few questions I have regarding ADP/ACP Testing for a plan that terminates during their plan year.

First - my understanding is that a plan termination does not end the plan year unless there are specifics in an amendment/board resolution that states "the final plan year will end...". In the absence of such language, the test would be completed with the compensation for the entire plan year.

So, for example, if a calendar year plan terminates effective 9/30 however the company remains in business through the end of the year the compensation used for testing would be the comp for the entire plan year unless an amendment is adopting changing the plan year end. Is this logic sound?

Also, when does the clock start clicking to have corrective distributions removed from the plan if there is an ADP/ACP failure? Per Sal...

Treas. Reg. §1.401(k)-2(b)(v), which states that when a plan terminates, corrective distributions to pass the ADP test must be completed as soon as administratively feasible after the date of termination, but in no event later than 12 months following the date of termination of the plan. The same rule is stated in Treas. Reg. §1.401(m)-2(b)(2)(v) for corrective distributions to pass the ACP test. This lends some support to the idea that the plan year "ends" with the date of termination for testing purposes.

So, if a calendar year plan terminates 9/30 the clock starts 9/30 no 12/31. However, the last sentence seems to contradict my understanding that terminating the plan prior to the plan year end does not automatically change the plan year end to the termination date.

Any clarification on this would be greatly appreciated.

We were thinking of taking administration fees of around $18 a quarter from the accounts of terminated participants, and the ER will pay for the active accounts.

This seems permissible when the fees are taking pro rata, but these are per capita fees. And Rev Rul 2004-10 says it may be acceptable if the fees are taken "on another reasonable basis that complies with...Title I of ERISA."

Do you think this would be a reasonable basis? Would it impose a "significant detriment" on a participant?

We were planning on cashing out the accounts under $1,000. Only for the account over $1,000 were we planning on taking this fee.

Also, there are three accounts whose owners we cannot locate, and have gone through the lost participant procedure; due diligence was done.

One account is around $80, another $700 and a third around $4,500. Should we (or the ER) take the time and expense to open IRA's for these people?

what's the story with the irs now sending out letters to clients that filed extensions timely, filed their returns through efast with confirmations of receipt and being told their returns were received late?

why is it we are constantly responding to erroneous gov. correspondence that takes more time to prove we were meeting all of their "rules"?

I thought this new system would eliminate all of this?

Would we be willing to move funds from our forfeiture account into the ERISA account? My interpretation is no, they must stay in the account and be used in the year immediately following the forfeiture. Also, am I correct in assuming that these funds can ONLY be used to pay plan expenses or new employer contributions if and only if it is specified in the plan document?

I took over a 1 man DB plan established in 2005, so it was not amended for PPA, 415 etc. and owner wants to terminate the plan before 12/31/2010. I read here I need to do VCP, how do I do the amendments, what amendments any model language?

Is VCP going to be in time for plan termination before end of 2010?

Thanks in advance.

I have a client. 25 total employees, no retirement plan in place. 3 owners and 1 other employee meet the eligibility requirements for a SEP in 2010. The owners are in their 50's and the other is 27. I would like to skew the SEP contributions to the owners using an age weighted formula but cannot find anyone that provides a document.

Can anyone help?

Stupid question, I assume, but I'll ask anyway (because I thought I knew the answer, but I'm now not so sure).

Is the $50,000 maximum a per plan limit, or a per participant limit?

Examples:

• Can an individual borrow the $50,000 maximuim from each of 2 different plans of an employer (i.e,., psp & mppp), without considering the amount borrowed form the other plan (assuming the account balalnces support that much)?
  
• What if one plan of the employer is a PSP and the other is another PSP?
  
• What if the plans are from 2 different employers?
  

The letter says that they are already enrolled in EFTPS (the clients call and ask why I have done this to them) and explain how to deposit their taxes electronically. Some of my less computer literate clients - already traumatized by electronic 5500 requirements want to continue to use their coupon books and make their one deposit (or two) per year in that manner. One of my clients called for a new 8109 coupon book (they ran out) and was told they would not need it because they would have to deposit electronically next year.

Are all deposits required to be electronically deposited by 2011? I hadn't heard anything about this. Perhaps the IRS is trying to encourage electronic filing ...but I wish they would warn us. Clients are calling left right and center.

Anyone else having this experience? Thanks

Question on a scenario where under recent proposed regs client wants to use an Index rate for the interest crediting on a cash-balance hypothetical accounts.

If you choose to use one of the equity based index rates (e.g., S&P 500 index) for your interest credit on the hypothetical accounts, and it has a negative rate of return for a year or more, then for funding I assume it's an actuarial assumption as to whate future interest credit to assume to project to NRA for funding purposes. I'm still working my way through those final and proposed regs but if it's just an actuarial assumption issue then I suspect there isn't any guidance.

Any opinion on what one might consider using to make sure the actuarial assumption is reasonable on say an S&P 500 index crediting rate (e.g., S&P 500 returns over past 5 years ? 10 years ? somthing else) ? Just trying to think through the process and what benchmarks one might use for reasonable assumptions.

Short First Year Safe Harbor, pro-rate compensation limit?

We are calculating true-ups from 11/1 - 2/28 (pye), using just the compensation for this period. Two of the owners will be over $245k during this period. Is it ok to use their actual comp, limited to $245 for the 11/1 - 2/28 period, or should the $245,000 be pro-rated?

Does anyone think that HSAs are excluded from the change under PPACA that allows tax-favored treatment of payments realted to "children" up through the year the child turns 27? The law changes section 105(b) and other Code sections, but not Section 223. Section 223(d)(2) has its own description of "qualified medical expenses" of the indidividual, spouse and "dependents".. Has anyone run across this?

A potential client has come to us to look into a DB plan for her in 2010. She is self employed (and only employee) but has funded a SEP in 2010. Plan not covered by PBGC.

Assuming that the contribution is more than 6% of net earned income then it looks like she cannot set up a DB plan for 2010. Can the SEP and DB plan co-exist? If the DB plan is set up in 2011 does the SEP have to be terminated and paid out in 2010?

Plan allows for deferral election changes as of the first of any quarter. The safe harbor notice we just sent for next year (2011) states that deferral elections may be made quarterly. However, it also states "In addition to any other elction periods provided above, you may make or modify a salary deferral election during the 30-day period immediately preceding the Plan Year for which this notice is being provided."

Employee wants to increase their 2010 deferral election now after the 10/1 date has passed. Does the "in addition" clause above apply to only the 2010 as well as the 2011 deferral election?

Legally seperated 6/29/91, divorce final 2/26/93 in California. The ex waited till 2000 to file her first QDRO attempt. Was rejected 2-3 times and then she let it slide till this year. She was rejected 4-5 times more till this last one. The QDRO that was "Preapproved" by Hewitt shows the date to be used for the account balance to be split is 1/1/2002! The QDRO is in the divorce papers which state a 50/50 split of the account balance as of the date of seperation 6/29/91.

1) Is this legal?

Now for the sticky parts.... I hired in to GTE in 1980, they handled the "Savings and Investment Plan (401K) in house. In 1993 they turned the plan over to Hewitt to manage. In 2000 Bell Atlantic bought GTE (they termed it a "merger") and thus Verizon was born. Not sure of the date when the plan was moved to Fidelity but believe it was 2000. I have called the Verizon Benefit Center, Hewitt, and Fidelity. I have been told by one or another that "... only have records back to 2002", "... only have records back to 2000", "... we have records back to 1993 but they are stored on microfiche or tape at a data warehouse". I requested a search for the records, I was told by the rep I would either receive a call back if nothing was found or the records in the mail. Have received nada, when I called back several weeks later they showed the items had been closed with nothing found. They also told me they are only required to keep records for seven years. The difference between the amount in my account as of 1991 and 2002 is tens of thousands of dollars. I will be seeking legal counsel tomorrow.

2)Is there a way to force a though search for the records? Maybe a subpoena? or....

Reading elsewhere in regards to this it was mentioned they should/could have quarterly balence info, I hope.

I am really perplexed as to why when a legal claim or motion is filed against an account (though not accepted at the time, granted), that it would not automaticly trigger a retention of account data perminately. In fact sense the law states (as I read/understand it) there is no statute of limitation when a QDRO can be filed, it does not make sense they only have to save seven years of past info. Heck, my ex or any forward thinking ex could wait and file when the results would benefit them the most! This can't be right. Any help, suggestions, ideas would be much appreciated. Been looking for days for any laws that pertain to the dates that are supposed to be used in a QDRO, can someone point me in the right direction? Thank you in advance for your time and response, Dan

Treas. Reg. § 1.401(k)-3©(6)(iii) requires that each NHCE in a safe harbor plan be allowed to defer at least the amount required to receive the maximum amount of matching contributions available under the plan. How does this rule apply where the definition of compensation from which deferrals are drawn is less broad than a definition of “Safe Harbor Compensation” that includes post-severance amounts?

Specifically, if a plan defines deferral compensation to exclude all post-severance amounts, but defines “Safe Harbor Compensation” to include all post-severance “regular” compensation, is the above-described requirement potentially violated? For example, assume a participant terminates on January 5, having received a $2,000 paycheck while still actively employed. He receives a post-severance paycheck on January 15 of $60,000 (as a "regular" bonus payment). The plan matches all deferrals up to 4% of Safe Harbor Compensation, and determines matches on a plan year basis (not a payroll-by-payroll basis). If he defers the full $2,000 he received on January 5, that is still less than 4% x $2,000 + $60,000 (i.e., is still less than 4% of Safe Harbor Compensation). Does this shortfall lead to a violation of Treas. Reg. § 1.401(k)-3©(6)(iii)?

Conversely, is the rule violated if a plan recognizes pre-participation compensation as Safe Harbor Compensation, in the case of a participant who first meets the eligibility requirements and begins participating very late in the plan year (i.e., because he cannot at that point defer 4% of the Safe Harbor Compensation/full plan year compensation).

I would have thought - - - in both cases - - - that there is no violation, since it can't be that the 401(k)(12) rules dictate the eligibility period for making deferrals.

Thanks.

I have questions about how the Section 415 limits affect the funding and testing of CB plans.

Let's say that the first year's contribution for a participant is $150k, and that this is less than the current max permissible lump sum benefit under Section 415. Further assume that the plan's NRA is 65, and that this is also used as the Testing Age.

For testing purposes, we take the $150k contribution, project to NRA using the current int crediting rate, and convert to an equivalent annual benefit. Let's say that this result comes to $20,000. Since this exceeds the 415 dollar limit after 1 YOP (i.e. $195k x 1/10 = $19,500), do we use $19,500 or $20,000 for running the general test?

How about the impact on funding? Here, we project the $150k contribution to ARA using a "reasonable" interest rate, and then discount back to PV using the funding segment rates. After we project to ARA, do we limit that result to the 415 max permissible lump sum at ARA, before discounting back at segment rates?

TIA.

.. Scott

I have a Plan that would like to add the ability for Participants that are out on an eligible LOA, with no or reduced rate of pay to obtain a new loan and be able to suspend the loan payments while on leave.

It is unclear to me when the loan suspension period begin when a participant is on a eligible LOA. Does the 12 month suspension period begin with the first day of the eligible leave or the first day of the loan payment due date?

All the examples I find in the regs. show the suspension applied to participant loans that were already in existence prior to leave. I cannot find any examples of a loan being initiated while the participant is on a LOA.

I appreciate any guidance you can give.