Got a client with some concerns about the plan administrator and/or the adjudicator of claims being the same person who also does the hiring and firing. The first thing that comes to mind of course is an abuse of power where an ee is not hired or loses employment because they would cost the company a lot of money because of health issues or concerns about job performance etc.

Any regulations, laws, guidelines, advice on this issue?

Edit: Just saw this thread which helps, but any further commentary on this issue would be appreciated.

It was discovered that the participant counts on a fairly recent Form 5500 for a small employer are incorrect. The numbers are significantly off (37%), but this doesn't change their status as a small employer. What's the realistic harm in letting this go and not amending the inaccurate filing?

ERISA 101(j) says the Notice shall be provided within 30 days. I don't believe there is a corresponding section in the Code.

If the AFTAP letter was issued 9/30/10, 30 days brings us to 10/30/10 - a Saturday. Does this get extended to 11/2/10 - a Monday?

Is it acceptable to use Line 4 f of schedule K-1 for calculating a partner's comp? Line 4 is 132,400.00 Line 14 C is $486,159.00. Accountant is saying that the only earned income was the Guaranteed payments listed in Line 4 and that the rest of the income reported in Line 14 C was from royalites.

Earlier in this 2010 calendar year, an individual was making contributions to a Roth IRA. The Employer has just established a 401(k) Plan that includes both Traditional and Roth Deferrals. Can the person now contribute under the new 401(k) given the contributions made to the Roth IRA?

Here's the situation...employer adopts a prototype plan for its GUST restatement. The prototype sponsor adopts all required interim amendments (through 401(a)(31)(B) on behalf of adopting employers in a timely manner. In spring of 2005, employer changes providers and adopts the new provider's prototype document. However, the provisions of the plan do not fit on the new providers prototype so it is amended and considered individually designed.

The employer did not adopt any interim amendments from 2005 through the present. Can this employer who amended out of prototype status nevertheless rely on the interim amendments adopted at the sponsor level post 2005?

Or, is a streamlined VCP required to cover the interim amendments post 2005?

Comments are appreciated.

Recently a 401(k) plan terminated and all of the assets were liquidated. Recently two pooled brokerage accounts were discovered total balance approx. $11,000. The accounts are titled Money Purchase plan. The Money Purchase plan was merged into the 401(k) years ago. The last year we can find the Money Purchase plan having assets is 1999. It is undetermined what year these assets stopped being accounted for in the annual valuation process. Unsure if it was when the Money Purchase plan existed or after the plans were merged.

Our thought is that these accounts should be allocated as earnings pro rata according to account balance. The question is do we allocate to the people who had an account in the Money Purchase plan in 1999 or do we allocate based upon the 401(k) plan participants balance on the day the plan terminated.

Any regs or guidance you can point me to would be great.

Plan just submitted required information for yearend Compliance testing for PYE 12/31/08. Plan failed ADP testing and 1 refunded is required. Plan uses Prior Year testing. Due to lateness of the testing, What is the proper correction method:

1. Refund w/Excise Tax

2. Refund W/Excise Tax & QNEC

3. Just a QNEC

Any guidance and/or IRC refererence would be greatly appreciated as the CPA & I disagree.

Thanks!

Does anyone know where I can find the unrounded compensation limit, DB dollar limit, etc. for 2010 and 2011?

I know that someone posted a link a couple of years ago but I cannot find it.

Bundled service provider who has physical control of the assets. After multiple contacts over 18 or more months has a handful of clients who have ignored all attempts to get their documents restated. After more contacts explaining the need for VCP filing, service provider resigns from the cases and instructs clients to provide direction about where to move the plan assets. Notice requirements of the written service agreement were met before this resignation. No instruction about moving assets has been provided.

Distribution requests from individual participants are now beginning to show up. What sort of liability issues might the service provider expect if 1) the requests are honored after resigning from the case or 2) valid requests are NOT honored because of the resignation?

I do not think you can do this, but can an employer offer one safe harbor match to one group of employees and then a different safe harbor to another group? It seems that Treas. Reg. 1.401(k)-1(b)(4)(iii)(B) would not allow this. Assume no separate lines or control group issues.

Consider a sponsor with two plans, hourly and salaried. The plans provide for a transfer of assets and liabilities if a participant transfers from hourly to salaried or vice versa.

Is a 5310-A required?

IRS Announces Pension Plan Limitations for 2011

IR-2010-108, Oct. 28, 2010

WASHINGTON -- The Internal Revenue Service today announced cost-of-living adjustments affecting dollar limitations for pension plans and other retirement-related items for Tax Year 2011. In general, these limits will either remain unchanged, or the inflation adjustments for 2011 will be small. Highlights include:

The elective deferral (contribution) limit for employees who participate in section 401(k), 403(b), or 457(b) plans, and the federal government's Thrift Savings Plan remains unchanged at $16,500.

The catch-up contribution limit under those plans for those aged 50 and over remains unchanged at $5,500.

The deduction for taxpayers making contributions to a traditional IRA is phased out for singles and heads of household who are active participants in an employer-sponsored retirement plan and have modified adjusted gross incomes (AGI) between $56,000 and $66,000, unchanged from 2010. For married couples filing jointly, in which the spouse who makes the IRA contribution is an active participant in an employer-sponsored retirement plan, the income phase-out range is $90,000 to $110,000, up from $89,000 to $109,000. For an IRA contributor who is not an active participant in an employer-sponsored retirement plan and is married to someone who is an active participant, the deduction is phased out if the couple's income is between $169,000 and 179,000, up from $167,000 and $177,000.

The AGI phase-out range for taxpayers making contributions to a Roth IRA is $169,000 to 179,000 for married couples filing jointly, up from $167,000 to $177,000 in 2010. For singles and heads of household, the income phase-out range is $107,000 to $122,000, up from $105,000 to $120,000. For a married individual filing a separate return who is an active participant in an employer-sponsored retirement plan, the phase-out range remains $0 to $10,000.

The AGI limit for the saver's credit (also known as the retirement savings contributions credit) for low-and moderate-income workers is $56,500 for married couples filing jointly, up from $55,500 in 2010; $42,375 for heads of household, up from $41,625; and $28,250 for married individuals filing separately and for singles, up from $27,750.

Below are details on both the unchanged and adjusted limitations.

Section 415 of the Internal Revenue Code provides for dollar limitations on benefits and contributions under qualified retirement plans. Section 415(d) requires that the Commissioner annually adjust these limits for cost-of-living increases. Other limitations applicable to deferred compensation plans are also affected by these adjustments under Section 415. Under Section 415(d), the adjustments are to be made pursuant to adjustment procedures which are similar to those used to adjust benefit amounts under Section 215(i)(2)(A) of the Social Security Act.

The limitations that are adjusted by reference to Section 415(d) generally will remain unchanged for 2011. This is because the cost-of-living index for the quarter ended September 30, 2010, while greater than the cost-of-living index for the quarter ended September 30, 2009, is less than the cost-of-living index for the quarter ended September 30, 2008, and, following the procedures under the Social Security Act for adjusting benefit amounts, any decline in the applicable index cannot result in a reduced limitation. For example, the limitation under Section 402(g)(1) on the exclusion for elective deferrals described in Section 402(g)(3) will be $16,500 for 2011, which is the same amount as for 2009 and 2010. This limitation affects elective deferrals to Section 401(k) plans, Section 403(b) plans, and the Federal Government's Thrift Savings Plan.

Effective January 1, 2011, the limitation on the annual benefit under a defined benefit plan under section 415(b)(1)(A) remains unchanged at $195,000. Pursuant to section 1.415(d)-1(a)(2)(ii) of the Income Tax Regulations, the adjustment to the limitation under a defined benefit plan under section 415(b)(1)(B) is determined using a special rule that takes into account that the cost-of-living indexes for the quarter ended September 30, 2009, and for the quarter ended September 30, 2010, were both less than the cost-of-living index for the quarter ended September 30, 2008, and that the cost-of-living index for the quarter ended September 30, 2010, is greater than the cost-of-living index for the quarter ended September 30, 2009. For a participant who separated from service before January 1, 2010, the participant's limitation under a defined benefit plan under section 415(b)(1)(B) is unchanged (i.e., the adjustment factor is 1.0000). For a participant who separated from service during 2010, the limitation under a defined benefit plan under Section 415(b)(1)(B) for 2011 is computed by multiplying the participant's 2010 compensation limitation by 1.0118 in order to reflect changes in the cost-of-living index from the quarter ended September 30, 2009, to the quarter ended September 30, 2010.

The limitation for defined contribution plans under Section 415©(1)(A) remains unchanged for 2011 at $49,000.

The Code provides that various other dollar amounts are to be adjusted at the same time and in the same manner as the dollar limitation of Section 415(b)(1)(A). After taking into account the applicable rounding rules, the amounts for 2011 are as follows:

The limitation under Section 402(g)(1) on the exclusion for elective deferrals described in Section 402(g)(3) remains unchanged at $16,500.

The annual compensation limit under Sections 401(a)(17), 404(l), 408(k)(3)©, and 408(k)(6)(D)(ii) remains unchanged at $245,000.

The dollar limitation under Section 416(i)(1)(A)(i) concerning the definition of key employee in a top-heavy plan remains unchanged at $160,000.

The dollar amount under Section 409(o)(1)©(ii) for determining the maximum account balance in an employee stock ownership plan subject to a 5-year distribution period remains unchanged at $985,000, while the dollar amount used to determine the lengthening of the 5-year distribution period remains unchanged at $195,000.

The limitation used in the definition of highly compensated employee under Section 414(q)(1)(B) remains unchanged at $110,000.

The dollar limitation under Section 414(v)(2)(B)(i) for catch-up contributions to an applicable employer plan other than a plan described in Section 401(k)(11) or Section 408(p) for individuals aged 50 or over remains unchanged at $5,500. The dollar limitation under Section

414(v)(2)(B)(ii) for catch-up contributions to an applicable employer plan described in Section 401(k)(11) or Section 408(p) for individuals aged 50 or over remains unchanged at $2,500.

The annual compensation limitation under Section 401(a)(17) for eligible participants in certain governmental plans that, under the plan as in effect on July 1, 1993, allowed cost-of-living adjustments to the compensation limitation under the plan under Section 401(a)(17) to be taken into account, remains unchanged at $360,000.

The compensation amount under Section 408(k)(2)© regarding simplified employee pensions (SEPs) remains unchanged at $550.

The limitation under Section 408(p)(2)(E) regarding SIMPLE retirement accounts remains unchanged at $11,500.

The limitation on deferrals under Section 457(e)(15) concerning deferred compensation plans of state and local governments and tax-exempt organizations remains unchanged at $16,500.

The compensation amounts under Section 1.61-21(f)(5)(i) of the Income Tax Regulations concerning the definition of "control employee" for fringe benefit valuation purposes remains unchanged at $95,000. The compensation amount under Section 1.61-21(f)(5)(iii) remains unchanged at $195,000.

The Code also provides that several pension-related amounts are to be adjusted using the cost-of-living adjustment under Section 1(f)(3). After taking the applicable rounding rules into account, the amounts for 2011 are as follows:

The adjusted gross income limitation under Section 25B(b)(1)(A) for determining the retirement savings contribution credit for married taxpayers filing a joint return is increased from $33,500 to $34,000; the limitation under Section 25B(b)(1)(B) is increased from $36,000 to $36,500; and the limitation under Sections 25B(b)(1)© and 25B(b)(1)(D), is increased from $55,500 to $56,500.

The adjusted gross income limitation under Section 25B(b)(1)(A) for determining the retirement savings contribution credit for taxpayers filing as head of household is increased from $25,125 to $25,500; the limitation under Section 25B(b)(1)(B) is increased from $27,000 to $27,375; and the limitation under Sections 25B(b)(1)© and 25B(b)(1)(D), is increased from $41,625 to $42,375.

The adjusted gross income limitation under Section 25B(b)(1)(A) for determining the retirement savings contribution credit for all other taxpayers is increased from $16,750 to $17,000; the limitation under Section 25B(b)(1)(B) is increased from $18,000 to $18,250; and the limitation under Sections 25B(b)(1)© and 25B(b)(1)(D), is increased from $27,750 to $28,250.

The deductible amount under § 219(b)(5)(A) for an individual making qualified retirement contributions remains unchanged at $5,000.

The applicable dollar amount under Section 219(g)(3)(B)(i) for determining the deductible amount of an IRA contribution for taxpayers who are active participants filing a joint return or as a qualifying widow(er) is increased from $89,000 to $90,000. The applicable dollar amount under Section 219(g)(3)(B)(ii) for all other taxpayers (other than married taxpayers filing separate returns) remains unchanged at $56,000. The applicable dollar amount under Section 219(g)(7)(A) for a taxpayer who is not an active participant but whose spouse is an active participant is increased from $167,000 to $169,000.

The adjusted gross income limitation under Section 408A©(3)©(ii)(I) for determining the maximum Roth IRA contribution for married taxpayers filing a joint return or for taxpayers filing as a qualifying widow(er) is increased from $167,000 to $169,000. The adjusted gross income limitation under Section 408A©(3)©(ii)(II) for all other taxpayers (other than married taxpayers filing separate returns) is increased from $105,000 to $107,000.

The dollar amount under Section 430©(7)(D)(i)(II) used to determine excess employee compensation with respect to a single-employer defined benefit pension plan for which the special election under section 430©(2)(D) has been made is increased from $1,000,000 to $1,014,000.

We use the Corbel 401k EGTRRA prototype.

Got a person who became a 2% owner on 6/30/2009. He earned more than $150K in both 2008 and 2009. Client does not want to give the THM to the participant for the 2009 Plan Year. I know there are two schools of thought on whether or not he can be considered key for 2009 (a), consistent with TH Ratio determination, b) as of last day of applicable plan year).

Has anyone ever gone over this before, specifically with the corbel document?

Does anyone know whether an employer who pays a higher percentage of premiums for executives violates 105(h)? In other words, would a health plan that provides different levels of employer contributions to different classes of employees run afoul of the nondiscrimination rules in 105(h)? The IRS is slated to issue guidance on Section 2716 of PPACA and IRC Section 105(h) later this year. Thank you.

If the 100% shareholder of a closely held company transfers his stock to a 10-year GRAT, will the transfer to the GRAT and the ultimate transfer of the stock to the remiander beneficiaries trigger withdrawal liability by the company? Under Section 4218 of ERISA it is not a liquidation or merger, consolidation or division, but is it a mere change in identy or form? The 100% shareholder is transferring ownership of the stock into the name of the trust, while the shareholder is considered the grantor. I guess you could argue that a mere stock transfer is not a trigger. Any thoughts?

Profit Sharing Plan has life insurance. Plan has a 1,000 hour/last day requirement for a contribution. A participant just terminated, the plan sponsor wrote a check for his insurance premiums already. Participant won't receive a contribution. Is there any argument that his distributable balance can be reduced by the amount of the insurance premium? I don't see it, but wanted to check.

Thanks in advance for any guidance.

Easy question- do SARs have to be distributed to employees who are eligible for a 401(k) only Plan but not participating?

Also, any creative & legal ideas on distributing SARs?

Thx

A prospect is using a payroll co for the admin of the 401k. HCE contributes $900 in 2009 as 401k contr. No NCHE contributes. No match and No SH match. Same for 2010.

The payroll co said that they give leeway for the ADP test up to 2.8%.

I spoke to the HCE about the failed adp test and failed top heavy test. HCE calls the payroll co. Their solution is to return all of the money in the account to the HCE.

I am wondering whether that would solve the 2009 & 2010 top heavy test?? My gut says no.

Employer is a property management firm. 401(k) Plan covers two employee groups: Group 1 consists of corporate employees (i.e., employees who work in the corporate office) and Group 2 consists of employees who work on site at the various property locations. Goal is to provide employer match for Group 1 employees only; Group 2 employees would be salary deferral only. If we were to exclude Group 2 employees from eligiblity under the Plan, the Plan -- covering only Group 1 employees -- will pass Average Benefits Test. And, we could then presumably apply ADP and ACP tests to Group 1 employees only.

Same result (I think) if we set up two separate plans -- one plan covering Group 1 and one plan covering Group 2.

Can we accomplish the same result with one plan? If Group 1 and Group 2 separately pass 410(b) coverage requirements, can I test Group 1 and Group 2 separately for ADP and ACP?

Thanks.