Mom and Pop organization has no common law employees. They sponsor DB Plan and DC plan where they defer under 401(k) and receive 6% PS contribution. In 2010, Mom retires under the DB Plan and receives in-service lump sum of her entire benefit. Mom continues in the employ of Mom and Pop full-time and continues to have compensation. My understanding is that although Mom will earn no additional benefits, Mom must continue her participation under the DB plan or we have a 401(a)(26) problem. Because of this, we cannot set up a SEP for Mom for 2011 and contribute more than 6% because she would be considered a beneficiary under both the DB and the SEP even though she's not benefiting from the DB plan in the literal sense.

Any disagreement?

A DB plan distributes (a) non-consensual lump sums if the lump sum is less than $1,000 and (b) consensual lump sums if the lump sum >$1,000 and <=$5,000. Otherwise, the Plan does not offer lump sum payment. The 2011 AFTAP is certified as <60%. My understanding is that the Plan must distribute the lump sum in (a) but cannot distribute the benefit in a lump sum in (b).

Any disagreement?

I understand that the IRS provided a Q&A regarding AFTAPs for EOY valuations (specifically permitting the inclusion of the target normal cost and all current year contributions - which is what everybody has been doing I think). Does anyone have a copy of the Q&A that they can post?? Thanks in advance for any help!!

Can an employee elect coverage for their spouse and/or dependents but not themselves? I'm specifically referring to a Premium Reimbursement Account. The employee would like to go on a Medicare Advantage plan but that leaves the spouse, a nonemployee, to buy her own insurance and that privately purchased insurance for her is what is desired to be covered under the PRA.

A slightly different angle on the same case and second question: What if the company's insurance provider is willing to write a policy for the spouse only. Can this premium be covered pretax through the employee's paycheck?

Just hoping people will tell me I don't have a discrimination problem.

I have a doctor (of course) who was in a 5-person practice. She is leaving that practice to open a specialty practice. None of her new employees worked in the old practice. If we set up a new plan in the new practice and recognize service with her old practice, are we being discriminatory???

Thanks.

For form 5300, under Initial Qualification -- Date Plan Signed.

For the plan to be effective 1/1/2010, the Date Plan Signed must be on or before 12/31/2010.

Is this correct?

Thanks for all responses.

A part-time employee is allowed to contribute to a 401K plan but is laid-off a few months later. Forced distrubtion was processed for less than $200, the employee was later rehired 2-3 months following. A few weeks into employment, HR is now threatening layoff again advising employee that they should not have been re-hired until 6 months after distribution had been processed. Is this valid? Is there any reg that allows the employer to enforce termination? Does it make a difference that the employee works in an "at-will" state?

To all of you who contribtue to this Board -- I hope you have a safe and healthy New Year . . .!!

I have found a few prior discussions regarding how to handle back pay awards in 401(k) plans but none that are particularly current or seem to address all the potential issues. We have a former employee who is about to receive a settlement that will be treated as W-2 wages. The amounts will be paid tomorrow but relate to wages she would have received from both 2009 and 2010. We have a safe harbor 401(k) that provides a 3% nonelective contribution.

Questions:

1. I assume the back pay should be counted as compensation for plan purposes and the hours represented by the back pay recognized as hours of service?

2. Assuming the answers to 1 are yes, do we have to recalculate the amounts attributable to 2009 in the 2009 safe harbor contribution or can we simply factor everything into 2010--the year the amounts were paid.

3. What do we do about elective deferrals that would have been possible over this period? If former employee was participating in 401(k) when she left, do we assume that deferral would have continued and deduct these amounts from the settlement award?

From today's BenefitsLink Retirement Plans Newsletter:

[Official Guidance]

Text of IRS Notice 2011-6: Form 5500 Declared Exempt from PTIN Requirement (PDF)

14 pages. Excerpt: "An individual must obtain a PTIN to prepare for compensation all or substantially all of any form except those specifically identified by the IRS as not subject to the requirements of sec. 1.6109-2. At this time, the IRS identifies the following forms as not subject to the requirements of sec. 1.6109-2: . . . . Form 5300, Application for Determination for Employee Benefit Plan; Form 5307, Application for Determination for Adopters of Master or Prototype or Volume Submitter Plans; Form 5310, Application for Determination for Terminating Plan; Form 5500 series; . . . . Form 8717 User Fee for Employee Plan Determination, Opinion, and Advisory Letter Request; . . . ."

(U.S. Internal Revenue Service)

Here is situation - tax exempt sponsor has 2 plans, a 401k with a match and then a voluntary 403b. The HCE's are capped at 6% in the 401k, they can then defer additional amounts into the 403b plan. The enrollment team mistakenly enrolled a group of NHCEs into both plans however employees only wanted to defer into the 401k.

How can we get the deferrals out of the 403b plan, with no distributable event? They are not ineligible employees, they were mistakenly set up under this plan.

I cannot see an exact correction method under EPCRS. Think we should be able to distribute deferrals plus earnings as 1099 income?

I find an EPCRS correction using a retroactive amendment if a plan allows a person to make elective deferrals before they have met the service requirement. I'd rather correct by refunding. Is it permissible to do this?

Here's my situation:

I worked for a company for 5 years and made contributions to their 401K that were matched in an ESOP plan. I was laid off about 15 years ago and left the 401K there.

Recently I decided to rollover part of the 401K as the amount was rather large and began to initiate a rollover but was told by someone that I should never do this with ESOP money. The amount that was in was about 95K; the part that I contributed was $5,720.00, and the rollover was a partial distribution of 40K. A check was issued to a financial planner under my name and he put it in a "qualified account" (money market) and is waiting for instructions on what to do with it.

After looking into ESOP and "net unrealized appreciations" I'm becoming aware that it would be advantagous for me to instead take this partial distribution and transfer it to a taxable brokerage account. I would only be taxed and penalized on the 5,720.00 and the rest would only have a capitol gain tax applied to it whan I touch it.

Can someone give me some info on what I should consider doing with this partial distrubution and the rest that is still in the ESOP 401K?

We are processing a QDRO under a defined benefit plan for benefits in pay status. The QDRO just says that the Alternate Payee is to get 50% of the accrued benefit, and allows the Alternate Payee to choose the form of the payment. How does that work? What rules apply to a QDRO for a DB account that is already in pay status?

for plan years ending 5/31/07, 5/31/08 and 5/31/09. 2 participant plan. Total 3 year contribution due $34222.82.

Proposed solution:

1) File 5330 and pay 10% excise tax

2) Amend the 2007, 2008 Form 5500's (2009 is on extension)

Am I missing something?

Oh and plan has prepared resolution to terminate.

Is Mr. Maldonado still around? He used to provide a lot of good material in this forum but I have not seen anything from him in at least a couple of years. Just wondering . . . .

Form 5500 preparers may or may not be required to obtain a PTIN and ultimately ERPA, even though the 5500 is not a tax return. Using the same sort of "IRS logic" what are likely to be the requirements for those preparing VCP filings?

A client has established a benefits structure where a number of benefits are identified and employees can elect what they want. This includes insurance benefits, vacation, and other benefits. The company has setup a safe harbor matching contribution for the 401(k) plan. The intent is that the match is part of the overall benefits package, so if an employee elects to participate in the 401(k), their matching contribution is included in the benefits elections. That means those employees do have to adjust any other benefits to stay within their maximum benefit package. This package was specifically designed to provide the highest level of benefits flexibility since the company is planning for a strong growth phase and they need to be able to attract and keep the best talent.

My 401(k) administrator has indicated this is acceptable as long as we ensure that any employee who elects to participate in the 401(k) receives their matching contribution. What we've setup is that any time an employee submits a 401(k) election form, they also submit a new benefits election form to identify their adjusted benefits.

Does anyone see any issues with this?

If we are looking to trade providers and there is a market value adjustment on the Stable Value Fund, how would this be passed along to the plan sponsor(or the new provider) ? And can someone define a put option for me. Thank you!

The pay credit is the maximum alllowable, which is 1/10 of the 415 $ limit at current age using 5.5%.

Question:

Is the pay credit (which depends on age) based on beginning-of-year age or end-of-year age?

For example, for 2010, the boy age is 45 and eoy age is 46. Is the pay credit based on age 45 or 46?

Thanks for all responses.