Prior to plan termination, can a defined benefit plan with a NRA of 62 add a fully subsidized early retirement benefit at age 50 as opposed to the more common age 55? I would like to make sure the IRS would not question this approach.

Do the prohibitions on lifetime caps on benefits, and the phasing out of annual caps on benefits, of PPACA '10 apply to MERPs, HRAs, and FSAs?

All three limit benefits based on a dollar amount. For example, a MERP might limit the employer's reimbursement of medical expenses, for example, to $7,500 per year. Is that an annual limit that will now be prohibited under Obamacare, meaning that the employer's obligation to reimburse must now be unlimited?

Does anyone know whether the W-2 safe harbor definition of compensation (under Code Section 3401(a), without regard to any rules limiting the remuneration included in wages based on the nature or location of the employment or services performed) includes remuneration reported on Form 1042-S?

Thank you, in advance, for your thougths and advice!

2 Professional Service Corporations (single owner in each - ER 1 and ER 2) have formed ABC Company and have adopted ABC 401(k) Plan...1 plan/2 participating employers...

ER 1 and ER 2 have split and would like to disolve ABC Company; however, ER 1 would like to continue sponsoring a 401(k) Plan while ER 2 would like to adopt a SIMPLE 401(k). Can ER 2 adopt SIMPLE 401(k) Plan in the same year...?

Any other information would be helpful...

Two doctors each have their own P.A. The PAs are not in any kind of partnership or anything like that, so no controlled group. They happen to work in the same office. PA #1 has all of the employees on its payroll. Some of these employees provide services for PA #1 exclusively. Some employees work exclusively for PA #2. Some employees provide services to both PA #1 and PA #2. PA #2 reimburses PA #1 for the payroll attributed to employees providing services to PA #2.

The only people that get a W-2 from PA #2 are the owner and his wife.

Both PAs are part of a multiple employer plan, so I'm trying to figure out who the employees belong to (since coverage, non-discrim, and top heavy are applied separately). They all get their W-2 from PA #1.

Since PA #2 reimburses PA #1 for its payroll expense, is there anything that somehow makes them employees of PA #2? Or are they strictly just employees of PA #1 because that's where their W-2 comes from??

If anyone can point me in the right direction, I'd appreciate it!

For employees on Medicare and others who waive coverage under an employer's group health plan, the employer reimburses the cost of Medicare supplemental coverage, a spouse's health plan or other alternative coverage. This is fully employer-paid--no salary reduction.

As this arrangement only reimburses employees for the cost of coverage under another insured plan, I believe reimbursements are excluded from tax under section 106, and not section 105. Therefore, I don't think it's subject to the discrimination rules of 105(h), so it would be OK if the only employees who actually waive coverage are HCEs. Am I right?

If you receive an administrative scrutiny ruling on QSLOB status I assume you can rely on that ruling until there are material changes in the controlled group or the plans of the group. I also assume that if you can satisfy one of the safe harbors and don't need an administrative scrutiny determination that you can only rely on QSLOB status for each year you satisfy the safe harbor. Can anyone confirm that? I'm not finding anything on this. Thanks.

One of my client's allowed a participant under 50 to defer $16,650 of his pay.

We are obviously having the plan disburse $150 back to the participant plus earnings as a excess 402(g) correction.

My question is how is this presented in our annual reporting?

My assumption is that we show the net of $16,500 as his 401(k) contribution on his benefit statement; therefore the balance will be showing is $150 less than the actual asset balance as of 12/31/2010. In doing so I would assume that for reporting on the 5500 we will need to indicate the $150 as a liability.

Any suggestions or knowledge of how to handle this would be great?

This client does there own payroll and screwed up.

I'm working on an issue that's somewhat similar and any insights/thoughts are welcome. I'm trying to determine if there is a prohibited transaction applicable exemption to an unusual situation I've been presented with. Here are the facts, starting with why I believe it's prohibited absent an exemption:

-Bank-employer sponsors a 401(k) plan.

-Plan trustee is disinterested third party.

-100% of Bank's stock is owned by a Holding Company (which is not an S Corporation - so there's no potential 'second class of stock concern, just fyi).

-Holding Corporation has an amount of debt that needs to be paid off in order to grant the Bank more lenience by federal banking regulators so that Bank can again begin issuing dividends.

- (The same regulator prohibits the Bank from outright transfering extra cash to the Holding Company to pay the debt, on the theory that such transfer would constitute a 'dividend,' and that Bank is not allowed to issue dividends until it eliminates this debt.)

-Holding company, itself, has no income with which to pay the debt (it just holds the bank's stock).

-Since Holding Company owns 100% of Bank shares, this exceeds the 50% amount in the defintions of 'interested party' and 'disqualified person,' I am assuming that Holding Company is an interested party/disqualified person with respect to Bank's Plan.

-Bank-employer proposes the following:

-Have the Holding Company issue a "debt instrument," a.k.a. "Note" with a 2-3 year maturity that would pay 7% interest. I beleive this would be a *non*-marketable obligation under the ERISA 408 definition of 'qualifying employer securities.' It therefore does NOT qualify as a "marketable obligation" and therefore can't be a qualifying employer security for purposes of qualifying for that statutory PTE.

- Add a brokerage account to the plan.

- Allow those participants who wish to do so to invest in the Note as an investment under the 401(k) Plan.

I understand that the Bank-employer can't be fully protected from potential claims of fiduciary breach/imprudence for offering this investment in the event that the promised return fails to materialize. But I believe it could be a permissible brokerage window investment IF I can find a PTE. (And there are other issues, such as possibly doing a valuation, getting approval of an independent fiduciary, and finding a broker/TPA willing to manage the nonmarketable Note investment).

So far, I'm stumped in coming up with a class or individual PTE that is similar.

So I am thinking that I'll have to recommend to Bank that they apply for their own individual exemption.

Does anyone out there know of any existing PTE that might apply to this situation?

Thank you!!

I realize this has been discussed here before but I haven't seen anything that really convinces me on the proper handling of taxes witheld from plan distributions when the plan has only a brokerage account and no checking account.

Many simply deposit to the employers bank account and pay the taxes from there, but as raised by posters before, I just worry about plan assets reverting to the employer's bank account.

In the past we could handle this with the 8109 forms, but that option is now gone. Assuming a situation over the limit allowing payment directly with the 945, what are you doing? Does anyone have a cite that it is ok to transfer to employers bank account? Only thing I find related is discussion regarding paying the distributionis in an ASPPA IRS Q&A where IRS said it was "legally incorrect and should not be done." On the other hand, I seem to recall there is a PT exemption for employer loans to the plan in limited circumstances with repayment within 3 days, could this be used if employer payment was treated as a loan to the plan with plan reimbursement to employer?

Opening a checking account just for a few distributions seems to be a waste of funds,, but I'm leery of transfering to employer account.

Payment was made January 2009. I think I have to have to 1099's. I think the gain is taxable in 2010, Code 8.

How do I code the refunded Roth so it is not taxed again?

The DB Plan says to start the pension on April 1 following . . .

The election package gets completed by the end of February and is submitted to the Bank for processing. The initial monthly pension check is not cut until April 11, 2011. Have the RMD rules been violated?

Suppose this were April 1, 2012 which is a Sunday, and so the check is not dated until April 2, 2012. Have the RMD rules been violated?

As a practical matter, the rules have been complied with. Has anyone have experience or knowledge to the contrary?

A plan fails the ADP Test in 2010. Refunds are made within the first 2 1/2 months of the following year (2011). There were gains on the return as well. What is the tax consequence to the affected employee? Is the full amount taxable as 2010 income? Just the returned Salary deferral in 2010 and gain in 2011? Or all taxable in 2011? I know there are no gap earnings any more but I am finding conflicting info on handling this.

The plan is not failing the ACP test, but due to the return for the ADP test, the participant, in essense, will receive too much match. These funds need to be forfeited. Is there an issue if the funds are not deposited to the participant's account until later in the year (after the 2 1/2 month period, closer to due date of corporate tax return.)

Thanks.

401(k)/PSP wants to change the plan year a second time in the last 3 years. My interpretation of the Instructions to the Form 5308 is that no 5308 must be filed, even though there has been a 2nd change in this time span, since a PSP is exempted from the Form 5308 filing requirement.

Does anyone agree/disagree with this conclusion?

The facts are as follows:

1. I contribute to a 403b plan by salary deferral. My employer also contributes to a 403b on my behalf.

2. My wife also contributes to a 403b plan by salary deferral with a contribution from her employer.

3. We also have a consulting business and would like to contribution to individual SEP accounts.

My understanding is that Publication 571 and publication 4482 specify that contributions made to 403b accounts must be combined with SEP contributions of all partnerships, corporations and sole proprietorships in which one has more than a 50% control, to determine 415 contribution limits (49K).

Now here is the issue:

Our consulting business LLC is owned 50% by me and 50% by my wife. I am trying to figure out the 415 contribution limit implications in this situation.

I can see three possibilities:

a. See-through provisions do not apply and neither one has control. This implies that we get four $49,000 limits (two for me, 403b and SEP, and two for her).

b. See-through provisions apply to both and both are deemed to have control. This implies that each is limited to one 49K limit.

b. See-through provisions apply to one of us and therefore one is deemed to have control. This implies we get three 49K limits (one for the person deemed to have control and two for the other person)

Is the answer affected by whether I am in a community property state?

I would be grateful for any clarification that can be provided on this issue.

Has anyone ever written a report that will run a promissory note for a loan that has been setup? I am tired of having to do these manually.

One individual is a 50% owner of a new LLC that wants to sponsor a 401(k) plan.

The same individual is a 5% owner of another otherwise-unrelated entity that sponsors a SIMPLE IRA in which he participates (deferrals plus ER match).

Is his contribution (employee and employer) in the 401(k) limited by his participation in the SIMPLE IRA?

Thanks!

Under the new health care act, Cafeteria Plans must be amended to cover dependents up to age 26. This change must be effective by 1/1/2011 for calendar year plans.

Guidance issued by the IRS (http://www.irs.gov/pub/irs-drop/n-10-38.pdf) indicates that Cafeteria Plans may be amended retroactively to include employees' children who have not attained age 27 by the end of the taxable year. However, this guidance states that such an amendment must be adopted by December 31, 2010 (and may be effective as early as March 30, 2010).

What is your understanding with respect to the general deadline to amend cafeteria plans if an employer does not wish to include dependents up to age 26 until required to do so by the healthcare act (for example, 1/1/2011 for a calendar year plan)? What have clients done in this regard?

In reading TIAA's Auditor FAQ's, they indicate that many plan sponsors have concluded that terminated participants with balances may be excluded from the participant counts (and therefore line 6c on the 5500) based on the instructions for line 6c, which says you may exclude anyone whose benefit is guaranteed by the insurance, company etc.

Has anyone been using this position?

TIAA's write up is at the bottom of page 9 of the attached document.

The crux of it is this:

tiaa_cref_faq__s.pdf

Recently, I came across a J&S annuity in a plan that is reduced when EITHER the participant or spouse dies. I am wondering if any of you think that it satisfies the requirements of 417 and 1.401(a)-11(b)? It seems to me that it doesn't b/c the regs seem to require an annuity for the life of the participant and a survivor annuity for the spouse. If the benefit reduces when the spouse dies, then the participant receives a survivor annuity instead of a life annuity. Any thoughts?