I have a new prospective client and we are discussing plan designs. I have discussed the possibility of a safe harbor plan. I informed them that the SH allocation only needs to be provided to the NHCEs. They then asked about other allocations to the HCEs. My questions are as follows:

1) My thought has always been that a SH plan could be designed with the 3% SHNEC to only NHCEs. It could also have a New Comparability feature with two groups: NHCEs and HCEs. Due to the fact that a 3% SHNEC was being given to the NHCEs, a regular 3% NEC could be give to the HCEs without any type of coverage/nondiscrmination testing. Does anyone disagree with this statement? What about a BRF issue? I do not think it is an issue, but would like confirmation. Thoughts?

2) My thought has always been that a SH plan could be designed with the basic SHMAC to only NHCEs. It could also have a discretionary match feature. Due to the fact that a basic SHMAC was being given to the NHCEs, could the discretionary match of 3% (100% of the first three percent) be given to only the HCEs? I do not believe that there would be any coverage issue, but the ACP test would need to be run. However, if I tested all of the match allocated to the plan and it passed, then there would be no nondiscrminination testing issue. Agree? Additionally, I am concerned about a BRF issue? Based on the basic safe harbor match formula and a match capped at 3% for all, would this be OK? Thoughts?

Any help would be greatly appreciated.

Scenario: taxable organization provides NQDCP subject to 409A. Benefits under the plan are not subject to SROF. The organization freezes deferrals to the plan but otherwise intends to maintain the plan while benefits are paid out according to the plan. Meanwhile, the organization changes its own tax status to a tax exempt organization.

Question: would the plan, which is now maintained by a tax exempt entity, be subject to section 457(f) (assuming its not an eligible plan), causing the deferrals under the plan to be taxable as they are no longer subject to SROF? I think so, but would like others' input.

Thanks in advance.

A guy starts a company on 1/1/2010 and is the only employee on that day... 1/12/2010, he hires several employees.

Wants to start a plan, effective 1/1/2010, with 1 year of service age 21, dual entry, but anyone employed on 1/1/2010 is in the plan... can he have the plan by himself for the first year?

Can a plan use elapsed for individuals for whom hours are not tracked, and counting hours for individuals for whom hours are tracked?

Or must a plan select an eligibitlity service credititing method and stick with it? So for example, if hours are not tracked for salaried people, is the only option to use the equivalencies?

A site specifically suggesting consistency is required would be perfect...

I have to admit I'm confused by the RMD rules for cash balance plans. Am I missing something obvious in the regs?

Do I convert the hypothetical account balance to an annuity benefit and that is the RMD using the DB rules? Or do I treat the account balance like DC Plan and simply divide by the applicable table to get the RMD?

What happens when a 5% owner continues working, getting contribution credits and interest credits but is alos recieving RMDs? If treated like a DC plan no problem, if annuity method; do I recalculate each year based on account balance or add the current year annuity eqivalent of this year's contribution credit to prior year RMD annuity benefit?

Hope this question makes sense.

It has always been my understanding that becoming covered by another group plan can end COBRA early, but being eligible for another group plan does not mean you cannot sign up for COBRA. An employee's son was recently reduced in hours and received his COBRA notice. It says on there that to be eligible to elect COBRA, you cannot be eligible for another plan, including a parent's plan. Did I understand this wrong, are they wrong, or did something change with PPACA and the age extension for dependents? Note, I haven't actually seen the form, but this is how it was explained to me.

Thank you.

We currently took over a large 403b plan and are in the processing of moving the money to a new vendor. In 2006 the client moved money to another vendor however 9 contracts stayed with the old vendor. 5 are currently active and 4 are terminated. All 9 accounts were not included on the Form 5500. I guess Accountant did not know of the contracts. Can we consider them orphaned contracts? Does the money have to moved over to the new vendor for all the contracts or just actives.

Any advice would be greatly appreciated.

TRying to fill out a Crobel 403b "prototype" and strugglng with the interest rate section. Does everyone agree that the Plan Administrator is NOT setting the loan interest rate? Technically, TIAA is loaning the participant the money. I'm just curious what people's thoughts are on this matter...

Anyone encountered this situation?

DB Plan participant retires and startes receiving a joint and survivor annuity. He gets divorced. He wants to name a new person to receive the survivor portion of the annuity but is told by the Plan "No way."

Any assistance is appreciated.

The excise tax for funding deficiencies as referenced in the Form 5330 refer to section 412. If a funding deficiency shows up on a Schedule SB, it is no longer under 412.

THe question is - do we still have to file a 5330 for the 10% excise tax on the deficiency?

I have a multiple employer plan that has adopted a 3% safe harbor nonelective design. The plan has 16 adopting employers of which five discontinued their safe harbor contribuiton for the 2009 plan year. My question is - since See Treas. Reg. §1.401(a)-30(a) allows for each adoptiong employer to be treated as a separate plan, am I OK to just perform ADP testing on the five plans in question? I was not sure if this would create a document issue - the VS does have "wait and see" language.

Any thoughts on this issue would be very much appreciated. Thanks.

I have a client who has had a Solo K plan for him and his wife for many years. THey are 50 years old. WE are using a "canned plan" with Invesco / Aim Funds.

THey would like to roll these assets out of this plan and into a managed IRA program.

However they also want to continue a solo K plan with another open architecture vendor I am suggesting.

Can we terminate the old plan and start a new one? Final 5500 EZ reguired ?

Any other suggestions ?

Thank you.

I have a fiscal 9/1/09-8/31/10 PY that has 29 people that terminated in the prior plan year (2008), but received compensation in the 2009 plan year. The amounts range from 32 cents to $123.77. None of them have hours, deferrals, match or profit sharing allocations. We are debating as to whether they should be included in the testing. As of now, they are not showing up on the census count, as they term'd in the prior year and were paid out (if they had an account balance to begin with). This plan is in Datair's PE-WIN system.

Thoughts?

I know that it is not allowable for one person to be given trade authorization in order to direct the investments of a participant (i.e. a plan participant may not grant their spouse trade authority in order to direct the investments within their 401(k) account). The problem is that I can not find any DOL, IRS, Treas Reg or ERISA guideline that specifies that it is not allowable for a 401(k) to permit any plan participant to add any individual to their participant account has having "trading authority" on their account in order to direct the investments on their behalf.

Guidance? Thoughts?

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?