I have a profit sharing plan, only, and needs to be cross-tested due to the group allocation of the contribution.

The plan is passing the ratio test, but failing avg benefits test. So, I am not passing 401(a)(4). Is there a way I can break the plan into component plans, and pass the avg benefits test and 401(a)(4)? Or, am I stuck because I am failing ABT, so I can not do the component plans?

In the past we've completed the 8109-B coupon and instructed the client to deposit the federal tax withholding check with the coupon and mail to the Financial Agent. We requested our client to hen return for 1099-R and 945 records a copy of the check written to the financial agent. Effective 12/31/09, we've been informed that paper submissions and 8109-B Coupons will no longer be accepted and the withholding must be filed electronically using EFTPS. I realize this is only a proposed reg at this time however feel it is important to educate my firm as well as our clients between now and then.

Do any of you have thoughts or suggestions on how we can educate and or communicate this new electronic filing to Clients? How can we assist out clients with this new process?

Information on EFTPS, including how to enroll, can be found at www.eftps.gov or by calling EFTPS Customer Service at 1-800-555-4477

Thanks

A 15 employee floor husband/wife contractor is looking to install a plan. Most of their employees are hispanic and only work when work is available. They are not necessarily terminated. He wants to set up a plan and doubts they will participate, but is there a way they can be excluded for plan purposes and still satisfy minimum coverage requirements? They were considering a Safe Harbor 401(k).

Terminated employee elected COBRA for herself and qualified for the ARRA subsidy. She did not choose to cover her child at that time. Now, it is open enrollment and she wants to cover the child. The COBRA participant is still entitled to the ARRA subsidy, but what about the child that she now wants to cover?

Thanks.

Client is majority owner/employee of business. He is planning to retire soon and would like to begin making gifts of his business interest to family members. It has been suggested that he lower the value of the business (and thus lower the value of his planned gifts) by adding a NQDC Plan and/or severance agreement for his benefit before he retires.

Any problems with this plan from a 409A perspective?

WRERA provided relief for the 436 benefit accrual freeze if a calendar year plan's AFTAP was above 60% for 2008 but below 60% for the 2009 AFTAP and this was extended by the funding relief that was issued this June to apply for 2010 as well.

Does this still apply if the AFTAP is deemed to be below 60% because it was not certified by 9/30/10 or does the late certification result in benefit accruals being frozen anyway?

Facts: 69 year old owner of an IRA

44 year old is sole beneficiary.

HOW DOES THE IRA OWNER ASSURE THAT THE BENEFICIARY TAKE WITHDRAWALS BASED ON LIFE EXPECTANCY?

A hypothetical employer is content to use its recordkeeper’s “pre-approved” prototype plan with one revision: The employer adds a provision mandating that, in addition to other investment alternatives that the plan administrator selects in its discretion, each of six mutual funds (specified by name) is a designated investment alternative that no plan fiduciary has power to remove (except to the extent that ERISA § 404(a)(1) requires the fiduciary to disobey the plan’s terms).

The employer wonders whether this one revision, which doesn’t seem to affect any § 401(a) qualification requirement, results in losing reliance on the prototype’s opinion letter.

Revenue Procedure 2005-16 includes the following provisions:

[19.02] Nonstandardized M&P Plans and Volume Submitter Plans — An employer adopting a nonstandardized M&P … plan may rely on that plan’s opinion … letter as described below if the employer’s plan is identical to an approved M&P … plan with a currently valid favorable opinion letter, the employer has chosen only options permitted under the terms of the approved plan, and the employer has followed the terms of the plan. Also see section 19.03(3) below. These employers can forego filing Form 5307 and rely on the plan’s favorable opinion … letter with respect to the qualification requirements, except as provided in [other conditions not relevant to this query].

[19.03(3)] An adopting employer can rely on an opinion … letter only if the requirements of this section 19 are met, and the employer’s plan is identical to an approved M&P … plan with a currently valid favorable opinion … letter; that is, the employer has not added any terms to the approved M&P … plan and has not modified or deleted any terms of the plan other than choosing options permitted under the plan or, in the case of an M&P plan, amended the document as permitted under section … 5.09[.]

[5.09] Adopting Employer Modification of Trust or Custodial Account Document — An employer that adopts a nonstandardized M&P plan will not be considered to have an individually designed plan merely because the employer amends administrative provisions of the trust or custodial account document (such as provisions relating to investments and the duties of trustees), provided the amended provisions are not in conflict with any other provision of the plan and do not cause the plan to fail to qualify under § 401(a). For this purpose, an amendment includes modification of the language of the trust or custodial account document and the addition of overriding language.

What do the experts think, may the employer still rely on the prototype’s opinion letter? Or should the employer submit Form 5307?

A large plan money purchase pension plan was merged into a new 401k profit sharing plan. There will of course be an audit report for the profit sharing plan, but does there need to be a final audit report for the terminated and merged money purchase plan? The mppp was merged in March of 2010.

An accounting firm has advised a client whose plan count has dropped below 100 that the audit needs to continue nonetheless. Barring any circumstances other than simply the participant count, does anyone know if that is true?

I have a client who allocates an employer contribution based on base pay only, and excludes all bonuses and overtime. They fail the 414 S test, so I can run the 401(a)(4) test, correct?

Am I correct in saying that in order to pass the 1/3 Gateway, I would be using total (415) compensation? If that is the case, what compensation is used for the 401(a)(4) test - the 415 compensation or the plan definiton of compensation?

It is my understanding that employee contributions have to be "held in trust" for a self funded plan (even though the plan is funded through general assets of company). What exactly is the held in trust requirement? Is it a special bank account or is it more that it has to be segregated from other employer funds? If employee contributions are held in trust does this trust then require an audit for the 5500?

thanks

is anyone seeing processing stopped statuses flip over to Filing Received? We have a lot coming back in the last day or two (even after adjusting for higher volume) as processing stopped, but nothing obvious is jumping out at us as a cause.

Is there legal authority that permits an employer to charge highly compensated individuals a higher premium than nonhighly compensated individuals? For example, $500 premium for employees with incomes $50k-$100k, $1000 for employees with incomes $100k-$150k, and $2000 for employees with income $150k +. Is this set up simply a reasonable classification under 105(h)?

with an end of the year valuation(year x), when

using the results to compute the following year's(x+1) aftap

is the fact that contributions were late for year x immaterial

for the year x+1 aftap?? in other words, the effect of late interest

impacts year x funding but does not impact 436 in year x+1?

Does the remedial amendment period for 403(b) plans that's discussed in Notice 2009-89 cover late amendments to bring a plan document into compliance with new law changes that require an amendment (i.e., the equivalent of a missed 401(k) interim amendment to a 401(k) plan)?

For example, if a plan is being maintained pursuant to a written document signed in early 2008 to comply with the final regulations, could that plan be amended after the deadline to adopt an interim amendment for a new law change so long as the amendment is just intended to correct the form of the plan and the plan operationally complied with that law change?

Or, is this the type of circumstance that should be corrected with a VCP Appendix F submission? Anyone tried this?

Would appreciate feedback on this issue.

This issue relates to Indian Tribes and the controlled group rules. Assume an Indian Tribe directly owns a number of entities (corporations, LLCs etc...). The parent-subsidiary controlled group rules apply to corporations, partnerships, sole proprietorships, trusts and estates. The Tribe is none of those, so it seems like an Indian Tribe cannot be the parent in a parent-subsidiary controlled group. Similarly, a Tribe is not an individual, trust or estate, so it cannot be the common owner in a brother-sister controlled group. The recent tax exempt entity controlled group regulations do not apply to government entities and IRS Notice 95-48 states that Tribes are treated as government entities.

It certainly seems reasonable to conclude that entities owned directly by an Indian Tribe would not be considered to be a controlled group as to the Tribe. Does anyone disagree with this logic?

Although this post deals with non-governmental plans and this might not be the best board for this topic, I figured those who deal with governmental plans might have a good deal of knowledge about tribal entities and how the controlled group rules apply.

A company I work with is trying to reduce the paperwork required for administering their cafeteria plan, because currently they require an individual to both enroll in a group health plan and fill out a separate salary reduction agreement to elect to have their pay withheld pre-tax. The pitfall is that they have had individuals change their health coverage (for example, drop a spouse due to spouse's change in employment status that affects eligibility) and forget to fill out an election change form in order to change their status, and the person continues to have their same election taken out.

I understand that the most recent regs addressed automatic enrollment in a group health plan with a corresponding pre-tax election, but what about just an automatic linking of group health plan election and pre-tax election? Can the plan doc legally be drafted to state something like, "you will automatically enroll in the POP when you enroll in a GHP, and such election will be automatically adjusted if a change in enrollment in the GHP corresponds to a qualified change of status under Section 125 and the change of status regulations"? The choice between tax and benefits is essentially - choose the health plan (with pre-tax) or choose no health plan and get the increased salary (no opportunity for after-tax payment of health benefits). Thoughts?

In researching the topic for fiduciary standard of a governmental 401(a) plan, I have not found an ERISA standard. In fact, I have been advised by many well- respected people in the 401(a) plan market that there is no fiduciary standard for a governmental 401(a) plan. "The Governement is not going to sue the government" is the standard response I am receiving. However, i cannot fine any supporting documentation to back this up.

Further, are there state fiduciary imposed standards on a state municipality for a 401(a) plan?

Thank you in advance.

We have a case where an employer needs to make a top-heavy contribution for the 2009 plan year. Company states that it does not have the money to pay the contribution and intends not to make a deposit. We are unsure of how to reflect this on year-end valuation and on Form 5500 - whether we should show top-heavy contribution amount as a receivable or handle otherwise.

Company would also like to terminate the plan (but will also owe top-heavy contribution for 2010 plan year). We are not cerrtain how the non-compliant act of failing to pay this contribution affects termination of the plan.

Please help!!