I'm re-posting under 403(b) plans since there was no response in the 5500 section...

An employer has a basic deferral-only plan that meets the safe harbor for not filing a return under DOL Reg 29 CFR 2510.3-2(f). For unknown reasons, they adopted a resolution in 2008 that said "the plan is covered by ERISA." (Don't have a copy of that.) Do you think that, in itself, does make the plan subject to 5500 reporting? The safe harbor describes how a plan is generally subject to Title I but if specific requirements are met, is not subject to the reporting requirements of Title I. Just saying it is doesn't necessarily make it so, IMO.

I suspect they were trying to say that there is a written document, maybe? Is there a reason that I don't know of to go out of your way to adopt a resolution saying a plan is subject "to ERISA?"

Making it weirder is the fact that someone convinced them they should file a return, and someone filed an extension - on August 6. It was rejected. They're he**-bent on filing and paying the late filing penalty, in part because a sister organization has filed under similar circumstances, and the controller has ties to both and assumes they have to do the same thing. I think they don't have enough to do.

Has anyone ever heard of any enforcement initiatives, etc. regarding the PPA requirement that plans disclose the existence of social security integration on the quarterly participant statements? I imagine people must have gone through DOL audits where these disclosures have at least come up.

Is anyone using the "Attachment to 2009 Form 5500 SF Line 10a - Schedule of Delinquent Participant Contributions"?

1) If so, why or why not?

2) Is this information the DOL can access electroncially or does a person need to open a pdf file and look at it? For example, will including this form make less likely that the DOL might send a letter inquiring regarding whether or not the late depoit was corrected?

Generally, I prefer to do less work unless there is a compelling reason to do more work. Is there a reason to do this?

I need to amend a 2008 Schedule SB. Item 12 indicated the plan sponsor voluntarily waived their entire carryover balance, leaving $0 as the total beginning of year carryover balance in item 13. Actually, this amount was suppose to show in item 13 and $0 should have been in item 12 as the amount volunatily waived (the two entries got flipped flopped).

No waiver of carryover balance is consistent wtih the plan sponsor's election.

Any concern with submitting an amended 2008 Sch SB to correct this error?

Thanks.

Instead of starting a new Safe Harbor plan effective 10-1-10, the employer has elected to start a profit sharing plan effective 1-1-10 so that they can make a profit sharing contribution based on full-year compensation.

For a calendar-year plan, I know that a SH plan must be effective no later than 10-1. Is this for SH only. . or any 401k feature? If it were just to be a normal 401k plan w/ a profit sharing feature - could this still be effective 1-1-10? Or is the only way the Plan can be effective 1-1-10 is if it is profit sharing only?

Has anyone examined the issue of whether church plans are required to provide an actuarial increase to participants who work past normal retirement? See 411©(3) and 1.411©-1(e). Obviously, Section 411 doesn't apply to church plans. However, they are subject to the ADEA, which incorporates a number of the Regulations issued under Section 411.

Given the following scenario...

Cash Balance plan using separate allocation groups & a Floor Offset Arrangement

401(k) New Comparability Profit Sharing Plan

Groups: Owners & All Others

CB Allocation: Owners 60% of Pay, All Others 3% of Pay

Profit Sharing: Owners: 0% of Pay, All Others 6.5% of Pay

No allocation or Floor Offset Safe Harbors are employed

Both plans are aggregated for coverage and non-discrimination testing which passes using general testing (assume it passes at the razor's edge).

Is it allowable to use aggregated testing in such a Floor Offset arrangement? In essense you are testing the employees as if they are recieving 9.5% when in reality all they can receive is 6.5%.

Is it specifically allowed or specifically disallowed? Or is it gray?

A new plan is implemented 1/1/2010.

Say it bases benefits of 0.5% per year based on years of participation.

This would mean that no one has an accrued benefit at 1/1/2010.

The PBGC determines participant count as of 1/1/10 for a new plan and only participants with benefit liabilities are counted.

So it appears to me that the pbgc could take the position that the plan has no non owner participants benefitting and is thus not covered by the pbgc. Of course the plan on that basis would be covered in year 2.

Does the above seem accurate?

This has implications:

if the plan is not covered in 2010 would it follow that the company's profit sharing plan is subject to the 6% limit instead of 25% limit? Even though the plan will be covered by year 2.

Of course we can have (and may take this approach) a non owner participant have their pension be based on years of service and have an accd ben at 1/1/10 and thus be counted.

By the way the PBGC already said plan was not covered due to no non owner participants, though I am not sure where they came up with that as they don't even know the plan formula, etc. Employer of course wants coverage as they want to contribute above 6% to PS plan and make large (over 25% payroll) contribution to db plan.

Curious to hear views.

thanks

Our client offers an onsite medical clinic for its employees providing non-significant services (e.g., band-aides, temperature check, etc.). Should the value of the service be imputed as income for the employees making use of the clinic? If not, under what tax code section are these services excluded -- Section 106 (employer coverage)? Section 132 (fringe benefit)? Has the IRS put out any guidance on this topic? Thanks in advance.

Maybe this should be under 403(b)s to get the right eyeballs, but here it is. An employer has a basic deferral-only plan that meets the safe harbor for not filing a return under DOL Reg 29 CFR 2510.3-2(f). For unknown reasons, they adopted a resolution in 2008 that said "the plan is covered by ERISA." (Don't have a copy of that.) Do you think that, in itself, does make the plan subject to 5500 reporting? The safe harbor describes how a plan is generally subject to Title I but if specific requirements are met, is not subject to the reporting requirements of Title I. Just saying it is doesn't necessarily make it so, IMO.

I suspect they were trying to say that there is a written document, maybe? Is there a reason that I don't know of to go out of your way to adopt a resolution saying a plan is subject "to ERISA?"

Making it weirder is the fact that someone convinced them they should file a return, and someone filed an extension - on August 6. It was rejected. They're he**-bent on filing and paying the late filing penalty, in part because a sister organization has filed under similar circumstances, and the controller has ties to both and assumes they have to do the same thing. I think they don't have enough to do.

A large plan (100+ participants) needs an audit and gets the bill from the accountant. Can these costs be passed onto the participants and deducted directly from their accounts?

Thanks

Hi everyone!

Can anyone chime in on Relius WebClient errors; specifically a P-215 error regarding termination criteria? We had a welfare benefit plan (with only 5500 and schedule A attachments) receive this error.

Do you know what they are looking for? Is this a glitch not yet fixed?

Thanks for any input or hunches you can provide!

Vicki

I'm trying to vet a consultant's 409A plan design proposal. This would be a deferred compensation plan for key employees of a privately held C-corporation.

The plan is set up as a defined contribution plan, with credits placed annually in participant's bookkeeping account.

Although this is not being (and they don't want it to be) set up as a stock option plan, what the company would really like to 'incent' is that when money become payable (on specified date), it is used to purchase company stock.

If the money is not used to purchase company stock, the amount (cash) received is forfeited by 50%.

My take on this is that it's a no-go under 409A - or at least, that, forfeiture or not, they're still going to have to include FMV of the whole vested amount in income (reduction notwithstanding).

Further, I believe this design specifically violates 1.409A-3(i)(1)(i), which says that an "amount is not objectively determinable [for purposes of being payable as of a specified date] if the amount of the payment is based all or in part upon the occurrence of an event, including the consummation of a transaction by, or a payment of an amount to, a service recipient."

Do you agree that this means you can't make the amount/value of payment, as of a specified date, contingent upon whether or not there is a stock purchase/sale?

I believe a better proposal is to allow amounts to be paid upon a certain schedule (as they become vested over a graded schedule). The Company can allow each payable amount to be used to purchase stock, or not, but there is no reduction in amount payable if stock is not purchased. The only disincentive to employee for *not* buying stock is that, if they don't buy stock when amount is first payable, they lose that 'stock purchase opportunity,' and the paid amount will not be able to be used to buy stock in future.

Anyone else ever seen a similar proposal or have other insights to share? I'm all ears.

Many thanks.

If our co. wants to use the same eligibility rules for the dental plan and medical plan (the medical has to cover dependents to age 26), won't the tax consequences be different to the employee? The rule that allows medical coverage to dependents to age 26 won't be taxable to the employee doesn't apply to dental coverage so if dependents don't qualify as a dependent as defined before health care reform, the coverage will be taxable to the employee. Thanks!

Suppose it is not possible to do the actuarial work and complete the 2009 Sch SB by Oct 15. Can you file just the 5500-SF w/o the Sch SB and avoid any filing penalty? Or will EFAST reject the filing w/o the Sch SB? It is anticipated the SB would be completed within a month after Oct 15 and filed at that time. Thanks in advance for any thoughts/insight on this.

A client is being sued personally. His self-directed IRA is also a named defendant in the lawsuit. The parties have worked out a settlement and the IRA will pay a portion of the amount necessary to settle the lawsuit. Is this a prohibited transaction under 4975? I think it is, but can't find any affirmative authority. Also, the settlement is not subject to the exemption granted under PTE 2003-39 because that does not apply to claims brought against a plan. Any help would be greatly appreciated!!!

With a Safe Harbor 401K plan it is my understanding that the elective deferral and safe harbor money sources cannot be accessed in an in-service distribution until the participant has reached age 59 1/2. The Adoption Agreement of the Prototype plan document we use allows you to select the money sources from a list that will be available for distribution but there is a note that states the following:

Distributions from a Participant's Elective Deferral Account, Qualified Matching Contribution Account and Qualified

Nonelective Contribution Account (including 401(k) safe harbor contributions) are subject to restrictions and

generally may not be distributed prior to age 59 1/2.

Are these sources unavailable to the participant until age 59 1/2? The "note" above states "generally" cannot be distributed. Is there any circumstances they can be distributed?

Also, what would happen if a participant / trustee decided to take an in-service distribution from all sources including the Elective Deferral and Safe Harbor money source before they were 59 1/2?

I really appreciate any clarification on this!!

Assuming the Plan Sponsor plan docs allow for the forfeiture account to be used for payment of administrative expenses and contributions, can it be used to pay the gains/interest required because of a late contribution?

Are you truncating or rounding? Any guidance from the IRS other than the SB instructions that say to truncate entires on SB?

In section 2715 of the Affordable Care Act it talks about the new uniform benefits summary and says that guidance about the new format will be out by March 23, 2011 and the new format must begin being used no later than March 23, 2012. Within section 2715 there is also a provision that requires plans to provide 60-days advanced notice of material modifications to plan participants. Section 2715 falls under the general effective date of the first plan year beginning on or after September 23, 2010.

If a calendar year plan is going to make changes effective January 1, 2011, does the 60-day advance notice provision apply?

Here are my choices:

A. No, because the 60-day provision isn't effective until March 23, 2012 when the new uniform benefits summary provisions apply

B. No, because the 60-day provision isn't effective until January 1, 2011, so the duty to provide advanced notice doesn't arise until that date (and therefore would be impossible for changes implemented 1/1/2011)

C. Yes, because the changes will be effective January 1, 2011

What are your thoughts??