I have a plan that utilizes the maximum offset allowance per IRC section 401(l). A recently terminated employee significantly reduced her hours in the final three years of her employment. Since the 401(l) offset is based on final three-year average compensation, this employee's benefit has been leverage up considerably due solely to her reduced work schedule. I am wondering if anyone has experienced a similar situation and if anything can be done to mitigate this skewing of benefits. Thanks.

Client changed name and EIN in 1996. When they changed service provider in 2002, new TPA picked up the old EIN and filed 2002-2006 5500s under the wrong EIN. We filed for 2007 and 2008 using the correct EIN. Now IRS is looking for the 2007 5500 under the wrong EIN. How do I fix this?

Respond to IRS Notice noting in Section I of the notice that the Form 5500 for 2007 was filed under a different EIN (the correct EIN) and leave it at that.

Or do I need to amend each Form to show the correct EIN? I don't have copies of the forms from 2002-2006. Would I just print the 1st page of a 2009 Form and indicate an amended return, the appropriate PYE and correct EIN?

Thanks!

I have a client who has a 403b contract with company A. They have gotten on the "fiduciary bandwagon" and have been reviewing fees with their current provider, and have decided to move assets to a lower cost provider (company B) because they have decided that company A is not in the best interest of participants.

New money has begun to deposit into company B. The plan sponsor wants to transfer the accounts in company A over to company B. However, the accounts are individual annuities and require paperwork from every participant.

Company A has now started communicating directly with participants, advising them of their right to keep the money where it is.

The plan sponsor truly is trying to do the right thing, but they are wondering how they can possibly "force" employees to move since the accounts require individual participant signatures. A small group of employees has been swayed by Company A, and has started to complain about moving to Company B. The concern is that they will "refuse to sign".

The issue with keeping money in 2 places is due to the additional burden of administrative costs. To make matters worse, the company cannot afford to pay the administrative fees, and Company A will not pull administrative fees from individual contracts.

I know there have been attorneys who have fought (and won) to have surrender penalties or MVAs waived in instances such as this. However, was wondering if anyone has heard of a plan sponsor "winning" the battle to be able to direct these accounts be liquidated without participant signature, using plan sponsor signatures instead to direct plan assets?

I am representing neither Company A nor Company B...just trying to help the client. Seems a shame they are trying to do whats best but having issues with paperwork/signatures....this is a nice company with well-intentioned management.

Thanks!

Would appreciate any thoughts and comments and if you find any flaws in conclusions.

Facts: Frozen DB plan has 150 participants.

Facts: No change from 2009 to 2010

MV Assets: 2,000,000

FT = $1.700.000

FSCOB = $600,000

Expenses To Be Paid Out of Trust = $10,000 = MRC

Conclusions

(1) Plan has funding shortfall in 2009 of (1,700,000 - (2,000,000 - 600,000)) = 300,000 so quarterly contributions of $2,500 apply in 2010 (and in 2011).

(2) If Plan fails to make these quarterly contributions, then must meaninglessly notify PBGC for each missed contribution within 30 days.

(3) Plan sponsor cannot issue standing election to apply FSCOB to get around quarterly contributions because ordering provisions of final regs would apply FSCOB after quarterly due dates.

(4) Possible remedies

(a) Plan sponsor can made $10,000 contribution before first quarterly is due

(b) Plan sponsor can elect to burn $310,000 of FSCOB so that not only there is no shortfall on 1/1/2010 (i.e., no quarterly contributions due in 2011) but also there is no MRC in 2010.

© Plan sponsor could elect before first quarterly contribution is due to apply $10,000 of FSCOB to MRC.

(d) Plan sponsor could elect before first quarterly contribution is due 4 separate elections to apply FSCOB to reduce quarterly contribution.

After reviewing EPCRS, it appears to me that if an employee is improperly excluded from the plan and is catch-up-age-eligible, in addition to making the missed deferral/match payments, you also have to make a catch-up contribution for an amount equal to 25% of the applicable amount (i.e. 25% of $5,500 for 2009), assuming the contribution amount does not exceed the participant's gross income (Section 415).

Is this correct?

Corp has a few different plans.

HMO, PPO, Kaiser

Employee only - the employer pays 50%.

Just the employees spouse or dependent the er pays 30%.

Employee and Children the employer pays 40%

Entire Family - Employer pays 30%

Most of the HCES are in the entire family plan.

Do we have a discrimination issue?

Participant received a plan loan in November 2007, 15 year payment period for purchase of his home (final payment October 2022. Plan allows for refinancing of loans. He has since refinanced to increase his payments and to shorten length by 5 years already.

Now he would like to lower his payments (of course this would extend the repayment period and perhaps beyond the original final payment date), anything out there that would not permit the 2nd refinancing?

If not, does the refinancing and new payment period have to be completed in a certain length of time (since it was for purchase of a new home)? That is, does the re-fi need to be within the first 15 years it was first made or .....?

Thanks!

The Wall Street Journal has an article on conversions to church plan status, and an IRS project requiring some form of participant notice on conversion. Interesting read.

http://online.wsj.com/article/SB1000142405...0632243300.html

Tom Geer

Control group. Employer A sponsers 401(k) Plan A and Employer B sponsers 401(k) Plan B. They both have a 1-1 plan year. They have the exact same entry requirements and the exact same match formula. Both plans only allow deferrals and match - no other contributions.

The only difference is that Plan A uses the current year testing method and Plan B uses the Prior Year testing method.

Can these plans be aggregated for coverage purposes? My gut feeling is no - since §1.401(k)-1(b)(4)(iii)(B) states: Thus, in applying the permissive aggregation rules of §1.410(b)-7(d), an employer may not aggregate plans (within the meaning of §1.410(b)-7(b)) that apply inconsistent testing methods.

Thoughts?

When is a multi-employer, collectively bargained, health and welfare fund required to comply with the requirement to cover dependents up to age 26? I know for most plans, it is the first plan year beginning after September 23, 2010. However, there is a provision in PPACA that appears to extend the effective date to the date of termination of the last collective bargaining agreement. There is also a question of whether or not that provision even applies to self-funded plans.

What are others thinking?

I am trying to find a citation for the following proposition:

"A qualified plan may not be merged with a 403(b) plan because qualified plan assets may not be commingled with a 403(b) or any other nonqualified plan."

Any help would be appreciated.

I thought I read the answer to this somewhere, but now cannot find it. If the plan administrator and the plan sponsor are one in the same, do we need to electronically sign both lines with the IREG credentials?

Employee passed away while actively employed. Employee had named Sister as Primary Beneficiary and Nephew as Contingent. Plan allows for Pre-Retirement Survivor Annuity to be paid immediately, with guaranteed payments for 10 years.

We began paying a monthly Pre-Retirement Survivor Annuity to the Sister. Now the Sister has passed away prior to 10 years of guaranteed payments.

Do the remaining payments go to Employees' Contingent (nephew) or to the Beneficiary of Sister (who is NOT the nephew)?

Our Plan Document does not address this situation. It only addresses what happens if there is no Beneficiary form on file.

If you have a discounted stock option with a vesting schedule, is there 409A income on unvested options?

Any idea what you are supposed ot do when you file under VCP for an old ADP failure and some HCEs received too much from the original tests. The rules are pretty clear if you need to do an additional refund but I can't find anything on the excess.

We currently have a FY for our 401k plan. I am confused by our record keeper using 'crossover" deferrals to help up pass the ACP?ADP and 402G testing? Would a calendar year help prevent this? I'm relative new to the 401k world.

This is, I think, a fairly newby question. I am not 100% sure what is relevant, so I'm going to be overinclusive in my description. I apologize for both problems in advance.

Company A (a service business with around $3M in revenue) is being acquired by Company B, a new S corporation, via asset sale. As part of the sale, either a new retirement type plan will be established (looking at a KSOP) and existing employees allowed to roll their existing 401k into the KSOP or the existing 401k plan will be transferred (to the extent possible) to Company B (and thereafter the 401k plan converted to a KSOP). Company B intends to honor all accrued vacation, seniority, etc. according to the policies of Company A. The 401k plan of Company A currently does a safe harbor match, I believe, and does not invest in the securities of Company A.

The new owner is investigating alternatives to provide long term incentives for the various employees. The new owner also has an existing IRA outside of the company which he might consider rolling into the KSOP to the extent to which he could then use it to buy stock or lend monies to the corporation. The new owner is aware that all participants in the KSOP (basically all employees) have to be given the same opportunity -- and does not regard that as a real issue of concern.

My confusion starts when I look at the rules for who can hold stock in an S corporation. It is my understanding that generally a 401k plan is not allowed to hold stock in an S corporation. So, in order to invest roll over monies into the company via a rollover of an existing IRA into a 401k, the usual requirement is that the new corporation must be a C corporation. This leads to my first questions:

1. Can the rolled over monies from the new owner's old IRA be used to purchase stock from the S corporation, provided the KSOP is set up correctly?

2. I guess another way to say the same thing is can the KSOP be used by the new owner to sell the stock to himself in the KSOP structure?

3. Can the rolled over monies from the new owner's old IRA be used to purchase bonds from/provide debt financing to the S corporation?

4. Does the answer to #3 change if the funds are then loaned by the S corporation to the ESOP to purchase company stock from the new owner?

5. Can the rolled over monies from the new owner's old IRA be used as a loan directly to the ESOP portion of the KSOP plan?

6. To whom and on what basis can the ESOP stock be allocated?

7. Do any of these answers change to the extent the new owner retains at least 50% interest in the S corporation outside the KSOP structure?

1-5 I believe should be fairly simple for someone unlike myself who knows what they are doing in this arena. 6 & 7 look more complex to me.

Quick disclaimer -- I'm looking for a broad strokes approach as to what is possible. I fully recognize that implementing any of the above may turn out to be a stone cold !$@# and not practicable for a company of this size and magnitude. Any response in this thread is strictly intended as a basis for talking with professionals (accountants/attorneys) who specialize in this area.

Thanks you in advance for any replies.

I've done a lot of reading on the internet about who can/can't open an individual 401K/Single-K/Solo-K and can't quite determine if the following is possible. An individual and spouse are the sole owners of a C- Corp. It the owner and owner's spouse are NOT employees (no W-2), but for the first year took income as 1099 contractors, can they open a Single-K or Individual 401K and contribute?

Thank you.

Our administration system provides present value factors to determine lump sum benefits at various ages based interest rates and the mortality table input. The factors are calculated for AE and 417(e).

A friend who works at a plan admin firm recently sent us a copy of the questions asked on a PBGC post-termination audit. One of the questions asked for the interest rates, mortality table and age methodology used in determining lump sum distributions (age last, age nearest or interpolation).

We will be terminating a 30 participant DB as a standard termination. If a participant is 47.765 years old at the date of distribution, must we interpolate between the factors at age 47 and 48? How about just using age nearest to the nearest month? Or what about age last birthday?

The document is silent on the age methodology issue.

Thanks for any input.

I have been approached by a PEO to take over our employees. We are a non-governmental not for profit and have a 457(b) deferred comp plan. Our employees would become employees of the PEO and wages would be reported under the EIN of the PEO. I have not been able to find any definitive answer about what impact the new relationship would have on the 457(b) future contributions, and/or the account itself. Does anyone have experience in this?