9/1/10 employee eligible to join 401(k)

Plan Year 9/1 - 8/31

Defers $16,500 by 12/31/10

Can she continue her salary deferrals 1/1/11 for 2011 W-2 Tax Year or does Plan Year prevent additional deferrals until 9/1/11?

Never been asked this before so I appreciate help from anyone who knows answer. Thank you.

We (TPA) have a client with a DB plan that has been around for 2 years. While originally, the only employees/participants were the two shareholders and their spouses, things suddenly took off and they found themselves with a couple hundred employees. While it was active, the plan provided benefits at the 415 limit level. The plan was frozen before any of these new employees satisfied the eligibility requirements (which would have been 1/1/10).

My problem is that for 2009, the client made the maximum deductible DB contribution, which included a signfiicant cushion amount. So now, this frozen plan, which will likely never be resuscitated, is signficantly overfunded.

If the client reallocates these excess assets to plan participants pursuant to some future plan termination, the 415 limits will have grown enough (through additional years of participation) to accommodate it, but will that allocation constitute an accrual in that future year, that would have to be subjected to 401(a)(26), 410(b), and 401(a)(4)? If so, considering the other employees, I don't see how it can possibly pass muster. Am I wrong?

Hi,

A lone participant has passed away and the wife is wrapping up the affairs of the plan. a life policy was in the plan with a Face amount of $55,000 and a CSV of appx $35,000 at the last plan year end. What will be her tax implications on that policy, if any and how will that policy be reflected as a distribution? Will the CSV at the time of death be used for 5500 purposes or the Face amount?

I have just been contacted by a client who is named as one of several beneficiaries in a recently deceased woman's estate. Apparently, the woman had an IRA with Wachovia and when she set up the IRA was told that if she did not name a beneficiary, the beneficiary would be her estate. She did not name a beneficiary, but after her death, Wachovia now advises that since the date she began her IRA with them, they have changed their rules and now her IRA will not go to her estate, but to her spouse, or if she has no spouse to her children. This woman's will was drafted wth the intention of disinheriting her son and yet now, it appears from what Wachovia is saying, that he is entitled to receive her IRA. Has anyone else dealt with this issue? Any ideas?

Does the recipient vendor in a ROTH contract exchange need to know when the participant first made ROTH contributions to the transferring vendor? the cost basis?

I'm sure this has been discussed before. Two partners, no other employees. Each partner would like to control their profit sharing contribution to the plan. If the partnership prepares a resolution to the effect that governs the allocation, would this avoid a possible deemed CODA?

Plan's loan program provides for a cure period not to exceed the last day of the calendar quarter following the quarter in which the loan payment was due.

If the loan payment is due in the 3rd quarter, the cure period ends on 12/31/2010. Would you consider the loan to be in default as of 12/31/2010, or does the participant get the benefit of the "entire" cure period, and the loan is considered in default on 1/1/2011?

Thanks!

A plan with a safe harbor match provision is thinking about amending to remove the safe harbor. A notice that the safe harbor will be discontinued in 30 days is distributed. Plan sponsor changes their mind after figuring out that the top heavy minimum will cost more than the safe harbor match. No amendment is ever signed.

What sort of notice is required now?

Anybody familiar with MBO Partners (f/k/a mybizoffice.com) and the 401(k) Plan they offer. Based on their website, they indicate they have created a unique sort of set-up for independent contractors and consultants that they call a portable employer of record (PER). Basically if you are an independent contractor or service provider, it appears you can sign up with MBO and have them bill your client, etc. and they will provide you with a W-2 instead of a 1099 for your receipts. They say that basically they establish a separate division or group under MBO Partners for each consultant then the consultant more or less hires themself through the separate MBO division.

Of particular interest to me is the 401(k) Plan they offer to their consultants and advertise as one of the key advantages to going with their PER model rather than typical indendepent contractor arrangement. They say that their arrangement / plan will permit consultants to defer up to the maximum annual contribution $49,000 each year. Apparently you make elective deferrals on the employee side and because each consultant is also a separate employing group or division under the MBO Executive 401(k) Plan, the division can also make employer matching and profit sharing contributions (presumably determined on a division by division basis).

I'm trying to figure out exactly how their 401(k) plan can permit this and whether that all seems viable. Would welcome thoughts from anybody with experience with this or similar arrangements.

Small plan, where owner has $500K with a financial advisor, and the employees have their money with a recordkeeper (perhaps Asensus). Because the money is actually held by someone other than asensus, they are subject to the small plan audit waiver disclosures.

1) Does everyone agree with me so far?

2) Let's say the SAR says plan assets are $1Million. You disclose that trust company ABC is holding $500K. How are people handling the fact that a little simple math can be revealing regarding the owner's balances? OR perhaps people will question, "where is the rest of my money?".

We've done two things in the past:

1) We've added the two pockets of money together and said "ABC Trust Company and Pershing" and then put the total investmetns held, toghether.

2) Concluded that getting a statement from Asensus is so close to being an individual account plan that it's probably OK and skipped the disclosure (as I'm sure thousands of plans do simply because they haven't put as much thought into this as I have!

I have a client with a cross tested 401(k) and wants to add a cash balance plans covering the same employees. I have a few of questions.

1. I assume the 401(k) plan will have to provide the 7 1/2% gateway. I remember something about proposed regs that changed this but were withdrawn. I don't think the withdrawn language was included in the final regs. Is the 7 1/2% gateway still the rule?

2. If the answer to #1 yes, are terminated participants who still get interest credits considered benefiting under 410(b) so that they get the gateway? I know terminated participants will not have any compensation and 7 1/2% of zero is zero. Maybe this is how it is avoided but I want to make sure I am not missing somethign here.

3. I assume we will need to eliminate the end of year requirement in the 401(k) plan so that the employees who terminate during the year and benefit under the CB plan can get the gateway under the 401(k) plan. Is there any other items I should look for to make these two plans work together?

Thanks

Does anyone know whether individual participants in a Non-Qualified DCP are allowed to direct their own investments in the Plan?

We are trustee of a DCP with about 10 participants and we are attempting to develop an investment policy. We are unsure about whether it would be considered constructive receipt (by the participants) if we allow them to direct the investment process. Does anybody have any thoughts, or know where we can read up on this?

Thank You!

Does anyone have an opinion on if the Plan Sponsor needs to keep the original signed promissory note (paper copy) or is an electronic copy sufficient?

Thanks All!

For a defined benefit plan, the definition of actuarial equivalence is:

Pre-retirement interest: 6%

Pre-retirement mortality: None

Post-retirement interest: 6%

Post-retirement mortality: 94 GAR, proj to 2002.

In calculating a lump sum distribution under IRC 417(e), do you use pre-retirement mortality or post-retirement only?

Has any guidance on this issue been published?

Previously, in the old SAR days, we would include a statement on the SAR explaining that the employer missed a quarterly contribution and provide them with all of the required information. Since the SAR was done with the 5500 for the year in question, most people considered this timely notification.

Now that AFN's are due 4 months after the first day of the year, before the employer may have completed the required deposits, do you think it would be ok to wait until the following AFN to report the late quarterlies?

For example, can I report missed quarterlies for 2009 on the 2010 AFN which is distributed in April of 2011 or would the client need to do a stand alone notice? If you think it needs to be a stand alone notice, when would you send it?

Can you use QNEC's to satisfy gateway requirements assuming the QNEC is not needed to pass a(4)?

I am just looking for some input on a problem I have. I took over a DB plan in 2007 and I have completed the 2007, 2008, and 2009 valuations, etc. The plan is a small plan with 8 participants and it's covered by the PBGC. The plan has been terminated as of 12/31/09. The plan sposnor is the client of the TPA that engaged me as the EA.

This week I was advised that there was an additional terminated vested participant that we were not aware of. The participant terminated in 2004 with a $100/mo AB payable at age 65. The participant is now age 35. Obviously everything that has been done is technically incorrect. I want to do the right thing but I do not want to needlessly have the plan spsonsor incurring fees. If I look back through the actuarial valuations, if I were to amend the valautions there would be no meaningful effect on the plan compared to what actually happened. In 2007 the sposnor contributed $15,000 more than required so maybe that credit balance would be lower by a couple of thousand at most. They never used that credit balance and and they had a $0 requirement in 2008 and 2009, and that would not have changed if the missed participant were included in those valuations. I just don't know if it's necessary to amend the vals and 5500 filings? The PBGC filings are off and those should probably be amended I feel. The Form EA-S is being amended. The plan has significant excess assets.

What would you do?

Thanks.

I hope someone can assist with the questions below. We are trying to anticipate the issues that will arise with clients that wait until October 15 to file and do not have the financial statements available. Please post if anyone has had experience with two scenarios described:

Scenario 1:

The 2009 Form 5500 is required to attach the report of the IQPA, but the report will not be attached to the electronic filing that is submitted with the Form 5500 to the DOL. Part III of the Schedule H is not completed. The filing will be accepted by the DOL as a timely filed return, but the filing should be amended ASAP. This is consistent with FAQ25. Per the EFAST2 helpdesk the filing status most likely will be the status “Filing Error”, but they are not sure.

Which filing status will be received - Filing Stopped, Filing Error or Filing Received (all indicate that the return is timely filed; the first two indicate an amended returns is required)

Scenario 2:

The 2009 Form 5500 is required to attach the report of the IQPA, but the report will not be attached to the electronic filing that is submitted with the Form 5500 to the DOL. Part III of the Schedule H is completed. The EFAST2 helpdesk does not know whether or not this filing will get Filing Unprocessable (not timely filed) or Filing Error/Filing Stopped.

Which filing status will be received - Filing Unprocessable, Filing Stopped, Filing Error or Filing Received? Filing Unprocesssable indicates the return is not timely filed; so we move into a DFVC filing instead of amended return filing.

Thanks.

ok - in the our new world of EFAST2 can others tell me what they do for this situation...

I have a JHancock plan with redemption fees. We report these on the Sch A. The report does not give me the street address, city, state or zip for the Fund Company.

The Sch A does not validate without that info. What do others do or can someone point me to where I could find a valid address for a Fund Company?

In this instance it is Vanguard Group Inc but I know there are bound to be more.

Thanks in advance.

We have a client that has two participants who had distributions paid in 2009 with incorrect vesting calculations.

The correct vesting was calculated and paid to these participants in 2010.

The client wants to know if they now need to answer question 4L on the Schedule H ‘Has the plan failed to provide any benefit when due under the plan’ as a ‘Yes.’

Any help would be greatly appreciated!