I have read the instructions, called DOL - were nice but just told me to read the instructions or call the IRS on EZ questions, Was on hold with the IRS for over 1/2 hour and gave up.

Situation.

Controlled Group

Both companies covered under one plan.

Both companies have one EE each - husband in one, wife in other.

Can I file an EZ? I think the controled group issue that I had before went away.

Any ideas?

Pat

I am interested in information regarding restrictions around paperless enrollment within a 401(k) plan.

My question is related to obtaining electronic signatures via Web or IVR systems.

I have always believed that the enrollment form is an agreement (e.g. a contract) between the Employer and the Employee to withhold a portion of the compensation and deposit the contribution into the plan trust. Therefore, obtaining an electronic signature via the ESIGN act will suffice in relation to official execution of this agreement.

However, I am being told that there are 15 states in which such an electronically signed agreement is invalid because those states do not recognize or allow electronic signature for agreements.

Is it true that a participant's paperless enrollment into a 401(k) plan is invalid in some states?

Thank you in advance for your comments.

Suppose a small employer wants to terminate their DB plan ($750,000 in the plan). The current plan year began July 1, 2009. They will freeze now and terminate the plan before June 30. The plan is not subject to PBGC.

The July 1, 2009 minimum contribution is $100,000, but no contribution has been made yet for this plan year. The 100% owner has 90% of all the plan benefits and wants to sign a "waiver" to forego receipt of any of their own benefits that do not get fully funded. They want to put in $50,000 into the plan and waive the rest.

According to one enrolled actuary, the affects of the plan termination and any signed "waiver" of benefits by a majority owner, if done by the end of the plan year, can be reflected on the schedule B and thus a new actuarial valuation can be done to show a July 1, 2009 minimum of $0, even though benefits accrued for the year (the waiver undoes the accrual).

If that's true, wouldn't that also affect the maximum deduction as well? The EA hesitated on this but thought the plan could always deduct up to an amount needed to fund lump sums, even if the owner's benefits were waived.

1. Can the July 1, 2009 truly be modified as described to now show a minimum of zero?

2. If so, would the employer be able to contribute and deduct an amount to partly fund the final benefits?

Sole proprietor has a tax qualified plan. The State has seized all assets, including the assets of the one-man retirement plan. We don't have the protections of ERISA's anti-alientation rules...would 401(a)(13) protect the benefits from State seizure of assets?

Routing filings function is not working. This issue is not with your computer. PBGC is aware of problem and should have resolved in next day or two.

Hi,

We just picked up a new client. The client has a profit sharing plan that he wants terminated asap. The plan document has not been amended since 2004. The client was misinformed and did not realize that amendments were necessary - he has been acting as though the plan was terminated for some time.

Some of the plan assets have been distributed - but most are still in tact. This is a 2 person plan (1 owner 1 employee) - I believe the employee received a distribution from the plan in March 2010.

We are going to update the plan for any missed amendments and file under VCP. My question is - is it possible to avoid restating the plan? If the employer adopts a termination amendment as of of February 1, 2010 (employer would sign this amendment with today's date) - would a restatement be necessary since the plan terminated before the restatement deadline?

This is a small start up business and any fees we save this employer would help him out. My thoughts was to update any missed amendments, adopt a termination amendment as of 2/1/2010 and file under VCP.

Thanks for any help.

Linda

We have an employer with the potential for a number of seasonal / temporary employees that come and go during the year (Spring and Fall seasons). Some of these individuals will likely accrue 1,000 Hours of Service during the course of a 12 month period / Plan Year. The Plan historically has required a Year of Service to be eligible. My understanding of the eligibility rules is that these individuals likely have to be permitted to participate in the 401(k) Plan once they have 1,000 Hours of Service even though they will not be employed on the last day of the Plan Year or work continuously throughout the year.

First question, is there any way to generally exclude these sorts of seasonal employees from entering the Plan? For example, the volume submitter plan document includes one eligibility option which provides for "______ (not to exceed 12) consecutive months of employment from the Eligible Employee's employment commencement date. If the Employee does not complete the stated number of months, the Employee is subject to the 1 Year of Service requirement in f. above." My understanding is that this option still may not work to exclude the seasonal employees who come and go and come back under the Plan. That is to say, unless an employee has an extended break in service, service spanning rules could require the period(s) of absence to be counted as eligible service. Does that seem correct?

Any way we may be missing to exclude these sorts of seasonal employees from entering the Plan?

Second question, the 401(k) is deferral only so no match and thus not that much of an issue to permit the seasonal employees to make elective deferrals if they desire. Employer is thinking about adding a profit sharing contribution to the Plan now, however, and does not want to have seasonal employees receive that profit sharing contribution. Assuming that the eligibility provisions are such that the seasonal employees with 1,000 Hours of Service are in the Plan and assuming they continue to accrue 1,000 Hours in each Plan Year, can the employer impose a Last Day requirement on the profit sharing piece and effectively deny the seasonals a profit sharing contribution? Because of the seasonal periods, none of the seasonal employees would ever generally be working on the last day of the Plan Year (December 31)--although they may or may not return to seasonal employment the next spring.

DB Plan is the beneficiary of an insurance policy with a face value of 1,000,000 with a cash value of 100,000.

Plan wants to assign the policy to the individual participant (HCE) and get the policy out of the plan. Currently owner is the only participant but he will be hiring some employees during 2010. Plan will be amended accordingly so as not to purchase insurance for participants.

How is this accomplished

Does the participant pay cash value back into the trust

Is “springing cash value” an issue?

Assuming we can satisfy coverage and nondiscrimination tests, is it possible to exclude union employees from participating in a DC plan, regardless of whether they are covered under a CBA? For example, if union is certified during the third month of the plan year, can they be excluded even if there is not yet a CBA? They would not meet the definintion of "collectively bargained employees" and consequently could not be disregarded for purposes of testing, but is it otherwise permissible to exclude union members as a class of employees?

Due to the economy, client was not able to fund their 2008 Safe Harbor 3% nonelective contribution. They are able to do so now. Since we are past 12 months following the plan year, but still within the 2 year self-correction period, is this eligible for self-correction? Or, is this a qualification issue and as such must be submitted under VCP?

Recently had a client report their audit cost about $33,000. This seems pretty high to me as the last I heard Form 5500 audits were more like the $5,000 to $10,000 neighborhood - for limited scope where the plan has a certified annual asset statement. A full scope audit was required because of the lack of a certified annual statement. Employer uses a TPA for recordkeeping and all money is invested in one mutual fund company that informed them they do not provide certified annual statements. Have you had the same experience with mutual fund companies? Thank you for any information you can share! Employer is located in Texas.

Employer failed ADP test for 2002 and distributed excess deferrals to HCEs within 2-1/2 months after end of 2002. Because of a plan correction, the Employer had to re-run its ADP test and discovers it distributed out too much in corrective contributions to its HCEs in 2002. What is the correction method? The catchall overpayment provision in Section 6 of Rev. Proc. 2008-50 says the employer is to request the money back but if the employee does not refund it, then the money must be paid back into the plan by the employer if no one else pays. The Employer would just like to issue a 1099-R as to any un-reimbursed amounts so that the employ just pays 10% early distribution tax on un-reimbursed amounts.

I am at a company right now that switched Payroll providers about 2 years ago. The old payroll company had provided a POP plan document and testing to meet Sect 125 compliance, but I can't see where anyone was ever required to enroll in the POP (no enrollment forms have been found in any personnel folder). For the last 2 years, I don't believe there has been any testing for the POP (although I am certain they would have passed testing as all employees are eligible from day 1), there wass no updated plan document for the POP, and still no employees have ever elected to particpate in POP....just an assumption that when they signed up for the eligible benefits that the employee premium would be deducted from the paycheck on a pretax basis.

Any suggestions on how to clean this up and any idea on how significant the company's exposure is?

I have already gotten a plan document from the payroll provider, have contracted with them to do our testing, and will have new employees enroll officially in the POP?

What do I do about the missed testing? What do I do for employees who never signed up for the POP? Technically, I can't retroactively enroll them under section 125.

Any help or suggestions are appreciated.

Thanks in advance.

When a company gets a Federal Funded contract, do they have to set up a fringe benefit account at that time? That is does each contract require a new plan?

I work with a TPA who provides their clients, for which we serve as trustee, a trust and plan document and a service agreement. The TPA says they cannot contract directly with the company on this service agreement. Instead, they have written the document such that the trustee must hire the TPA. I am wondering if this is necessary. And if it is, what is the basis for it. Why can't the client and the TPA deal directly with each other?

Last year (2008) we filed a plan with two numbers in the EIN transposed and have caught it this year. Any idea how to remedy this situation without notices being generated??

Does anyone know where I can find a copy of the attachment for late deferrals? We use the Datair 5500 program and I do not see a copy of the form.

Draft ISO/NSO plan provides that value will be determined by the company using reasonable application of a reasonable method, etc. Service provider is expressing concern that owner of closely-held can manipulate its payout by simply withdrawing equity (or other ways that negatively impact a valuation formula that is used (EBITDA x multiplier less liability).

To address this concern, service provider suggests adding back dollar amount of equity withdrawn during 12 month period preceding the exercise.

Any problems?

If I have 33 Eligible Employees and the Plan has a Top Paid Group Election; 20% = 6.6. Do I round up or down or do I have discretion?

Thanks in advance

I've got a series of small "loans" to a disqualified person that add up to a fairly significant amount. I need more space on Schedule C in order to include all of these PTs. Can I supplement the table in Schedule C to reflect all the PTs? Another thought is to treat these disbursements made throughout the year as one big PT and calculate the "amount involved" and excise tax on the total amount, from the date of the first distribution. I don't think anyone is going to like that idea.

Treasury Reg. 1.415©-2(e)(4) permits, but does not require, salary continuation payments to be included in 415 comp. Does HEART's requirement that differential wage payments be included in 415 comp negate the voluntary nature of 1.415©-2(e)(4)? Is there some difference between salary continuation payments and differential wage payments that I'm missing?

I've seen a number of discussions of the impact of this HEART requirement, but none that contain any discussion of its impact on 1.415©-2(e)(4).