Employee properly elected an amount to be withheld in 2009. Due to administrative error, withholding did not occur through the full year and the full elected amount was not withheld. What are the options the employer has to put the employee in a neutral position (as if the full amount was withheld in 2009)? Thanks!

It appears that, for a partial IRA conversion to a Roth in 2010, the IRA holder will need to wait until December 31, 2010 to value the consolidated IRA balances and determine tax consequences (assuming there is basis in the IRAs and they weren't all deductible contributions). My question is, does this "pro rata" valuation date of 12/31 apply when all IRA balances are converted (i.e., not a partial conversion)? Can the IRA holder in this instance use the IRA valuation as of the conversion date?

An employer wants to merger two 403(b) plans - one provides for hardships and loans and the other does not. As I read the regulations, a plan merger would need to comply with the plan to plan transfer rules. Specifically, the requirement that the receiving plan must provide that to the extent any amount transferred is subject o any distribuiton restrictions under 1.403(b)-6, the receivng plan must impose restrictions on distributions... that are not less stringent than those imposed on the transferor plan."

I am thinking this means that the transferred amounts cannot be made available for loans and hardships. But couldn't the transferred plan be amended to provide for loans and hardships before the transfer? And then aren't we in the same place as with 401(k) plans where the IRS has esstentially said you can allow these types of options because it is treated like a plan amendment?

We restated a document for EGTRRA and are going to submit it to the IRS for approval. Is this plan exempt fromt he user fee?

401(k) plan

less than 100 EE's

at least one NHCE

initial effective date, 1/1/99

My little chart says it is exempt, but I want to make sure.

Our company is closing- one of the employers is starting a new company or taking over this company. They have decided to close the 401k plan. However they have mentioned that there will be charges incurred, administrative charges to close it, and these charges will be charged back to the employees. This is a very small company.

Is this legal? do they have to give written notice of any administrative fees they will charge?

I have another 401k plan with a company I used to work with, and they charge quarterly fees for administrative costs, and they have always given at least 30 days notice of any changes to the plan.

There are very few employees in the plan, but there are also some former employees that are still in the plan. If charges are legal and incurred would it be to all members in the plan, I assume. Is there some reasonable way to determine the actual fees and how they are divided amongst the employees?

who would I ask these questions? Attorney General?

Employer A and Employer B (controlled group) have been participating in a Safe Harbor 401(k). During 2010 (not sure when) relationship changed and Employer B no longer part of the A/B controlled group. Employer B now wants to spin-off their portion of the A/B plan into their own plan mid-2010 and want that plan to be a Safe Harbor plan (same provisions that were inthe A/B plan).

If Employer B establishes the plan year as the calendar year, then the first plan year obviously would be fewer than 12 months.

Would this be a "successor plan" for Employer B prohibiting them from establishing a safe harbor plan for the first calendar/plan year (more than 50% of eligibles in the Employer B plan participated in the A/B plan)?

Would the obvious solution to be safe harbor for the first plan year be to establish the first plan year as off calendar year and then (if they want/need to) do a short plan year and then go calendar/plan year?

Company sponsored an individually designed target benefit plan - (set to amended for EGTRRA in 2011). They decided they wanted to switch to a profit-sharing plan. So they signed a volume submitter document profit-sharing document (with a minor variance from the specimen document) and merged the target benefit plan (individually designed) into the profit-sharing plan (VS)

The profit-sharing plan was effective beginning 7/1/09. I would like to get a determination letter since there is a variance from the specimen plan, but am unclear whether I need to do so by 4/30/10 (the deadline for EGTRRA Restatements for M&P and VS plans).

Can anyone point me in the right direction?

This is a complicated situation, so I'll see if I can hit enough of the highlights to get the questions across. Facts are not in duspute:

We (I'm with the sponsor) have a large plan with lots of participants (more than 125,000). All transactions are paperless except for hardship withdrawals, and those few people whose accounts still have money requiring spousal consent.

Participant gets a virus on his home computer that "scrapes" his social security number and password and sends it to the bad guys (BG). BG uses that information to log in to the account, and changes the banking information. Participant receives notice of change in banking information, but disregards it.

BG waits through the required 7 day wait on banking changes, requests a $9,500 loan with direct payment to the newly defined bank.

Another week later, Participant receives paystub that shows a hefty loan payment being deducted from his check. He calls the call center, which triggers research. Needless to say, the money is no longer in the receiving bank. It went to a bank in Russia, and may or may not still be there.

We see two sets of issues:

1. The money has left the account, and we're seeing the participant as the responsible party. But at a high level, do we treat this as a loan and continue loan payments, treat this as a loan but allow him to stop payments, or treat this as some kind of investment loss.

2. What is the tax treatment of the event? 1099 R Early distribution no known exception; 1099 R Early distribution exception applies; No reporting required. Fortunately, it was a 2010 event so we do have time to figure this part out.

Anyone with actual experience in a similar situation?

In the post-PPA world, for a cash balance plan that is not subject to 417(e) whipsaw that defines the accrued benefit as the account balance, is it still necessary to convert the account balance to an annuity if the plan is being tested on an allocations basis (as part of a 410(b) test). Or can the account balance be uses as the allocation for purposes of determining the normal allocation rate?

Opinions?

Second question, is the pvab for top heavy testing the account balance? (Obviously this is a document question but the ones I'm working with are foggy at best on this issue and aren't necessarily PPA final form, e.g. Corbel).

I was asked to do a DB proposal for a company that as of March 2010 terminated all of the rank and file employees and now only the two owners remain. The owners want to set up a plan for themselves effective 4/1/10. If the plan was set up with no past service credit I am wondering if there could be any issues with respect to 1.401(a)(4)-5(a) nondiscriminatory timing of amendments (which includes the establishment of a plan)? Any input is appreciated.

Can a plan sponsor craft their own rules for counting Hours of Service under a 401(k) Plan? In this case, the plan sponsor is a university and has historically permitted instructors (similar to adjunct professors) to participate in the 401(k) subject to the plan's 500 Hours of Service requirement. Instructors are paid based on the number of classes (and class hours) they teach per semester. The university has historically tracked instructors' Hours of Service for 401(k) Plan purposes by crediting them with 2 Hours of Service for each 1 "hour" (really 50 minutes) spent in class. Thus, each hour taught by an instructor results in 3.0 Hours of Service (1.0 hour for the in-class time plus 2.0 hours of prep time). Based on a quick read of the regulations, it does not seem to me that a plan sponsor can craft it's own system for crediting service or establishing Hours of Service equivalencies. Am hoping I am missing another way to think about that. Thanks.

Plan was set up in the 60's w/ a special effective for 401k of 1/1/2007. If the plan is being restated, is it necessary to continue to indciate the special effective dates for the 401k feature? I've always looked at those fields in the prototype as a way to create one document today that can have certain features kick in tomorrow, but that it's not necessarily necessary to memorialize until the end of time.

A resolution by the retirement plan committee (not a plan amendment):

"Until a Participant or beneficiary receives an additional contribution to his or her account under the Plan, no income or gains of less than $25 shall be allocated to a Participant's or beneficiary's account after he or she has received a lump-sum distribution from the Plan. If such income or gains are allocated to a Participants's or beneficiary's account, such amounts, as directed by the Committee, shall be treated as forfeitures of Matching Contributions."

Are there any known issues using Relius Web client to submit 5500s to clients and DOL?

Anyone having software problems?

Can someone please tell me the deadline for making a top paid group election under 414(q) (1)(B)(ii) in order to be effective for the testing year of calendar 2010?

I have a Newsletter which claims that the PPA established a set deadline for making the election. The Newsletter says that the election must be made "by the end of the plan year." I am unclear as to which plan year the Newsletter is referring to ... the testing year (2010), or the preceding "lookback" year (2009).

I was unable to find the relevant provision in the PPA. Can anyone provide me a citation?

Thanks for your help!

We administer a calendar year 401(k) profit sharing plan that has a pooled account consisting of various investments, including cash, mutual funds, etc. and a parcel of undeveloped land. The appraised value of the property as of 12/31/09 has decreased substantially from the appraised value as of 12/31/08. As of 12/31/09 the property is worth less than what is owed on the note, so when we calculate what each participant's account balance, the values are negative. There are HCE's and NHCE's participating in the plan. Any suggestions or input on what to do? Is this right?

Thanks!

What is the fiduciary duty of a Plan to the alternate payee?

I'm an AP to my ex's annuity plan. When I asked the plan to place an administrative hold on the account until they receive a court signed QDRO, the plan told me they only do that for 30 days at a time and for a maximum of 60 days. I asked what happens if that time passes and they court hasn't signed a QDRO and the participant retires and withdraws all the funds. I told them my ex will be retiring soon. The plan told me that they don't protect the AP's funds after the 60 days if they haven't received a court signed QDRO.

Is this a breach of the fiducuary duty to the AP?

Also, I asked for their plan procedures after a draft QDRO is submitted and they said they are not in writing but they could "tell" me their procedures.

Don't they have to file written plan procedures with the DOL?

Can someone shed some light on this? Thank you in advance.

Where do you mail the 5500ez for 2009 (using 2008 EZ form)? Thanks

Over the past couple days, I've been getting "IPS" errors, or something like that. Says something is wrong w/ the database.

Anyone else getting that error a lot?

Assume a health FSA operates on a year of Feb. 1, 2010 to Jan. 31, 2011 (so employee salary reduction elections were made prior to PPACA), it files its 6039D information on that basis, and would report any discriminatory benefits for key employees or highly compensated employees as of the year ending 01/31/2011. Assume further that some participants file for bankruptcy during 2010, so their taxable years are not necessarily a calendar year. When does the restriction of new IRC section 125(i) become applicable so as to prohibit reimbursement for over the counter medications in "taxable years" beginning after 12/31/2010?

Thank you in advance for your replies to this question.