If I person has rolled over their profit sharing money to another profit sharing plan - would you consider that seasoned money or rollover money? If they want to pay their life insurance premiums by using this rollover or seasoned money - what is taxable? the premium, ps-58 costs? What do you issue a 1099 for? Do you still do PS-58 costs for premiums made with seasoned or rollover money? No one seems to agree on this question. Thanks

1/1/2010 valuation date.

2009 Aftap 63%

Currently, the 2010 aftap is at 59.6% not reflected in the assets are the contributions receivable to the 2009 plan year.

Can I assume the receivables will be made and issue an aftap over 60% or do I have to freeze accruals until the contributions are made and then reissue an aftap?

Thanks,

Andrew

Plan has two entities adopt the Plan. Both entities operate fast food restaraunts. The ownership is similar in both plans, and is considered a controlled group after attribution. One has a modest profit and the other has a modest loss. Is it safe to assume that each different entity represents its own "trade or business"? What concerns me is that thye are both fast food restaraunts that are therefore in the same business (they are even operating the same franchise). Is this one "trade or business"? Does the fact that it's a controlled group make it "one trade or business"?

If they are "separate trades or businesses" my interpretation (and apparently the EOB's) are that I can ignore the losses based on the following site. My interpretation is tha tthis holds even both adopt the same plan (they could, after all, have created two plans and there should be no dispute at all).

From 401(d):

A trust forming part of a pension or profit-sharing plan which provides contributions or benefits for employees some or all of whom are owner-employees shall constitute a qualified trust under this section only if, in addition to meeting the requirements of subsection (a), the plan provides that contributions on behalf of any owner-employee may be made only with respect to the earned income of such owner-employee which is derived from the trade or business with respect to which such plan is established.

Hi,

We have a client who believes he can make a catch-up contribution to his traditional SEP (client does not have a SARSEP). We have shown him some research (IRS PUB 560 & CCH explanation) to help convince him that catch-ups are not permitted in traditional SEPs. IS there anything else I can show him. He is not convinced by what we have provided so far.

Thanks for your help.

I have a question on COBRA benefits. We have a client who is self-insured. They provide the following types of health insurance options:

Individual

Family

2-person

They would like to offer COBRA as either an individual or a family rate. Is this allowable? I believe you must allow a participant to elect the same coverage they could elect before the qualifying event - and so this option is not possible for them. They believe that they are covering all beneficiaries by offering family coverage.

Thanks so much.

Do you have to give the participant and alternate payee a blackout notice while a DRO is being determined for a QDRO?

Would appreciate any thoughts on the following. Target company has accelerated vesting provisions that cause options and restricted stock to vest upon a Change in Control (CIC). Target also has a DB-style SERP that provides for accelerated vesting and some accelerated service credit plus automatic payout upon a CIC. The CIC definition is 409A compliant. Buyer, as term of the deal, will retain Target's employees but wishes Target's officers to voluntarily waive their rights to any single-trigger CIC benefits for double-triggers. If Target's officers are willing to do that as part of the deal, can it be safely done under 409A?

I wouldn't think amending vesting terms under the options would raise 409A issues per se. Seems neither a modification nor a typical extension of the option here as exercise price does not prolong the period of exercising options.

I know 409A doesn't typically govern restricted stock grants but what if individuals on eve of vesting of the shares due to CIC (and thus on the eve of taxable compensation) agree to amend the stock agreements and push back accelerated vesting rights so they only get acceleration if involuntarily terminated within a certain period following CIC? Some will likely stick around and vest on regular schedule without any acceleration but it is possible some will leave, possibly in 2011, which would seems to me may arguably result in a deferral of restricted stock income--i.e., you had a legally binding right to income that would have triggered upon CIC but you pushed back to a later year. If you amend the agreements before CIC is done, can you somehow avoid 409A issues?

What about the SERP? Is there any way for individuals to basically turn their back on the additional benefit and lump sum single trigger payments they would be entitled to upon a CIC? If you try to amend before CIC is certain, is that impermissible delay in payment and/or impermissible substitution of the original benefit. General plan would be for participants to get the same benefits as before without any additional increase for agreeing to change or for additional service--i.e., they don't get anything more for agreeing to waive the immediate CIC benefits (other than ability to have amounts deferred) since they would generally be given the right to the same accelerated benefits package if involuntarily terminated. (I suppose perhaps there would be some risk to them in agreeing to the waiver in that the amounts are unfunded so they might not be around at a later date. Also, I suppose the Buyer could terminate the individuals for cause or the officers could voluntarily resign after CIC such that they presumably wouldn't be entitled to the SERP benefits at that time but I don't think the Service would really view risk of forfeiture due to termination for cause or voluntary resignation as a substantial risk of forfeiture.

Thanks for any thoughts as to what others have done in these situations.

Reply

A 401k profit sharing is drafted such that each participant (of a plan with say 5 participants) gets its own allocation group. So after the plan year the employer decides on an allocation formula for each participant that meets the non discrimination rules.

Once this is decided is the provision incorporated by means of an amendment for that plan year and then another amendment the next year and so on for each year's allocation rates?

Thanks.

A 401(k) plan has terminated in 2009. The 100% owner of the corporation sponsoring the plan will turn age 70 1/2 October 1, 2010. Her required beginning date is 4/1/2011 but she does not want to take two RMD's in 2011 so she wishes to start in 2010. Our understanding was that the RMD (if taken in calendar year 2010) must be distributed from the plan prior to distributing remaining benefits to the participant.

The fund company will not make the distribution until the participant actually turns age 70 1/2. They claim IRS regulations do not allow for the RMD unless taken after actually reaching age 70 1/2. I asked if they could give me the cite they were referring to and they replied that we must instead prove to them that a greater than 5% owner could paid an RMD on termination prior to actually attaining age 70 1/2.

They could be correct, but 401(a)(9) does not seem to specifically address the age issue.

Has anyone run into this?

My question is once an HSA has been opened, can I incur medical costs in 2010, but finish paying for them after January 1 with my 2011 contribution?

In October 2008 I enrolled our family in a HDHP. It excludes maternity coverage. I opened an HSA in November 2008. Contributed full amounts for 2008 and 2009. Current balance is approximately $10,000.

I am due with baby #2 in September 2010. I had a C-section last time, so I am budgeting for that again. I plan on making full 2010 contribution when pregnancy is further along. (Budget-wise, if I have a miscarriage, I would prefer not to have over $15,000 locked up in HSA, when otherwise our health expenses are minimal.)

When I deliver I plan on having approximately $16,000 in the HSA. I anticipate maternity charges could be in the area of $20,000. After delivery I plan on using all but $25.00 in HSA account (to keep open and active) to pay the medical bills. If I have $4,000 in medical bills remaining, can I make my 2011 contribution January 1, 2011. Then pay the remaining bills out of my 2011 contribution? It would be nice to use the pre-tax money to pay off the last of the maternity bills.

Thank you for your assistance.

This has been a bit of a pet peeve for me.

I generally work with clients that have about 10 employees (when they have employees).

They frequently implement a safe harbor (3% non elective) 401k profit sharing plan.

If the plan sponsor wants to invest than the employees are not relevant and the company invests how they choose and pays out benefits upon termination. Not a problem, though few plan sponsors choose this route as they typically want some or all of the investments self directed.

With that said they look to me for guidance on the set up.

My understanding is that there are many rules to adhere to for the plan to have 404c protection and perhaps not a necessary feature.

So where do I direct them for self directed plan?

1) One idea I have is to have them set up individual sub accounts with Schwab where each participant invests in his own brokerage account in whatever he wants.

2) Another method I believe is to have the sponsor work with a broker at some financial institution where they establish a menu of reasonable and prudent investment options for each participant and they each have access on line to their own account.

The clients I have just want something simple to work with and understand. I don't have to suggest anything complex and extremely custom made. Just something to get them started.

So in conclusion based on the two methods I mention above and my goals, does anyone have suggestions on how to implement what I am trying to do? The more specific re: procedures the better.

I want to establish a comfotable procedure for implementing these plans.

Thanks.

We are the TPA & recordkeeper for a 401(k) plan for which the employer has gone into receivership. We have been trying to terminate this plan for quite some time.. 8-10 months however, there is about $1700 of late deposits & lost earnings due to the plan. The receivership attorney has authorization from the IRS to deposit into the trust however is now claiming there may be other "expenses" that will deplete the funds of the "estate" and he is not sure if he will be able to fund the late deposit amount.

I am at a loss .. I explained that the $1700 represents pre-tax deferrals - and failure to remit is tantamount to stealing wages .. These funds do not represent corporate assets and that there are plan assets...Hence the prohibitted transaction etc.

A suggestion to proceed with the plan termination & distributions now.. and let the receiver attorney deal with any future deposits etc. on their own... I am not in agreement - I would like to see the plan compliant before distributing all assets.

Any ideas/suggestions would be greatly appreciated.

In the past, if an employee has gone through a weight loss medical proceedure or weight loss program because a doctor diagnosed a medical condition such as hypertension or diabetes or heart trouble etc., we have allowed "tummy tucks" and other skin tightening procedures to be reimbursed because the need ultimately resulted from a medical condition. Is this allowable?

In a current case, there is a woman who has on her own as far as we can tell, through diet and exercise, lost a lot of weight and now desires a tummy tuck to take in all the loose skin. Her doctor is telling her this can be reimbursed but we don't think so unless the weight loss portion came about because a doctor said there was a medical condition requiring it and prescribed it. They are also trying to separate out the anesthesthetics for the proceedure, saying that it should be reimbursed anyway regardless.

What is the rule here?

Thanks

We have a 403(b) plan with < 100 ee's, that is marked code 2L for 403(b)(1) arrangement. Looking at 2009 SF instructions, it almost seems like no 5500 is required for 2009? previously, we attached a letter to ebsa indicating that as a 403(b)(1) plan, not all items needed to be filled out. there was also a very abbreviated SAR sent to ee's with next to no info in it. do we do nothing now?

What kind of time frame do you usually allow to go through the FAB 2004-02 steps during a plan termination?

Let's say the initial forms go out certified mail, so that doesn't have to be repeated. And the plan sponsor also attempts to contact the participants using beneficiaries to no avail. What's a "reasonable" time before sending something to the IRS or SSA letter-forwarding services? And, more importantly, what's "reasonable" before just sending the money to a Penchecks or Millennium Trust or someplace like that? I would think you'd want to have that decided up-front so you can put it in the initial letter: "If you don't respond by X, your money will be sent to Y."

Thanks!

Anyone able to illustrate the general structure of building the annuity factor (in general) for a 100% Joint and Survivor Annuity with a 10-year certain feature. Either with first principles or commutation functions. I've never run across this annuity combination before.

Client maintains a safe harbor 401(k) profit sharing plan.

Client maintains a Section 125 deferral plan.

Client offers an HSA that is not part of the Section 125 plan.

HSA contributions are excluded from considered compensation for 401(k) plan purposes.

Correct or incorrect?

Thanks.

In a standard 401k/Profit Sharing Plan, do the partner's employer contributions have to be made by 4/15, if the Form 1065 (Partnership Return) is not extended. If the partner's put their 1040's on extension, can they fund their by the 1040 extended due date, or is it by the due date of the partnership return (4/15 if not extended). Since the employees' profit sharing contribution goes onto the the 1065, that would need to be deposited by the 1065 due date, correct?

We process unforseeable emergency requests based on participant's application asserting that unforeseeable emergency is a result of a sudden and unexpected accident. The accident often results in the particiapnt being unable to work and thus has fallen behind in paying utility bills, car payments, credit card expenses, etc. Generally, these expenese would not qualify as a severe financial hardship because, standing on their own, ordianrily would not qualify as a unforeseeable emergency involved. However, due to the fact that the participant had no significant control over the event that caused the participant to be caught in a financial bind, it appears that these expenses could be considered for an unforseeable emergency distribution. The question is for how long can the particiapnt continue to have distributions be made from his/her account to cover these ordinary expenses, including credit card payments?

Let's say you just want to make a plain vanilla plan amendment to (let's say) add hardship distriubtions, or change the plan's eligibility?

When does such an amendment need to be signed? Or perhaps more to what I'm looking for, is there a good write-up somewhere that goes into when various amendments need to be signed? Before implented, by the last day of the plan year, etc., etc.

Has Corbel done this??