In addition to the annual matching contribution made on behalf of employees contributing to the employer's 457 plan, a governmental 401 plan provided for a one-time employer non-elective contribution for the 2004 plan year. The plan was restated effective 1-1-2009 and continued to provide only for employer matching contributions. However, following the 2004 plan year, the employer continued to make non-elective contributions and wishes to make this a permanent feature. To remedy this operational defect, should the employer submit through VCP a retroactive amendment effective 1-1-2004 for the inclusion of the non-elective contribution?

Is it possible to have a multiple employer governmental 457 plan? For example, numerous municipalities wish to consolidate their benefits and regionalize for purposes of 457(b) plan sponsorship. How would such a plan be structured? Would it be suffice to have one plan document and each adopting employer execute a joinder agreement signifying their adoption of the plan identifying any plan provisions that deviate from the standard plan structure? Other than monitoring the deferral limits, are there any compliance and recordkeeping issues that would need to be addressed?

Hi ...i was wondering if someone can defer a percentage of their total compensation?

if over the Comp limit?

thanks

As an IRS agent specializing in employee plans, I am puzzled by the failure of employers to lower their payroll excise taxes by compensating employees through 401(a) plans. I am also mystified by the failure of advisors to notify employers about how profit-sharing contributions avoid excise taxes of as much as 21.3 percent while elective deferrals to the cash-or-deferred arrangement in a 401(k) plan fail to avoid any of that tax (see 3121(v)(1)(A) and 3306®(1)(A)).

A small employer with five employees earning $100,000 in compensation (including deferred compensation) each can defer up to $100,000, thus avoiding $15,300 in Social Security and Medicare excise taxes. The full 21.3 percent (including unemployment), or $21,300, can be avoided if the employees earn no more than $7,000 each. $15,300 seems like a significant tax savings for such a small company, and $21,300 even more so.

When I asked a business-owning friend about this topic he said that his company had a 401(k) plan without profit-sharing contributions because he thought they needed big profits to make such contributions. Of course, such is not the case- the requirement that profit-sharing plan contributions be limited to profits was abolished by statute in the 1980s. Saying that an employer cannot afford such deferrals makes no sense either, because profit-sharing contributions allow employees to keep a greater proportion of their compensation.

Of course, contributions to retirement plans are generally subject to the additional tax on early distributions. However, even if employees cash out all of the contributions, the tax of ten percent is less than the tax savings of 15.3 percent or 21.3 percent. Keep in mind that employer contributions to profit-sharing plans can be distributed at a certain age and that the age at which such distributions are allowed can be less than the age of each and every one of the employees. Revenue

Procedure 80-276 includes the following assertion. "...a profit-sharing plan may specify any age for distribution of

benefits..."

Use of profit-sharing plans for excise tax avoidance may limit the extent to which highly-compensated employees can exploit the benefits of tax deferral. However, I strongly question whether those benefits can realistically be expected to be greater than the value of excise tax avoidance. To begin with, the ADP test can substantially limit the amount highly-compensated employees can defer. Even if they can defer up to the 402(g) limit, the amount is still not very impressive. For example, if all five employees in the example employer cited above deferred the full $16,000 (my apologies if I am a little off) and were in the 31 percent marginal rate in retirement (I am using the rates for married individuals), the savings would only add up to $4,000. And that assumes that they will be earning substantially less during retirement and that tax rates will not go up- both of which are dubious assumptions, for the most part. If the difference in earnings between the time when the compensation is earned and when it is withdrawn does not cross a bracket, no savings will be achieved at all from tax deferral. Moreover, the employer contributions that I discussed above have the very same tax deferral advantages as elective deferrals. In fact, they are even more advantageous, since the total amount of deferred compensation is $100,000 versus only about $80,000 for elective deferrals, as limited by 402(g).

So what am I missing?

Does anyone know the difference between a sub-transfer agent fee and a shareholder servicing fee?

On 6/1, the company I work for was acquired, resulting in new benefits becoming available to our family. The effective date of any elections under the new benefit plan is 6/1.

Our family is currently covered through a HDHP/HSA offered by my husband's employer, but we're opting to change to the family coverage offered by my company. The new coverage is a PPO plan, offered with an optional full (NOT limited purpose) health FSA. I understand that discontinuing participation in the HDHP will make us ineligible to continue contributing to the HSA.

My husband's employer states that any family status changes are to take effect 30 days after the date of the change, so our coverage under the HDHP/HSA will continue until 7/1. We will be thus double-covered for the month of June.

Specifically because of this overlap month, I *think* we are ineligible to participate in the new health FSA, because it looks to me as if simultaneous participation in an HSA and a non-limited-purpose health FSA is prohibited by IRS code. Am I correct?

We've talked to both employers, and no one is willing (or able, very possibly) to budge on coverage end/begin dates.

Are we best off just making a lump-sum contribution to the HSA before 7/1 to max out our $3075 adjusted limit for the year and foregoing the health FSA until next open enrollment (which is the same as the calendar year)?

I have a TPA who is charging two types of loan fees - an annual maintenance fee that is deducted from the participant account each year and a loan set-up fee which is not posted to the participant as a fee, but is included in the loan disbursement and then deducted from the check amount (ie the participant has a loan for $5,000 but only received $4,900 check due to the $100 loan set-up fee). My question is about how these fees should be reported on the new Schedule C for 2009. The TPA has prepared the Schedule C showing only the annual maintenance fees as direct compensation, and not the set-up fees. I am not sure if this is correct or not. On one hand the set-up fees are being distributed from the plan to the TPA and seem like they would be reportable as fees received. On the other hand, the fees are being paid by the participant to the TPA (not that the participant ever sees the money or has a choice). How is anyone else handling this situation? I couldn't find any clear guidance in the IRS instructions or FAQ's. If I missed it please help me out! thanks.

Under the Early Retiree Reinsurance Program regulations, plan sponsors are required to have a written agreement with their health insurance issuer or employment-based plan, requiring the health insurance issuer or employment-based plan to disclose information on behalf of the sponsor to the Secretary of HHS.

Does the Business Associate Agreement that is already in place with the health insurance issuer cover this requirement? Or do we need to get a separate agreement signed?

Any thoughts?

I was asked to do a proposal for a defined benefit plan for company that has an existing 401(k)/profit sharing/Davis Bacon plan. Now normally this does not present a problem except this is the first Davis Bacon plan I have seen with a contribution rate of about 25% on Davis Bacon wages.

When I inspect gross covered pay for the 401(k) plan vs Davis Bacon contribution it comes to 22.5% of pay. Regular profit sharing took the contribution to a full 25%.

That leaves very little to use for a defined benefit plan, whether traditional or cash balance. Since the pension plan has to pass 401(a)(26) with meaningful benefit accruals for a sufficient number of participants, a standalone plan seems out of the question as well as a plain DB/DC combo.

That leaves me with an offset plan, probably a traditional offset because of the meaningful benefit problems - that is, a formula that gives the desired contribution for the owners and see how the offset affects the rest of the contribution - which is limited due to Davis Bacon contributions.

I believe the offset can only be balances accumulated while both plans are in place. Question 1- is is possible to use all prior accumulated balances if past service is granted?

Of course this rules out using DB/DC combo testing, but it accomplishes the same goal. Question 2 - is there a better design, and if so are you willing to share it with me?

Thanks all.

We are just trying to get the hang of using Web Client.

It seems when we set up a new client, they automatically receive an an email notification with their UserID and password. Then when we publish their 5500, they once again receive the same email notification with UserID and password.

Is there any way to circumvent these duplicate nofications?

(A fellow employee is submitting an incident to Relius; we are trying to see who gets an answer first.)

Has anyone seen information on an extension beyond June 1, 2010?

Myself, along with two other employees are participants in a 412i plan that is terminating. There have been four outside parties involved with the administration and termination of the plan and have reason to believe that many things have been done wrong. We have been given inconsistent information from each party and have had information withheld from us. How can I find an advocate to review and advise on our behalf as we are in way over our heads trying to understand this complicated plan and termination process.

We are wondering whether a fee that we charge for the distribution of a participant's account is to be included in Box 1 of the 1099R. If so, should it also be included in the taxable amount box?

Thanks for your help!

Hello:

This one seems to has me going in circles.

Participant is a FT Employee and has worked and been eligible for the 401(k) plan for 4 years. Participant decides they want to change to PT status. Plan excludes PT Employees until or unless they work 1000 hours during an eligibility computation period.

The answer would be easy if they were moving into a different type of excluded class (i.e. union emloyees, nurses, etc), but this PT status has me struggling. Given the IRS's sensitivity to this PT/Temp class exclusion, I am not sure how this should be applied.

If they change today into PT status, but have worked 1000 hours already in 2010, would they really ever be PT, or does the "hours clock" start over from the day they enter the PT excluded class?

Obviously the risk is if they exclude them, and they should not have and a good amount of time passes before discovery, they will owe QNECs to correct, whereas if they include them and it is determined they "guessed" wrong, the correction would be to get the money out of the plan. Just not sure

Thanks in advance for any insight into this application.

Andmik

"Dear XXXXXX

Product enhancements and EFAST2 regulations mandated by the IRS have generated a higher than expected call volume. As a result, you may experience a delay of a week or longer before you receive a response from our Relius Government Forms client services team. We apologize for any inconvenience this has caused and assure you that incidents are being answered in the order they are received. "

I

Is there a problem granting 100% vesting when certain employees are hired and they previously worked at certain medical facilities and are now being hired by a certain employer, lets call it an anesthesilogy PA. If HCEs and NHCES of the group being hired are treated the same, there is no discriminatory treatment. But granting this group 100% vesting and immediate eligibility while new hires of the employer have to work 3 years for 100% vesting and one year to be eligible, creates BRF testing does it not?

I appreciate any insights, thanks!

I have a plan that lays off employees during the winter. When the employee comes back we refinance their loan to be sure the finish the loan in the original time period. One participant came back and made a few loan payment but his loan need to be paid up by 6/1. He still has a $500 balance. He needs to pay off in full now or the loan defaults correct? It is a deemed distribution not an offset correct since he has not had a distributable event? This also limits him to not being able to take a new loan in the future right?

Also, I have a plan that stopped making payments on a participants loan b/c the participant could not afford to make the payments anymore. The plan just told us they did this months ago. The loan is in default now. Is this also a deemed distribution since the participant still works there?

When running testing using net comp, if the owner has K-1 income of say $250,000 AFTER all employer/payroll tax deductions, are other people reducing the comp by the $16,500 in deferrals to test consistently?

I'm not sure there is any basis for doing it this way, it just seems like the right thing to do...

First year of Non-profit organization is 2010. There are no owners and three of ten participants are earning more than $110,000 in 2010. Are there any HCEs in 2010 if there was no employer in 2009? Thanks.

FT Williams has a report that indicates whether a 5500 has been accepted and the date.

One plan was accepted the other day, just for the heck I tried the DOL website

(you can enter EIN, plan name or whatever,

http://www.efast.dol.gov/portal/app/dissem...?execution=e1s1

yes indeed, its already out there for full public viewing.