Currently the plan document allocates PS salary proportionate. Eligibliity requirements are 21 and 1 year of service. Once eligibile, there are no conditions on getting the allocation. The client has come to us (at the end of May) and requested a change to the document to allocate PS class allocated by participant. They want the change for 2010. Do I have an issue with changing the PS allocation mid-year?

Thanks for any guidance you can provide.

While cleaning up and reviewing old benefit files, we ran across a Domestic Relations Order (signed and filed with the courts) which appears to have been never completed. There is no indication that we ever accepted or rejected it. The DRO is clearly NOT Qualified. It simply appears that the final steps of the QDRO procedures were not completed.

Fortunately, the Participant is still an employee and the benefit is not in "pay status" yet. We are confident the divorce was finalized.

Has anyone ever ran across this? Would you contact the employee and ask for any paperwork related to this? The year of divorce was 1996.

With respect to the diversification notice required by ERISA Section 101(m) (required to be distributed 30 days before a participant first acquires the rights described in IRC Section 401(a)(35)), does that requirement apply to a 401(k) plan that has just now been amended to add a company stock option (publicly traded), and that will freely allow participants to divest of the stock from the start (as described in the recently-issued IRS regulation)? If so, is it a recurring disclosure requirement, that must be given to every new participant 30 days before the date he or she begins to participate? Is it enough that similar diversification language is contained in the plan's benefit statement (under ERISA Section 105(a)(1)(A)(i)), to which participants have continuous access via a secure website (as described in DOL FAB 2006-03)?

Thanks.

being newer to the 457 world , is it possible in a 457b to have only employer contributions and if so can they be formula driven. If not possible do you then have to use a 457f plan?

Is a small plan holding an asset which is a DFE ineligible to file form 5500 SF because of that?

I think the answer is the sponsor is eligible to file SF, provided the DFE (and every other plan asset) has a readily determinable fair market value and the other non-asset conditions are met.

I went to http://www.regulations.gov/search/Regs/home.html#home, selected "Rules" and pasted "29 CFR 2520.103-1©(2)(ii)©" from EBSA's instructions into the keyword textbox and it immediately served up this Federal Register document! The reg is pretty clear (please see page 20 of the PDF).

EBSA_2007_0045_0001_1_.pdf

I have a cafeteria plan that is terminating.

The plan has been exempt from filing Form 5500 since it has less than 100 participants and does not maintain a Trust for the plan assets.

Since they have not had to file in several years, is a final Form 5500 required to be filed?

Just a quick comment before further analysis:

One of my beliefs to date is that a 412i plan can be funded where 50% of total premium is for annuity contract and 50% of total premium is for life insurance, thus not violating the exceeding 50% of total costs requirement of 74-307.

Is that one approach that is satisfactory?

Cost of life insurance. 412i plan is for the two owners (husband and wife) and only employees of company. Is it always required that a cost of life insurance protection be reported as taxable income per nitice 2002-8 currently or are there situations where cost of insurance is not required or reported as income to participant?

Thanks.

3% NESH for all eligible employees.

Non-Safe Harbor Allocation for Profit Sharring

2% Profit Sharing for all others

10% for HCEs.

They want the 3%NESH to also count towards the 5% minimum gateway.

Is this allowed?

There are multiple s corporations with one shareholder owning over 60% of each. They are trying to form a single parent S corp. to use as the vehicle to form an ESOP and own control of all corporations. Can 1 ESOP be formed at the parent company level and have it cover employees of the 60% subs? I would think this would be permissible - if it turns out to not be a controlled group, it would be treated as a multiple employer plan and subject to the rules under 413?

Any insight would be greatly appreciated.

Hello:

I have a client asking if they can assess an administrative fee only to terminated employees with account balances, but not applying any type of fee to active participants.

I can see that the DOL, in FAB 2003-3, establishes some guidelines but if my reading is correct, it appears to me that they really intended that an administrative fee that is assessed to everyone, can be passed through to terminated participants, but paid by the employer for actives, without a problem.

I do not read the FAB as saying you can assess a fee to terminated participants, but not assess it to active participants (though they may be paid by others), but maybe someone can correct me if I am reading this too conservatively.

Thank you,

Andmik

A participant terminated in 2009 with an outstanding loan balance.

They took a distributuion in 2009, less the outstanding loan amount. The loan was defaulted. A 1099 R was issued for the distribution and for the loan default

My question is where to report the default of the outstanding loan amount of the Schedule H.

Is it reported on line e(1) Benefit payment to participants or is is reported on line g Certain deemed distribribtions of participant loans?

Thank you for any help

I am one of the lucky ones whose Social Security Number ends in 0, 1, 2, or 3. So I must renew my ERPA enrollment by 6/30/2010.

I was enrolled 9/3/2009 and it expires 9/30/2010.

I have read the Circular 230 regarding CPE credits for those enrolled during an enrollment cycle and am confused.

For a regular 3 year cycle it is clear that one must have 72 CPE credit, and one must have at least 16 (including at least 2 ethics) each year.

When one was enrolled during a an enrollment cycle Circular 230 states (page 9 - section 10.6 (e)(2)(iii)):

(iii) Enrollment during enrollment cycle. —

(A) In general. Subject to paragraph (e)(2)(iii)

(B) of this section, an individual who receives initial

enrollment during an enrollment cycle must complete

2 hours of qualifying continuing education credit for

each month enrolled during the enrollment cycle.

Enrollment for any part of a month is considered enrollment

for the entire month.

(B) Ethics. An individual who receives initial

enrollment during an enrollment cycle must complete

2 hours of ethics or professional conduct for

each enrollment year during the enrollment cycle.

Enrollment for any part of an enrollment year is considered

enrollment for the entire year.

I wasn't exactly sure what an enrollment year was for me. For part A, "In general", I figured that I had 10 months from 9/2009 to 6/2010 so that was 20 CPE that I needed. What I could not figure out at all was how many ethics CPE I needed. If the enrollment year was a calendar year (as defined in section 10.6 (e)(1)(i)), and any part of a year was considered a whole year, then I would need 4 ethics CPE. This made no sense to me as I have been enrolled less than one year.

After a couple of attempts I got through to someone at the IRS, and I was not able to clear things up - it only made it worse as I don't think the person I talked to knows what she was talking about.

First of all she said that first paragraph above ("(A) In general . . .") required that someone enrolled during an enrollment cycle had to have 2 CPE IN each month. So even though I was enrolled on 9/3/2009 and received my certificate and card sometime later that month, I had to have 2 CPE in 9/09, and then 2 in Oct 09, 2 in Nov 09, etc. I expressed that this didn't make any sense at all, but she was animate and said we would agree to disagree. That if I was audited, I could be sanctioned if I did not have 2 CPE in each month rather than 20 in the period 9/09 to 6/10. When I asked what I was supposed to about it now as there is no way to go back and get 2 CPE in each month, she said "can't you get them now before you renew?" Which of completely contradicts what she previously said - when I pointed that out, she said that they would accept the renewal, but again if I was audited, I could be sanctioned. I pointed out that the regular 3 year cycle does not require anything similar, that one just had to have 16 per year and 72 total, she referred me back to how the circular is written. She is clearly wrong about this, but it went no where.

When it came to ethics CPE, she first told me I had to have 4 ethics CPE. I’ll spare trying to describe all of this part of the conversation as it was completely bizarre. I explained that I had 1.5 ethics CPE from a recent conference and didn’t know where I could get .5 more to get to 2 total, let alone 2.5 more to get to 4, by 6/30. I asked her if she could define what my “enrollment year” was (calendar or other wise) so I could figure out how many years were in my cycle and then determine how many ethics CPEs I needed. She said some things, but never was able to answer the question - I don’t think she understands it herself. She said “what would I like, would I like it to be 1.5?” I said “sure” and she said “OK”. After picking my jaw off the floor I still don’t know what that means or what I’m supposed to do.

Then she said, “do you want the extension or not?” I didn’t know what she was talking about. She then said something like “well we knew for this first renewal cycle people would have difficulty getting the CPE by 6/30, so we’ve extended until 9/30." I felt like screaming “why didn’t you say this in the beginning?” That also contradicts her contention that we must have 2 CPE in each month.

She then said she wanted to fax me an internal memo. The fax is a Policy and Procedures Memorandum dated 3/8/10 from the Chief of the Case Development & Licensure Branch. It states in part:

ERPA CPE hours for the first renewal cycle of SSN’s ending in 0, 1, 2, and 3, will run from the date the ERPA was enrolled through the end of June 30, 2010.

Renewal applicants will be allowed to earn CPE credits through June 30, 2010.

Although the renewal application window will end June 30, renewal applications will continue to be accepted and processed up to the card expiration date of September 30, 2010.

But I’m lost in figuring this out. She told me on the phone that we had an extension to apply for renewal and get the CPEs, but the memo seems to say that we have an extension to apply for renewal, but he CPEs must be completed by 6/30.

It appears that we have to certify what we have done and retain the records to prove it only if asked. Nothing needs to be submitted with the application to support that we have competed the requirements.

I’m not even sure if I’m posting this to ask a question or just to make others aware of the issue. If any one has anything that can enlighten the situation I would sure appreciate it.

FACTS:

Plan defines Compensation as:

Participant's wages as defined in Code Section 3401(a) and all other payments of compensation by the employer (in the course of the Employer's trade or business) for a Plan Year for which the Employer is required to furnish the Participant a written statement under Code Sections 641(d), 6051(a)(3) and 6052. Compensation must be determined without regard to any rules under Code Section 3401(a) that limit the remuneration included in wages based on the nature or location of the employment or the services performed (such as the exception for agricultural labor in Code Section 3401(a)(2)). The determination of Compensation shall be made by including amounts which are contributed by the Employer pursuant to a salary reduction agreement and which are not includible in the gross income of the Participant under Code Sections 125, 132(f)(4), 402(e)(3), 402(h)(1)(B), 403(b) or 457(b), and Employee contributions described in Code Section 414(h)(2) that are treated as Employer contributions.

Plan states that Benefit Service ends on the date Employee severs employment with the Employer and defines service as elapsed time.

Company has a policy to pay for any unused vacation accumulated by the termination date (could equal the annual compensation if somebody worked over 25 years without taking any vacation) within couple weeks after the termination of employment.

QUESTIONS/CONCERNS:

1. Based on the Compensation definition above, it appears that the final year compensation will include severance pay and will also include the unused vacation pay. Correct?

2. So if somebody terminates the employment on 7/1 and week later receives his severance pay for another 6 months, I will have to use 6 month of service for the last year and full annual pay to calculate retirement benefits. And if this employee has 52 weeks of accumulated non-paid vacations, I would really use double annual salary for the final year. Correct?

3. If client wants to amend the compensation definition to exclude unused vacation pay for benefit calculation purposes, will it make the compensation definition a non safe harbor definition subject to the compensation testing?

4. If client wants to amend the compensation definition to exclude severance pay for benefit calculation purposes, will it make the compensation definition a non safe harbor definition subject to the compensation testing?

When correcting in a subsequent year an operational failure to make a distribution under Section VII.D of IRS Notice 2008-113, it appears there is a conflict in the reporting provisions of Section VII.D and Section IX.B. The company is required to provided an amended W-2/1099 as applicable to the individual to reflect payment of the amount for the year the missed distribution should have been paid. In addition, the individual is required to file an amended tax return to reflect the missed payment. However, In Section IX.B, the company is not required to provide the individual with the required statement until the due date for provided an information return for the calendar year in which it discovers the failure. Additionally, the individual is required to attach the statement to his or her tax return for the year the failure is discovered. The filing of the amended tax return for the year of the missed payment and notifying the IRS via the attached statement in a subsequent year don't seem to coordinate. Has anyone from the IRS informally commented on this apparent conflict?

The Sieve was at the Tigers' game last night, and then stayed up half the night watching the replay of the final "out" over & over & over. My reaction at the time, without benefit of replay, was that he should have been called out on a close play like that for the final out of a perfect game. The batter later said that he expected to be called out based on the circumstances. Interesting, though, when you look at the replays: Carlos Guillen, at 2B, was right there, and could have made the play had Carbera (1B) stayed at 1st to take the throw . . .

We all expected that the perfect game was meant to be after the absolutely phenomenal Willie Mays over-the-shoulder catch in left center field for the first out of the 9th. Unfortunately, we were wrong.

"... And she and Billy Joe was throwing somethin' off the Tallahatchie Bridge."

Do you suppose it was a first base umpire?

to the tune "Do you remember these" (Statler Bros) - ok, maybe nobody remembers this one, but I was inspired a bit by someone groaning about e-filing, so I 'dedicate' part of the 3rd verse to him!

a music file is enclosed - to make the file work you have to rename from .rpt to .midi, but I have to beat Mr. Baker's system of uploading attachments somehow - at least I think this will work

you probably have to be catch-up eligible to even understand this one.

well, ok, I only had time to come up with 3 verses so far on such short notice, maybe someday I'll dream of more.

10 year cliffs, class year plans, and the rule of 45,

Five to fifteen year vesting really made those plans alive

Laid off just before you’d vest, but that’s the way it goes-

Ah, do you remember those?

No EGTRRA, no USERRA and what the heck is GUST?

No top heavy requirement was placed upon the Trust

No self-direction, default funds and why disclose the fees

Ah do you remember these

Fifty-five hundred C or R, there’s No e-file 2

hand filled forms sent in by mail, that’s all that we need do

no nondisrim, no 410-b, we didn’t dream of GATT,

ah do you remember that?

Employee elected 15% in January 2009. This somehow didn't get printed in the payroll office and the employee never mentioned that his deferrals never started. This comes to light in May when he is talking to the financial advisor and his account balance is zero.

We are being advised that the proper corrective action is to fund his account with 50% of the deferrals that should have occurred and 100% of the missing match, adjusted for any growth. Is this correct? I thought I read something about missed deferrals being at the average rate of the ADP test or something like that, but it's very likely that I misunderstood or that that is for something else.

Thank you.

Our client sponsored a DB plan for several years and then acquired another entity. They froze their plan timely in order to avoid covering any of the employees of the new entity. Now after several years, the plan has become somewhat overfunded. The current benefit formula is pretty low (i.e. the 2 owner/participants are well below the 415 limit), so the overfunding can be eliminated by amending the benefit formula, but they have a rather large staff now and do not want to have to provide benefits to staff in order to increase their benefits.

They aren't looking to close the plan right now, so the overfunding is not a problem just yet, but they want to know if there are any other options other than providing benefits to staff or paying the excise tax should they need to close the plan in the future and it is still overfunded. Do they have any other options?

When an existing company establishes a 401(k) plan, does it have to count service for eligiblity purposes for periods prior to the effective date of the plan for those individuals not actively employed with the company on the effective date of the plan but rehired at a later time?

Facts are as follows:

Company has been in existence awhile. It sets up a 401(k) Plan effective January 1, 2010. Plan includes basic 1 Year of Service requirement for eligibility. Plan SPD provides that "in determining whether an indiviudal satisfies the minimum service requirements to participate in the Plan, all service the individual performs for the Employer will generally be counted."

On January 1, 2010 there are a number of regular employees that have been employed with company continuously for a long time. They all have a Year of Service based on their prior service and begin participating in the Plan immediately. The company also has some seasonal summer employees--some of whom come back and work multiple summers. During the summer, the seasonal employees may work 1,000 hours or more and so would earn a Year of Service for participation purposes. My question is when do these seasonal employees enter the Plan.

In particular, if the company had a seasonal employee that worked the summer of 2009 and earned 1,000 hours that summer--does that employee have to be permitted to participate in the Plan June 1, 2010 (upon return for 2010 seasonal work) or does that individual have to earn 1,000 hours in the 2010 summer season (i.e., the first period following adoption of the plan) before getting into the plan?

No dispute that the seasonal employee would be entitled to participate June 2011 if he returns in 2011 after working 1,000 hours in summer 2010. Just not sure if they get in right away based on service earned prior to the time the plan went into effect when they were not a current employee on the effective date. (Note, I have also seen plenty of guidance that indicates prior service must be counted for active employees in place on the effective date as well as plenty of guidance regarding the need to track prior service for rehires that previously worked during periods when the plan was in place but this is a different question.)

The plan document does not seem as clear as it might be on this point because it speaks in terms of employment commencement dates and tracks eligibility based on computation periods starting on the employee's employment commencement date. The Year of Service definition in the Plan notes that "the initial computation period shall begin with the date on which the Employee first performs an Hour of Service (employment commencement date)." The seasonal folks arguably have multiple employee commencement dates though (i.e., they come and go each year) so question would be which commencement date counts and does first hour of service mean first hour of service once the plan has been adopted. In particular, do we look at the first commencement date beginning after the effective date if the individual was not actively employed on the plan's effective date?