I have a client that terminated their defined benefit plan a few months ago and is now looking to start a new one. Is there any issues with this?

Does a 30 day notice period apply to terminating safe harbor plans under mergers or business hardship (i.e., under bullet point ii below). The 30 day notice requirement arises from the reference in (i) that the requirements of paragrpah (g) are satsifed. So it seems to me that when temrinating a plan under mergers and/or business hardship, no 30 day notice is required (whether it's a SHMAC or a SHNEC). Does anyone agree/disagree?

(i) The plan would satisfy the requirements of paragraph (g) of this section, treating the termination of the plan as a reduction or suspension of safe harbor matching contributions, other than the requirement that employees have a reasonable opportunity to change their cash or deferred elections and, if applicable, employee contribution elections; or

(ii) The plan termination is in connection with a transaction described in section 410(b)(6)© or the employer incurs a substantial business hardship comparable to a substantial business hardship described in section 412(d)

Employee is covered for medical and pays a percentage of premium, taken out of pay on a pre-tax basis per their Sec 125 plan. Employee is also covered on spouse's medical plan at her employer. Open enrollment was Jan 1, and employee maintained past election. Effective April, employee is receiving pay cut, and wants to drop medical plan.

While not directly a "significant increase in cost" to medical, the employee's take home pay is changing 4/1, and he sees the double coverage at this time to be less attractive, thereby his request to drop coverage. If he had known the pay cut was coming prior to the 1/1 open enrollment, he probably would have made the change then.

I can see where a mid year pay adjustment, could greatly affect a person's ability to pay. But, I haven't found anything in the regulations that would address this. Have any of you run into a similar situation or can you site a section of the law that I missing that would allow this type of mid year change?

Thanks

Today a practitioner/friend of mine who is handling a field audit explained that the plan under audit has k safe harbor language, but ER never provided the annual k safe harbor notice and did not make any k safe harbor contributions, as the plan provision called for. The ER and practitioner had thought that the plan would not be safe harbored, but would be subject to ADP/ACP testing for each plan year for which no k safe harbor notice was timely provided. The document was not one that so provided, it simply said that the plan is k safe harbored and that the k safe harbor contribution would be the match.

Auditor was considering insisting that the ER make the k safe harbor contribution described in the plan provision. Here's how this situation was resolved that that specific IRS auditor:

"The owner/employees did not have any 401k deferrals for the year being audited, and hardly any for other years. The agent could see basically how we were interpreting the document and then closed the audit. She did recommend we fix that part of the plan with an amendment."

Whenever I am involved in a plan audit, I'd like to be able to call and request this particular agent be assigned. But this is a second such situation where I've seen the IRS auditor start off wanting (a) the plan provision described k safe harbor contribution made, but (b) the plan to demonstrate ADP testing to pass. In both, the auditor closed the audit without the k safe harbor contribution being required. In this one, there wasn't even a need for any QNECs corrections.

Calendar year DB plan freezes 5/31/2009.

Benefits accrue on elapsed time.

The annual method is being used for 410(b) testing, i.e. the measurement period is calendar 2009.

1. What is testing service, 5/12 or 1?

2. What are the options for testing comp other than an average of 3 or more years, i.e. is calendar 2009 ok despite the freeze?

Some very different results will occur depending on the choice. I don't see anything in the regs that helps with these issues.

I suppose this could be viewed as a change to a 0% benefit formua and under that approach the accrual divided by the full year comp could be used, and since benefit service is capped at 5/9 that could and perhaps should be the testing service.

Opinions?

(5/9 changed to 5/12)

I have just obtained a schedule 5500 from our unions multi employer pension plan and trying to figure out what percentage it is funded. Under schedule MB section 1c the liability numbers are far less than section 1d under rpa 94 information lline 1d(2)a. I guess what I am asking is what line do you use to determine the liability when determining the true funding of a plan? And can someone explain to me what "rpa 94" is in laymens terms? Thanks in advance. GT

I've gotten a couple of email messages from worldnet that services are being discontinued and that email addresses need to end in @att.net henceforth.

Has anyone else gotten these messages? Are they legitimate? I cannot tell from worldnet.att.net -- You'd think they'd have this information plastered on their website.

In any event, I use outlook express. If these announcements are legitimate and anyone else out there uses outlook express and has made the conversion, is there anything more to do in outlook than to make sure the "worldnet." prefix is removed?

For whatever reason I can't seem to decide on this. Line 13 M on the Schedule K-1 is amounts paid for medical insurance. Do we have to adjust net earnings from slef-employment (line 14A) for the insurance premiums? It seems to me yes because they are being deducted on the partner's personal return, but I've looked at too many of these & feel a little shaky.

Thanks

Our client is a partnership where staff is paid bi-weekly and partners take monthly draws.Per 401 k plan document changes to deferral elections are permitted on a per payroll basis. Partners have elections in place for deferrals from monthly draws. Once the true earned income has been determined for each partner ( and assuming it is in excess of the total draw aready paid) must the plan defer from the final payment of income based on the deferral election in plance at 12/31 ( cal yr plan)? Parners were conservitive in what was deferred during year from draws and now at the end of the year, once their true earnings are known, wish to maximize their deferral. I don't believe we can permitt them to make a special election for this additional income but instead should follow whatever election they had in place at pye. Has anyone had this situation presented to them before?

Must matching contributions be made to the plan with a CODA or can it be to another plan? Assume all participants of plan with a CODA are also participants in other plan to which all matching contributions would be made.

A tax exempt sponsor has a 401(a) plan with nonelective contributions only and uses cross testing allocation groups. Sponsor also has a 403b salary deferral only plan, and a 457b top hat plan for the executives/select group. When running rate group testing on the cross tested plan, when you do the average benefits test, my understanding is that you can exclude the 403b plan - 1.410(b)-7(f). Although no mention of the 457b, since this type of plan is not subject to coverage testing anyways, I do not think you would include it when apply ABT test?

Does anyone have any comments?

I have studied the hours-counting requirements of Reg. Section 2530.200b.

Scenario is this. Employee terminates employment. Immediately or thereafter he is paid for unused vacation. Does the payment for unused vacation pay give him additional hours of service for the computation period in which paid?

I am aware of the general rule that you count hours for services not performed "irrespective of whether the employment relationship" has terminated. However, there is also a rule against "double counting" of hours to the same period of time.

Based on these two rules, is this the answer: To the extent that the unpaid vacation represented hours earned in a prior computation period, the corresponding hours are not counted, but hours earned in the current computation period are counted.

If this is not the answer, the only other answer, I think, is that that you count all the hours, and the double counting prohibition really has no application. A third answer is that you don't count any of the hours, but that would seem to make the "irrespective of" language in the regulation completely meaningless.

Any takers?

The DOL and Treasury have jointly issued a request for responses regarding whether and how ERISA and tax regulations could enhance the offering and use of DC retirement lifetime income distribution options.

http://www.dol.gov/federalregister/HtmlDis...&AgencyId=8

Do we really need this? Will this really provide DC plan participants with guaranteed lifetime income or is it a special interest motivated effort to force participants into insurance company annuities. I thought that social security was intended to satisfy guaranteed lifetime income needs and DC plan participants who want to can lock-in lifetime income payments by rolling over their DC plan accounts into annuity IRAs. I know that DC plan participants often make the worst retirement plan investment decisions, but are annuity contracts a better idea? Annuity contracts are popular in 403(b) plans plans, so maybe they can work well in 401(k) plans as well. Does anyone have have an opinion?

My wife and I both have size-able traditional IRAs. Depending upon what congress does regarding the inheritance tax our combined assets including the IRAs will exceed the minimum. I do not need my IRA, and therefore am considering taking the total as a distribution, and use it to pay the taxes, and then convert that same amount of her IRA to a Roth. I think this will accomplish to goals. It will reduce the size of the estate, and it will allow that amount to grow tax free in the future. Am not sure who to ask for advice. A tax lawyer or accountant.

I thought this was an easy question.

A client makes a non-elective 3% safe harbor 401k contribution. He hired an employee in October 2008 who was eligible for deferrals on November 1st, 2009 as entry dates are the first of the following month. The SPD states "you will be eligible to participate for purposes of salary deferrals and safe harbor contributions when you have completed one year of service and attained age 21."

It was my understanding that the employer's 3% non-elective contribution would be made on compensation earned by the participant in November and December. Others are saying that the employer must contribute 3% of the entire year's compensation since she became eligible in 2009.

Can anyone clarify/settle this for me?

Thank you.

A company maintains a profit sharing plan that permits the investment of up to 50% in qualified employer securities. The assets are pooled with no participant direction. The individual trustees invested 70% of the plan assets in qualified employer securities. The company got caught in the economic downturn, things turned south and several HCEs we either laid off or fired, including the plan trustees.

Assets other than the company stock were liquidated to make the distributions to the HCEs, driving the percentage of company stock even higher. You guessed it, the company goes bankrupt. The bankruptcy trustee as plan administrator now brings a lawsuit against the departed trustees. The plan has few assets, but it looks like a substantial recovery is possible. The company has little or no assets.

1) Can the expenses of the bankruptcy trustee be paid from the judgment recovery, which I assume are plan assets. My research has found no definitive answer. Routine administration expenses yes, but nothing about litigation expenses.

2) If the answer remains unclear, can the trustee in bankruptcy make a application to the DOL (which is watching this case) to permit the payment.

Thanks for any insight you might have.

I am largely unfamiliar with EPCRS (I never ever make mistakes ), so let me know if you think this is correct. All those affected are NHCEs, so no discrimination issues.

Takeover profit sharing plan has the following issues:

1) The prior TPA failed to include some eligible employees. This seems like an easy correction under SCP: just give contributions plus earnings. Note I specifically did not say to adjust for losses as I don't think that is required and I don't want to do that.)

2) They allowed participants into the plan too early. Seems like the SCP correction can be to amend the plan under 2.07 of Appendix B to retroactively allow entry.

3) There is a last day requirement to receive a profit sharing contribution, yet too much was given to terminated participants. They just needed to get the gateway, but instead received amounts over and above it. I don't see how this is eligible to be corrected under SCP and allow the employees to keep the allocations. The correction would require an amendment to remove the last day requirement. I don't see this as one of the operation failures eligible for correction under SCP under 2.07 of Appendix B. So, it seems to me a VCP submission is required.

4) Their EGTRRA restatement was effective 1/1/2008 yet signed 11/2009. It did amend eligibility entry dates. It would be best if the effective date was changed to 1/1/2009. Anyone know what the IRS would say about this?

When making the VCP submission should all failures be disclosed, even the ones that can be corrected via SCP?

Thanks.

Please forgive me if this already has a thread (or if I have previously raised the topic!)

Valuation Date: 1/1/2010

Benefit is considerably less than 415 limits.

Regular funding segment rates for a monthly life annuity are 4.92%, 6.71%, and 6.80% (October 2009).

There is "100% probability" of the benefit being paid as a lump sum, on 1/1/2020 (10 years from valuation date).

The current 417(e) segment rates are 3.31%, 5.05%, and 5.32% (September 2009).

Questions:

1. Under 430(h)(4), is the actuary required to use any of the above segment rates in calculating the FT for this benefit?

2. If not, and the actuary uses "reasonable assumptions," how is line 21 of the SB completed?

Can anyone please share their experience with ongoing dependent verification for new hires and permitted election changes?

As sponsor and administrator of a self-funded welfare plan, we have conducted several periodic dependent audits. We are now implementing a process to verify eligibility of a dependent upon request for enrollment in the Plan. Our TPA has indicated that to pend elections until the proof is furnished would be very costly. So, instead we are opting to permit enrollment in the Plan, then request that the employee send documentation to verify eligibility for coverage.

The questions are:

1) if documentation is not provided timely, should we terminate coverage retroactively since the individual is considered ineligible for coverage, or should we drop coverage prospectively.

2) if we term coverage retroactively, must it be done within a prescribed period of time? (is there a duration after which they could be "deemed" acceptable for coverage under the Plan?) And, if retro term'd, I assume COBRA should not be offered?

3) if we just drop coverage prospectively, which means we allowed the person to be covered under the plan for a period, would we then have to offer COBRA?

Any input is appreciated.

Is there any concensus on how to apply 436(d) restrictions to nonspouse beneficiaries? If a plan has only lump sums for nonspouse beneficiaries, it would need to be amended to allow for an annuity during restrictions to permit bifurcation. If we are limited to a straight life annuity for 50%, we can't fit that into the 5-year 401(a)(9) window. It wasn't clear to me how that should work under final regs. Any thoughts?