Hello

I worked for a company for a few years (~2000 through 2002) where I had a 401k plan with matching employer contributions. I contributed a total of about 850 dollars and my employer matched that amount. A few weeks ago I decided to start rolling old IRAs into a single fidelity managed IRA. I told the director of the IRA what I wanted to do (a direct transfer to fidelity) and she directed me to paperwork to accomplish this. Instead of seeing the money deposited into my fidelity account I received a check yesterday for half the amount that was in my IRA. I have been scouring the internet for information about this but can find no instance where the employer was allowed to retain his contributions.

Is there some sort of rule that companies have that if you don't work for them for a certain number of years they'll pull back their contributions?

And if so why didn't they do that when I quit?

How do I know that they pulled what they contributed. They literally divided the account in half and withheld that amount. What if that was money that had grown as a result of their contributions.. Are they allowed to keep that too? The check stub just says "Amount Forfeited: 857" which is half of the account balance. (Maybe it's not due to employer contributions but I can't think of anything else)

I plan on calling this woman tomorrow but want to be prepared before I talk to her.

Thanks for any help!

The reg says

(2) Safe harbor. For purposes of

paragraph (a)(1) of this section, in the

case of a plan with fewer than 100

participants at the beginning of the plan

year, any amount deposited with such

plan not later than the 7th business day

following the day on which such

amount is received by the employer (in

the case of amounts that a participant or

beneficiary pays to an employer), or the

7th business day following the day on

Pay-Day is 2/5/2010, which is a Friday.

Don't count Saturday or Sunday (6th and 7th).

Day 1 = 8th (Mon) (first business day following the date on which it was withheld)

Day 2 = 9th (Tues)

Day 3 = 10th (Wed)

Day 4 = 11th (Thurs)

Day 5 = 12th (Fri)

Don't count Saturday or Sunday (13th and 14th).

Day 6 = 15th (Mon)

Day 7 = 16th (Tues)

Is this correct? The reg say

Participating employer has received a notice that the plan is in critical status. It is, therefore, obligated to pay a 5% surcharge on the contribution otherwise due to the Plan. I understand that the Plan must adopt a rehab plan within 240 days following the deadline for plan certification, but is there any means by which a participating employer can force the Plan to develop a rehab plan earlier than such time or force negotiation over such rehab plan prior to the imposition of a 5% surcharge. I am curious as to whether there is any way to avoid the 5% surcharge. It seems to me that the employer should review its CBA to see if they have anything in it that would compel mid-term bargaining over the surcharge. Any other ideas or comments?

As I understand it Proposed reg 1.125-1(g) limits participation in an FSA to employees and self employed persons are excluded from participation. Under IRC 1372 a more than 2% owner of a S corp is considered self employed for taxation of fringe benefits. In otherwords any fringe benefits paid by the S-Corp on behalf of or to the owner are included as taxable income to the owner subject to available deductions, e.g., health insurance which is included as wages on the owner's w-2 and deducted on line 29 of the 1040.

The above would imply that FSA amounts paid to the owner would be regarded as a taxable fringe benefit for which no corresponding tax deduction is permitted but I cannot find a confirmation of this answer.

Is there an IRS cite?

I'm not coming up with the answer on the answer key, but then again....I'm one of those strange DB guys. Anyone care to take a look?

Based on the following information, which of the following statements regarding excess contributions is/are TRUE?

*The plan is a calendar year 401(k) plan.

*The plan does not permit employer contributions.

*The plan fails the ADP test and is going to correct by refunding excess contributions to the HCEs.

*The HCE ADP limit is 6.00%.

*All HCEs are listed in the table below.

*None of the HCEs are catch-up eligible.

HCE1, comp = $180,000, Deferral = $15,000, ADR = 8.34%

HCE2, comp = $100,000, Deferral = $10,000, ADR = 10%

HCE3, comp = $80,000, Deferral = $5,600, ADR = 7%

I. The total amount of excess contributions to be refunded is $8,200.

II. HCE1's excess contribution is $4,200.

III. HCE2's excess contribution is $2,000.

A. I only

B. II only

C. I and II only

D. II and III only

E. I, II, and III

The Answer Key says C is the correct answer, but I'm coming up with $9,000 for the amount to be refunded. Aren't I supposed to bring each HCE ADR down to 6% to determine the excess contribution? That gives me $4,200 for HCE1, $4,000 for HCE2, and $800 for HCE3.

Two employees had (k) contributions during 2009 in a Safe Harbor Match plan prior their date of participation. The client would like to have a corrective amendment done so that these employees can keep their (k) contributions in the plan.

Is there flexibility to have the amendment only allow for the (k) contribution and not the SH Match? I understand the possible Top Heavy implications.

A plan sponsor partiicpant is taking an in service distribution on a quarterly basis.

He asked how the withholding should be handled.

As far as I see it, the income of course is taxed as ordinary income and with regard to withholding it should be handled just like any W-2 income (except no FICA taxes). I think this is something that is in the domain of their CPA (or payroll provider for that matter) not their pension professional.

Does my opinion seem reasonable? Better ideas?

Thanks.

Employer decides to deposit employer contributions every single pay-period. Document says last day rule / 1,000 hour requirement.

Wouldn't it be a cut-back to then forfeit the contribution for those employees who ultimately do not meet the allocation requirements? To me, it seems that the employer clearly decided NOT to impose allocation conditions on the profit sharing contributions, or that should at least be what a reasonable participant's interpretation would be.

Plan match formula is 50% of all deferrals (including catch-up) and has only one HCE. Assume no earnings to make it easier.

The inital ADP refund is calcualted as $5,000 but $1,000 is recharaterized as catch-up eligible and retained by the plan so the ADP refund of excess contributions is $4,000.

The Plan also fails the ACP test and needs correction of an additional $5,000 for the match to pass. - the plan's ACP correction is method in the document is to refund the excess aggregate contribution to HCEs however any match "related to excess contributions" is forfieted.

The related match on the intial refund amount is $2,500 (half the $5,000) but the related match on the actual amount distributed would only be $2,000 (half the $4,000 ADP correction).

So for the excess aggregate contribution would the plan refund $2,500 and forfeit $2,500 or refund $3,000 and forfeit $2,000?

Any thoughts?

Everyone,

We have a new client who has 2 plans. A DB and a DC. The owner is the only participant in each plan.

Assets in the DB plan at year end 2009 total 135,000. Assets in the DC plan at year end 2009 are 180,000.

The 2008 5500 EZ instructions read as follows:

You do not have to file Form 5500-EZ (or Form 5500) for a plan year (other than the final plan year) that began on or after January 1, 2007, if you meet the five conditions above and you have one or more one-participant plans that separately or together had total assets of $250,000 or less at the end of that plan year.

The Client meets the 5 conditions alluded to in the instructions. Pretend the instructions hold for 2009 as well.

Since the instructions say "OR" as in seperatley OR together. I am interpreting it as if individually the clients plans have less than 250,000 each no 5500 EZ. OR if together total assets are less than 250,000, no EZ.

Basically this client does not pass the "together" test but passes the "seperately" test. Should the client file the form 5500 EZ for the 2009 plan year?

Also, please note that we would just file the form to be safe but an advisor already told the client they would not need to file forms 5500 EZ and we prefer not to eat crow.

Thanks so much.

Hi,

Am relatively new to church plans. From what I've read so far, I believe that non-electing church plans do not need to have a plan document unless they are including 403(b)(9) provisions in their operations? Is this correct?

Secondly, since non-electing church plans are exempt from ERISA, plan sponsors can perform discretionary functions such as approving loans, determining eligibility for hardships, etc. without subjecting the plans to ERISA. Is that correct?

Lastly, if plan documents are not required, what do you recommend we receive so that we'll know the operative provisions of the "program', e.g., if ROTH and/ or employer contributions are permiitted?

Thanks for your input.

I had a question from a co-worker. A client of hers needs to fund late deposit earnings. They want to use plan forfeitures to allocate these earnings versus a check from the corporate account. In doing a little research, it doesn't appear that forfeitures should be used to fund this type of deposit. Forfeitures are used to pay expenses or fund EMPLOYER contributions. This really isn't an employer contribution.

Any opinions? Anyone ran into this?

thanks!!!

Would changing the Normal Retirement Age on a 401(k) Plan from age 62 to 65 be considered a Protected Benefit under IRC 411(d)(6)? The plan does not have Early Retirement.

Thank you!

Company offered AFLAC insurance for dental benefits to employees on pre-tax basis. Not required, or a group plan.

Company is now offering employees a group dental plan.

AFLAC is still available to those who want extra coverage. Some employees would like to drop their AFLAC coverage since the group dental plan will now be enough coverage for them.

AFLAC has stated that they think that the employees can not stop coverage mid-year, but would need to wait until the next enrollment period to stop coverage. They told the employer that before anyone cancelled their coverage, they (the Employer) should be certain that they were allowed to do this mid year.

My thought is that since one plan is not replacing the other, employees cannot change mid-year.

Does anyone know if this is true?

THANK YOU!

Hello all,

There's some great commentary on these forums on how 105(h) applies to specific situations. However, wouldn't 26 CFR 1.105-11©(4) (reproduced below) provide a work-around for many of the non-discrimination limitations on plan design?

For example, wouldn't 1.105-11©(4) allow an employer to setup a series of individual plans (all contained within one document) that provides differing benefit levels on the basis of job category, tenure, salary vs. hourly, and other reasonable and objective business classifications? Wouldn't it also allow the individual plans to impose differing waiting periods?

It's not a complete pass however. The way I understand it, if you use multiple plans and "reasonable and objective business classifications" (see 26 CFR 1.410(b)-4), you still have to pass one of the 1.410(b)-4 safe/unsafe Harbor percentage tests.

Does anyone have any insight on 1.105-11©(4) and the legislative history as to why this provision exists?

DOL regulation section 2550.404a-3 provides a fiduciary liability safe-harbor for default IRA rollovers from terminating defined contribution plans that is applicable regardless of whether participant account balances equal or exceed $5,000. However, does the tax code permit such plan termination default IRA rollovers when participant account balances equal or exceed $5,000?

My boss asked me to post this question- We have a client with a union contract that has wage concessions. As part of that employees put dollars that are withheld from their pay into a IAM pension plan. Is this after tax or before tax as far as how it is reported? It is not 401k money, they have that too.

If it is after tax, does the employee contribution come out non-taxable when it comes out of the IAM pension plan?

thanks!

The Rev Proc contains a safe harbor for valuing policies distributed or sold by a plan to a participant. The safe habor is determined as the greater of two amounts, each derived from a formula in the Rev Proc. One formula is essentially:

(1) premiums paid + earnings credited - mortality and other charges (or "PERC"); times

(2) the "Average Surrender Factor" for the next 10 years.

The surrender factor for a year is the greater of:

(a) .7; or

(b) the cash surrender value on the first day of the year/the PERC on that day.

Under Client's policy, (b) would be much lower than .7 thereby substantially reducing the amount derived from this formula.

Does anyone know how the IRS came up with the seemingly arbitrary .7?

Since the Rev Proc only provides a safe harbor for determining (rather than establishing) the value of the policy, does anyone know how I could go about getting another valuation that the IRS might accept?

Thanks.

hi,

Plan has pooled funds, however, participants can direct their contributions to funds within the pooled account. I believe that this is 'participant directed' and would need quarterly statements to participants, am I correct... Sponsor wants to go to semi annual val's but I don't believe he can do this under PPA.

Thanks,

Jason

Is there a voluntary correction program available for employers who inadvetently fail to submit employer contributions for all eligible associates?