Plan administrator thought participants were to start deferring first of month after satisfying eligibility conditions. Document states enter the plan the day eligibility conditions were met.

I can find where EPCRS states if the participant was not given the opportunity to defer for the entire plan year you take them out of the ADP test. However, I cannot find any guidance for participants who are briefly excluded where the error is not discovered until after the end of the plan year.

I am assuming you do not take the person out of the test. This assumpiton gives rise to my next question -

Do you use full year compensation, compensation from date they started deferring or something else for the ADP test?

If you use compensation from the time they actually deferred, it might make the participant neutral when you use the average of the group to calculate the required QNEC for the missed opportunity cost. Seems logically but is it the right approach.

Any suggestions would be greatly appreciated.

A Plan must limit distributions to HCEs. An CHE elects lump sum payment and will receive annual until restricts are lifted an annual payment. The plan does not provide for escrow or other arrangements to facilitate lump sum payment.

(1) Does this annual payment constitute an eligible rollover distribution? While it may be based on a lifetime spread, it nonetheless constitutes a temporary series of annual payments of indeterminable length.

(2) If it is not believed this distribution constitutes an eligible rollover distribution, is it still necessary to provide "Your Rollover Options" with the participant's election package?

Note, the participant would be electing lump sum payment, which is not covered under this wonderful piece of paper. It is also of interest that the disclosure provides that "The Plan administrator or payor can tell you what portion of the payment is eligible for rollover." Don't bet on that!!!!

(I resent the requirement to make this statement as it suggests the PA will offer tax advice. If a participant presses, would it be incumbent upon the PA to obtain a tax opinion?)

A company has two plans: 1. A DB plan that covers the two owners and certain groups of employees while excluding other employee groups but passes coverage and nondiscrimination on a standalone basis, amd 2. A safe harbor 401(k) plan that provides the SH match and $0 PS and covers all employees that meet the 21 & 1 requirement. Since the key employees are in both plans this would be a required aggregation group. My understanding is that the 401(k) plan is deemed not top heavy because of it's safe harbor status. What top heavy benefit if any does an employee get if they are excluded from the DB plan and they do a $0 salary deferral?

403(b) plan provides that the required beginning date for a participant other than a more than 5% owner is the later of age 70 1/2 or retirement. Pretty standard. My question is if any participant in a 403(b) of not for profit has to take an RMD prior to retirement? There are no owners. Thank you.

I have a plan that stopped their safe harbor non-elective contribution during 2009 and they now fail their ADP test.

Is it allowable to use the safe harbor contribution that was made during the year as a QNEC towards the ADP Test?

We will be making significant changes in our health plans for 2011. We would like to provide employees with some kind of on-line tool that can be used to help them determine which plan would be the best choice. Any suggestions? Thanks.

Does anyone know if there are any penalties associated with not having a Summary Plan Description for a Welfare Benefits Plan?

EBIA ERISA manual says that an SPD is required for every single welfare plan, regardless of size. One of our clients had a DOL audit and the DOL made them go to a law firm and get a very expensive Welfare SPD (not the same as a wrap document so that you only have to file 1 5500).

I would like to tell my other clients about this, but they will ask what the penalties are for not having it, and I can't find that anywhere.

Thanks.

This is a unique situation and I'm having a hard time finding a resource. Executive of startup agrees to defer 50% of his salary each year for the term of his agreement. The 50% is payable upon a change of control (I didn't draft the agreement). Executive realizes that company is in bad shape and that the accrual of this deferred comp makes it a poor target. He wants to surrender or cancel these prior deferrals (and doesn't want anything in return). See any problems with amending his employment agreement to accomplish this? Of course, if they agreed to cancel the deferrals and pay out some amount, then of course its an acceleration, but that's not the case...they aren't paying out any of the deferrals and never will...they just want to document this by amending the agreement.

Problems?

My employer matches 10% of employee contributions. I've been notified that since I've reached 65 years of age and am still working full time, the employer will not longer match my contributions, while continuing to match others. Is this within the employer's rights, or does ERISA regulations state that this is illegal?

mif2000

The exclusive benefit requirement can be met using a custodial account or an annuity contract instead of a trust. Treas. Reg. §1.45-8(a)(3). Whenever a plan uses a custodial account or an annuity contract instead of a trust, the account or contract must expressly state the exclusive benefit language. Treas. Reg. §1.457-8(a)(3)(i).

A plan can "mix or match" different kinds of exclusive benefit arrangements-trust, custodial account, and annuity contract - as long as every plan asset is held under at least one exclusive benefit arrangement. Treas. Reg. 1.457-8(a)(3)(i).

Where all the plan assets are held under a custodial account or an annuity contract, the establishment of an outside trust is not necessary. However, for plans that provide for loans, or other assets held outside the exclusive funding arrangement (i.e., self-directed brokerage account), would the plan sponsor need to have someone or some entity appointed as trustee to fulfill the trust requirement?

We have a concern as a vendor selling 457b annuity contracts and custodial accounts. It creates additional steps and expense for us to set up an outside trust agreement/document with a bank for a 457b governmental plan that wants to offer loans. If this is not necessary, then the situation will be streamlined for all parties. The 457 Answer Book does not directly address this question, although Question 2:45 and 2:50 seem to imply that an annuity contract or custodial account can contain trust language and exclusive benefit language which our document does.

Bottom line, is this sufficient to not have to provide trust documents outside a plan document?

We have a 401K / Profit Sharing Plan that uses the Corbel Defined Contribution Prototype Plan document. The plan uses the American Funds Record Keeper Direct platform and all the plan assets are held at American Funds. Participant directed investments are permitted.

Now, one of the owners wants to have his balance at American Funds transferred to an account he has set up at Merrill Lynch by way of a trustee-to-trustee transfer and have all future contributions made on his behalf sent to this account rather than American Funds like everyone elses. The account he set up at Merrill Lynch is titled in the name of the Plan F/B/O the owner.

Is this okay? Would a plan usually have to be amended to allow for this? It seems to me that if all participants are not given the same access to a seperate account at Merrill Lynch then it would be discriminatory. I would think this type of request would be fairly common and I was just looking for some guidance on how to handle it.

Thanks for any help!

We are a recordkeeping firm using a daily open architecture mutual fund platform. We charge clients a base and per participant flat fee (no asset based fees). I have a schedule C to complete. Our fees are over $5k annually. However, we reduce our fees by all subTA fees received from the mutual funds. The remainder due is pulled from assets at the custodian.

I cannot figure out how to report this...is the amount we get paid from the plan "direct compensation"? Or "indirect"? I have read the instructions, FAQ's, and called the DOL, who told me to call the CPA auditing the plan, who says "no clue!".

Also, the custodian emailed me back and said they do not provide any schedule C reporting for custodial services. But there are areas here where it appears I need to report float, custodial fees, over $5k...if the custodian has no reporting for the schedule C, how would I know what to report? And I cant figure out if that is direct or indirect either...they pull thier custodial fees from assets, but first use the revenue in the ERISA fee bucket which is paid from a Stable Value fund and also the plan money market fund.

This is so confusing. My return is due on Monday, this is a short plan year for a plan year ending April 2009 and already extended, so I am out of time...they could have used the paper forms on an 08 return if they filed by 12/31/09 but they didnt....

If a governmental plan (who currently has 5 year cliff vesting) changes their plan to be a hybrid plan, do they have to change their vesting to a 3 year cliff?

Hello,

Hoping for some feedback.

Client performed ADP testing for PY2007 (calendar year) and due to a failed testing result, made corrective distributions before March 15, 2008. Late in 2008 client discovered an error in the testing information which when corrected resulted in the need for additional corrective distribution to certain HCEs.

The correction was not actually distributed until January 2009.

Had the correction been made in late 2008, the corrective distributions and the applicable Excise Tax under Form 5330 would have been the only steps to be taken.

However, given that it took until early 2009, under EPCRS, it looks like a test not ever completed would require a one-to-one QNEC as well for the amount that was not timely distributed by end of 2008.

Does anyone see a potential argument in favor of not needing to make the one-to-one QNECs as part of this additional correction due to the test originally being completed in good faith and corrected in early 2008 and the later amounts that needed to be corrected due to the participant information error could be viewed as an Operational Error, rather than a testing error at that point?

Thanks for any insight.

Andmik

We have a 401(k) sponsor who added a cash balance plan for the 2009 py. The actuary wants us to amend the plan effective 1/1/09 to change the non-elective formula from discretionary age weighted to individual groups, add j&s, lower nra, take out the last day accrual requirement and allow for the top heavy minimum to be made in the 401(k). I looked in the ERISA Outline book and it appears there isn't a definitive answer regarding whether it's permissible or not. Cites from Izzarelli v. Rexene Products (5th Cir. 1994) and TAM97350 regarding the change in allocation formula differ in opinion. Should I question this or just follow the actuaries request?

Client company only offers health insurance coverage to its Management Team. Employee in question was demoted from the management team for poor performance. There was no gross misconduct.

Employee lost eligibility for the health insurance because he is no longer in management. There was not a resulting loss of hours.

Is the employer required to offer COBRA to this employee?

Thanks for your thoughts.

Can a governmental 401(a) plan define a year of service for vesting purposes to be more than 1,000 hours in a 12-consecutive moth period? If yes, is there a limit to how many hours can be required in order to be credited with a year of service?

Plan A merged into Plan B on 1/1/09, the first day of the plan year. Plan A used current year testing. Plan B uses prior. How do I run 2009's ADP test? Using just Plan B's NHCE's prior yr %? Do I combine the 2008 NHCEs for both plans to determine the 2008 NHCE ADP?

If a son/daughter receives compensation from the company but does not ever meet the eligibility criteria (1,000 hours), they would not factor into any of the testing for a DB/DC combination, correct? So as long as they do not defer anything or work 1,000 hours or more they are okay to take a small amount of compensation.

Just curious to know whether anyone has received a determination letter on their EGTRRA restatement ESOP document. We received a favorable letter on a cycle A plan, but not a word on cycle B filers or later. Anyone have any info on when these will shake loose?