A profit sharing plan participant was mistakenly paid her benefit of $4,800 from the corporation account rather than the plan account. Benefit elections were signed, the employer just mistakenly paid the roll-over benefit from the company account.

We are thinking about just having the plan reimburse the company for the amount.

Has anyone else run into this problem?

A terminated DB plan is winding up and making it's final distributions, and the sponsor expects there to be a chunk of cash remaining once all expenses and benefits have been paid.

Currently, the plan provides that any remaining assets will be paid to a group of current and former participants that we don't have the records/information to identify based on an allocation formula that we don't have the records/information to apply. The population/formula is fixed and knowable in theory, we're just lacking the necessary records. We're looking for a way out.

Obviously, amending the plan to provide for a reversion to the employer isn't an option. If we went that route, the provision wouldn't be effective until 2015.

Alternatively, I'm wondering if we can amend the existing provision to instead provide the surplus assets to a knowable group of participants based on a knowable allocation formula. By changing this provision, anybody in the original group could likely go form getting something to getting nothing. When it comes to qualified plans, that sort of thing gives me the willies.

If this were an ongoing plan that was silent on the disposition of surplus assets upon plan termination, the default operation would allocate any surplus assets to participants. If that ongoing plan were amended to provide for reversion to the employer, I can't imagine any issue (aside from the five-year delay). Even though the participants have lost something in the abstract, you wouldn't say there was a cutback or that accrued benefits were affected in anyway. Until the checks are cut, does that approach ever change?

• Does the position change if an event occurs that allows us to identify, concretely, the participants that would be entitled to receive surplus assets?
  
• Does the position change once the plan actually terminates?
  
• Does the position change once the final benefit distribution is made, and the amount of surplus assets are known?
  

At the end of the day, we're just looking for a method to allocate the surplus that we can actually administer. The easiest solution would be to amend the plan to provide an alternate allocation section to replace the existing one. However in doing so, I want to make sure we're not negatively affecting any current or former participants impermissibly.

Any thoughts?

We currently use Relius for both Daily Val and balance forward plans. On the dv side, with the vru, online access and other features of Relius, our IT consultants have continuously told us that it is a very complex system requiring "more than the usual" amount of resources. That is, compared to a company that is running say, Datair, it is more involved. So, our IT expense is 2-3x more than it would be if we WEREN'T running Relius.

Are there any Relius users out there that outsource their IT and would be willing to share the name of their company? We'd like to rfp our IT to see how it compares and if we should consider other options.

Or, perhaps you can just indicate the number of hours on average, IT spends maintaining your system to help me gauge if our IT hours are in line.

thanks for any information you can provide.

bill

This is probably a stupid question but I've never come across this before.

We have a QDRO that calls for a 50% distribution to the alternate payee as of a specific date, adjusted for gains / losses. We've done the calcualtion and the attorney confirmed our numbers. But from what money type(s) do we withdraw the funds from? The participant has a 401(k) account, a match account and a profit sharing account. Participant is not 59 1/2. Do we allocate the withdrawal amount pro-rata across all money types or what do we do?

Any input would be greatly appreciated.

Thanks!

Are the phrases "at its sole discretion" and "in its sole discretion" equivalent? For example, Company A at/in its sole discretion can contribute

Or are there cases where it is more correct to use one or the other?

Or is only one the really correct phrase to use?

I see both and wonder. Thanks for educating me (again).

Hi~

I'm looking for a simple (?) formula to determine HCE's. We've made the TPG election, since more than 20% of our employees would be considered HCE's if we didn't. Just when I think I understand the rules, I come across something that makes me question it.

Here goes:

I understand that step 1 is to list and count all employees that were employed any time during the LBY (2008). Let's say that number is 34. There were 5 employees in 2008 that had completed less than 6 months of service by the end of 2008.

My first question:

Is the number of employees that will be considered HCE's in 2009:

20% of 34 (34 x .2 = 6.8 = 7)

--- Or ---

20% of 29 (34 - 5 = 29 x .2 = 5.8 = 6)

THEN - we rank the employees by compensation in the LBY, and only the top ___ (6 or 7) employees are identified as HCE's for 2009, right?

Questions:

1) Would those employees identified as HCE in the test above, be an HCE in 2009 regardless of their 2009 income? (since compensation fluctuates, it is quite likely that others would have higher compensation)

2) What happens if one of those employees identified as HCE terminated in 2009? Does someone else take his place?

3) What if a 5% owner is also the highest paid employee? Would he be part of the ___ (6 or 7)? Or in addition to? Note that he was one of the 34.

I may have more questions, depending on the answers.

Thanks very much!

Are the wife and son in A because they are owners by attribution? Or can they be in B because they are non-commissioned HCEs and less than 10% owners (not taking into account attribution)?

Can I do an 11(g) amendment to add another group, Owners by Attribution Only to clarify and not allocate a contribution to the wife and son?

Thanks!

I used to have a handy chart on what to prorate (and what not to prorate) for short plan years. I have since lost it.

Does anyone have a handy guide that lists what limits get prorated (and don't)?

A question on the interaction of the Qualified Reservist Distributions under PPA and the distributions for deemed severance from employment under HEART.

Senerio

A plan does not allow for Qualified Reservist Distributions, but does allow for distributions for deemed severance. Participant takes a distribution under the deemed severance but also meets the requirement for a Qualified Reservist Distribution. Does he owe the 10% penalty tax?

My thoughts are that since PPA is written that the Qualified Reservist Distributions is "any distributon to an individual" and does not specify that the distribution must be allowed by the plan, the participant would get the penalty waiver. He would use the 5329 to show that he qualified for the waiver.

Does this sound reasonable, or am I missing something big?

Thanks

Have a client that discovered 4 payrolls into the year that 401(k) deductions were being made for several employees who had elected to stop contributing effective 1/1/10.

We suggested correcting the payroll system on its own, forfeiting incorrect amounts that were deposited, and using forfeitures to offset future contributions (yes, plan permits).

Client now wants to know if they can have that money back, since it was a payroll error. I haven't been able to find anything that would allow this, so any insight would be appreciated.

05/31/2009 plan year end was extended on December 15, 2009. Client just received a rejection notice dated Feb 1 stating that the extension was not filed timely. It references 5500/8955-SSA. Lokks like a problem with the new SSA?. Has anyone else seen this?

We are looking to merge two 401(k) plans and want to make certain I'm not missing anything... We satisfy the exception for filing a 5310-A and other than resolutions to document the merger, what other things do we need to think about? Are we required to provide notice to participants? The two plans are identical in design (same sponsor, same vesting schedule, etc), and the non-surviving plan has no active employees. I just don't see what else we need to do other than the resolutions and letting the recordkeeper know.

Thanks

A participant terminates employment 12/10/08. The client pays her severance until 1/10/10. The participant passes away at the end of 2009. Based on the Plan Document if she dies hours are not required for the Profit sharing contribution. My guess is that she is entitled to the PS contribution for 2009. If she would have received the severance within 2 1/2 months after termination it could have been avoided.

Any thoughts? Am I correct?

The plan sponsor forgot to make their SH contribution within the 12 months after the plan year end.

They made proper notice before the 2008 year began that a 3% SH NEC would be made.

Now we are in 2010 and the plan failed to make the payment by 12-31-2009.

My read is that you cannot go back to ADP testing for this. Further, you cannot correct a failed ADP.

Does this become a DOL issue? Qualification issue? Fiduciary breach?

I don't know where we would even report this failure on either the 2008 or 2009 5500 forms.

I am thinking of proposing that this be a voluntary correction with interest from 12-31-09 to date of deposit.

Ideas?

For a DB plan with mandatory employee contributions, USERRA permits an employer to require the contributions to be made up before crediting service. It also requires that the employee be permitted to contribute makeup contributions during the period starting with the date of reemployment and continuing for up to three times the length of the employee's immediate past period of uniformed service, not to exceed five years.

Is anyone aware of any guidance on whether this period is tolled if an employee is redeployed while making up payments for a previous period of qualified military service? Seems to me that it should be, but I haven't seen anything on it.

What is the consequence of not having a balance election timely in place for a plan for the 2008 calendar year? Is this a qualification issue or would it cause any balance that would have existed to either be erased or not established, or in the case of a plan that intended to use a credit to meet minimum funding, would the plan be considered as not meeting its MRC?

Is there any correction available?

I don't suppose that maintaining these elections beginning with the 2009 year would be considered a good-faith interpretation of the proposed regs?

Our members are approaching the 180 day mark to have a alternate schedule in place, however the parties cannot come to a agreement, therfore we are scheduled for arbitration Feb 23-24. We have a tenative plan over 13 years to address the underfunding issues with the plan. One major group with more members in this union multi employer group has accepted a $30 dollar accural rate per year regards to Pension benefits, we are being told that even if we win the arbitration we will have to accept the base level1% or $20 accural rate. Our position is we have the right to continue to bargain and address our differences regards to this, we currently have three proposals which have been denied by the employers. Our position is that if we win the arbitration that the arbitrator can award the same as the other group or accept one of the higher alternate schedules we have offered. The real issue is if we reach the 180 day bench mark we are being told that the a default schedule would be implemented and would be worse than any schedules currently presented. What are our best options if any?? Does the IRS or government then make the decision to implement default schedules, and if so is it based on the default schedules presented by the corporations and how much time would be allowed or will we be given more options to try and resolve the issue. Any help would be appreciated.

PJMARQ

In an end of year valuation, if a participant has an accrued benefit limited by 415 and the prior end of year benefit increases on the first day of the current year due to the COLA increase, is the increase from prior benefit to beginning of year benefit included in the funding target or the target normal cost?

Example:

Participant with 6 years of service/participation and average comp/plan formula benefit in excess of the 415(b) dollar limit.

at 12/31/2008 benefit is $9,250

at 1/1/2009 benefit is $9,750

at 12/31/2009 benefit is $11,375

Am I correct that the funding target be based on $9,750 because it represents benefits that "have been accrued, earned, or otherwise allocated to years of service prior to the first day of the plan year" and the accrual for Target Normal Cost would be based on $1,625 ($11,375 - $9,750)?

Can a DRO that directs loan payments from an ESOP to a participant be a QDRO? SH-participant sold ER stock to ESOP, and order requires that the loan repayments be split. I don't know that this is subject to a QDRO, as the "benefits" are the underlying stock.

Just heard from the grapevine that the 5500-EZ wont be ready until late Summer. Is this true? If so, I wonder when the due date will be.

Also, a friend of mine told me that the 5500 and the 5500-SF have not officially been released. Yet FT William says that they have been submitting forms to the DOL. Anyone got a clue??

Thanks.