We issued a distribution check to a participant in November 2009, however the check has not yet been cashed. Do we issue a 2009 Form 1099R for this participant?

My understanding is a 1099R is issued when the check is issued to the participant - not when it is cashed.

Any guidance would be appreciated.

I have just been reading the long thread regarding Otherwise Excludable Employees. I have not been able to find the answer to this question. For ADP testing, are we able to use compensation based on the statutory exclusion limit?

We have a plan that has immediate eligibility for deferrals but has a year of service with semi-annual entry dates for the profit sharing. If I have a participant who was hired on 3/17/08 and terminated on 7/10/09, could I use the compensation from 7/1/09-7/10/09 for ADP purposes although the participant had deferred from the beginning?

I have calendar year plan (BOY VAL.)with COB of 23000 from 2007 schedule B line 9 o. This was reported on the 2008 Schedule SB.

No contribution was required for 2008 plan year so no reduction is COB was needed.

With the 2009 valuation, the plan has now had a minimum requirement. If the sponsor wishes to elect to use the COB toward the Min. Req. Contr., they will due so as of 1/1/2009 (plan valuation date).

My question is, is it correct that I adjust the 23000 by the Plan's Actual Rate of return for the 2008 plan year BEFORE it is used to offset contribution?

In other words, if Plan's 2008 ROR was -10%. Is the amount available to be used on 1/1/2009 20,700 (23000 x .9)?

I appreciate your help.

In my final 401(k) amendment, it referecnes section 1.401(k)-1(d)(2)(iv)(A). However, I cannot find that section. I found 1.401(k)-1(d)(2), but I do not see any subsections.

Can anyone point me to this reg?

This is where I was looking: http://edocket.access.gpo.gov/cfr_2005/apr...01%28k%29-1.pdf

(it is on p. 303, or p. 10 of the pdf)

Participant had the option of participating in Employer's group health plan. The employer pays half of the employee's premium and the employee pays the other half, plus dependent coverage.

The Participant obtained individual coverage and has elected not to participate in the group health plan.

May the Participant still participate in the flexible spending account, i.e., pay co-pays, prescriptions, etc. through the plan?

Here is the situation:

3 plans are members of the controlled group. 2 of the plans are 10/31 PYE- 1 12/31 PYE. Effective 11/1/07, the plan froze their DB contributions to new employees and added a profit sharing contribution that is a point based allocation formula. For the 2007 plan year there are no HCEs receiving this contribution. The other 2 plans have profit sharing as well however they are a % of compensation allocation. Since one of the contributions is not a uniform rate, we feel general testing is required. The question is how to run the general test or is it even required for the 07 time period since there are no HCEs. If testing is required, and this contribution passes on its own, would you only use that population in the general test and treat all others as nonexcludable not benefiting? Which actually brings up another question...Can each profit sharing contribution be treated separately if it passes coverage separately? For example, Group A treats only group A employees as benefiting, but treats Group B & C employees as non excludable not benifiting.

Any thoughtw would be greatly appreciated...

Sounds simple, I know.

Assume the following:

DC plan with 5-year graded vesting.

Vesting service is defined as calendar year with 1,000 hours.

Following 2009 plan year, participant is 60% vesting.

Participant completes 1,000th hour in April, 2010.

Under this scenario, the participant will certainly get his additional 20% vesting for 2010 and will be 80% vested following the 2010 year. Nothing (not death, termination of employment, or burning the office down) will change that. Having completed a year of service for 2010, the participant will receive vesting credit for the year. But WHEN?

Specifically, if the participant wishes to take an in-service distribution in May, 2010, he obviously cannot take a distribution of the unvested portion. But how vested is he at that moment in May? Is he 80% vested because he's already completed 2010's 1,000 hours? Is he 60% because 2010's not over yet?

Sal's got an example on page 4.73 that's implying that either approach is permissible (although recommending crediting of the additional 20% immediately upon completion of the 1,000 for the sake of administrative hassle), but I was hoping for something more authoritative. Surely this is an issue that somebody's had to deal with on a practical level, before!

Any thoughts?

Have a plan sponsor that just changed their broker on their Fund Specific Platform 401k (not related to employer at all) to an employee that is in the Plan. I can't find anything that says that the employee is a disqualifed person, but they are a party in interest. Assuming no ownership, trustee status, etc., can the employee be the broker and/or financial advisor on a plan that he is participating in? I've never had this exact scenario before.

A physician in a practice retires in June, 2009. He had maxed out his 401(k) by 6/30/09 and retired with $100,000 in compensation. The practice is paying him as they collect his receivables and he gets paid another $100,000 in the last six months of 2009. The plan is a safe harbor 401(k) plan. Is his SHNEC 3% of $100,000 or 3% of $200,000?

I would argue that he earned the $100,000 of deferred compensation and it is compensation for hours worked and this is not "severance" pay.

If a person who lives abroad is granted an extension to file taxes beyond 6 months, do they still have until their extened due date- to recharacterize an IRA contribution, even if it is past October 15?

Without getting into a technical discussion about commutation factors and the way the 3 segment rates parce the lump sum, I ask the question about a person Age 40 so that the calculation is a normal lump sum calculation like.

Accrued Ben x v^25 x a65

Question: For a participant who is not impacted by 415(b), is the lump sum the greater of the Actuarial Equivalence defined in a plan document and the lump sum based on the new mortality table in 08' and the Segment 3 applicable rate i.e. 417(e)(3)?

Question 2: For a participant who is impacted by 415(b) is the lump sum the smaller of the Actuarial Equivalence and the Lump Sum using the segment rates [417(e)(3)]

Our plans have less than 100 participants so I thought there was a 105% of some rate to use, but is not applicable for the work I do. I wanted to know the 3rd possible calculation for my own curiousity.

Please someone advise me.

DBDude

I am curious as to others' experience with the most typical style of deferral election form for partners in a partnership with other employees.

We have a client (LLC taxed as partnership) that has traditionally provided for partners to elect either a set % of compensation or a flat dollar amount taken from partner draws or distributions. (This generally mirrors the deferral election form used for regular employees which permits employees to elect either a set % or a flat dollar amount to be taken out for each "per pay period."

One question is that while employees are paid every two weeks, partners generally receive distributions on a monthly basis thus the two groups have different "pay periods" (setting aside the fact that the partners' self employment income cannot truly be determined until year-end).

The real question comes up in that in 2009 partners received some interim draws or distributions (timed around estimated tax dates) in addition to the regular end of the month distributions. Some partners electing a flat deferral amount questioned why 401(k) deferrals were not taken out of these supplemental distributions rather than merely at the end of the month. (Note, partners deferring a % of compensation did have amounts taken out of the supplemental distributions to ensure that the desired percentage of overall compensation was deferred.)

Is there any problem or concern with drafting a separate deferral election form for partners which restricts those electing a flat $ deferral amount to having that amount taken out only from regular partner draws at the end of the month (and zero taken out of any supplemental draws) such that those electing to defer a flat $ amount will have that amount taken out once a month (i.e., 12 times a year) regardless of what their overall draw is each month (and regardless how many separate draw payments are made)?

Folks:

In a letter from the CBO which I found on today's Benefits Link, the director, Douglas Elmendorf, responds to the questions posed of "CBO's analysis of the effects of the Patient Protection and Affordable Care Act (PPACA), as passed by the Senate on Dec. 24.

In particular, the effect of the legislation on the Hospital Insurance (HI) trust fund, from which Medicare Part A benefits are paid."

"Gross federal debt consists of debt held by the public and debt issued to government accounts.

Debt held by the public is the most meaningful measure for assessing the relationship between federal debt and the economy because it represents the amount the government has borrowed; such borrowing competes with other participants for financial resources. In contrast, debt held by trust funds represents internal transactions of the government and thus has no effect on credit markets."

"Enacting PPACA would increase debt held by government accounts more than it would decrease debt held by the public, and would thus increase gross federal debt. However, that measure of debt conveys little information about the federal government's future financial burdens and has little economic meaning. In contrast, the effects of legislation on debt held by the public offer a more useful measure of that legislation's impact on the government's financial condition."

I agree with this analysis in the short run.

However, in the long run, as the various trust funds are depleted, the intragovernmental debt will evolve into public debt, with similar effects on competition for financial resources.

Intragovernmental debt, for today, is "good debt," but eventually, it will be treated like "bad debt."

This accounting of debt goes against my grandfather's sound philosophy,"What you own, you may not own.

What you owe, you owe."

Don Levit

Since the change in how excess contributions are taxed (now taxed in year received) have any practitioners noticed a change in how many plan sponsors will not implement a cap on HCE contributions? Ie. Is it that big of a deal to fail ADP testing and receive a distribution? We are an employer using current year testing and limit HCE contributions to $10,000. I would prefer HCEs to maximize the amount they contribute and not be limited to an artificial cap. Other than paying the cost to print refund checks what is the drawaback of letting the plan fail and issuing refunds?

the employee was on leave during last year and into this year. they finish the leave and then they resigned from their position. the plan requires the employee be there the last day of the plan year and 1000 hours. is the employee entitled to a profit sharing for last year?

Does anyone know the IRS position on the use of pretax benefits for ferry rides? The code clearly shows ferries as an allowed form of mass transit, but it isn't clear (at least to me) whether that only means riding the ferry as a passenger, or whether that can include car and driver tolls. I've had a couple people tell me that car tolls cannot be included, but to me the code isn't specifically clear about that and no one has any backup to support their position, other than saying that the code has to be for "mass transit", and I fail to see how if you can take the same ferry and either walk on or drive on, it is mass transit for one but not the other.

Thank you!

Several employees of a 401(k) plan are over the 415 limit. Do I need to go through the EPCRS for correction, or what are my options?

An owner and his wife work in a small business and their two children work part time and never have become eligible for the 401-k Plan. Should they (the children) be included in the ADP and ACP testing as contributing 0%??

Can a non-safe harbor plan ammend the document and provide notification to participants that it will become a safe harbor (non elective contribution) plan at any time during the year or does it have to start on January 1st for a calander year plan?

Individual worked for a large non-profit and is a participant their defined benefit plan. She has been retired and in pay status for a few years. Recently, her husband died. The plan then reduced her benefit by 50%. Plan reps refer to this as a "true" joint & survivor annuity. Apparently, the benefit is reduced regardless of whether the participant or non-participant spouse dies first.

Participant says that she did not know she signed up for this. The benefit election form shows participant checked a box next to a benefit described as “Joint & Survivor Annuity with a survivor benefit of ___% (enter 50, 66 2/3, 100).” Participant checked this box.

The SPD for this plan describes Joint and Survivor Annuity as follows: “Benefits will continue for another person in the even of your death. You may elect to receive an adjusted income during your life and, upon you death, 100% of this income will continue for the life of the person you designate. Alternatively, you may elect to receive an adjusted monthly income while you are both alive and then 50%, 66-2/3% of that amount will be paid to the survivor for life when either of you dies.”

My Question:

It appears from the description above, that the SPD is offering a 100% joint and survivor annuity and a “true” JSA. However, the benefit election form did not differentiate b/w the two. It only had that one option I described above.

It seems participant would have an argument at the very least, that the benefit election form was ambiguous as to whether she was electing a 50% JSA or a true JSA. On a larger scale though, does this plan lack the option of a Qualified Joint & Survivor Annuity as required by IRC section 401? Anyone have any suggestions or advice here? Is it possible this plan is not qualified or that the non-profit status of the plan my allow it not to offer a QJSA?

Thank you thank you for any help