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?

Below is a section of a DB plan that defines the benefit formula. I just provide the concept in simple terms for purposes of this question.

Class A Participants: Owners (say 2 of them)

Benefit of 5% per year

Class B participants: Employee Smith, Employee Jones, Employee Brown

Benefit of 0.5% per year offset by benefit from profit sharing plan

Class C participants: all other eligible employees (say 3 other employees)

Excluded from plan

Without getting into details the plan will be tested with DC plan to pass non discrimination

Any problem with having Classes of participants that directly reference names as above?

Thanks.

Would a mid-year amendment to a Safe Harbor plan's definition of Compensation (e.g., exclude bonuses) be permitted? Or would it violate the "plan year requirement" under Reg. Sec. 1.401(k)-3(e)? Could it be considered a reduction in the s-h match, which is permitted under 1.401(k)-3(g)?

When using the accrued to date testing method, I know that you must add back in distributions made to HCEs, and you have the option of adding back in distributions to NHCE's. Does this also apply to loans? If an HCE took a loan from his/her employer contribution source, does the outstanding loan balance get added back in?

As I understand the regulations Life Insurance policies in a Governmental 457(b) Plan should be owned by the trust with the trust as the beneficiary and PS 58 income applied for DB over $50K. I have a client who has Life Insurance policies owned by the participants in thier plan.

What are the issues here and logical correction methods? On a broader note how did the plan provider allow these policies to be set up this way?

Client with a 401(k) prototype plan had an amendment signed in early February 2009 and effective at the same time adding a company as an affiliated employer and permitting this company immediate eligibility while normal eligibility is 1 year. The amendment references all the appropriate sections of their old GUST document. Plan was also amended and restated and put on an EGTRRA document effective 1/1/2009 and signed in January of the same month. There is no mention of this affiliated employer in the EGTRRA document. So, there is an amendment referencing all the provisions of the old GUST document after the EGTRRA document was already put into place. How do I go about preparing an amendment referencing the new EGTRRA document? I don't see how I can prepare a discretionary amendment effective in 2009 and signed in 2010 without having a late amendment, and this amendment was prepared and signed timely, it just referenced the wrong document. Thanks.