Individually designed money purchase plan currently permits 10% after tax employee contributions. Plan received a d-letter in 2002. I am putting this plan on a prototype document and the only selections for employee contributions are "no" or "formerly allowed." Did the law change to now not permit after-tax contributions? If not, then why doesn't the prototype document providers allow them? I don't even know if there are any after-tax employee contributions made. It is an owner/wife only plan.

Thanks.

Situtation is this: Employer and employee entered into an employment agreement in 2008 which provides for 12 months of salary continuation paid in substantially equal payroll installments if employee is involuntarily terminated. Severance amounts are based on base pay immediately prior to termination. So, under the terms of the employment agreement, the severance benefits most likely will qualify for an exemption from 409A under the 2 times pay / involuntary termination provision; however, an exemption is not guaranteed because the final salary / severance amounts are not known until termination. (Also, while it is possible that all severance benefits will be paid prior to 2 1/2 months after end of year in which termination occurs, that is not required so the agreement does not ensure short-term deferral exemption.)

Employer is now terminating employee. Employer wants to change / enhance severance terms slightly by basically permitting employee to choose as part of the separation agreement whether to receive the 12 months of severance in regular installments or receive an immediate lump sum amount. As it turns out, the employee's current salary is $250,000 so well below maximum amount to qualify for two times involuntary pay exception.

Is there a concern that amending the severance provisions under the existing employment agreement could be construed as an impermissible acceleration or substitution of an existing deferred compensation arrangement where all the beenfits will qualify for the 2 times pay exception under 409A anyway? (If the original agreement somehow ensured that the payouts would have in all cases been exempt from 409A--say if it had required payment in all cases within the short-term deferral period--I would not worry as that would have presumably escaped regulation under 409A but here the severance provision seem to provide for deferred compensation arrangement subject to 409A (although possible that it may qualify for an exception depending on actual numbers). Any thoughts would be appreciated.

Hi,

After a year of working with Bank of America's HSA product connected to our Tufts Health Insurance HDHP, Tufts decided to sever their relationship with Tufts effective 1/1/10.

We believe this decoupling has led to our horrible experience with trying to speak to someone at Bank of America to transact business for new participants and a participant that has been arbitrarily terminated in their system.  However, every contact phone number we have for customer service results in wait times of 50 minutes, automatic hang ups and no live person to speak to.  Using the help section on BoA's website yields no results either - cases are arbitrarily marked "closed" when there has been no discussion/resolution.

Is anyone else experiencing this problem with Bank of America HSA?  If so, could you share any success you've experienced recently? 

Does anyone have any ideas about which government agency provides oversight (we've contacted both the DOL and IRS and both claim the other has jurisdiction)? 

Any insight/wisdom is deeply appreciated.

~Rebecca

A participant has a loan on their 401(k). They are eligible for a in-serivce withdrawal. Is loan security required before processing an in-service withdrawal after 59 1/2?

I know 2009 Form 5500 Schedule H added a line 2b(2)© to report dividends from mutual fund. But where should I report mutual fund dividend on 2008 Form 5500? Thinking about sticking it on line 2b(2)(a) under preferred stock and move on. Will that work?

Suggestions are much appreciated!

I have a calendar year PS/401k plan with a 3% non-elective SH. They have a integrated PS formula. For the past 20 years, the company has maximized the HCE contributions each plan year. The HCE's make well over the maximum compensation limit, so at the beginning of each year, we can calculate the PS contribution percentage for the NHCE's. The plan document says that the Employer Contributions are allocated on the last day of each month. So at the end of every month, the 3% SH and the PS % is deposited into each participant's account based on that month's salaries.

With the change in the economy, the company decided not to fund the PS after the May contribution was sent in. Only the 3% SH was funded for Jun - Dec.

Now I'm trying to true up the PS contributions already deposited with the YTD salaries. If I give all eligible participants a 3% PS contribution integrated at TWB, there will only be a small amount of PS contribution due for the 2009.

However, there are nine participants who terminated mid-year. When I calculate their actual 2009 PS contribution, all of them have had too much PS deposited into their individual accounts. One of these participants has been paid out and has a zero balance.

My question is can we legally remove the excess PS contribution from the other eight terminated employees accounts? If so, how do we notify the employees?

Thanks.

Arrest report

A school teacher was arrested today at John F. Kennedy International Airport

by T.S.A agents as he attempted to board a flight while in possession of a ruler,

a protractor, a compass, a slide-rule and a calculator.

At a morning press conference, Attorney General Eric Holder said

he believes the man is a member of the notorious Al-Gebra movement.

He did not identify the man, who has been charged by the FBI with

carrying weapons of math instruction.

'Al-Gebra is a problem for us', the Attorney General said.

'They derive solutions by means and extremes, and sometimes

go off on tangents in search of absolute values.' They use secret

code names like 'X' and 'Y' and refer to themselves as 'unknowns',

but we have determined that they belong to a common denominator

of the axis of medieval with coordinates in every country.

As the Greek philanderer Isosceles used to say, 'There are 3 sides to every triangle'.

When asked to comment on the arrest, President Obama said,

'If God had wanted us to have better weapons of math instruction,

he would have given us more fingers and toes..'

White House aides told reporters they could not recall a more

intelligent or profound statement by the President.

It is believed that the Nobel Prize for Physics will follow---

What are you recommending ERs do with their restated EGTRRA plan documents using an IRS-approved prototype, regarding whether to apply for an IRS determination letter?

Employer has 401k and 403b Plans. After year end it is discovered that the deferral limits were not updated in the payroll system for several employees. This caused their deferrals to stop at $15,500 instead of $16,500 which is what they elected. How is this corrected ? Does the employer make contributions to the plans ? Is it 50% of the missed deferrals ? Thanks

I'm working on a plan, 3% safe harbor is allocated on full year compensation. The plan is top heavy. So the safe harbor covers the top heavy minimum. They also would like to make an additional 3% profit sharing contribution. The p/s contribution is allocated on an integrated basis. Would the 3% p/s contribuiton be allocated as if the plan is top heavy, straight 3% to everyone eligible, or would it be allocated as if the plan is not top heavy on compensation plus excess compensation. THanks for any help to clear this up.

A participant's spouse is currently under care of hospice. The participant wants to go ahead and take a hardship distribution to prepay the funeral expenses. Is prepayment of the expense allowed for hardship?

I have a 11/1 - 10/31 DB plan that due to layoffs experienced enough of an active participant reduction that it is considered a partial plan termination at 11/1/09. There has always been less than 50 participants. In the past the plan would get a waiver from reporting to the PBGC for the active participant reduction due to small plan status but now that the proposed regs are out is the Form 10 required to be submitted?

My company used to have a Cafeteria plan that offered Medical Reimbursement FSA, Dependent Care Coverage and Premium Conversion. We are switching to a HDHP with an HSA. We understand we cannot have the FSA any longer (we don't want to bother with a LFSA). Can we keep the other two parts? the Dependent Care Coverage and the Premium Conversion? I am getting conflicting advise on this from advisors. One says we have to switch to a Premium Only Plan and get rid of Dependent Care Coverage. The other says we can keep both.

Thanks in advance!

Hi. Has anyone heard whether the IRS has issued procedures for high income employees to "permanently waive" the COBRA premium subsidy in order to avoid having to pay it back later? If a former employee didn't waive the subsidy in writing, could he still be entitled to it?

A client (consisting of business owner and 1 employee) has maintained a PS Plan for years. PS Plan has a 2 Years of Service requirement for eligibility to participate, with 100% immediate vesting. Employee (thus far) has never been credited with 1,000 Hours of Service. Consequently, only the business owner has been covered by the PS Plan to date.

Owner is appproaching retirement age and is considering adding a 401(k) component to maximize/optimize her contributions from here on out. I realize that eligibility to participate in the 401(k) component cannot exceed 1 Year of Service, although the plan will continue to require 2 Years of Service for the "profit sharing" component.

I am going to recommend that this client go safe-harbor 401(k), using the 3% safe-harbor non-elective contribution only for NHCE participants (i.e., to both eliminate ADP testing and meet T-H minimum contribution requirement). Then, IF her employee were ever to complete 1 Year of Service (she's been getting closer and closer to the magic 1 ,000 hours mark) and become eligible for the 401(k) and employer 3% safe-harbor components, I am assuming (hoping?) that there would be no non-discrimination or other issues with the profit sharing component, since the employee had not completed the 2 Years of Service requirement for same?

In other words, if the employee were to become eligible for 401(k) and safe-harbor - no biggie. Profit sharing, however, would be an entirely different story.

Seems obvious - but I've been tripped up by the seemingly obvious before!

Thanks for any and all input.

Someone sent to me a scan of question 2:220 of the 401(k) answer book. It says that for match calculated on a annual basis, you have 12 months after the Plan Year End to contribute the match.

I remember:

Deductible under section 404 is the due date of the tax return counting extensions.

Section 415 requires payment within 30 days after the due date of the tax return counting extensions to count in that year's annual additions.

Where does the "12 months after Plan Year End" come from?

This sounds almost too simple, but I have to ask? If a Church plan accidently omits a few participants from sharing in the employer contribution, they have to go back and make those contributions, plus earnings, correct? Wasn't sure if there was a difference because this is a church plan (compared to a PS plan).

Thanks

I have heard several DB/DC combo speakers make comments that both DB and DC plans, if combined for nondiscrimination testing, should avoid benefits, rights, and features (BRF) testing by making sure the plans have the same/similar BRF provisions. From an grey book Q&A, a 3-year cliff and a 6-year graded schedule are considered comparable and thus not subject to BRF testing.

I think BRF would include in-service distribution timing options? Suppose the DC plan has age 59.5 for an in-service option for all acoounts, but the DB has age 62. That appears to be a BRF, but how/what gets tested there?

What about an accrual requirement - suppose the DB requires 1000 hours for accrual, but the DC plan has no accrual requirement - is that a BRF that must be tested, and if so, how/what gets tested there, doesn't the 401(a)(4) test itself do exactly that?

This is a new one to me. My client can no longer make a match and has discontinued it with all proper notices, amendments etc. Of course, between that and the economy, deferral's dropped. He would like to hold an annual raffle for non-highly compensated employees who defer into the plan for some prizes as an incentive to defer. He might raffle monetary prizes (1,000 to the first person picked from the hat) or he might buy some prizes (a WII, or IPOD).

My suspicion is that this may not be allowed but am curious as to your (collective) thoughts. thank you.

Treas. Reg. 1.7476-1(b)(6)(i) says that "In the case of an application to which paragraph (b) (1) or (2) of this section applies, an employee who is not eligible to participate in the plan shall not be an interested party if such employee is excluded from consideration for purposes of section 410(b)(1) by reason of section 410(b)(2)(B) or ©."

Should the bold part be 410(b)(3)(B) or ©? It doesn't make sense to me as is.