I have a small professional employer with about 10 participants who is not PBGC covered (due to small size).

Previously there were 2 owners but one owner sold out to the other owner about 1 year ago.

Initially the ongoing owner (now 100% owner) thought he would maintain the under funded DB plan but now he is thinking about terminating it. He would like the under funding to be applied to both he and the former owner (Former HCE) benefits which are still in the plan. They want the employees to get their full benefits.

401(a)(4)-5(b)(2) seems to include Former HCEs in the same boat as HCEs in its brief paragraph that states the benefits must be limited to a benefit that is non discriminatory. Rev. Ruling 80-229 regarding a non-discriminatory allocation of assets doesn't specifically mention Former HCEs but stresses non-discrimination that protects the "rank and file employees".

Does anyone see any problems with the former owner (Former HCE) limiting his benefit to the same proportion of available assets as the current owner. Both former and current owners seem to be ok with this shared under funding approach, but IF the former owner were to change his mind and challenge it would he have much of a case ? Opinions.

Say we have a db plan (i suppose a 401k plan applies to) with 5 active participants (1 owner and 4 common law employees).

Situation 1

If 95% or more of plan assets are qualified assets than no IQPA audit required.

However, my undersatanding is that an ERISA bond for 10% of assets is required (assume less than 500k) and s/b renewed or increased each year.

So if at then end of 2008 plan assets were 100k the fiduciary ahndling the money would obtain coverage for 10k.

And if at end of 2009 assets are 150k the fiduciary would increase bond to 15k.

My understanding is that one of the approved surety companies can assist with the details and implementation.

Is this understanding correct?

Situation 2

Say a plan has 200k in assets and invests 100k of such assets in private real estate and the other 100k is invested in qualified plan assets.

Once again the ERISA requirement is to purchase a bond for 20k coverage.

However, the plan would be required to engage an IQPA.

Alternatively, if a bond for 100k was purchased than the plan would not be required to engage an IQPA.

Is this understanding correct?

Specifically a plan sponsor is purchasing a pension investment in a private company for $1,000,000. So my understanding is that a bond for $1 million is necessary to avoid the audit requirement.

Is that correct?

If an IQPA is required does anyone have suggestions as to where to go for this assistance?

Thank you.

Have a plan that upon review missed an eligible participant that should have received a profit sharing contribution in 2008. I am going to instruct for a make up contribution on his behalf this year.

My question is can this 'make-up' PS contribution be included and deducted for the 2009 PY? Other options? Or does the ER lose the ability to deduct the 'make-up' contribuiton?

Thanks,

Jason

A European company has a 401(k) Plan. They are opening another company/branch in the U.S. Since this is a controlled group situation, does the U.S. company have to adopt the European's plan document, or do the rules apply differently, allowing them to have their own plan document?

Thanks!

There are a couple of sections in the Patient Protection and Affordable Care Act that reference provisions that I think either don't exist or are not applicable - has anyone else found this or am I missing something?

1. In PPACA Section 1001(1), which amends PHSA to create a new Section 2712 re: prohibition on rescissions, the last sentence states that plans or coverage can only be cancelled in accordance with sections 2702© or 2742(b).

2702© does not exist in the pre-PPACA PHSA or in post-PPACA PHSA. If you assume it is a misprint and should read 2712©, and assume that pre-PPACA PHSA applies (since there is also no © in Section 2702 post-PPACA), you are referred to requirements for uniform termination of coverage in the group health insurance market. This makes sense. However, if you then look at 2742(b), you are referred to a section that deals with termination in the individual market which, instead of addressing uniform termination of coverage (that is found in 2742©), addresses the reasons an insurer can rescind or nonrenew coverage. 2712 and 2742 are substantially similar - I may be missing something, but it seems to me that these references are inconsistent - why not refer to both (b) and © of both sections, or (b) of both sections, or © of both sections, rather than this mix?

2. In PPACA Section 1201, amendment to PHSA creating new Section 2705, the text goes from subsection (a) (re: discrimination based on health status) to (j) (re: wellness programs). (j)(1)(A) refers to "subsection (b)(2)(B)," which doesn't exist. Even if you assume that (j) should have been (b), the cross-reference really doesn't make sense ((j)(2)(B) gives one example of the types of wellness programs that don't have to meet certain requirements, whereas (j)(1)(A) is providing an apparently general definition). Has anyone else noticed this? Are we all missing subsections (b)-(i), or were these just numbered incorrectly?

Finally, is anyone else having trouble making sense of (b)(1)© of new PHSA Section 2719A (which deals with coverage of emergency services) - especially from (ii) on?

I think I know the answer to this, but thought I would run it by this forum.

An employee signed a waiver of participation in the section 125 plan in Dec. of 2008, thus all her premiums were taxed. When she received her 2009 W2, she couldn't understand why she had to pay taxes. I showed her her signed waiver. She claims that the agent did not make it clear to her what she was signing. It's her word against the agent's, who says that he asked her repeatedly if she was sure about this.

She is insisting on having a retro adjustment done and a corrected W2 issued. I don't think that would be possible. She has signed a legally binding document, if we make the change wouldn't we be out of compliance? And our section 125 plan could be revoked.

I am pretty sure, we cannot go back and make this change, but if anyone here has an idea or way please do let me know!

Version 14 SP Whatever is most recent.

How do I tell Relius, "now listen to me! This person is NOT ELIGIBLE" in a way that Relius will understand? I have been trying and trying and trying and nothing will work. Plan has annual comp periods only. This person worked 1,000 in the plan year but NOT in their first 12 months.

I have a Plan sponsor who has asked if he can make his contribution to the 401(k) Plan using some common stock he owns. This is a self-employed owner, so he wants to transfer his ownership of some common stock to the Plan, in lieu of a cash payment.

Is this prohibited?

I've seen guidance on "property" transfer, but I don't think widely traded stock would be considered property.

Plan uses group annuity (John Hancock) as funding vehicle - are the commissions paid to the broker included both on questions 8f & 10e? Secondly, Hancock's annual 5500 Sch A report which gives the commission total also shows a $43 contract admin fee deducted from the guaranteed interest account, yet the annual balance sheet on the administrators report shows $740 as the contract admin fee - is only the $740 considered towards total on 8f? This is my first attempt completing the filing using EFAST! thanks for any assistance you can give!

We inherited a 403b plan that has had a written document since the plan's existence in July 2004. The client provided us with a new document dated 1/1/2008 and numerous amendments. Is this plan required to be restated for EGTRRA by 4/30/2010?

Please provide some guidance. Thanks.

What am I missing . . .?

Dr. with 6/30 pye adds a SH 401(k) to his straight PSP at the start of the plan year, 7/1/2010. For the rest of calendar year 2010, he defers $22,000 (he's over 50). Then, in the first half of 2011 he does the same. So, for the plan year, he has deferred $44,000, and only needs another $10,500 (using current numbers) to reach the 415 limitation--that's only 1.3% of compensation above the 3% safe harbor contribution (i.e., about 4.3% of his $245,000 compensation). So, he'll only have to contribute 4.3% of compensation for his staff for that plan year. A pretty cheap way to his 415 limitation. That's right, right?

And, if the PS side of the plan is integrated, he can get himself the 1.3% above the SH contribution by making less than a 1.3% integrated contribution (i.e., about 0.8% of total comp. + .8% of comp above the wage base, thus just .8% of staff compensation more than the 3% SH contribution). Right?

The next plan year, of course, he'll only be able to defer $22,000.

Have a small DB plan that will be terminating in the next few months.

Is there any problem amending act eqiv interest from 6.5% pre and post to 5.5%? There should not be any cut-back issues as everyone will be getting more not less. I know timing for the minimum present value cannot be utilized if changed within 12 months, but not aware of anything for actuarial equivalence.

i am new to the world of 457. lets say i put in a new plan today and an employee is 69 years old. can they take advantage of the catch up for the prior three years even when the plan wasn't in existence?

I have a 401(k) plan that has a $1000 cash out rule - i.e. no consent is required to cash out a person with less than $1000 in his account. The wording of this provision is mandatory - the plan is required to cash out such participants.

However, the plan has been following its own cash out rule and only cashing out participants with less than $200account balances. Is anyone aware of a correction method for this type of error? I guess it is an operational error since the document was not followed, but it seems like a rather benign one to me. Any ideas?

Can an individual contribute to a company SIMPLE-IRA while also contributing to a SEP-IRA for a separate line of business? The individual has Schedule F income and other earned income and wants to contribute to a SEP as well as contribute to the SIMPLE-IRA at the individual's main place of employment, where he receives a W-2.

I couldn't find anything quickly that allowed or prohibited. Any help is appreciated.

Calendar year defined benefit plan has been around for several years. It has 2 deferred Vested participants and two active participants (the active participants are married/owners and the owner has began receiving benefits in an annuity on 7/1/2009 and continues to be employed).

Two deferred vested participants are their children.

No compensation has been taken for the past 5 years. Plan has been overfunded since 2005.

We informed client in 2005 that the plan was overfunded and that the accrual of benefits would decrease the overfunding IF THEY TOOK COMPENSATION. Benefit formula is already 100% of avg. comp. We have informed them of these facts every year since 2005.

Finally in 2008 (the market downturn), the plan became more managable and was no longer overfunded as of 12/31/2008. We informed the client that although the assets dropped significantly, the plan was able to terminate now.

The client finally discusses termination with us in early 2010. Problem is the plan had a return for 2009 of over 100%. Statements show no contributions to the trust but do show a transaction to buy and sell securities that led to increasing assets to double what they were as of 12/31/2008.

BOY valuation shows a min. required contribution of 112,000. (using 1/1/2009 or 12/31/2008 assets). But now the plan is overfunded again!

We have contemplated changing the Valuation to EOY (with IRS approval). But, is there anything in the regs. that states a min. required contribution can be left unpaid if it would only overfund the plan even more?

Any one have any other creative solutions at this point. Yes the client failed to follow our recommendations for the past 5 years, but we are where we are and are looking for solutions going forward.

Owner who is currently receiving benefits is also receiving social security and has discussed with his accountant about the negative of claiming compensation while receiving social security and retirement benefits.

Is the reversion tax of 50% the only option? Or 20% if they start up a Defined Contribution Plan?

We discovered a client who has not been filing their 5500-EZ's. We're not eligible for the DFVCP because it's an EZ. What have others been recommending? Filing the back forms and seeing if you get a letter? When people have taken this course of action, have they gotten penalty letters?

I was thinking maybe attach to the filings a letter requesting forgiveness for the late filing as they were not aware of the requirement. It actually relates to the change in filing threshhold from 100K to 250K.

US Citizen is married to a Resident Alien. US Citizen has W-2 compensation and is not covered by an eligible retirement plan. US Citizen may make an IRA Contribution, but can an IRA be made on behalf of the spouse who is a Resident Alien? Publication 590 does not address this scenario.

Thanks for any replies.

This is not a safe harbor match. Can the match formula be a percentage of pay instead of a percentage of deferral? For example, the employer is contributing a match to only people who defer equal to 3% of salary instead of a % of deferral. This resulted in a formula of 700% of deferral not to exceed 3% of pay. Would this raise any red flags with IRS or DOL? There are no highly compensated people in this plan.

This is not a safe harbor match. Can the match formula be a percentage of pay instead of a percentage of deferral? For example, the employer is contributing a match to only people who defer equal to 3% of salary instead of a % of deferral. This resulted in a formula of 700% of deferral not to exceed 3% of pay. Would this raise any red flags with IRS or DOL? There are no highly compensated people in this plan.