I know this has been asked and answered, but I can't find it...

Safe Harbor Nonelective Plan

Plan Allows Discretionary Matching Contributions

2 Entry Dates

Comp Excludes Pay Before Entry In the Plan

The Plan is Allocating the Nonelective Safe Harbor 3% and a Discretionary Match (50% of 5%)

For the employees who entered mid-year, would they get 3% of their pay from the entry date? Or is the plan required to allocate 3% of whole year pay to satisfy Top Heavy?

It seems to me that the only contributions being made are Safe Harbor and a discretionary match that satisfies the safe harbor, which should (if I'm not mistaken) give them a pass on the top heavy contribution, but our software is forcing a 3% top heavy on whole year pay for those who entered mid year.

Any help?

Plan sponsor has a DB and a 401(k) PSP. The combined plans were top heavy for 2009. The DB Plan was frozen in 2009 before anyone accrued a benefit. In order to test for top heavy status for 2010, do both plans need to be combined? Or since the DB plan is frozen, is the 401(k) PSP tested on its own?

Partner made contributions to the safe harbor source during the year in the amount of 20,800. Obviously, some of this needed to be moved to profit sharing. However, his income was far less than expected and we have about 7500 that he is not going to use for 2009. Can this be refunded to him by 4/15/10 or should it be forfeited?

Employee incurred an expense that was first submitted to insurance. Insurance paid part. Claim for the rest was then submitted to HRA and the remainder to MFSA (about $500 to the MFSA) and both reimbursed. Only just now is the insurance company saying that the entire amount should have been covered by them and has notified the employee that a check will be sent. The original claim was occured and reimbursed in their 2009 plan year which ended 12/31/2009.

What should or can be done in this case? I'm assuming the HRA portion needs to be refunded back to the account. But what about the Flex? The employee, not unreasonably, claims that there were other incurred expenses that she could have had reimbursed via the MFSA. Perhaps just use the insurance check to refund the HRA and the ee keeps the remaining $500 and Flex is therefore appropriately used up?

I want to get a few 5307s filed before the April 30, 2010 deadline. These are not new plans. Some have prior determination letters and some never applied for a determination letter. I'm thinking that all of these clients need to pay the user fee because their plans existed prior to 2005. This is in reference to the part of the instructions that says "within the first five plan years." Only new plans that started out on an EGTRRA document would be exempt from the filing fee. But then, the IRS says that "a plan that was first effective on or after January 2, 1997 will automatically meet this requirement." I'm so confused!

Per a member's/distributee's request, a plan prepared a direct rollover check made payable to the eligible retirement plan, gave check to the distributee/plan member for delivery to the payee. The plan member somehow managed to cash the check, even though was not made out to him.

Plan, of course, did not withhold mandatory 20% because it was a direct rollover. Distributee now comes back to plan and asks for a "corrected 1099" showing distribution as ? not sure what, but something other than a direct rollover.

Questions: (1) should the plan correct the 1099R, since the one it issued was presumably correct base on available information? It had no control over the member's ability to improperly cash the check made out to the rollover plan.

(2) if no corrected 1099R should be issued, does the plan have other reporting reuqirements relating to this set of facts, or is this solely a problem now for the member/distributee?

(3) I do not believe the plan should be liable for failing to withhold, under 3405 regs, but can anyone offer additional comfort (cases, PLRs) for me/my client? Q7 of 31.3405©-1 does not contemplate this bizarre set of facts.

What is the deadline for a Cycle E filer to adopt a pre approved plan if they are currently on an individually designed plan? If they sign an 8905 do they have until Jan 31, 2011 the cycle E deadline or do they have to adopt the plan by April 31, 2010?

Thanks!!

A 401 (k) Plan is now being terminated. One participant has life insurance with cash value. The advisor for the plan wants to strip out the life insurance, place these proceeds into the cash portion of participant's account and distribute the contact without taxation. Is this still possible?

In 2008, a calendar year plan sponsor elected to use the transitional segment rates for the preceding September (2008). In 2009, the plan sponsor elected to use the non-transitional segment rates for January (2009). With final regs effective 1/1/2010, may the plan sponsor elect to use another basis for 2010 such reverting to a prior September determination month. Or, did the Plan sponsor use up his "freebee" change?

I have an offset Cash Balance Plan where four Doctors accrue beneifts in the Plan and the remaining "Participants" are in the Plan but their benefits are completly offset by the Profit Sharing allocaiton. The Professional organization has more than 25 employees but only four have a benefit. Is this Plan covered by the PBGC?

Hi!

I started a Traditional IRA before the amount contributed was tax deductible. From 1978 to 1986 I made contributions on which I paid taxes on. From 1987 to 2004 I made contributions to this account that were tax deductible.

In April 2009 I opened a Roth and contributed a portion of my Traditional IRA to my Roth. I have calculated that the amount I paid taxes on was 3% of the total value as of April 2009.

Supposing the amount I moved to the Roth was 100,000.00. Would 97,000.00 be taxable and the 3,00.00 non taxable?

Thanks, Joe

I have a plan that was written to release forfeitures when the vested balance was paid out.

The client read the Adoption Agreement (what a surprise) and learned that he had the option of releasing forfeitures earlier and he liked the 5 year break in service rule.

This is amendable, right? There is no benefits, rights, and feature isssue, is there?

Thanks for your guidance.

Does anyone have (and would be willing to share) or have a link to a "bullet point" summary of qualified plan provisions impacted by EGTRRA, PPA, etc.?

Thanks!

Can a plan pay the expenses related to a large plan audit? We are leaning towards no, because the audit company is engaged with the plan sponsor to perform the audit, not with the plan. Any thougths?

Payroll sends contribution file to 401k service provider and then the provider does an ACH to take the money out of sponsor's bank account to fund the contribution. Unfortunately the 401k service provider doubled the contribution amount so the ACH was for more than the amounts listed on contribution file.

Contributions were employee deferrals plus match. The amount that was withheld from employee paychecks is correct. The error is just that the amount funded in plan is double.

This error involved all participants who had contributions for this payroll. The total amount that was over funded is $2,800. This is a small plan with 21 employees currently contributing.

We haven't had this happen before and I would like suggestions regarding appropriate correction alternatives.

1. Do we reverse the trades and remove the amount of overfunded contribution plus any earnings from employee deferral and match sources and place in error correction or forfeiture account? Assuming document permits. If reversal of trades produces a loss then what?

2. Do we take no action and just leave the extra funds in participant accounts and adjust with next contribution? If we do this does this create an issue with prefunding deferrals and match contributions before the money is actually withheld from paychecks?

3. One thought was for the trades to be reversed and overfunded amount plus earnings to be returned to employer but I'm concerned about ERISA rules regarding reversion of assets to employer and plan assets to be managed for exclusive benefit of participants.

Proposal 2 would seem the easiest and since this is a mistake I'm thinking this wouldn't be considered prefunding of contributions.

Thank you for any suggestions you can provice.

Facts: Client was supposed to pay out (in lump sum) US employees under compliant 409A plan in certain traded securities with a FMV of $1000X. The securities stopped trading prior to the payment. Client is forced to scrap this plan and wants to institute a new plan which would pay the same employees in 48 monthly cash payments, with the first payment being made on the date the lump sum payment of securities would have been made. The total of the cash installment payments will be about $500X, materially less than the $1000X lump sump payment under the original plan.

Question 1: Is this a "substitution" under 1.409A-3(f) or are there any other provisions in the Regs. that would make this problematic?

Question 2: If this is a "substitution", I assume that the payments would be in violation of 409A as a prohibited subsequent deferral. How is the amount to be taxed calculated based on the proposed regs. under 1.409A-4? More specifically, is the violation of 409A occuring in the year of the "substituion" or is each payment after the initial payment considered a separate violation, with penalty taxes being imposed on each annual payment?

Any advice or guidance is extremely appreciated! Thanks in advance.

I vaguely remember their being a requirement that DB plans w/ a social security offset formual allow participants the opportunity to provide actual social security earnings history instead of the employer relying soley on reasonable estimates. Does anyone know where this requirement can be found???

thanks.

We just adopted a daily recordkeeping platform (Relius). However, when we receive the dividends and post them, it allocates them slightly different than our trust system (Addvantage). We've talked to both vendors and neither can provide resolution.

Should we "force" one of the systems and if so, which one?

Also, with daily accrual of dividends, how should mid-month distributions be handled? It seems problematic to try to "pre-pay" the accrued dividends, but if we don't, wouldn't we have to issue a second check to the distributee for the dividends after they are paid? It seems like we will be mailing a lot of checks in the amount of 5 cents!

In a section 105 plan, can the employer have the employees pay a portion of the premiums, and then use that money to pays claims??

Would appreciate comments on whether or not I'm getting this correct:

No credit balances are maintained.

A client plans to contribute the last piece of their 2009 calendar year plan contribution - $100,000 - on 9/15/2010

The plan sponsor (i.e., plan administrator) has elected to determine the actuarial value of assets as average value.

So, for purposes of computing the 2010 minimum contribution (officially after 9/15/2010), we determine the fair market value of assets on 1/1/2010 by including the discounted value of the $100,000, which in turn is used to determine the average value.

However, suppose I will certify the 2010 AFTAP in May 2010. We cannot include contributions that have not been made as of the certification date. Consequently, for purposes of calculating the AFTAP, I must not include the (discounted value of the ) $100,000 in determining the fair market value that is used to determine the average value.

Consequently, I must determine two average asset values as of 1/1/2010 !!!

Worse, the AFTAP determined in May will be 79%. If I am requested (and I will be) to recalculate the AFTAP in September after the plan sponsor makes the $100,000 contribution, the AFTAP will be 81%. The 2009 AFTAP was 73%.

So, lump sums will be restricted to 50% effective April 1 through September whenever and thereafter unrestricted (other than for HCEs). Further, (unless I plan to croak before October 1) there is no purpose in certifying the AFTAP in May since it is already presumed to be less than 80%.