An employer has a TDA 403(b) plan and also has a DC 403(b) plan. The DC plan offers a new investment option that the TDA does not offer. Many of the participants wanted to move their TDA accounts to the DC to take advantage of this new investment option.

My question is, can the participants move their money as a transfer from one plan to another? My concern is that there is not a distributable event for most participants.

Does anybody have a template or example to help prepare this new required statement for multiple sources?

Thanks!

If a participant is enrolled in Cobra (not through a ARRA subsidy) and they have other coverage available to them, either through their employer or their spouse's employer can the cobra employer drop them from coverage? How do you monitor whether or not your cobra particpants have other coverage?

For the mavens who are digging into new Schedule C questions:

Assuming no other relationship to the retirement plan, which of the service providers to a mutual fund (manager, underwriter, transfer agent) becomes a service provider to be reported (assuming enough $) on Schedule C because of the plan's investment in the fund's shares?

401(k) plan is defined to use section 3401(a) wages as their definition of compensation.

The employer awards 500 shares of restricted (a.k.a. contingent) stock to an employee after 1 year of service. The stock is subject to a 5 year vesting schedule. It has no value until it is vested.

The value of the stock is reported on the W2 in the year it is awarded (1 year of service). The employee can pay taxes on it the year it's awarded (taxed as ordinary income), or they can file a section 83(b) form and pay taxes in the year it is vested.

The stock is not part of stock option program. It is not publicly traded, not registered with the SEC, is not subject to payroll tax, is not used in the determination of 401(k) benefits, cannot be used for collateral, and cannot be sold other than when the employee terminates.

So, should the value of the stock be included in the plan's definition of 3401(a) compensation - and be included in 415 compensation for purposes of the IRC §415 limit and determination of HCE status?

Any thoughts?

I am working on a New Comparabilty Plan with a Last Day & 1,000 hours rule.

If a employee is terminated in the year, but works more than 500 hours, and does not get the Profit Sharing Contribution, do they have to be included in the New Comparabilty calculation with a zero EBAR?

At a recent ABA conference, it was suggested that all prototype plan sponsors should file a 5307 for a determination letter.

What are the reasons for doing this as a prototype? Are there any advantages or disadvantages to filing for a DL as a prototype?

Any insight is appreciated. Thank you.

Say we have a one participant plan; i.e. owner/employee.

Say he is age 50 (i.e. < NRA) and he withdraws from his DB plan $75,000 and does not make any payments back to plan.

Up to 50k (assuming that is the loan limit in t his case) can be deemed distribution subject to income tax and 10% penalty.

From a practical perspective it would be easy administratively to treat the additional $25k the same way and report 75k in form 1099r.

How are small plan pratcitioners handling this type of situation?

I suppose the technical approach is to treat the 25k as a PT. Then how does this work from a tax perspective (provide specific numerical explanation) if employer never pays it back to plan?

Thanks.

We're are a bank/trustee and recordkeeper and we're wrapping up our restatements but wondered how other shops were planning on helping their customers with the distribution of new SPDs.

There are some pros and cons to electronic distribution and so many rules that it may not be workable. However, there may also be some push back to asking the customer to print X# of copies to hand out to all, including terminated employees who still have a balance in the plan.

How are you approaching the process? Thanks

Should an insurance paying override commissions to a broker or agency, be reporting these amounts on the Schedule A attachment to the Form 5500? Thanks.

I am new to the HR department of an employer that has both a 403(b) and a safe harbor 401(k) plan. We have both union and non-union employees. We limit the 403(b) to union employees only. All other employees participate in the 401(k). Is this permissible? Is there any kind of discrimination issue to be concerned about?

We also have a subsidiary with all non-union employees. We exclude them from the 403(b) and only allow them to participate in the 401(k).

I am concerned that this is not permitted. I just want to make sure we aren't overlooking something. Are there questions I should be asking?

Thanks.

I have a controlled group of 11 companies. Two of the companies are closing due to economic conditions.

1. If we are under the 20% Partial Plan termination and we don't 100% vest. What happens to the forfeiture that originally went to reduce the contribution for that particiular ER?

2. If they are under 20% and the client wants to 100% vest the people affected what discrimination issues are we dealing with. (There aren't that many nonvested EE's) Client thinks this would be easier than trying to determine the 20% threshold.

Any suggestions are appreciated.

Pat

A plan sponsor (nonprofit) has one NHCE in their DB plan (subject to PBGC). They provide notice that the person has retired and asks for distribution paperwork. Plan allows full lump sum, plan has enough assets to pay out.

Participant, age 60.5 near the end of last year, did not actually retire, but sponsor paid the lump sum ($200,000) anyway. The plan sponsor thought in-service was still allowed. The plan had allowed in-service until a few months ago, last fall, when an amendment to comply with the unusual (IMO) IRS definition of the word "deference" under the final NRA regs changed the NRA to 62 and removed the in-service option pre-62.

At about the same time the participant was paid out, the plan adopted an amendment to terminate the plan and provided the proper plan term notices to the participant. The date of Plan Termination established was about 2 weeks after the participant was paid out. They are still employed now.

1. Plan paid when no distributable event occurred

2. Plan paid before the 60-day PBGC review period

What do you think would be a reasonable fix that the IRS and PBGC would accept?

In a defined contribution plan, the participant's balance consists of deductible contributions (taxable) and voluntary contributions (after-tax).

He is an owner and must begin taking his required minimum distributions in 2010.

Is there a certain order to follow in distributing his RMD, Voluntary Balance vs Deductible Balance?

Can he withdraw/deplete his voluntary contribution balance first and be taxed on the applicable earnings only? We have the basis in order to calculate.

Can he withdraw some from his deductible contribution balance and some from his voluntary contribution balance?

I appreciate any guidance.

Thank You,

Client previously adopted a protoptype plan and now has decided to switch to an individually designed plan. Can the client restate onto an IDP by April 30?

A client of mine (governmental hospital) received a notice from their DC plan provider/recordkeeper advising them about FAS 157 - do governmetnal DC plans have to comply with this reporting requirement?

Mass layoff creating a presumption of partial termination of a DC plan occurs in a single month, say April. Who must vest?

No:

1. anyone who voluntarily terminates (of course must be careful regarding constructive discharge) before the RIF.

2. anyone who voluntarily terminates (same as above) after the RIF

What about those employee-participants who are terminated for cause during the year - either before or after the RIF?

I believe they are counted for purposes of calculating the turnover, but it doesn't seem that they should be entitled to vest upon the partial termination.

However, Rev Rul 2007-43 includes a sentence that may indicate that EVERY terminated employee during the year must vest:

"If a partial termination occurs on account of turnover during an applicable period, all participating employees who had a

severance from employment during the period must be fully vested[.]"

Is the partial termination viewed as occuring in April, so that the earlier and later terminations during the year do not require vesting? Thus, the significance of the "applicable year" being the plan year (or possibly longer where there are multiple related layoffs) is to determine whether a partial termination has occurred. But determining who must vest depends on whether their participation terminated as a result of the corporate event (i.e., they were laid off or constructively discharged).

Put differently, if a partial termination occurs in April (and it's the only partial termination for the year), then only those who are laid off as a part of the RIF vests upon the partial termination.

Is there a general consensus on this?

ABC Corporation has 401(k) Plan A and has now started a new 401(k) Plan B. Both plans have a six year graded vesting schedule.

Plan A does not exclude YOS prior to the plan's effective date (1/1/06) but Plan B does (actually the effective date of the plan or a predecessor plan). The effective date of Plan B is 1/1/09. I don't think there is any question that Plan A is a predecessor of Plan B.

Currently Plan A is in the process of merging into Plan B.

If anyone can weigh in on the following issues, it would be much appreciated.

1. Does everyone agree that the change in vesting schedule rules apply here?
   
2. If 1 is yes, would you treat the vesting protection as applying only to amounts already accrued in Plan A, or to future accruals as well? I know the IRS takes the position that the protection applies to future as well as to past accruals, but I get the impression that this isn't necessarily the position embraced in the field. Nor does the IRS position specifically address plan mergers.
   
3. If 1 is yes, do you agree that the three YOS to determine who could make a vesting schedule election applies to all YOS, not just those subsequent to the effective date of either Plan A or Plan B?
   

Thank you for any and all replies!

P.S. I believe Plan B was created to get around the pro-rata safe harbor allocation rules for nonelective contributions in Plan A. It did not just "happen" to exist.

Dog

Can someone explain the new NRA rule (at least age 62) as it relates to DC plans and whether an amendment is required.

Does Gap Period Income need to be calculated on excess deferrals from a tax exempt or governmental 457(b) plan? All the articles discuss WRERA in a general defined contribution plan sense but don't specifically mention that the WRERA would or would not apply to a 457(b) plan. I'm not convinced one could apply it to a 457(b) plan since the 457(b) regulations don't specifically reference 402(g). However, what is the interrpretation of "any income allocable to such amount" in §1.457-4(e)(3) and "with allocable net income" in §457-4(e)(2)? Thanks!