A DB uses a Vol Submitter and has never been submitted to the IRS for a LOD. The DB excludes people by name. My understanding is that this is not allowed under 410(b). Is this correct?

I have a client that would like to make their discretionary PS contribution in a manner that defines compensation as only including bonus pay. Assuming that this definition of compensation would pass the 414(s) test is this allowed? We currently use a prototype document that contains an "other" line that allows for adjustments when defining compensation. Could you simply write in that for purposes of PS only bonuses will be taken into account and all other forms of compensation will be excluded?

Thanks for the help!

ok - the latest and greatest in the line of what's up????

Anyone else have clients receiving letters from the IRS on the #945 withholding claiming that the deposits do not match the amount on the form?

I'm on my second one already today and both clients say they did submit the withholding and thankfully have the EFTS slip from their bank. I'm having them respond and send in the backup info, but am wondering if we are in for a whole slew of these....

A 403(b)(7) plan has employer matching and employer nonelective contributions in addition to elective deferral contributions. The plan doesn't permit age 59-1/2 and hardship withdrawals. The plan is transferrring to a 403(b)(1) annuity contract and would like to allow 59-1/2 withdrawal from all accounts and hardeship distributions of elective deferral contributions.

Can the plan add the in-service distribution provisions going forward under the annuity contract?

Assume Plan that covers about 150 participants provides lump sum as greater of PPA and 71GA/PBGC.

A former HCE is age 60 and can retire at age 62 with unreduced benefit. As of 1/1/2009, AFTAP was 73%, which included assumption (right or wrong) that employee would elect lump sum at age 62.

Given the near zero probability that the Plan will be 110% funded in two years, the HCEs benefit will likely be distributed in an annuity form.

Question: Should the FT be valued assuming a lump sum will be paid or should it more realistically assume a monthly annuity form of distribution?

If an executive has a $1.5 million base salary and defers $500,000, does that mean the company can deduct 1,000,000 of base salary this year, and then, assuming the executive has left the company at payout, deduct the $500,000 plus earnings at that time. The current bonus is structured to allow full deduction for cash bonus.

Thanks

Has anyone attended a good web-cast or workshop related to the revised Schedule C which provided some good case studies and examples of the completed Schedule C based on the case study fact pattern? If so who sponsored the web-cast or workshop?

Please help. Lots of discussion on whether or not we have to continue to file a schedule R for the 2009 plan year. If the plan is otherwise eligible to file the SF form ( small plan, waive audit not required to file scheudle A or D. BUT DID have distributions in the 2009 plan year. We are getting mixed answers from numerous resources. Can you please tell me how you are handling the schedule R for DC plan under 100 lives who did have distributions.? Any input would help...Thank you!

We have been contacted by an individual who claims to have a power of attorney from the sole trustee of a 401(k) plan that we administer. We have not yet seen the document.

I thought that long ago I had heard that one can give a power of attorney as to one's personal affairs, but not as to one's fiduciary duties. Is that correct?

If I person has rolled over their profit sharing money to another profit sharing plan - would you consider that seasoned money or rollover money? If they want to pay their life insurance premiums by using this rollover or seasoned money - what is taxable? the premium, ps-58 costs? What do you issue a 1099 for? Do you still do PS-58 costs for premiums made with seasoned or rollover money? No one seems to agree on this question. Thanks

1/1/2010 valuation date.

2009 Aftap 63%

Currently, the 2010 aftap is at 59.6% not reflected in the assets are the contributions receivable to the 2009 plan year.

Can I assume the receivables will be made and issue an aftap over 60% or do I have to freeze accruals until the contributions are made and then reissue an aftap?

Thanks,

Andrew

Plan has two entities adopt the Plan. Both entities operate fast food restaraunts. The ownership is similar in both plans, and is considered a controlled group after attribution. One has a modest profit and the other has a modest loss. Is it safe to assume that each different entity represents its own "trade or business"? What concerns me is that thye are both fast food restaraunts that are therefore in the same business (they are even operating the same franchise). Is this one "trade or business"? Does the fact that it's a controlled group make it "one trade or business"?

If they are "separate trades or businesses" my interpretation (and apparently the EOB's) are that I can ignore the losses based on the following site. My interpretation is tha tthis holds even both adopt the same plan (they could, after all, have created two plans and there should be no dispute at all).

From 401(d):

A trust forming part of a pension or profit-sharing plan which provides contributions or benefits for employees some or all of whom are owner-employees shall constitute a qualified trust under this section only if, in addition to meeting the requirements of subsection (a), the plan provides that contributions on behalf of any owner-employee may be made only with respect to the earned income of such owner-employee which is derived from the trade or business with respect to which such plan is established.

Hi,

We have a client who believes he can make a catch-up contribution to his traditional SEP (client does not have a SARSEP). We have shown him some research (IRS PUB 560 & CCH explanation) to help convince him that catch-ups are not permitted in traditional SEPs. IS there anything else I can show him. He is not convinced by what we have provided so far.

Thanks for your help.

I have a question on COBRA benefits. We have a client who is self-insured. They provide the following types of health insurance options:

Individual

Family

2-person

They would like to offer COBRA as either an individual or a family rate. Is this allowable? I believe you must allow a participant to elect the same coverage they could elect before the qualifying event - and so this option is not possible for them. They believe that they are covering all beneficiaries by offering family coverage.

Thanks so much.

Do you have to give the participant and alternate payee a blackout notice while a DRO is being determined for a QDRO?

Would appreciate any thoughts on the following. Target company has accelerated vesting provisions that cause options and restricted stock to vest upon a Change in Control (CIC). Target also has a DB-style SERP that provides for accelerated vesting and some accelerated service credit plus automatic payout upon a CIC. The CIC definition is 409A compliant. Buyer, as term of the deal, will retain Target's employees but wishes Target's officers to voluntarily waive their rights to any single-trigger CIC benefits for double-triggers. If Target's officers are willing to do that as part of the deal, can it be safely done under 409A?

I wouldn't think amending vesting terms under the options would raise 409A issues per se. Seems neither a modification nor a typical extension of the option here as exercise price does not prolong the period of exercising options.

I know 409A doesn't typically govern restricted stock grants but what if individuals on eve of vesting of the shares due to CIC (and thus on the eve of taxable compensation) agree to amend the stock agreements and push back accelerated vesting rights so they only get acceleration if involuntarily terminated within a certain period following CIC? Some will likely stick around and vest on regular schedule without any acceleration but it is possible some will leave, possibly in 2011, which would seems to me may arguably result in a deferral of restricted stock income--i.e., you had a legally binding right to income that would have triggered upon CIC but you pushed back to a later year. If you amend the agreements before CIC is done, can you somehow avoid 409A issues?

What about the SERP? Is there any way for individuals to basically turn their back on the additional benefit and lump sum single trigger payments they would be entitled to upon a CIC? If you try to amend before CIC is certain, is that impermissible delay in payment and/or impermissible substitution of the original benefit. General plan would be for participants to get the same benefits as before without any additional increase for agreeing to change or for additional service--i.e., they don't get anything more for agreeing to waive the immediate CIC benefits (other than ability to have amounts deferred) since they would generally be given the right to the same accelerated benefits package if involuntarily terminated. (I suppose perhaps there would be some risk to them in agreeing to the waiver in that the amounts are unfunded so they might not be around at a later date. Also, I suppose the Buyer could terminate the individuals for cause or the officers could voluntarily resign after CIC such that they presumably wouldn't be entitled to the SERP benefits at that time but I don't think the Service would really view risk of forfeiture due to termination for cause or voluntary resignation as a substantial risk of forfeiture.

Thanks for any thoughts as to what others have done in these situations.

Reply

A 401k profit sharing is drafted such that each participant (of a plan with say 5 participants) gets its own allocation group. So after the plan year the employer decides on an allocation formula for each participant that meets the non discrimination rules.

Once this is decided is the provision incorporated by means of an amendment for that plan year and then another amendment the next year and so on for each year's allocation rates?

Thanks.

A 401(k) plan has terminated in 2009. The 100% owner of the corporation sponsoring the plan will turn age 70 1/2 October 1, 2010. Her required beginning date is 4/1/2011 but she does not want to take two RMD's in 2011 so she wishes to start in 2010. Our understanding was that the RMD (if taken in calendar year 2010) must be distributed from the plan prior to distributing remaining benefits to the participant.

The fund company will not make the distribution until the participant actually turns age 70 1/2. They claim IRS regulations do not allow for the RMD unless taken after actually reaching age 70 1/2. I asked if they could give me the cite they were referring to and they replied that we must instead prove to them that a greater than 5% owner could paid an RMD on termination prior to actually attaining age 70 1/2.

They could be correct, but 401(a)(9) does not seem to specifically address the age issue.

Has anyone run into this?

My question is once an HSA has been opened, can I incur medical costs in 2010, but finish paying for them after January 1 with my 2011 contribution?

In October 2008 I enrolled our family in a HDHP. It excludes maternity coverage. I opened an HSA in November 2008. Contributed full amounts for 2008 and 2009. Current balance is approximately $10,000.

I am due with baby #2 in September 2010. I had a C-section last time, so I am budgeting for that again. I plan on making full 2010 contribution when pregnancy is further along. (Budget-wise, if I have a miscarriage, I would prefer not to have over $15,000 locked up in HSA, when otherwise our health expenses are minimal.)

When I deliver I plan on having approximately $16,000 in the HSA. I anticipate maternity charges could be in the area of $20,000. After delivery I plan on using all but $25.00 in HSA account (to keep open and active) to pay the medical bills. If I have $4,000 in medical bills remaining, can I make my 2011 contribution January 1, 2011. Then pay the remaining bills out of my 2011 contribution? It would be nice to use the pre-tax money to pay off the last of the maternity bills.

Thank you for your assistance.

This has been a bit of a pet peeve for me.

I generally work with clients that have about 10 employees (when they have employees).

They frequently implement a safe harbor (3% non elective) 401k profit sharing plan.

If the plan sponsor wants to invest than the employees are not relevant and the company invests how they choose and pays out benefits upon termination. Not a problem, though few plan sponsors choose this route as they typically want some or all of the investments self directed.

With that said they look to me for guidance on the set up.

My understanding is that there are many rules to adhere to for the plan to have 404c protection and perhaps not a necessary feature.

So where do I direct them for self directed plan?

1) One idea I have is to have them set up individual sub accounts with Schwab where each participant invests in his own brokerage account in whatever he wants.

2) Another method I believe is to have the sponsor work with a broker at some financial institution where they establish a menu of reasonable and prudent investment options for each participant and they each have access on line to their own account.

The clients I have just want something simple to work with and understand. I don't have to suggest anything complex and extremely custom made. Just something to get them started.

So in conclusion based on the two methods I mention above and my goals, does anyone have suggestions on how to implement what I am trying to do? The more specific re: procedures the better.

I want to establish a comfotable procedure for implementing these plans.

Thanks.