Is it possible to switch from the matching safe harbor 401K plan to a nonelective 3% safe harbor 401K plan during the plan year? Currently, our plan provides the typical 3% match up to an employee's elective contribution of 3% of compensation and then 50% of additional elective contributions up to 5% of an employee's compensation. So the maximum match is 4% of compensation. If we can make the switch to the nonelective 3% safe harbor, then we will actually contribute 4% this year for all eligible employees. This is because some employees have already received the 4% match based on the elective contributions they have made to their 401K plans and we wouldn't want to reduce the match as a result of the proposed safe harbor switch.

We would like to make this switch effective for the 2009 plan year.

A prior recordkeeper has just provided a check to the current recordkeeper, along with an explanation that the prior recordkeeper had overcharged participant accounts for the prior record-keeper's fees back in 2008. At that time, the recordkeeper’s fees were paid from plan assets.

The current recordkeeper, upon receiving an allocation breakdown from the plan sponsor, has been directed by the plan sponsor to deposit the overcharged fees pro rata into the appropriate participants' account.

The problem is: The correct money source into which the funds should be deposited for each affected participant.

It can't be in the employer's money source because the funds would be subject to a vesting schedule.

Should these assets be treated as pre-tax?

Any other alternatives?

Any guidance would be grately received and appreciated.

Suppose the owner of a small corp that sponsors a DB plan is also a participant in the plan. He also happens to be the trustee.

He owns 7% of the stock of a privately held company (not the company that sponsors the DB). Can the plan invest in that stock?

Something tells me that it may be a prohibited transaction. Use of plan assets for the benefit of a disqualified person. The disqualified person being him as a plan fiduciary. Suppose instead this was a publicly traded company. Then would it be a prohibited transaction?

Is there a best Website Roth conversion calculator?

Employer merged with another company (new company still considering k plan), old plan had 8 people was safe harbor all contibutions made before all employees including owner went into new merged companies. Owner still had A/R due which has now been collected money could be converted to payroll and was curious about whether he could fund prior 401 k plan. All participants have been paid out except him investment issue delaying his distribution. it sort of brings up questions prior plan was top heavy but only safe harbor match was made he would be only employee in (old company) 14 months with payroll made. thanks for review

Plan has four owners who all receive K1s and W2s. There are no other employees. When running the K1 calculations (by individual) I am getting a negative number for two employees. I am not sure how to handle a negative K1. . .For example:

K1 compensation totals $2,700 (before any deductions)

W2 compensation totals $35,000

After running the K1 compensation thru the self-employment earnings calculation and deducting self employment and the profit sharing contribution for the year I am left with a negative number ($9,500). Can I then add the W2 compensation of $35,000 to the ($9,500) and use the $25,500 as the participant's total compensation for the year?

Also, does anyone know of a good resource to read up on K1 and Schedule C compensation? I feel like I get caught up on this stuff every year. . .

Thanks!

if my client is 1/31/2010 cycle and currently using an individually designed plan but intends on adopting an EGTRRA prototype plan, is it entitled to the april 30 deadline or the January 31 deadline?

Does anyone have a sample irrevocable election out of a plan that they are willing to share?

Hi,

I have a MERP that allows post tax premiums to be submitted for reimbursement.

I was looking for clarification on what is meant by "post tax"

Thank you!!

Can you have different distribution schedules (e.g., 6 month vs. 12 month) for deferred compensation amounts that are distributed upon a separation from service but vary depending upon whether it is an involuntary termination by employer versus a voluntary termination by the individual.

Treas. Reg. 1.409A-3© would seem to prohibit such distinctions to the one time and form of payment rule but I am trying to determine exactly what 1.409A-3©(3) means in this regard. It seems to open the door very broadly to permit distinctions based on any sort of separation from service. Would appreciate any thoughts on how to parse that language.

I want to be clear.

Calendar year DB plan with lookback month of November.

Participant terminated this month (December 2009). If they are paid out in January 2010, it is my understanding that the 417(e) lump sum should be valued using 2010 mortality. But would I use the December 2009 segment rates or the Novemeber 2008 segment rates?

Thanks in advance.

The plan has an alternate payee who elected to not take his distribution out of the plan at the time of the QDRO. Since then, the plan has increased the cashout limit to $5,000 (with automatic rollovers from $1,001 - $5,000). The AP's balance is <$5,000, so the Trustee wants to pay him out. Everything I see says that the automatic rollover is triggered by the termination of a Participant (with a capital "P"), but does AP fall under that umbrella for this purpose? Thanks.

I have inherited the administration of a 401k plan that apparently has never suspended employee contributions after hardship withdrawals have been taken (going back to 1994). Was this ever legal? What is the correction method for this?

Thank you,

Of course in my 2,000 years of practicing, I've never had to determine the maximum distributable lump sum on a deferred pension. Alas, my day has come, in particular, because of the NRA=62 requirement.

So, facts are participant age 52 with NRA=62 has over 10 years of whatever and has accrued the full benefit of the high three (H3) average compensation under 415(b)(1)(B). Since lump sum is available, then presumably "annuity starting date" is at age 52 and not age 62.

So, we do as follows:

(1) Determine the lump sum for a deferred annuity to age 62 valued at age 52 using the plan factors.

(2) Convert this lump sum to an immediate life annuity at age 52 using the lesser of the Plan actuarial equivalence or the applicable mortality table and 5.5% interest. I.e., produce the greater annuity.

(3) Reduce H3 to an immediate annuity using whichever produces a lower factor -- the Plan actuarial equivalence or the applicable mortality table and 5.5% interest. I.e., use the lower amount.

(4) Assuming (3) < (2), the distributable lump sum is (1) / (2) x (3)

Any disagreement?

I have an employer who wants to reward employees who do not need to be covered by the employer's group health plan because they have coverage through a spouse's plan or retiree benefits from a former employer. The Employer would like to make a contribution to the Health FSA for each of these employees. The employees would not have the option of receiving the cash outright.

I am having a hard time figuring out if this is OK.

Reg 1.125-2(b)(2)(ii) seems to permit an employee to opt out of health coverage and receive cash:

The cafeteria plan provides for an automatic enrollment process: Each new employee and each current employee is automatically enrolled in employee-only coverage under the accident and health insurance plan, and the employee's salary is reduced to pay the employee's share of the accident and health insurance premium, unless the employee affirmatively elects cash. Alternatively, if the employee has a spouse or child, the employee can elect family coverage.

Is there any reason an employee can't opt out of health coverage and receive an employer contribution to a Flex FSA instead of cash?

I assume the employer contributions must pass nondiscrimination testing, correct?

I appreciate any assistance.

Plan sponsor has a 401(k)/Profit Sharing Plan. Plan sponsor wants to invest in real estate. I don't know the exact details of what yet. I know there a lot of caveats to having real estate in the plan, but does anyone have a good article on this? This article would talk about real estate in the plan and the step by step guide to how you do it.

Thank you and Happy Holidays!

A company purchased a company that I admin a plan for. The company is not accepting the plan but will accept the rollovers.

The exisitng company would like to keep the plan open and offer the employee the ability to roll into the new company plan, roll to an IRA or keep in exisiting plan.

There are a couple loans in the plan. Can these loans still be paid on (obvioulsy not thru payroll deduction) as to not to default? The loan policy states "MANNER OF REPAYMENT. Loan payments will be repaid by payroll deduction repayments as of each payroll withholding period (but at least quarterly). If the applicant revokes the payroll deduction election, the entire unpaid principal sum ofthe loan plus accrued interest (plus any other amounts due under the loan) will become due and payable."

Can this be changed to accept payments?

What options does the company have for keepign the plan open?

We have an alternate payee who is also a participant in a defined benefit plan. The alternate payee is eligible to receive a distribution related to the QDRO as the former spouse has reached his earliest retirement age. The alternate payee is also an active plan participant. The Plan is silent as to whether an alternate payee may receive benefits under the plan while actively employed.

Based on my review of the Code and guidance issued by the IRS and DOL, there does not appear to be any restrictions that prohibit the Plan from distributing QDRO benefits to the alternate payee. In fact, one could argue that denying benefits to the alternate payee places an encumbrance on the exercise of the alternate payee's right to benefits.

I would greatly appreciate comments on this....

One of my clients said there are new rules related the employer stock dividend election, starting in 2010... that a portion of the contributions the participant elects in the Employer Stock Fund might not be eligible for the dividend payment election. Does anyone know what this is refering to? A portion? Wonder what that means?

Kind of a basic question, but are there any employer obligations that go along with having a discretionary profit sharing component in a 401k plan? All of my research suggests that the answer is no (after all, discretionary means discretionary), but Treasury Reg. 1.401-1(b)(2) states that a profit sharing plan will be considered temporary if substantial and recurring contributions are not made.

Is this reg designed to address standalone profit sharing plans as opposed to profit sharing within a 401k plan?

Best regards,

Bob