DB plan with a career average formula integrated with covered compensation froze benefit accruals on 8/31/09. It is a calendar year plan. The benefit accrual for 2009 is based on compensation from 1/1/09 - 8/31/09. Should the covered compensation used in determining the benefit accrual for 2009 be prorated for the 8 months?

Curious as to why the IRS released rates today, but didn't provide the 2010 Funding Transition rates (Jan-10 only shows for plan year 2009). Oversight?

Funding Yield Curve Segment Rates

When is a defined benefit valuation required to be completed? For example, a 2009 valuation with a calendar year plan year end is due when? Is there a 5 year rule where for the first 5 years you do not have to meet this date? Does it matter if it is a sole proprietor plan with a Schedule C? The reason I ask is the actuary is requiring Schedule C income for 2009 before preparing the valuation. I thought the val. was due in Sept. of 2009. Thank you.

What happens if a participant is due a 415 or ADP refund, but they don't have enough money in their account because they took a 401(k) loan? I assume you can just adjust the outstanding loan balance and create a 1099 for the participant. That seems to be the only alternative.

Does anyone know if there is any guidance regarding this?

Employer A sponsers an HSA program with employee contributions through a Cafeteria Plan. Employee X wants to cover his family under the HDHPlan. Employee X spouse also covers the family under her employers (B) traditional HMO plan. The question which our HSA provider can't answer with any cites is: What is the contribution limit for employee X? Is he limited to employee only limits ($3,050), because the family has "other health coverage", or can he elect the family limit of ($6,150)? I know this is an odd situation, because most folks no longer are double covered but we have run into this on two occasions recently and don't have an answer. Any enlightenment will be greatly appreciated.

Employee_Contribution_limits_HSA.doc

Seeking opinions on non-safe harbor floor/offset plan designs.

Lately I have see many floor offset proposals and fairly new plans done by others. Some floor offset plans appear to comply with the Schultz memo ( .5% accrual before offset and uniform offset) and some clearly comply with nothing. I admit to a bias against non-safe harbor floor/offset plans on the grounds of concerns about the consistent interpretation of 401(a)(26) by the IRS, some ambiguity in the regulations, and the general "thin ice" that I perceive them to be bullt upon when there is a $0 net accrual.

In contrast, a DB/DC combo (cash balance or traditional) can do much the same with the complication that lots of people might have small benefits in the DB plan. But a CB accrual is less powerful for testing purposes.

Do others share my view or are others ok with full offsets and general testing of non-safe harbor floor/offset plans?

In addition to waiving 2009 participant RMDs, 401(a)(9)(H) also changed the RMD rules for beneficiaries under the life-time annuity rule and 5-year rule. Can anyone cofirm the following points?

With respect to participants who died in 2008, beneficiaries have one additional year, until Decemebr 31, 2010, to elect the life-time annuity rule.

For participants who died in 2004 through 2008, the 5-year rule is extended by one year (e.g., for a participant who died in 2004, beneficiaries must complete distributions by Decemebr 31, 2010).

The 2009 RMD waiver has no effect with respect to participants who died in 2009.

In a case where the Put of shares back to the company is paid out via a Promissory Note over a 5-year period, is the stock held as collateral for the Note? Or, are all of the shares turned over to the company in exchange for the Note and the Note is held as the asset in the rollover IRA?

I think the IRA owner would be more comfortable holding the shares as collateral and then releasing 1/5th of the shares each year as the Note is paid down.

How are these typically handled?

Can allocation groups in a new comp plan be defined by name? For example: Group 1 = specific owner, Group 2 = specific owner, Group 4 = all other participants?

Thanks

We have a defined benefit plan with about 50 employees that is terminating. We started the termination process in August 2008. The IRS determination letter was received in November 2009. Normally, the PBGC requires the distributions be completed within 120 days after the IRS determination letter is received. The owner of the company is wondering if there is any way to extend the 120 day period. Like all other plans, there was a substantial decrease in the assets in late 2008 and early 2009. The owner will forego all of his benefits (which the IRS is aware of) but he still only has about 90% of the assets needed to pay benefits. He would like to delay the distribution date a couple of months in the hope that the market recovery will continue and eat up most of the $200,000 funding shortfall he currently has. Has anybody gotten the 120 day period extended? If so, how?

Thanks.

We are about to move all of our employees into a new entity. We need to change the plan sponsor of our 401(k) plan to this new entity. How do we do that? Do we just amend the plan? Do we need to do anything else?

We are about to move all of our employees into a new entity. We need to change the plan sponsor of our 401(k) plan to this new entity. How do we do that? Do we just amend the plan? Do we need to do anything else?

QACA is supposed to use a 414(s) safe harbor definition, but what if certain items such as bonuses are excluded and comp ratio test is passed, then this is ok because it satisfies 414(s). However lets say comp ratio test is failed, does this mean plan has to file under EPCRS or can you correct by making up contributions using a definition of comp that satisfies 414(s) - ie adding back in the bonuses?

A new plan (Cycle C) was adopted December 2009 and effective January 2009. Since it is a Cycle C the deadline was already 1/31/2009. Can anyone provide me a regs cite that might handle this situation (i.e. when is this plan required to submit, and when can it submit to be "on cycle"). Thanks.

Plan states that if participant dies with no spouse then distribution will be made to participant's children, per stirpes. What specifically should a plan fiduciary do to identify the participant's children? Participant's personnel files are of no help.

Individually designed money purchase plan currently permits 10% after tax employee contributions. Plan received a d-letter in 2002. I am putting this plan on a prototype document and the only selections for employee contributions are "no" or "formerly allowed." Did the law change to now not permit after-tax contributions? If not, then why doesn't the prototype document providers allow them? I don't even know if there are any after-tax employee contributions made. It is an owner/wife only plan.

Thanks.

Situtation is this: Employer and employee entered into an employment agreement in 2008 which provides for 12 months of salary continuation paid in substantially equal payroll installments if employee is involuntarily terminated. Severance amounts are based on base pay immediately prior to termination. So, under the terms of the employment agreement, the severance benefits most likely will qualify for an exemption from 409A under the 2 times pay / involuntary termination provision; however, an exemption is not guaranteed because the final salary / severance amounts are not known until termination. (Also, while it is possible that all severance benefits will be paid prior to 2 1/2 months after end of year in which termination occurs, that is not required so the agreement does not ensure short-term deferral exemption.)

Employer is now terminating employee. Employer wants to change / enhance severance terms slightly by basically permitting employee to choose as part of the separation agreement whether to receive the 12 months of severance in regular installments or receive an immediate lump sum amount. As it turns out, the employee's current salary is $250,000 so well below maximum amount to qualify for two times involuntary pay exception.

Is there a concern that amending the severance provisions under the existing employment agreement could be construed as an impermissible acceleration or substitution of an existing deferred compensation arrangement where all the beenfits will qualify for the 2 times pay exception under 409A anyway? (If the original agreement somehow ensured that the payouts would have in all cases been exempt from 409A--say if it had required payment in all cases within the short-term deferral period--I would not worry as that would have presumably escaped regulation under 409A but here the severance provision seem to provide for deferred compensation arrangement subject to 409A (although possible that it may qualify for an exception depending on actual numbers). Any thoughts would be appreciated.

Hi,

After a year of working with Bank of America's HSA product connected to our Tufts Health Insurance HDHP, Tufts decided to sever their relationship with Tufts effective 1/1/10.

We believe this decoupling has led to our horrible experience with trying to speak to someone at Bank of America to transact business for new participants and a participant that has been arbitrarily terminated in their system.  However, every contact phone number we have for customer service results in wait times of 50 minutes, automatic hang ups and no live person to speak to.  Using the help section on BoA's website yields no results either - cases are arbitrarily marked "closed" when there has been no discussion/resolution.

Is anyone else experiencing this problem with Bank of America HSA?  If so, could you share any success you've experienced recently? 

Does anyone have any ideas about which government agency provides oversight (we've contacted both the DOL and IRS and both claim the other has jurisdiction)? 

Any insight/wisdom is deeply appreciated.

~Rebecca

A participant has a loan on their 401(k). They are eligible for a in-serivce withdrawal. Is loan security required before processing an in-service withdrawal after 59 1/2?

I know 2009 Form 5500 Schedule H added a line 2b(2)© to report dividends from mutual fund. But where should I report mutual fund dividend on 2008 Form 5500? Thinking about sticking it on line 2b(2)(a) under preferred stock and move on. Will that work?

Suggestions are much appreciated!