So I have an employee that will be terminated after the final payroll of this year and they will have of made their final contribution to their Medical FSA plan.

The employee still has a positive balance in their account.

Does COBRA have to be offered to this employee or can we (the company) just allow the employee to be reimbursed for items that might have incurred after their term date?

A 401(k) plan with a 1/1 plan year merges into another 401(k) plan that has a 10/1 plan year. The merger occurs on 10/1/08.

The 1/1 plan runs an ADP test from 1/1/08 to 9/30/08 and it fails. Are refunds due 12 months from 9/30/08? Or are they due 12 months from 12/31/08?

Here's my situation: An employer wants to pre-fund his PS plan early in the plan year, and then allocate the funds later for the same plan year.

Is there a code section which dictates the point at which a contribution needs to be allocated to a specific participant in a defined contribution plan?

I've been unable to find something that is more specific than "the end of the year", but it seems dodgy to deposit unallocated money. Does a "Last Day Rule" make a difference in the freedom to do this?

Thanks.

An employer has sponsored a calendar year safe harbor 401(k) for several years, using a 4% match to satisfy the SH requirements. They're thinking about discontinuing the plan but have handed out the SH notice anyway. Problem is that they did not indicate what the SH contribution would be for next year.

Don't they have to give the notice at least 30 days prior to the beginning of the year? Or is it 30 days before the first payroll of the year?

And if the notice is not distributed timely to participants, does that mean the plan will not be a safe harbor plan for 2010?

Thanks!

In a multiple-employer plan, what happens to participant accounts of an employer who elects to discontinue it's participation in the plan if the terminating employer is not intending to sponsor a separate 401k plan? Is it considered a partial plan termination? Do those participant's accounts remain part of the multiple employer plan or should they be distributed? The plan in question is a safe harbor so vesting isn't an issue.

I know this doesn't come up too often (at least not in our office), but we were having a discussion on it. so tell me what you think:

Participant A turns 55 in 2009 and terminates on 12/1/2009. She requests a lump sum distribution. Should her code be a 2 and does she get a 10% early w/d penalty?

Participant B turns 55 in 2009 and terminated on 12/1/2007. He also requests a lump sum distribution. Should his code be a 2 and does he get s 10% early w/d penalty?

Our opinion of the instructions would be yes & no for A, no & yes for B, with his code being a 1.

Thoughts?

Hi! Our firm administers a PS plan whose document states distributions will occur upon close of plan year coincident with or next following date of term, however over each of the past 3 years, we've inadvertently distributed a participant immediately upon termination. (There were roughly 10 distributions per year that occurred correctly.) Each mistake happened unintentionally, probably because of a "squeaky wheel".

Is this a disqualifying event? We've been tagged for audit and are trying to determine if there is any type of self-correction method - or if it's too late.

TIA!

Annie :-)

I think that a lot of us on this board do DB/DC combined plan cross-testing. Everyone should be aware that HR 4126 has been introduced. The bill would prohibit cross-testing of benefits and contributions. There is a post on the Cross-Tested Plans board and an ASPPA ASAP on the topic was published on 11/30/09. The bill has been introduced to the Ways and Means Committee. Please support the effort against this bill. If you live or work in a state with a Ways and Means member please contact them and tell them about the harm that would come from this proposal.

I have a 30 life DB plan. In 2008 and in 2009, two participants who reached NRA one in each year, elected to take their benefits in the form of a life annuity pension. Now in 2010, they are going to terminate the entire plan. Does the trustee have to purchase an annuity for the two participants already receiving benefits to keep the life pension going that they selected or can he just offer them the "remaining" PVAB as a lump sum?

Thanks .... you guys are the best !

On some of the plans where we have recently applied online for a trust ID number, we are receiving IRS correspondence requesting the filing of a form 1041 - which obviously doesn't apply on a qualified plan trust.

Does anyone know what on the online applicaton is triggering that, and how we might complete it differently to avoid this?

Thanks!

Dog

Can you use the cash accumulative in the insurance policy in a 412(e) plan to pay the premium for the insurance?

Do you have to make the annuity premium since there is not a minimum funding requirement?

The plan wants to terminate and rollover the funds to a profit sharing plan - but does not want to make the contribution for 2009 for the annuity and use the cash in the insurance policy to pay the premium for the insurance so it will not lapse.

This is an owner only plan (1 participant) - can they do this?

Can a 412(e) plan be frozen as long as the insurance doesnt lapse? They want to keep the life insurance going because of the surrender charges. How does this effect their benefit?

Thanks

The testing in a new comparability plan works out to where the 5% gateway for all NHCEs would be OK. There are only 2 allocation groups - the HCEs and the NHCEs. Although the document defines compensation as the amount paid while an employee is a participant, it's my understanding that for top heavy purposes you must allocate 3% of the participant's compensation for the entire year. There are a couple of NHCEs who enter the plan mid-year whose TH min would exceed 5% of comp for 6 months. I'm wondering if I'm looking at this the right way - for testing purposes, their TH min allocation would be about 6% of their 6 month comp. Is this acceptable when all other NHCEs are getting 5%, or would you have to bump them all up to 6%? All help is greatly appreciated.

mpp is on calandar year. want to freeze it for next year (so we make contribution for 2009 but not 2010). should plan be frozen effective 12/31/2009 or 1/1/2010? thanks

IRS determined that there was a failed Roth conversion. The IRA provider is seeking guidance from the retiree on how to proceed. Shouldn't they know how to proceed in this case?

It seems like the IRA provider would simply recharacterize (retroactively) the Roth as a personal brokerage account with no favorable tax status. What else do they have to do?

I have a plan that has an 11/1 --> 10/31 plan year. For whatever reason, they set it up that way long ago. It's a pain for them (and us) to administer it that way, given their fiscal year is also the calendar year.

Is it too late to do a short plan year for 11/1 --> 12/31 and to switch to calendar starting 1/1/10?

An active participant in a 403b is wanting to take out the full value of his account. He is not terminated or 59.5. The current plan document became effective 1.1.09. The plans SPD states that distributions of elective deferrals can occur at age 59.5, hardship or disability and that employer contribution accounts invested in annuity contracts can occur at any stated age, hardship or disability or other stated event, however it has the wording "you should consult with the Administrator to see if the plan actually permits all of these distributions and what conditions may apply to the distributions". The participant was told that in service distributions can not occur. The participant then provided a provision from the original annuity mass mutual annuity contract that stated the "contract owner may, upon written request, make a total or partial withdrawal of the contract value".

Question is, would the plan doc now prevail over the provisions of the old annuity contract? Would they have to amend the plan to allow for inservice dist at any time to mirror the original contract?

If a cash balance plan has an AE of

Preretirement mortality: none

preretirement interest: 5%

Postretirement mortality: 94 GAR

postretirement interest: 5%

Hypothetical interest 5%

Does the plan have to amend both the AE and hypothetical interest or just the hypothetical interest?

Is there some type of correction for this? During the year the employer deposited all of the PS contribution for the owners but none for the NHCEs under the theory that because the plan has a last day rule the owners will definitely be there on the last day but the other employees might not. We have explained to them that they cannot do this, but it is obviously too late to stop what they did during the year. My question is related to correction. Is this a violation that can be corrected? Is it some kind of BRF perhaps that obviously fails coverage? Fortunately with the market conditions in 2008, earnings were not an issue and we are looking at it for 2009.

Hello. I am new to a small group plan, working in the HR Department. Today I had an employee come to me who technically was eligible for our 401k plan back on October 1. He did not enroll at that time, but now with only 1 month left in the year, decided for tax purposes that he wants to enroll and make a lump sum deduction from his pay for his missed deductions from this quarter. I didn't think that this was possible and that he was just SOL until 1/1/2010. Has anyone ever experienced this before? Any chance anyone can point me to IRS documents to support my ability to tell him one way or another?

Thanks in advance

Eric

Company EFG leases its employees from another company, I guess because they think it is easier to process payroll, non-retirement benefits, etc. (To clarify, EFG had its own employees and then one day turned them over to the leasing company. They are clearly under the control of EFG.) I understand that these people are "leased employees" after a year, and if we want to include them in EFG's plan, we simply include "leased employees" and are done.

But they want to include these employees after 2 months, and we think that we need the leasing company to sign on as an adopting employer in a joinder agreement, specifically referencing employees of EFG so as not to include all of the leasing company's employees.

What do you think, are we headed in the right general direction or is there some other way to do this?