I am fairly certain of the answer to my question, but now a days I can never be too sure of anything.

I have a one participant DB plan with participant becoming 70.5 by end of 2009. The participant thought they would be able to use part of their RMD for the 2009 required contribution due. We did not give the participant this idea.

I am fairly certain that since the RMD cannot be rolled over into another plan, that it would not be able to be used for the required contr. due.

However, the participant's practice is no longer operating at an income level. It's basically a dormant company as of now.

Long story short, the RMD should not be deductible but could it still fulfill the req. contribution for the plan? Even if the contribution is technically not coming from the company?

Your response is greatly appreciated.

I have a short plan year (7/1/2009 to 12/31/2009) beginning of year valuation. I could only find in the regulations that the amortization payment is prorated for the short plan year.

Did I miss it or is the Target Normal Cost for the full year (not prorated)?

Does a TPA of section 125 plans have an obligation to keep enrollment forms/change in status forms or can they work completely from an electronic feed from the clients payroll company with client stating they will keep forms on file? Up until now we have collected all forms and held them on premisis and then later in secure storage.

sorry

First time poster!

I'm running a PS calculation using Grouping, A-HCE, B-NHCE. Plan sponsor complaining that group B's minimum % is too high. Even though the doc doesn't state this-can I just give all the eligible participants the same % & call it a day?

I'm confused about the time periods for qualifying events. For example, let's say I had child born a week ago. Would I be able to add the child to my health insurance or must I wait until mid year for the change? I believe you can only change your election at the middle of the year, but if adding a dependent would change your election, is that allowed?

If an employee has a HIPAA special enrollment event (marriage, birth, adoption) is the company required to allow that employee the option of switching between different levels of coverage or is the company simply required to allow that employee the option of adding/deleting dependents from his current level of coverage?

I have done quite a bit of calculating regarding non discrimination testing, but am limited in the amount of practical plan admin and communications for 401k plan investing.

With that said, below is a situation that I need to research further, but I submit a post to get some feedback as well:

A small company - (owner and say 10 eligible employees) implements a 401k profit sharing plan where such plan provides:

- elective 401k contributions

- 3% 401k safe harbor contributions

- discretionary profit sharing contributions w/ 3 year cliff vesting

the client wants to have one sub account for each participant that consists of the 401k deferrals and 3% safe harbor contribution - he wants this account self directed where each employee manages their own Schwab account and can invest in whatever they want

To my knowledge this approach seems allowed, though not likely a 404c protected situation. is that correct? Or other suggestions?

The client than wants a second account for each employee that consists of their profit sharing contributions - he has a few methods he wants to consider for this account:

1) he manages these assets until the employee is vested and then allows for self direction at that time

Is this approach allowed or other suggestions?

2) or he would have the account be self directed but with a menu of say 6 investment options or so to keep it more safe and simple for the employee and when the employee is vested he could then transfer the profit sharing account into the 401k account so employee can fully manage all assets.

Is this allowed or other suggestions?

In conclusion this 401k profit sharing plan investing and self direction can seem a bit awkward or unclear to me.

Any suggestions/alternatives in general to handle/respond to these types of client questions/ideas?

Thanks.

Hi,

Plan is cross tested, HCE group & NHCE group, only one participant in each group this year, the NHCE is older by ten years. I am failing 401(a)4 testing. If I bump up the NHCE to the same allocation percentage as HCE do I still need to run 401a4 test or am I fine with just running & passing 410b? Just wondering....

Thanks

I am testing a 2009 plan for ADP. One employee had 2008 comp of $105,700 and I have (and feel correct in doing so) considered him an HCE for 2009. Doing so, the test fails. If I use the 2009 compensation limit threshold of $110K, ADP test would pass. Is there any support for doing so or am I correct in my original thought process? Thanks.

A participant in a Top Hat Plan died. He was divorced from his first wife, and married to his second wife when he died. He named his children from his first marriage as his beneficiaries, but if the usual QP beneficiary rules apply, his second wife would be the beneficiary. The employer just wants to make sure they pay out the money correctly.

I have a client that gives a SH 10% NEC at the end of the year. The 10% is written into the document. I have explained to client that he could do 3% SH and the rest discretionary but he does not want to.

For 09, once we allocate the 10%, there are 5 people who will be over the 415 limit, because ER also gives a pay period match.

Document states that if an ER contribution will cause the plan to fail 415, the plan should reduce the contribution. However, I wonder if that applies in the case of a safe harbor contribution. I am reluctant to not give the full 10% since it is a required SH contribution. On the other hand, since plans really only have to give 3% in order to be safe harbor, maybe I could reduce the contribution as long as I don't go below the 3%.

Has anyone seen any guidance about whether a SH can be reduced because of 415 problems? The next remedy, according to the document, would be to return the employee deferrals till the plan passes.

The Background

A loan from a 401(k) and subsequent repayment of the loan do not trigger tax consequences unless it is deemed distributed, e.g. because it failed to meet the requirements of §72(p)(2).

When a loan (or portion of a loan) is deemed distributed the participant is taxed on that portion of the loan (to the extent it would have been includible in gross income under §72 had an actually distribution been made), but no basis is credited at that time. Basis is credited once repayments are made on previously-taxed loans. See Treas. Reg. §1.72(p)-1, Q&A-21.

The portion of a loan that is attributable to a Roth account will be treated as a non-qualified distribution even if the participant met the qualifying distribution requirements. See Treas. Reg. 1.402A-1, Q&A-11. As a result, the portion of the Roth loan that represents earnings will be includible in income at the time of the deemed distribution. When the loan is repaid, basis gets credited for the earnings portion that was previously taxed. See Treas. Reg. §1.72(p)-1, Q&A-21.

The Question

But what about the portion of the loan that was not included in income when the loan was deemed distributed (i.e. the portion that represented the after-tax Roth contribution)? Is it taxed again when it is repaid? Or is there basis adjustment when it is repaid?

Employer pays the $1,000 deductible under the employees health insurance plan as a way of "Sefl insuring." The reimbursement runs through payroll. Has anyone seen this before? It seems to me this should be no different than an employer paid health insurance premium. Does that make sense?

Lead Plan Sponsor in a Multiple Employer Plan is terminiating the plan. Several participating employers (who just happen to be "owner only" plans) are not responding to requests to complete the associated documents to properly close out their individual plans and distribute funds as specified under the plan document.

Plan document provides for an "involuntary spin-off" in the event a participating employer does not comply with requirements.

So no problem so far.

But here's the catch. We can't find anyone to act as custodian for these spin off plans. (Would be easy if it was a rollover to an IRA)

Anyone know of a custodian that will accept the assets based on the signature of the lead plan sponsor's signature instead of the participating employer? (or other solution that seems to be escaping us currently)

Here is the link to the EBSA's fact sheet DOL

I have a large plan that matches 50% of the first 6%. They calculate the match annually and it is discretionary. They want me to give the match rate to the NHCEs and then give the HCE's the rate that will pass the test. So, they would be giving the HCEs less match than the NHCEs. Can this be done?

Are you allowed to add a loan provision to a cash balance plan?

Employer sponsors 401(k) plan that uses W-2 definition of compensation.

Employer permits employees to extend group health and other insurance coverages to domestic partners, both "registered" domestic partners who have the same status as spouses under state law, and unregistered domestic partners (e.g., opposite sex) who have no special status under state law.

Presume 100% of all domestic partners receiving coverage DO NOT qualify as the employees' dependents under IRC Section 152.

For federal tax purposes, employer reports imputed income equal to the value of the coverage provided to the domestic partners, on the employees' Form W-2s, in boxes 1, 3, 5, and 12.

Will the "phantom" income be included in compensation for plan purposes unless the employer expressly excludes it from the definition of compensation in the plan document? Or is it a non-issue, in most instances, because salary deferrals and matching contributions are based on payroll period income and the imputed income from domestic partner benefits is only tracked for W-2 purposes on an annual basis, and not reflected payroll period to payroll period???

Have others had this issue come up?

A profit sharing plan is originally set up with a new comparability allocation method and works fine for a few years until the employer's demographics change drastically - many of the younger employees were replaced with workers who are older than the owner. The plan now cannot pass the cross-testing even when everyone (including the owner) receives the same percentage of compensation as an allocation. I remember hearing a while back that in a scenario like this you can always "default" to a pro-rata allocation and not have to worry about cross-testing, even if the document does not specifically state this - has anyone else heard of this?