My client annually deposits their 3.0% non-elective safe harbor contribution mid-year in the following year. Can their Plan be amended prior to November 30th, or December 31st, to be relieved of the requirement of putting in any 2009 safe harbor contribution? Thanx.

We're inheriting a 401k/Profit Sharing Plan that implemented the QACA provision beginning 1/1/08 (calendar year Plan) as they were failing ADP in prior plan years and the Plan is also Top Heavy. The 401k Plan has been in place for over 10 Years. Their automatic enrollment feature enrolls participants at a rate of 3% of Comp for the 1st and 2nd Applicable Plan Year, 4% for the 3rd, 5% for the 4th, and caps at 6% for the 5th and any subsequent Plan Year.

The QACA match is the Basic Match that provides a match of 100% up to the first 1% and 50% of the next 5% contributed (max match of 3.5%). However, the Annual Notice states that "No matching contribution will be made on any deferral contributions that exceed 3% of Compensation in the first and second years, 4% in the third year, 5% in the fourth year, and 6% in the fifth and subsequent years." The match limit described here seems consistent with the match that would be associated with the automatic enrollment step-up feature as described in the paragraph above (i.e. the max match would be 2% of Pay for the first and second Plan year where a participant was enrolled at 3% of their Pay).

The question I have is if someone made an affirmative election to defer 6% of their Pay during their first year of participation, based on the match described above, would they be entitled to a 3.5% match or just a 2% Match? The research I've done seems to indicate it would be 3.5%. However, it's our client's understanding that the maximum exposure the Sponsor has for the match for the 2008 and 2009 Plan Year is 2% of Pay, and then this increases .50% for each additional year thereafter (for a cap of 3.5%). They base this on the sentence that I described in quotes in the paragraph above. I can't find anything that says their understanding is wrong, but based on what I've researched, this only applies to those that are automatically enrolled; everyone else that makes an affirmative election would be eligible for the entire match of up to 3.5%. Can someone please clarify this for me?

Thanks!

How are practicioners communicating and interpreting the new PPA requirement that plan sponsors post "actuarial information" from Form 5500 on company intranet sites?

There is very little guidance.

What due date are firms communicating? Are you telling your clients to include Schedule SB attachments? Anybody defining what an intranet is for this purpose?

What are the big firms communicating?

A 65-year-old client who is vested in a union pension plan has applied for his pension and been denied because he holds a contractor’s license. The plan forbids retirees from working more than 40 hours a month in the field (carpentry) and the PA has told him he must relinquish his contractor’s license (the plan doesn't mention this). The PA required our client to submit his 2008 tax records in order to determine how many hours a month he works. The client says 2008 should not matter since he’s retiring in 2009. He understands the work limits and plans to abide by them, but he doesn’t want to give up the contractor’s license (he needs to supplement his small pension). How can he prove he is not violating the rule?

Company A and Company B are within the same affiliated service group and each sponsors its own 401(k) plan. About half the employees of Company A terminated employment with Company A and now work for Company B. Company A would like to get those participant accounts out of Company A's plan. There's clearly no distribution event. However, can Company A transfer the accounts of their former employees to Company B's plan without the participants' consent (assuming Company B is on board with it)?

Also, should we be concerned about a partial termination of Company A's plan even though the employees are employed within the same affilaited service group?

I can't understand why any employee would execute the permanent waiver of the COBRA subsidy...am I missing something regarding what is added back to his AGI if over $290,000? Isn't it just the value of the subsidy? So for Employee who gets a decent severance package paid in 2009 which may put his income over the $290,000, but 2010 income could be drastically reduced due to no employment, is the scenario 1) gets hit for subsidy on 2009 taxes and 2) can then receive subsidy with no hit in 2010 if income stays below $250,000 (without waiver)...

Why chance elimination of the subsidy for 2010...what "penalty" remains without a waiver?????

Help, I'm confused!

If an employer adopts an increased contribution schedule consistent with a rehab plan that will apply for the remainder of the CBA, is the plan sponsor also committed to that schedule?

I see that 432(e)(3)(B)(iii) provides that rates provided by the sponsor and relied upon by the parties shall remain in effect for hte duration of the CBA. But (e)(3)(B)(ii) requries that the sponsor annually update the contribution schedules.

Does this mean that where, for example, a new CBA provides for increased contributions consistent with the rehab plan and then two years later the sponsor decides that it increased contributions are required and collect a surcharge from the employer until it adopts the higher contribution schedule?

Can anyone provide guidance here?

I have a client who is failing the ADP Test using 6 months data. The plan does not limit the Top Paid Group to the top 20%. If I make the change to the top 20%, the ADP Test passes.

Is changing the Top Paid election considered a discretionary amendment? If so, I can amend the plan to limit the top paid group to the top 20% so long as the client adopts the amendment by 12/31/2009. Is my thinking correct?

AFTAP is less than 60%. Participant terminates and wants to commence taking a life annuity. When the AFTAP is certified above 60% can he then take 50% of the remaining PVAB as a lump sum and continue taking the other 50% as a life annuity? If the AFTAP is certified above 80% can he then take 100% of the remaining PVAB as a lump sum? Would there be a plan amendment required in order to allow these "splits" or a change in the form of payment?

Anyone have a sense of how IRS and Treasury interpret “applicable covered employee” for purposes of applying the restriction on deferred compensation under a plan sponsored by an employer with a DB plan in at-risk status? Here the employer is a wholly-owned U.S. subsidiary of a foreign parent where the parent’s stock is traded on a foreign exchange.

There are 2 issues – which employees are affected? – and what is the restricted period?

The statute says a covered employee is an individual either described in 162(m)(3) or subject to 16(a) reporting under the ’34 Act. 162(m)(3) says a covered employee is the CEO or one of the 4 highest paid individuals subject to reporting under the ’34 Act. Of course, 162(m) is the compensation limitation for certain employees of publicly traded companies (i.e., subject to registration under the ’34 Act). Here neither the U.S. subsidiary nor its foreign parent is subject to reporting under the ’34 Act – but is the statutory definition for DC purposes intended to be broad enough to at least cover the CEO, regardless of ’34 Act registration status of the employer? If so, wouldn’t this also extend the restriction rule to closely held companies?

The restricted period is defined by reference to Code §430 – which suggests the at-risk/restriction period begins as of the next plan year after the year of certification and runs for the entire year, unlike the limitation on lump sums from the DB plan which is at risk.

I can find no official guidance other than the statutory language. Thoughts?

We have a participant who wants to use his funds to purchase a raw tract of land. In order to make it work he will have his Plan account purchase a 50% interest and his father-in-law will purchase the other half. Father-in-law will pay cash for his share, Plan participant will have to borrow funds to complete the transaction. They will probably establish an LLC taxed as a partnership to hold the property. We have looked at the rules overall and my greatest fear is whether the father-in-law would be considered a disqualified party. Appears that they are not related based on attribution rules. Anyone have concerns with this transactionf?

Any thoughts on whether a 401(k) plan may have certain groups of participants subject to a QACA and then have other employees fall under another safe harbor? In other words, must 401(k)(13) be applicable to the entire plan for it to apply?

Can a plan exclude part-time employees from participation in an FSA, if so, what kind of limitation can they use. ex. all employees who work under 40 hours, or does it have to be a different hour amount? what would be the maximum?

any help would be greatly appreciated!

A small plan sponsor had employees for the first 10 years of his business. He no longer has employees and will not again. However, he does want to keep the plan another 5 years or so. Must they continue to file the full 5500 or could they switch to a 5500-EZ. Also, the plan has non-publicly traded investments of about $300,000 and they would rather not maintain a fidelity bond since there is now only one participant (the company owner).

Thanks

Two companies are part of a controlled group. They want to maintain separate retirement plans. I think they can, as long as they are willing to go through the hoops of doing annual benefits, rights and features testing. In the end, they might determine that it's not worth it to continue that way, but as long as the plans pass brf testing, they can go on that way indefinitely. Am I right -- or is it just wishful thinking on my part?

Our money purchase pension plan currently provides for the first of each month as the distribution date. I take this to mean that if there are any participants that become entitled to benefits during the month, distribution of those benefits will commence on the first of the following month.

This is very cumbersome to administer. What does the law say as far as commencement of distribution of benefits? Could we limit this to once or twice a year? Can someone point me to the relevant legal guidance on this?

Thanks.

Hello everyone. This is my first post. I hope someone can point me in the right direction

I have a client who is a highly compensated employee and participant in a small (+/- 10 employees) DB plan. Client wants to take a lump sum payout of his benefit. However, a plan actuary told him that he cannot b/c the distribution would bring the plan funding down too low. I guess bellow 80%.

Question 1:

Can the plan take into consideration the affect the client's distribution would have on the funding percentage of the plan, or should it only look at the current funding percentage?

Question 2:

Additionally, client said that a plan rep. told him that he could take a percentage of the lump sum equivalent to the percentage the plan is funded. EX- if the plan is 80% funded, client could take 80% of the lump sum value, and take the other 20% as an annuity. Has anyone heard of this?

Thank you everyone for any help you can provide

Payroll company stopped withholding deferrals for an HCE who hit the compensation limit before he got to the 402g limit. What is the correction process? do you have to go back to prior years to fix and if so how far back?

thanks

Hey Everyone,

I just wanted to check to see if I understand something correctly. If an employer does not have an existing 401K plan and wants to set up a Safe Harbor 401K with an effective date of 1-01-2010 what is the latest the plan can be set up?

As long as it is a NEW 401K would be alright to have everything set up and plan docs signed by 12-31-09? Since the SH notice timing rule for a new plan would be the same as the timing rule for a newly eligible employee wouldn't we have until the date the participants would be eligible to participate which would be the effective date of the plan, 1-01-2010, to give out the Safe Harbor notice?

Thanks for your help!

I prepared a determination letter application for a client. I prepared the Notice to Interested Parties and sent it to the client. I instructed them to send it to participants on the date I was filing the application.

Well, the client forgot to send the Notice. It should have been sent 2 1/2 weeks ago. Does anyone know what the proper procedure is for this?