Ok, needs some opinions! I'm driving myself crazy trying to decide how to proceed.

1. Scenario #1: Calendar year plan with safe harbor nonelective feature. Amended out of safe harbor noneletive 8/31/2009 as allowed by the proposed regulations.

Participants received an allocation of 3% of their compensation for the period 1/1/2009-8/31/2009. (The $245,000 compensation limit for 2009 was pro-rated for the safe harbor nonelective calculation to $163,333.32.).

No other employer contributions allocated for the plan year.

If I calculate the percentage of plan year compensation (1/1/2009-12/31/2009) that was allocated, participants have non-uniform percentages and would not satisfy the 401(a)(4) safe harbor.

Does the plan need a 401(a)(4) test? Or for purposes of determining if the 401(a)(4) safe harbor was satisfied, do I only consider the percentage that was allocated based on compensation for the period 1/1/2009-8/31/2009, which would produce a uniform allocation?

2. Scenario #2: Same as above except there are profit sharing forfeitures as of 12/31/2009 that the document says are reallocated based on plan year (1/1/2009-12/31/2009) compensation. No accrual requirements on the forfeiture reallocation. The same participants who received the safe harbor nonelective will receive an allocation of approximately 1% of their plan year compensation due to the forfeitures.

Does the plan satisfy the multiple formula safe harbor under 401(a)(4)?

I say yes, if the answer to #1 was that when determining if the allocation of the safe harbor nonelective was uniform we only have to consider compensation from 1/1/2009-8/31/2009.

3. Scenario #3: Same as #2 except the safe harbor nonelective contribution is based on compensation paid for the plan year after the participant's date of entry. A non-highly compensated employee became a participant on 10/1/2009, so he did not receive an allocation of safe harbor nonelective. But he did receive an allocation of the profit sharing forfeitures.

My thought is that in this scenario the multiple formula rule would not be satisfied because both allocations are not available to the same group of non-highly compensated employees.

Any thoughts? Has anyone else dealt with similar situations?

Thanks!

Laura

What is the PPA remedial amendment period for an employer to adopt the adoption agreement of a prototype sponsor that adopted a PPA interim amendment onto its EGTRRA restatement? The vendor is telling my client they need to adopt its own PPA amendment even though they adopted an interim amendment on behalf of all plans.

It seems to me if my client has to do that now, it is too late. Rather, it seems to me that the interim amendment covers it.

Prototypes don't have a PPA RAP that is different from 12/31/09 do they?

Thanks.

Does anyone have any citation to statute, regulation, or case law concerning the right of an employer or union to provide additional compensation to one of its full time employees or members for undertaling the role of a trustee on a multi-employer pension fund? I can't find any prohibition on doing so. Section 408 seems to deal only with a fund paying trustees compensation.

Will a service agreement with an insurance company or custodian that provides investment products to a non-governmental voluntary 403(b) plan cause the plan to become subject to ERISA? DOL FAB 2010-01 makes it clear that a non-governmental voluntary plan is not eligible for the non-ERISA safe-harbor if the employer hires a TPA to administer the plan. I guess selecting a TPA is a discretionary determination that causes the plan to become subject to ERISA. However, insurance companies and custodians also want employers to sign agrements that allocate responsibilities and liabilites with respect to thier investment products. Is signing these agreements a discretionary determination that triggers ERISA?

Could the controlled group and affiliated service group rules be combined to create a group of related entities? For example, would a subsidiary in a parent/subsidiary controlled group be part the affiliated service group to which the parent company belongs (even if the subsidiary does not perform or receive any services from the ASG?)

Trying to apply the Final 415 regs section 1.415(a)-1(g)(4) regarding grandfathered benefits and would appreciate any input.

I have an HCE with over 20 years of service as of 12/31/07 and compensation greater than the 401(a)(17) Comp limits in just one big year (2006) with the following history:

2007: $210,000 (comp limit $235,000)

2006: $250,000 (comp limit $220,000)

2005: $210,000 (comp limit $210,000)

2004: $200,000 (comp limit $205,000)

This is a calendar year plan so I "think" I have a grandfathered 415 limited AB on 12/31/07 of:

($210,000 + $250,000 + $210,000) / 36 = $18,611.11

The final regs state I can grandfathered the AB as of the end of the limitation year that ends immediately prior to the effective date of the final regs. Based on the calendar year the application date of the final regs would start 1/1/08 so I can see an interpretation that allows me to grandfather as of 12/31/07 (i.e., $18,611).

However, the formal effective date of the regs is 4/5/07 which if I use the end of the limitation year that ends before THAT date I can only grandfather as of 12/31/06.

Either approach will cover my big 2006 year but since 2007 comp was larger than 2004 comp I'd like to be able to do my High-3 for the 2005-2007 years and grandfather as of 12/31/07 if that is a reasonable interpretation.

Any thoughts opinions ? Is this a grey area of intepretation or is it black-and-white to most of you out there.

Hi. Does anyone know how the successor plan rules apply to a 403(b) plan? I was under the impression that you could terminate a 403(b) and allow participation in a new 403(b) and not violate the successor plan rules if the new 403(b) was a deferral-only plan (i.e., no employer contributions). Does anyone know if this is correct?

Hi,

Plan has a fixed match formula of 50% of deferrals up to 7% of compensation. For 2009 the ADP failed, my question is do I calculate the match on the entire deferral amount (before the failure) or do I reduce the deferral amount by the distribution amount needed and calculate match?

I believe I need to calculate on the entire deferral amount that failed, then calculate match, run ACP and see if it passes and how much associated match needs to be forfeited, good times!

Also, on side note, when there is a matching forfeiture, these forfeitures only go to those that deferred for that year in the same manner as the match allocation? My system seems to allocating it to all eligible even if not deferring but it might be a spec I overlooked....or perhaps the system is smarter than me which is usually the case.... yup I am losing it already.

Thanks for the help.

Employer wishes to roll out a plan that will allow employees to purchase stock at a deep discount; purchase price is $1 and FMV is a few dollars more than that. The stock, if purchased, will be subject to vesting conditions. If shares are forfeited, employee gets his/her $1 back, and nothing more. The window for exercising the "option" to purchase the stock will be very short: only a couple of months from the time that the program is announced, and the entire "option" period is within a single calendar year. There is no other feature that would provide for the deferral of compensation. Although this does not satisfy the exemption in the regs for stock options, isn't it exempt because there is no deferral of compensation involved?

I have a client that terminated their defined benefit plan a few months ago and is now looking to start a new one. Is there any issues with this?

Does a 30 day notice period apply to terminating safe harbor plans under mergers or business hardship (i.e., under bullet point ii below). The 30 day notice requirement arises from the reference in (i) that the requirements of paragrpah (g) are satsifed. So it seems to me that when temrinating a plan under mergers and/or business hardship, no 30 day notice is required (whether it's a SHMAC or a SHNEC). Does anyone agree/disagree?

(i) The plan would satisfy the requirements of paragraph (g) of this section, treating the termination of the plan as a reduction or suspension of safe harbor matching contributions, other than the requirement that employees have a reasonable opportunity to change their cash or deferred elections and, if applicable, employee contribution elections; or

(ii) The plan termination is in connection with a transaction described in section 410(b)(6)© or the employer incurs a substantial business hardship comparable to a substantial business hardship described in section 412(d)

Employee is covered for medical and pays a percentage of premium, taken out of pay on a pre-tax basis per their Sec 125 plan. Employee is also covered on spouse's medical plan at her employer. Open enrollment was Jan 1, and employee maintained past election. Effective April, employee is receiving pay cut, and wants to drop medical plan.

While not directly a "significant increase in cost" to medical, the employee's take home pay is changing 4/1, and he sees the double coverage at this time to be less attractive, thereby his request to drop coverage. If he had known the pay cut was coming prior to the 1/1 open enrollment, he probably would have made the change then.

I can see where a mid year pay adjustment, could greatly affect a person's ability to pay. But, I haven't found anything in the regulations that would address this. Have any of you run into a similar situation or can you site a section of the law that I missing that would allow this type of mid year change?

Thanks

Today a practitioner/friend of mine who is handling a field audit explained that the plan under audit has k safe harbor language, but ER never provided the annual k safe harbor notice and did not make any k safe harbor contributions, as the plan provision called for. The ER and practitioner had thought that the plan would not be safe harbored, but would be subject to ADP/ACP testing for each plan year for which no k safe harbor notice was timely provided. The document was not one that so provided, it simply said that the plan is k safe harbored and that the k safe harbor contribution would be the match.

Auditor was considering insisting that the ER make the k safe harbor contribution described in the plan provision. Here's how this situation was resolved that that specific IRS auditor:

"The owner/employees did not have any 401k deferrals for the year being audited, and hardly any for other years. The agent could see basically how we were interpreting the document and then closed the audit. She did recommend we fix that part of the plan with an amendment."

Whenever I am involved in a plan audit, I'd like to be able to call and request this particular agent be assigned. But this is a second such situation where I've seen the IRS auditor start off wanting (a) the plan provision described k safe harbor contribution made, but (b) the plan to demonstrate ADP testing to pass. In both, the auditor closed the audit without the k safe harbor contribution being required. In this one, there wasn't even a need for any QNECs corrections.

Calendar year DB plan freezes 5/31/2009.

Benefits accrue on elapsed time.

The annual method is being used for 410(b) testing, i.e. the measurement period is calendar 2009.

1. What is testing service, 5/12 or 1?

2. What are the options for testing comp other than an average of 3 or more years, i.e. is calendar 2009 ok despite the freeze?

Some very different results will occur depending on the choice. I don't see anything in the regs that helps with these issues.

I suppose this could be viewed as a change to a 0% benefit formua and under that approach the accrual divided by the full year comp could be used, and since benefit service is capped at 5/9 that could and perhaps should be the testing service.

Opinions?

(5/9 changed to 5/12)

I have just obtained a schedule 5500 from our unions multi employer pension plan and trying to figure out what percentage it is funded. Under schedule MB section 1c the liability numbers are far less than section 1d under rpa 94 information lline 1d(2)a. I guess what I am asking is what line do you use to determine the liability when determining the true funding of a plan? And can someone explain to me what "rpa 94" is in laymens terms? Thanks in advance. GT

I've gotten a couple of email messages from worldnet that services are being discontinued and that email addresses need to end in @att.net henceforth.

Has anyone else gotten these messages? Are they legitimate? I cannot tell from worldnet.att.net -- You'd think they'd have this information plastered on their website.

In any event, I use outlook express. If these announcements are legitimate and anyone else out there uses outlook express and has made the conversion, is there anything more to do in outlook than to make sure the "worldnet." prefix is removed?

For whatever reason I can't seem to decide on this. Line 13 M on the Schedule K-1 is amounts paid for medical insurance. Do we have to adjust net earnings from slef-employment (line 14A) for the insurance premiums? It seems to me yes because they are being deducted on the partner's personal return, but I've looked at too many of these & feel a little shaky.

Thanks

Our client is a partnership where staff is paid bi-weekly and partners take monthly draws.Per 401 k plan document changes to deferral elections are permitted on a per payroll basis. Partners have elections in place for deferrals from monthly draws. Once the true earned income has been determined for each partner ( and assuming it is in excess of the total draw aready paid) must the plan defer from the final payment of income based on the deferral election in plance at 12/31 ( cal yr plan)? Parners were conservitive in what was deferred during year from draws and now at the end of the year, once their true earnings are known, wish to maximize their deferral. I don't believe we can permitt them to make a special election for this additional income but instead should follow whatever election they had in place at pye. Has anyone had this situation presented to them before?

Must matching contributions be made to the plan with a CODA or can it be to another plan? Assume all participants of plan with a CODA are also participants in other plan to which all matching contributions would be made.

A tax exempt sponsor has a 401(a) plan with nonelective contributions only and uses cross testing allocation groups. Sponsor also has a 403b salary deferral only plan, and a 457b top hat plan for the executives/select group. When running rate group testing on the cross tested plan, when you do the average benefits test, my understanding is that you can exclude the 403b plan - 1.410(b)-7(f). Although no mention of the 457b, since this type of plan is not subject to coverage testing anyways, I do not think you would include it when apply ABT test?

Does anyone have any comments?