I have a client that is going to give shares of stock outright (not an option, but actual shares) to employees as a bonus. He is worried about having to include the FMV of the shares as compensation for plan purposes. Does anyone know if this type of income is includable in 415 compensation?

In the proposed 430/436 regs, "elect" appears 190 times; in the final regs, "elect" appears 492 times. I suggest you get your clients to the polls early to ensure they make all of their elections!

I have a new client that is an S Corp. We've established that the daughter of the 100% owner may not participate. This daughter's husband is also an employee of the company and they have one young child together. I have established that the spouse [is eligible to participate.

However, the question has been posed as to the eligible expenses for reimbursement under a Medical Flexible Spending Account and Dependent Care Flexible Spending Account. Would the daughter's expenses be eligible for reimbursement even though she is not allowed to participate (as an owner under the Section 318 attribution rules)? Would the husband be allowed to claim the dependent care expenses for the child (who would also have ownership under the Section 318 attribution rules even though he/she is underage) under the Dependent Care Flexible Spending Account?

I realize this may trigger some nondiscrimination issues and I welcome comments on that aspect as well but I really need information regarding the eligibility of expenses for the spouse since I can't find any guidance on this.

Thanks!

Say an HCE was receiving an allocation of 50% of compensation per year, what would be the potential pitfalls (other than having to give more to the NHCEs) to raising the allocation to say 75% of compensation?

Plan had an age 21 and 6 month wait, entry on the first day of the plan year coincident or next following.

Said plan was later amended to have an age 21 and 1 year of service wait, but the entry date was not amended.

This does not satisfy the statutory eligibility requirements, does it?

Is there a different answer if the plan provides for 100% immediate vesting (a la 2 year wait)?

Thanks!

I have a cafeteria plan for a non-profit church organization. It has 126 other related entities, Parish Churches and Parish Catholic Schools. Since it is a non-profit, there is no ownership and each entity is a separate legal entity.

Their cafeteria plan offers medical benefits and also health and dependent flex accounts (POP & Flex).

They would like to establish another cafeteria plan with only medical benefits, NO flex accounts, and offer this plan to the other related entities.

Can the non-profit sponsor 2 cafeteria plans and offer the plan with POP and Flex to the administrative staff and offer the plan without Flex to the other related entities?

I would appreciate any guidance on this issue. Thank You.

Does anyone see a problem with the following definition of compensation, that will be in cash balnce plan.

The definition will apply only to the sole proprietor owner. Any other employees would of course have the normal definition of comp.

Definition of comp for owner only = Only compensation in excess of $100,000.

Large 401(k) Plan, with participants in virtually all states.

Plan document says that in event of failure of beneficiary designation, the account goes to

1. spouse
   
2. children, per stirpes
   
3. parents
   
4. siblings
   
5. estate
   

And ERISA council (who drafted plan) says that is best practice, because it avoids probate on the estate.

Recordkeeper on the other hand says that the best practice is

1. spouse
   
2. estate
   

Because of the administrative burden of being sure (for example) that the son who submits a claim for benefits is the only child of the participant.

So who do I believe?

I first should disclose that I know very little about ESOPs, so some follow-up qs may help. In connection with a refinancing, a company made a special allocation that was funded from unallocated dividends, cash, and forfeitures. The allocation was made to induce the trustee to do the refinancing. I am curious as to whether the amount of the special contribution that is funded from unallocated dividends and forfeitures is considered annual additions? Any thoughts or citations that can point me in the right direction?

I have something unusual. A public employer wants to charge a participant a premium if the participant’s spouse has health care coverage available from the spouse’s employer and turns it down with the intent of being covered by the public employer through his spouse.

The public employer wants the participant to execute an affidavit representing the accurate employment of the spouse, and if there is any misrepresentation, understands that all benefits will be revoked and any other legal action may be taken.

This seems a little elaborate and fishy to me. How does it strike you?

In reviewing the 2008 ADP / ACP Test Results for a Plan, it was noted that certain payroll periods were "miscoded" (e.g. a January 2008 Payroll was "miscoded" as a December 2007 Contribution). This resulted in the deferral percentages for 2008 being understated, and the 2007 percentages being overstated. Upon review of initial 2007 test results, other data errors were noted.

At the end of the day, the 2007 ADP Refund for HCE "X" was overcalculated by approximately $1,200 (and since it was completed before March 15, 2008, a 2007 1099 was issued).

Is there any guidance on how this participant could be "made whole" for the improper refunds attributable to the 2007 Plan Year?

Would this participant receive an amended Form 1099 for 2007, or is that "window" closed by now?

Are there any methods people have used to make the participant whole for the lost deduction in 2007, that may not involve the need to amend a prior return?

Would an improper ADP Refund in any way be treated similarly to the "missed deferral opportunity" correction under EPCRS? For example, when a participant is improperly excluded from the plan for a portion of the year, the correction is a QNEC equal to 50% of the "missed deferral opportunity", plus any applicable Match. Would this type of situation follow a similar pattern, in that a participant was "shortchanged" of a deferral opportunity?

Any thoughts would be appreciated.

Takeover Plan.

Document from Insurance company says Multiple Employer Plan.

5500 Filed as a Multiple Employer Plan, but had the name of the ER that we are working with listed as the ER

What do I have to do to Make it a Single ER Plan?

What about the weird Plan number 333 - does it have to change to 001?

Looks like the Adoption Agreement was set for this particiular Employer.

I don't know much else except it was done by an Insurance Company.

What do I need to look for to change this over to an regular 401(k)

Appreciate any insight and where to look for answers.

Thanks

Pat

A self-employed individual has a net earned income of $100,000 (after subtracting 1/2 SE tax)

Their DB contribution requirement is $90,000.

Can they defer $16,500 into the 401(k) plan, or are they limited to $10,000?

Assume no employer contribution to the DC plan.

An exception to the anti-acceleration rule exists for "limited cashouts". My question is whether this permitted acceleration applies only to the form of payment (i.e., paying a lump sum when the plan provides for installments) or can it also apply to the timing. For example, if a plan states that distribution will be made exactly 1 year from the date of termination could we use this Section of the Regulations to pay a lump sum within 90 days of termination (assuming it is less than the 402(g) limit and otherwise meets the exception)? Would it make a difference if the normal form of payment is a lump sum 1 year from termination and we pay out the lump sum within 90 days of termination?

I have been given the task of completing 1099-R forms for distributions that have occurred with plans that my company handles as TPA. Does anyone have any tips or tricks for compiling information or easy ways to follow up without sounding pushy to clients?

All responses are welcome and appreciated.

The plan sponsor under a very old PLR (8031091) appears to be required to count hours of service for the time periods that are the basis for severance pay.

If a participant is terminated during the plan year with 800 hours, but receives severance pay for 3 months, is the plan required to count those hours of service (for vesting) which are represented by that severance pay?

A plan participant died after filing a beneficiary designation naming her husband as her primary beneficiary and her son as her secondary beneficiary. The husband never claimed benefits from the plan or completed his own beneficiary form. Now the husband has also died.

The son is requesting payment as his mother's secondary beneficiary. Should the benefit be paid to the primary beneficiary's estate or to the original participant's secondary beneficiary?

Our plan provides that an unmarried "Participant's" default beneficiary is his estate but should this apply to a Beneficiary as well?

I am having trouble understanding the benefits/reasons of having a retroactive effective date (say 1/1/2002) for an EGTRRA prototype restatement, executed for example 1/1/2009.

If we made the effective date 1/1/2002, would this whipe out any nonamender defects? For example, client did not timely adopt a 401(a)(31)(B) amendment....but the provision is now correct in the new plan restatement (since plan is effective 1/1/2002 and the 401a31B amendment is in the plan document effective 3/28/2005). I would not think this would eliminate the nonamender error, but am I wrong? If it doesn't, then in theory the document is not really deemed effective in 2002.

If you have a GUST prototype that has been timely amended for all required law changes....why would you not simply make your EGTRRA restatement date the date/year executed (1/1/2009)?

What are the reasons to make the effective date 1/1/2002 instead of 1/1/2009?

I must be overthinking this issue, but I am going back and forth with my administration software support on the issue of deferrals in a fiscal year, adp failures, and catch-ups. I see some old threads on this, but am just not sure how to wrap my arms around it.

The facts:

Fiscal 10/31 plan. An HCE defers $1,500 from 11/1/08 to 12/31/08 (none of which is catch-up due to 402(g)) and then defers $18,700 from 1/1/09 to 10/31/09. So, his total deferrals are $20,200 for the plan year, $2,200 of which are 2009 catch-up due to 402(g) limit. The ADP test fails and his refund is calculated as $3,650. Since he still has $3,300 left in his 2009 catch-up, he only has to take a $350 refund. So, at this point, he has deferred $18,700 in calendar 2009 and has used up his $5,500 catch-up.

Administration software tells me that his 402(g) deferrals are only $13,200 for 2009 as of 10/31/09 ($18,700 - $2,200 - $3,300) and he can still defer another $3,300 in 2009.

There seems to be a logic problem here.

My problem is this ..... if this were a calendar year plan and I defer $22,000 and the ADP test fails and I get a $3,652 refund, I end up with $18,348 in the plan when all is said and done and, therefore, have a net tax deduction for the year of $18,348.

So, why, just because I have a fiscal year, can I do what they are telling me and have $22,000 deposited in the plan (the $18,700 I already have and the $3,300 they tell me I can still contribute in 2009), fail the test by $3,650, get a $350 refund, meaning I end up with $21,650 in the plan (and, therefore, a $21,650 net tax deduction).

It sure seems like I just got a $3,300 windfall just because I have a fiscal year.

Treas. Reg. Section 1.401(k)-3(e)(1) provides that "a plan which includes provisions that satisfy the rules of this section will not satisfy the requirements of section 1.401(k)-1(b) if it is amended to change such provisions for the plan year." Presumably, the reference to "the rules of this section" refers to anything even touched on in 1.401(k)-3. However, Announcement 2007-59 allows certain minimal changes to be made mid-year without violating this rule, and appears to be the IRS's only guidance on this regulatory provision (although the Announcement specifically requests comments on whether further guidance is needed). Does anyone have any experience as to how the IRS is enforcing this rule? An IRS agent I spoke to expressed the view that absolutely no changes are allowed of any sort, once the plan year is underway, that would in any way change the information provided in the safe harbor notice, even if the change is highly favorable. Does a mid-year change mean the plan is disqualified outright (since 1.401(k)-1(b) deals with "coverage and nondiscrimination requirements")? That seems unduly harsh if the change is a minor one that doesn't affect the level of safe harbor contributions or other core elements of the safe harbor design.

Thanks.