We have a client with a safe harbor 401(k) plan (3% nonelective) with annual valuations and distributions as soon as feasible after termination of employment. If a participant terminates mid year and want his money what do we give him? I assumed it would be previous year's account balance plus elective deferrals. However, I have looked at the plan document and can't find where it tells me. It is a Corbel VS plan. Also, the particpant will get the 3% safe harbor at the end of the year. Do we make another distribution after the contribution has been made?

I have an employee who currently has medical coverage for himself and his spouse. The premiums are paid through a Section 125 plan. He is also covered through the Veterans administration and now wants to drop his medical coverage because he considers this to be a qualifying event. I do think it is a qualifying event for 2 reasons:

1. He has been eligible for this coverage for a number of years and is now enrolling.

2. A qualifying event has to be beyond their control such as a spouse loosing employment, divorce, etc. This event is not beyond his control.

Should this be considered a qualifying event under Section 125?

A new client came to us for a consultation with the following problem; and we could use some help.

Two 50/50 partners own a company with approx 180 EE. They were advised by an insurance agent to form a new management company with no other EE and adopt a plan covering just the 2 partners. They adopted an Insurance Company’s 401K plan and made a PS contribution for 2008 and 2009, thinking it was just for the two of them. The TPA that the Insurance Company put them in contact with just now found out about the staffing company and advised them of their problem.

The TPA advised them to reallocate the PS contribution amongst all the 180 EE, which they don't want to do. They would rather amend their tax returns, eliminating the deduction, and try to find a way to get their money back.

The Adoption Agreement is for the 2 partner management company only, it was NOT adopted by the 180 EE staffing company. However, in the Insurance Company’s Basic Docs, "Employer" is defined as the "Adopting ER, and any other employer that is a member of the controlled group, or an affiliated service group."

Must the PS contribution be allocated amongst the 180 EE, even though that employer never adopted the plan? If not, is it possible to get their money back? If so, what is involved and what penalties apply?

Thanks in advance for all of your help.

I have 2 401k plans that are merging and Plan A has 3 year cliff vesting and Plan B has 6 year graded, and survivor plan will have 6 year graded.

How should participants in plan A that has the 3 year cliff be treated? From the way I interpret Sal Tripodi's ERISA Outline on vesting and anti cutback rules under the Heinz case, you have to protect future accruals. So someone with 1 year of service although not vested under either schedule, would still have to have the pre amendment account balance protected so it can grow into the 3 year schedule (you do this by giving the greater of for the prior balance) and you would have to bifurcate vesting for this participant until you have the same vesting under both schedules. Is this correct? I think this is why it is easier to just grandfather the 3 year cliff or give the greater of to these participants for their entire account, and apply the 6 year to new hires and participants in Plan B.

Do you then have BRF testing issues because there are 2 vesting schedules under the same plan?

I appreciate any comments!

Client received a QDRO permitting the A.P. to receive a distribution or keep the money in the account. Client is close to the large plan audit requirement and does not want to permit A.P. to keep her money in the plan as an option We are reviewing the DRO. Any grounds to require them to take that language out?

In March 2009, a company preformed the 2008 ADP test and distributed excess contributions. Later in 2009, it was determined that some of the data used for the testing was incorrect. The data was fixed and the ADP test was rerun resulting in additional excess contributions that needed to be distributed in order to pass the test. Unfortunately, the plan’s recordkeeper did not make the additional distributions until January 2010.

It was my understanding that because the distributions to correct the test failure were not made within 12 months following the end of the plan year, the test failure could be corrected with SCP using either a QNEC or the One-to-One method. However, the plan’s recordkeeper has come back and said that since the plan did test and make initial corrections in a timely fashion, the additional excess contributions due to the revised test data can be corrected under SCP by distributing excess amounts to participants within two years and no additional contribution is required. Are they correct?

Thanks.

PAL

A company I work with recently received an e-mail from another firm stating that the IRS had announced it's plans to send a questionaire to a cross-section of retirement plan sponsors in March 2010. The purpose of the questionnaire is to guage the level of compliance and determine which compliance issues need to be addressed. I can't seem to find this announcement anywhere. Can someone point me in the right direction? Thanks in advance for you help.

PAL

Service for an adopting employer on a multiple er plan?

We have a plan that we've been TPA for about 10 years. Sometime in the distant past a participant (Y) terminated employment with a vested benefit and was reported as such on the SSA. Following that, we assume, she was paid out since there was no record of her on the information we received. It also appears that no additional notation was completed on another SSA indicating that she was paid out.

We don't have a 1099 to show her. Any thoughts or suggestions on other avenues available to confirm the distribution? We're pretty sure it happened between 1997-1999.

Thanks.

I thought the Oct. 09 final regs addressed this but now I can't find a cite so maybe I'm wrong.

Does expected HCE restricted distributions play a role in whether the actuary can assume the expected form of payment will be an annuity vs. a lump sum ?

I have a plan that offers lump sums but about 50% of the benefits are for HCEs where the plan has never been well funded enough in its 30 years of existence, nor expected to be in the future, to pay out lump sums to the HCEs (this is an ongoing non-profit org plan that is not likely to terminate). There are no plans to increase funding levels.

Given this expectation of restricted HCE payments on the bulk of the benefits do the Regs allow an assumption that the form of payment will be an annuity (i.e., restricted series of distributions over the lifetime of the HCEs) even though some lump sums will be paid to lower paid non-highly compensated employees. The AFTAP tends to range between 85-90% each year.

Under 164.404 the obligation is on the CE to give the breach notice. Anyone seeing the BAAs wanting to send the notice to the individuals and the media (presumably to make themselves look better?). Although there is some appeal to this, I would worry the CE is on the hook if it is screwed up.

Thoughts? What are others doing?

I could use some help on doing and EOY valuation....

When doing and EOY val...is the FT calculated as of the beginning of the plan year then adjusted to the end of year with effective interest?

And, is the 150% cushion applied to the FT at the BOY or the EOY adjusted FT?

TNC as I see would simply be calcualted as of the EOY on that type of val.

What are you guys doing?

We consider our LTD recipients (whether or not receiving SSDI benefits) to be active employees with respect to health, dental and vision benefits. As such, we expect our health plans (self insured) to be primary and Medicare secondary. Recently one TPA stated that these employees don't qualify as "current" employees according to the Medicare Seconday Payor guidelines. Can we not consider them active employees on a leave of absence status?

What type of document are you using for Governmental plans where Employees make the salary reduction contributions through a 457 Plan and the Employer makes contributions through a 401(a) plan; Profit Sharing, Match or both?

Are you filing for LOD under Cycle E if using an IDP document?

If using a Volume Submitter are you relying on the Opinion Letter or filing for LOD by 04/30/2010?

Thank you!

Does anyone know where I can get a list of plans that are eligible for pre-tax contributions?

I know medical, dental, vision, life to $50k, but I would like a specific list with examples.

Thanks,

Carrie

I'm looking at Treas. Reg. section 1.411(d)-3©(ii), which provides a 180-day waiting period before you can eliminate an annuity as a redundant optional form of benefit. The preamble to the regs says the waiting period was inserted because the IRS was concerned about participants receiving notice of eligibility to elect a QJSA, and having the option eliminated before they could make an election.

Treas. Regs. section 1.411(d)-4(e) allows elimination of an annuity form of benefit if you give the participants a lump sum.

My question is, if you eliminate the annuity form of benefit by giving participants a lump sum form of benefit, do you still have to wait the 180 days?

The example following Treas. Regs. section 1.411(d)-4(e)(3) seems to suggest that you do, but the effective date is November 1, 2005 (60 days after the amendment date rather than 90 days). Does the example mean that the 180-day waiting period applies and the example has a typo in it, or was November 1, 2005 selected for some other reason (and presumably, the 180-day waiting period doesn't apply to elimination of a QJSA with a lump sum option).

Any thoughts?

For 417(e) purposes, can a plan use the average of the segment rates for the 2nd, 3rd, and 4th months prior to stability period?

401(k) plan provides for profit-sharing contribution and matching contributions - both with 6 year graded vesting schedule.

Plan has decided to stop making profit-sharing contributions and make a more generous match.

Lots of plan participants have small partially vested profit-sharing accounts and employee turnover is high therefore there are frequent profit-sharing forfeitures.

Plan doesn't want to allocate p-s forfeitures in the same manner as their p-s contribution because the cycle of people with small partially vested accounts will continue.

Is it permissible to use profit-sharing forfeitures to reduce the matching contribution?

Other solutions?

Employee had excess contributions for 2009, funded $20,000, he was making up for 'catch up' contributions missed in prior years. I am fairly certain that this is not allowed but what is the correction method?

1. Is it to return to the employee, adjusted for g/l?

2. His w-2 would show $20k for 2009 (I assume I do not mess with this), then he should he receive a 1099r for 2009 for the excess or is the 1099r issued 2010 and coded for 2009 excess?

Thanks

What are the suggested options in the following scenario:

A plan did not defer bonus payments according to the participants deferral election in 2009 or prior years; for example 0% was withheld from a bonus UNLESS a participant made a special election to defer from the bonus. The special election should have been the other way. The standard amount should have been withheld UNLESS the participant requested a different amount.

Would they have to make a correction?

Could they make the change moving forward only?

Thanks for any guidance on this issue.