I had a question from a co-worker. A client of hers needs to fund late deposit earnings. They want to use plan forfeitures to allocate these earnings versus a check from the corporate account. In doing a little research, it doesn't appear that forfeitures should be used to fund this type of deposit. Forfeitures are used to pay expenses or fund EMPLOYER contributions. This really isn't an employer contribution.

Any opinions? Anyone ran into this?

thanks!!!

Would changing the Normal Retirement Age on a 401(k) Plan from age 62 to 65 be considered a Protected Benefit under IRC 411(d)(6)? The plan does not have Early Retirement.

Thank you!

Company offered AFLAC insurance for dental benefits to employees on pre-tax basis. Not required, or a group plan.

Company is now offering employees a group dental plan.

AFLAC is still available to those who want extra coverage. Some employees would like to drop their AFLAC coverage since the group dental plan will now be enough coverage for them.

AFLAC has stated that they think that the employees can not stop coverage mid-year, but would need to wait until the next enrollment period to stop coverage. They told the employer that before anyone cancelled their coverage, they (the Employer) should be certain that they were allowed to do this mid year.

My thought is that since one plan is not replacing the other, employees cannot change mid-year.

Does anyone know if this is true?

THANK YOU!

Hello all,

There's some great commentary on these forums on how 105(h) applies to specific situations. However, wouldn't 26 CFR 1.105-11©(4) (reproduced below) provide a work-around for many of the non-discrimination limitations on plan design?

For example, wouldn't 1.105-11©(4) allow an employer to setup a series of individual plans (all contained within one document) that provides differing benefit levels on the basis of job category, tenure, salary vs. hourly, and other reasonable and objective business classifications? Wouldn't it also allow the individual plans to impose differing waiting periods?

It's not a complete pass however. The way I understand it, if you use multiple plans and "reasonable and objective business classifications" (see 26 CFR 1.410(b)-4), you still have to pass one of the 1.410(b)-4 safe/unsafe Harbor percentage tests.

Does anyone have any insight on 1.105-11©(4) and the legislative history as to why this provision exists?

DOL regulation section 2550.404a-3 provides a fiduciary liability safe-harbor for default IRA rollovers from terminating defined contribution plans that is applicable regardless of whether participant account balances equal or exceed $5,000. However, does the tax code permit such plan termination default IRA rollovers when participant account balances equal or exceed $5,000?

My boss asked me to post this question- We have a client with a union contract that has wage concessions. As part of that employees put dollars that are withheld from their pay into a IAM pension plan. Is this after tax or before tax as far as how it is reported? It is not 401k money, they have that too.

If it is after tax, does the employee contribution come out non-taxable when it comes out of the IAM pension plan?

thanks!

The Rev Proc contains a safe harbor for valuing policies distributed or sold by a plan to a participant. The safe habor is determined as the greater of two amounts, each derived from a formula in the Rev Proc. One formula is essentially:

(1) premiums paid + earnings credited - mortality and other charges (or "PERC"); times

(2) the "Average Surrender Factor" for the next 10 years.

The surrender factor for a year is the greater of:

(a) .7; or

(b) the cash surrender value on the first day of the year/the PERC on that day.

Under Client's policy, (b) would be much lower than .7 thereby substantially reducing the amount derived from this formula.

Does anyone know how the IRS came up with the seemingly arbitrary .7?

Since the Rev Proc only provides a safe harbor for determining (rather than establishing) the value of the policy, does anyone know how I could go about getting another valuation that the IRS might accept?

Thanks.

hi,

Plan has pooled funds, however, participants can direct their contributions to funds within the pooled account. I believe that this is 'participant directed' and would need quarterly statements to participants, am I correct... Sponsor wants to go to semi annual val's but I don't believe he can do this under PPA.

Thanks,

Jason

Is there a voluntary correction program available for employers who inadvetently fail to submit employer contributions for all eligible associates?

Below is a section of a DB plan that defines the benefit formula. I just provide the concept in simple terms for purposes of this question.

Class A Participants: Owners (say 2 of them)

Benefit of 5% per year

Class B participants: Employee Smith, Employee Jones, Employee Brown

Benefit of 0.5% per year offset by benefit from profit sharing plan

Class C participants: all other eligible employees (say 3 other employees)

Excluded from plan

Without getting into details the plan will be tested with DC plan to pass non discrimination

Any problem with having Classes of participants that directly reference names as above?

Thanks.

Would a mid-year amendment to a Safe Harbor plan's definition of Compensation (e.g., exclude bonuses) be permitted? Or would it violate the "plan year requirement" under Reg. Sec. 1.401(k)-3(e)? Could it be considered a reduction in the s-h match, which is permitted under 1.401(k)-3(g)?

When using the accrued to date testing method, I know that you must add back in distributions made to HCEs, and you have the option of adding back in distributions to NHCE's. Does this also apply to loans? If an HCE took a loan from his/her employer contribution source, does the outstanding loan balance get added back in?

As I understand the regulations Life Insurance policies in a Governmental 457(b) Plan should be owned by the trust with the trust as the beneficiary and PS 58 income applied for DB over $50K. I have a client who has Life Insurance policies owned by the participants in thier plan.

What are the issues here and logical correction methods? On a broader note how did the plan provider allow these policies to be set up this way?

Client with a 401(k) prototype plan had an amendment signed in early February 2009 and effective at the same time adding a company as an affiliated employer and permitting this company immediate eligibility while normal eligibility is 1 year. The amendment references all the appropriate sections of their old GUST document. Plan was also amended and restated and put on an EGTRRA document effective 1/1/2009 and signed in January of the same month. There is no mention of this affiliated employer in the EGTRRA document. So, there is an amendment referencing all the provisions of the old GUST document after the EGTRRA document was already put into place. How do I go about preparing an amendment referencing the new EGTRRA document? I don't see how I can prepare a discretionary amendment effective in 2009 and signed in 2010 without having a late amendment, and this amendment was prepared and signed timely, it just referenced the wrong document. Thanks.

A beneficiary of an inherited IRA has been receiving a stream of payments for a couple years. Now the bene is wondering about annuitizing the remaining IRA balance.

Any reason this couldn't be done or other thoughts/considerations?

Have a potential client currently maintaining a PSP and a CB with assets in the same insurance contract. They are clearly separated within the contract under 2 different "sources" (Employer Profit Sharing & Employer Contribution).

Does anyone see a problem with this? I know that 2 DC plans can share the same trust when the sources are clearly defined, I'm just not sure when they are un-like plans.

First of all, I know almost nothing about top hat plans but have been asked to find an answer to a question. I have checked the EBSA web site, downloaded 29 C.F.R. 2520.104-23 and a copy of the DFVC program.

A new client has told us that they established a top hat plan in 2004 and they do not think that they filed the registration statement with the DOL. Is the only consequence that they have to complete Form 5500 and need to go through DFVC to correct the missed filings 2004 - 2008?

Secondly, does the top hat plan file all the same forms with the 5500 that would be filed by a 401(k) plan, e.g. Schedule A (if applicable), Schedule I, etc.? What about the participant count?

Thank you.

Kate Smith

I should have read the DFVC program more carefully before posting this question. I found the answer in there.

Greetings,

I am a 39 year old who has made roth ira contributions from 2001-2004 in the total amount of 11,000. My account balance fell to $8,359. I withdrew the entire amount for the 2009 tax year for an early total distribution . I know I have to pay the early withdrawal 10% penalty. Do I owe any additional taxes? Is the 8,359 counted as taxable income? I dont have any capital gains so I am just confused on how to handle this on my tax return.

Any help would be greatly appreciated

Paul

I know for HCE and Key we look at any day of the year.

But for rate group membership determination, I have been told by an actuary that you look at the 1st day of the plan year.

Example: if a rate group consists of owners, then members of that group would consist of owners on the first day of the plan year, and not include participants who become owners during the year.

And vice versa, if someone is an owner (on the 1st day of the plan year), but sells ownership during the year, he is still in the owner group because he was an owner as of the 1st day of the plan year.

Is this correct?

If a corporation adopts a NQDC plan by documented board of directors action prior to the stated effective date of the plan, and participants complete individual salary deferral agreements prior to that time (or within 30 days), is there any reason why the IRS would not view the plan to have been "adopted" or "in existence" due to the failure a plan sponsor excutive to physically sign and date the plan document before its effective date?

Stated otherwise, would the IRS take a different position re: what constitutes adoption of a plan document (i.e. timely corporate resolution suffices) than it has taken in the qualified plan arena, as outlined in the attached thread.

http://benefitslink.com/boards/index.php?s...amp;hl=unsigned

I don't see anything in this regard in Notice 2010-6.

Any and all comments are appreciated.