Plan sponsor contributes too much employer money for 2 participants. I went to the SIMPLE Fix It guide on the IRS website. The suggested correction is to distribute the excess amount & report it on 1099-R issued to the participant indicating 0 as a taxable amount? A couple of questions:

1. Any good argument to have the money returned to the employer rather than the participant?

2. If the money is distributed to the participant, why is the taxable amount 0?

Thanks for any guidance.

401k plan has hardship withdrawals per the regulatory safe harbors.

EE presents a signed contract to purchase a house from her recently divorced ex-husband, which called for ex-husband to carry the contract for the entire purchase price. EE asked for a hardship withdrawal to make the "down payment" so she could buy the house. The request was rejected.

EE and ex-husband agree to tear up that contract and sign a new one for the same purchase price, but with a down payment and ex-husband just carrying the balance. EE submits the new contract, asking for a hardship withdrawal of the amount stated in the new contract for a down payment.

Is there a qualifying hardship?

Or, since she had an enforceable right under the first contract to acquire the house with no down payment, is the tearing up of that contract and signing of a new one a bootstrap effort that the plan administrator should reject?

Assume a typical health care FSA arrangement in a Section 125 plan with a calendar year plan year. Assume further that an employee (1) has a positive balance remaining in his FSA on December 31, and (2) terminates his employment with the plan sponsor on that day.

Can this terminated employee take advantage of the grace period (incurring new qualifiying expenses to be reimbursed by his FSA account) without having to elect COBRA?

I have argued that this terminated employee CAN use the grace period without electing COBRA. My rationale is that (A) this employee has already made the maximum contribution to his FSA, (B) the purpose of the 2 1/2 month grace period is to provide some limited relief from the "use it or lose it" rule for the benefit period covered by the FSA, and © requiring a participant to stay employed with the plan sponsor beyond that benefit period (or even, if still employed, to continue actively contributing to a new FSA for the new plan year) doesn't really further that purpose.

Unfortunately, I have not yet located any clear authority (or even a directly on-point discussion on this Board) to support my conclusion. We had a rather spriited philosophical debate about this in a plan restatement drafting session the other day, so I would love to come up with good authority or at least a more convincing rationale.

We understand that we would want to be sure that the plan's definition of "participant" is broad enough so as not to inadvertently tip the scales one way or another.

Thanks for your input.

The wording of IRC section 436(d)(4) in the final regs are a little different than the proposed regs with regard to benefit increases pursuant to a plan amendment for a plan that was frozen as of 9/1/05. The final reg states "If a plan this is described in this paragraph (d)(4) provides for benefit accruals during any time after 9/1/05 (treating benefit increases pursuant to an amendmen as benefit accruals), this paragraph (d)(4) ceases to apply for the plan as of the date any benefits accrue under the plan (or the date the amendment takes effect)."

Under the proposes reg we have been treating all our plans that were frozen as of 9/1/05 as exempt from 436 restrictions per (d)(4) since there were no actual benefit accruals. However the wording of the final reg is gving us second thoughts about whether simply the provision in the plan that increases benefits for 415 increases would eliminate that exemption regardless of whether benefits actually accrue.

I was wondering if any others have given this any thought what the consensus might be. Thanks.

A nonprofit has a 401(a) Plan, to which they contribute 5% of pay every pay period. They have a 403(b) plan with deferrals only, and two vendors, no employer contributions. Is the 403(b) plan considered an ERISA plan, with the 5500 requirement?

This is a top heavy plan. The key employee deferred 4%. The plan doc reads that all get the top heavy (non-key and key). All non-key will get 3%. Do I still need to give an additional 3% to the key or does his deferral off set this?

I was always under the impression that if you bought or sold vacation days under a Cafeteria plan, that those days were bought or sold with after tax dollars. I have been given a plan document by a client that shows a BeneFlex plan saying that the vacation days are pretax.

Does anyone know about this?

Ok - I thought perhaps there was a thread regarding this, but cannot seem to find one exactly on point...

I have a client here in NY who has an employee residing in MA. Said employee was married under MA law to a partner of the same gender. Said marriage is now dissolved. Employee's partner's attorney has prepared a DRO and forwarded it to the Plan Administrator for review. The DRO seems to be in order as far as the necessary information required by the client's plan.

This specific issue is NOT addressed in the Plan QDRO procedural section nor any other section of the Plan.

Can/should/must the plan recognize the marriage and therefore the DRO? Are there any other special issues that the client needs to be aware of?

all opinions appreciated.

A & B each is a 50% partner in P'ship X & P'ship Y. A also has a sole proprietorship, Z. From what I can tell, X, Y & Z are under common control. (Treas. Reg. 1.414©-2©(2)(iv).) Agreed?

Does it make a difference if X & Y are corporations?--i.e., if A & B each owns 50% of the stock of Corp. X & Corp. Y, and A also has sole proprietorship Z, are X, Y & Z under common control?

Looking for confirmation ---

I have a 401(k) plan sponsored by Company B which was established in 2003 by 3 individuals who left Company A. The plan recognizes service with Company A for eligibility and vesting. The Companies were never in a controlled group together.

John Doe worked for Company A and had a nonforfeitable interest in their 401(k) plan. When Company A dissolved in 2003, he went and worked for a Company C.

Life goes on and on and John left Company C in 2003 and went who knows where.

On 8/3/2009, Mr. Doe shows up at Company B, where he has never worked a day. But, Company B recognizes service with Company A and in 2003, Mr. Doe had a nonforefeitable interest in their plan. The document has the rule of parity (Corbel volume submitter), but I am concerned about the nonforfeitable interest issue. The language says "In the case of a Participant who under the Plan does not have a nonforfeitable right ...."

Well, he never had a nonforfeitable right in Company B's plan, although he would have had he started with them within 5 years of leaving Company A.

Do you think I need to bring him in on 8/3/2009???

Thanks.

James

A client has a profit sharing plan to which no new contributions have been made for several years. One account remains in the plan, for a retired employee who has been receiving annual RMDs. (She is 78). What, if any, PPA amendments are needed for this plan by 12/31/09?

I know the client should terminate the plan, and they will do that next year.

Is it a statutory requirement to make the direct rollover option available to the plan participant? Please furnish the citation.

I understand that if a participant has gone over the compensation limit before the end of the plan year, but has not reached any other limit (402(g), plan limit, 415 or ADP limit), that participant may defer additional amounts up to the lower of the 402(g), plan limit, 415 or ADP limit. Are there any limitations on the match? Or, is it that whenever there's a deferral, there must be a match?

The economy is so bad that:

... I got a pre-declined credit card in the mail.

... I ordered a burger at McDonalds and the kid behind the

counter asked, "Can you afford fries with that?"

... CEO's are now playing miniature golf.

... If the bank returns your check marked "Insufficient Funds"

you have to call them and ask if they meant you or them.

... Hot Wheels and Matchbox stocks are trading higher than GM.

... McDonald's is thinking of selling a new 1/4 ouncer.

... Parents in Beverly Hills have fired their nannies and

actually learned their children's names.

... Motel Six won't leave the light on anymore.

... The Mafia is laying off judges.

.. Blue Cross/Blue Shield laid off 25 Congressmen.

And finally ...a truckload of Americans was caught sneaking into Mexico.

2-physician practice has a profit sharing plan.

One doctor took out a loan in excess of $50K.

So the excess on the loan has to be reported as a distribution, plus he has to pay it back.

That creates basis in the plan.

If the doctor takes an inservice distribution as allowed (now) by the plan, how is the basis allocated?

Can he choose to take out the basis money first?

Does it have to be prorated?

Thanks!

I have a takeover one person DB plan that has an end of year valuation date. The owner would like to terminate the DB plan (termination date of 12/01/2009)...but wishes to minimize the procedure as much as possible. The owner would like to make a minimum contribution for the 2009 plan year on 12/30/2009 (we plan to change the valuation date to beginning of year to accomplish this). Then all assets would be liquidated on 12/31/2009.

The 5500-EZ would reflect the contribution for the plan year and would also show the trust value of zero on 12/31/2009. However, the Schedule SB would show the valuation date and results as of 1/1/2009.

Can anyone see a problem with this approach? Does the mehod seem do-able?

Any and all help would be appreciated.

Thanks.

I work for a nonunion company that has recently been doing alot of work for the State of Ohio. PW laws require the employer to match wages and benefit dollar amounts. Currently we recieve our hour wage, benefits, and a hourly amount to cover the additional amount in benefits, ($7 to $13 an hour). We just received notice, as of 1/1/10, the company is creating a new 401(k) that all employees will be enrolled in. This is so whenever we are working a prevailing wage job they can contribute this additional money into it and avoid paying taxes on that amount.

First: can a 401(K) be a mandatory contribution?

Second: Can the contribution be tied only to the people working certain jobs?

Third: Can the contribution amount change depending on the job being worked?

Fourth: Can an employer determine the amount of contribution?

Hi,

Question regarding ADP: plan end 5/31, HCE, over 50, defers only $1,200 for plan year. ADP test fails, can the $1,200 be 'recharacterized' as catch up (or the failure amount)? There are only deferral contributions for this year so did not exceed any limit....

Thanks,

Jason

Our small company (less than 20 employees) administers our own 401k plan. The original provisions of the plan did not allow for participants to take a loan or borrow from their account. We are now considering changing this to allow for borrowing.

Could this be done by just amending the original plan?

Carl C.

Little trouble understanding the part-time/temporary exclusion -

Plan has a 6 month eligibility requirement (no specified # of hours required). The Plan also wants to exclude part-time employees and includes the QAB wording if complete 1000 hours within eligibility computation period will be included.

1. Is it correct to assume that if a p-t employee does complete 1000 hours they also have to be employed on the last day of the eligibility computation period - the way a typical year of service works?

2. Since "regular" non part-time employees only have to complete 6 months of service and yet those considered to be part-time employees must essentially complete a year of service, are there any compliance/coverage issues with that?