I am curious as to others' experience with the most typical style of deferral election form for partners in a partnership with other employees.

We have a client (LLC taxed as partnership) that has traditionally provided for partners to elect either a set % of compensation or a flat dollar amount taken from partner draws or distributions. (This generally mirrors the deferral election form used for regular employees which permits employees to elect either a set % or a flat dollar amount to be taken out for each "per pay period."

One question is that while employees are paid every two weeks, partners generally receive distributions on a monthly basis thus the two groups have different "pay periods" (setting aside the fact that the partners' self employment income cannot truly be determined until year-end).

The real question comes up in that in 2009 partners received some interim draws or distributions (timed around estimated tax dates) in addition to the regular end of the month distributions. Some partners electing a flat deferral amount questioned why 401(k) deferrals were not taken out of these supplemental distributions rather than merely at the end of the month. (Note, partners deferring a % of compensation did have amounts taken out of the supplemental distributions to ensure that the desired percentage of overall compensation was deferred.)

Is there any problem or concern with drafting a separate deferral election form for partners which restricts those electing a flat $ deferral amount to having that amount taken out only from regular partner draws at the end of the month (and zero taken out of any supplemental draws) such that those electing to defer a flat $ amount will have that amount taken out once a month (i.e., 12 times a year) regardless of what their overall draw is each month (and regardless how many separate draw payments are made)?

Folks:

In a letter from the CBO which I found on today's Benefits Link, the director, Douglas Elmendorf, responds to the questions posed of "CBO's analysis of the effects of the Patient Protection and Affordable Care Act (PPACA), as passed by the Senate on Dec. 24.

In particular, the effect of the legislation on the Hospital Insurance (HI) trust fund, from which Medicare Part A benefits are paid."

"Gross federal debt consists of debt held by the public and debt issued to government accounts.

Debt held by the public is the most meaningful measure for assessing the relationship between federal debt and the economy because it represents the amount the government has borrowed; such borrowing competes with other participants for financial resources. In contrast, debt held by trust funds represents internal transactions of the government and thus has no effect on credit markets."

"Enacting PPACA would increase debt held by government accounts more than it would decrease debt held by the public, and would thus increase gross federal debt. However, that measure of debt conveys little information about the federal government's future financial burdens and has little economic meaning. In contrast, the effects of legislation on debt held by the public offer a more useful measure of that legislation's impact on the government's financial condition."

I agree with this analysis in the short run.

However, in the long run, as the various trust funds are depleted, the intragovernmental debt will evolve into public debt, with similar effects on competition for financial resources.

Intragovernmental debt, for today, is "good debt," but eventually, it will be treated like "bad debt."

This accounting of debt goes against my grandfather's sound philosophy,"What you own, you may not own.

What you owe, you owe."

Don Levit

Since the change in how excess contributions are taxed (now taxed in year received) have any practitioners noticed a change in how many plan sponsors will not implement a cap on HCE contributions? Ie. Is it that big of a deal to fail ADP testing and receive a distribution? We are an employer using current year testing and limit HCE contributions to $10,000. I would prefer HCEs to maximize the amount they contribute and not be limited to an artificial cap. Other than paying the cost to print refund checks what is the drawaback of letting the plan fail and issuing refunds?

the employee was on leave during last year and into this year. they finish the leave and then they resigned from their position. the plan requires the employee be there the last day of the plan year and 1000 hours. is the employee entitled to a profit sharing for last year?

Does anyone know the IRS position on the use of pretax benefits for ferry rides? The code clearly shows ferries as an allowed form of mass transit, but it isn't clear (at least to me) whether that only means riding the ferry as a passenger, or whether that can include car and driver tolls. I've had a couple people tell me that car tolls cannot be included, but to me the code isn't specifically clear about that and no one has any backup to support their position, other than saying that the code has to be for "mass transit", and I fail to see how if you can take the same ferry and either walk on or drive on, it is mass transit for one but not the other.

Thank you!

Several employees of a 401(k) plan are over the 415 limit. Do I need to go through the EPCRS for correction, or what are my options?

An owner and his wife work in a small business and their two children work part time and never have become eligible for the 401-k Plan. Should they (the children) be included in the ADP and ACP testing as contributing 0%??

Can a non-safe harbor plan ammend the document and provide notification to participants that it will become a safe harbor (non elective contribution) plan at any time during the year or does it have to start on January 1st for a calander year plan?

Individual worked for a large non-profit and is a participant their defined benefit plan. She has been retired and in pay status for a few years. Recently, her husband died. The plan then reduced her benefit by 50%. Plan reps refer to this as a "true" joint & survivor annuity. Apparently, the benefit is reduced regardless of whether the participant or non-participant spouse dies first.

Participant says that she did not know she signed up for this. The benefit election form shows participant checked a box next to a benefit described as “Joint & Survivor Annuity with a survivor benefit of ___% (enter 50, 66 2/3, 100).” Participant checked this box.

The SPD for this plan describes Joint and Survivor Annuity as follows: “Benefits will continue for another person in the even of your death. You may elect to receive an adjusted income during your life and, upon you death, 100% of this income will continue for the life of the person you designate. Alternatively, you may elect to receive an adjusted monthly income while you are both alive and then 50%, 66-2/3% of that amount will be paid to the survivor for life when either of you dies.”

My Question:

It appears from the description above, that the SPD is offering a 100% joint and survivor annuity and a “true” JSA. However, the benefit election form did not differentiate b/w the two. It only had that one option I described above.

It seems participant would have an argument at the very least, that the benefit election form was ambiguous as to whether she was electing a 50% JSA or a true JSA. On a larger scale though, does this plan lack the option of a Qualified Joint & Survivor Annuity as required by IRC section 401? Anyone have any suggestions or advice here? Is it possible this plan is not qualified or that the non-profit status of the plan my allow it not to offer a QJSA?

Thank you thank you for any help

Is anyone working through the ASPPA CPC module on non-qualified plans?

Is there anything that would prohibit the establishment of a cash balance plan for, say, 5 years, the termination and distribution of assets, and the restart of a cash balance plan in, say, 2 years?

The real purpose would be to allow the self direction of allocations to bypass the low NRA prohibition.

This is not my idea and not something I would advocate - it is a question posed to me.

Thanks for any comments.

Client never got a separate tax id for their retirement plan trust. Plan investment accounts have been opened using the company EIN.

Should they order a tax id for the trust now? If so, are there any issues/extra steps to address when changing the plan's tax id number?

DB plan is terminating in a standard termination. PBGC timeframes, unless there is a Notice of non compliance, are pretty straight forward, albeit strict.

Does anyone have a sense of how long 5310 LOD's upon termination are taking?

Is there any reason the plan could not submit both the NOIT to participants and NTIP simultaneously?

We have a client with two plans, a 403(b) plan for elective deferrals, and a second plan for match contributions. Would both plans be subject to Title I and the Form 5500 requirement, even though no match contributions are deposited into the 403(b) plan?

Thanks

I am trying to get an clear picture on what effective interest rates to use for EOY plans. The only example I have from Mr. Holland did not address an existing PFB. Here are my examples please let me know if you agree or disagree and if you disagree please explain why and how you think it should be done.

Example 1: what would be the PFB for doing calculations (determining Shortfall, burn, etc), for a 12/31/2010 EOY valuation.

PFB existing at 12/31/2009 = $2000

Excess contributions for 2009 plan year at 12/31/2009 = $800

EIR for 2009 = 5%

EIR for 2010 = 6%

So I am thinking the PFB for determining shortfall, etc would be:

(a) Existing PFB brought forward at the current year EIR to be $2,120

(b) Excess contribution for 2009 at 12/31/09 brought forward to 12/31/10 at prior to be $840

Sum of a and b = 2,960.

Example 2: Or do you think it should be $2000 plus $800 brought forward at 6% to get 2,968?

The way I read the final regs I think it would be Example 2. What do you think.

As added by the Pension Protection Act, Section 101(l) of ERISA requires the Trustees of a Pension Fund to provide an estimate of the dollar amount of withdrawal liability. The Section then states that the Trustees may impose a reasonable charge to cover the "cost of copying, mailing and other expenses involved in furnishing the notice." This language seems to only allow the Trustees to charge for the expenses of sending the notice and does not allow a charge for the actuarial fees in preparing the amount of withdrawal liability. Is this right? I have a Pension Fund that wants to charge $2,500 for the actuarial fees in preparing the estimate (which seems excessive in any event). Thanks.

The 8717 instructions describe an exemption from the User fee "...that applies to all eligible employers who request a determination letter within the first five plan years or, if later, the end of the remedial amendment period that begins within the first five plan years with respect to a plan...An application for a defined benefit plan from an eligible employer for a plan that was first effective on or after January 3, 1996, will automatically meet this requirement..."

I'm submitting the 5300 for a cash balance plan that was originally effectiving 1/1/2000, and is on Cycle D. The plan received a determination letter on 2/13/2003.

Does this exemption apply to my plan?

Thanks!

Safe Harbor Plan with enhanced match. No other Employer contributions permitted. Calendar year/plan year. Employer now (effective 3-1-10) wants to amend the Plan to add a Profit Sharing feature. Understand the prevailing thought is can't make changes to a safe harbor plan mid year (couple of limited exceptions) but just wondering what others may have done.

Seems crazy that the rules would not prohibit the Employer from establishing a separate PS Plan for this feature yet not permit the addition of the PS feature to the safe harbor plan.

OK, let's say we're the TPA. Participant sends us a letter of impending foreclosure. Let's say we prepare the paperwork for the client to execute, and the client signs off on it and we don't send them support for the hardship.

My opinion is that this would NOT make a fiduciary because the plan includes objective criteria and there is generally no judgment involved (for example, you either have medical expenses or you don't). I can think of a handful of situations where judgment would be involved.

Others in the office take the opposite opinion and say "approving it is a fiduciary function." I say approving it would be "performing purely minesterial" activities related to plan administration.

Assume the Plans use the safe harbor standards.

What do YOU think?

Hopefully this is an easy question. Are there any circumstances where a state university 403(b) plan WOULD be subject to ERISA Title 1? The plan has employer contributions, but I'm assuming this is irrelevant because the plan would be considered a governmental plan under ERISA.