I am looking at an ESOP and need some thoughts. The ESOP previously held other securites prior to becoming an ESOP and as a result has the oldest participant accounts including various other investments such as stock. The question has arisen whether the benefits can be bifurcated and distributed under different rules depending on the type of benefit. The goal would allow for an earlier distribution for the non-employer stock and a later distribution time for the ESOP employer stock.

It would pass my first smell test-- those participants who have the old stock are getting improved benefit (the ability to get there benefit earlier) and those who only have ESOP benefits aren't losing anything (they never had the old stock). I know that there are plenty of plans that have bifurcated benefits, but usually this develops because anti-cutback rules are keeping an old benefit. This is different, because the bifurcation is being given to create a new benefit (the earlier distribution timing).

Are there any rules that would prevent this? The reasoning is mostly a matter of money-- there are only a small handful (less than 5) who have any interest in this old non-employer stock, but it is being managed by a company and management fees are being paid. The hope is that people will take it out and allow that part of the plan benefits to be distributed (or rolled over into an IRA or whatever).

Any thoughts would be welcomed!

Does anyone know if maintaining a 403(b) plan makes the employer ineligible to use the Form 5305 for a SEP? In other words, does the Service consider a 403(b) plan to be a "qualified retirement plan" for purposes of using a Form 5305?

Thanks

When plan was converted in 2005, the document was restated and the definition of compensation excluded deferrals from bonuses in error. The plan was restated in 2005 and the error was just discovered. What needs to be done...is there a VCP to fix a scriveners error?

Private corporation wants to issue $0.01 options to its CEO. If the options vest immediately but may only be exercised during the 60 day period following a change in control (meeting the regulatory definition) or separation from service, do you think this award would be 409A compliant? It seems to me it would be deferred compensation but that payment triggers would comply with 1.409A-3. Just wanted to get other people's impressions.

Thanks.

Aaron

I'm not clear on when a partial withdrawal liability arises. I hope there's a multiemployer w/d liability expert who can help.

Assume an employer closes a plant in late 2010, so that the "3-year testing period" is 2008, 2009 & 2010, and the "high base year" is calculated based on 2003 through 2007. Because 2008 through 2010 were years with a full complement of employees, there is no 70% reduction under the partial withdrawal liability rules for as long as 2010 is part of the 3-yr. testing period.

In 2013, however, the 3-yr. testing period is 2011 through 2013 (2010 having dropped off). If each of those years--2011, 2012, & 2013--has more than a 70% reduction from the high base year (based on 2006 through 2010), does that mean that 2013 is the first partial withdrawal year, or are each of the years in the 3-yr. testing period (i.e., 2011, 2012 & 2013) partial w/d liability years, or is only the 1st year in the testing period (i.e., 2011) a partial w/d liability year?

Has anyone heard whether the IRS will take the same position they took with GUST that if you have two plans merging that only one needs to be restated for EGTRRA? I have two companies who are merging and each sponsor a 401(k) plan. They will merge the companies and the plans on 1/1/2010. So, I am wanting to just restate the surviving plan and prepare a merger and transfer agreement. If I have the new plan executed by 12/31/09 with an effective date of 1/1/2010, the simultaneously executed PPA/HEART amendment will therefore be signed before 12/31/09 meaning I have that taken care of as well. [Or, should I have the plan being eliminated execute its own PPA amendment by 12/31/09???]

Are there any provisions for participant who does not want a deferred annuity option in a terminating plan yet the spouse is unavailable to provide consent to waive the normal form of benefit prior to distribution of assets. The terminiating plan is a Money Purchase and the account balance is over $5k.

Assuming the plan's trust is a domestic trust, can a foreign corporation sponsor a 401(k)?

Employee is not enrolled in employer's cafeteria plan. Under employer's plan, dependents can only participate if the employee is enrolled. Employee presents QMCSO requiring his child to be added to plan. Accordingly, to meet the plan requirements and the QMCSO, Employee and child are added to plan pursuant to Prop. Treas. Reg. 1.125-4(d)

Employee obtains QMCSO requiring former spouse to add the child and wants to disenroll the child and himself from the Plan. Under Prop. Treas. Reg. 1.125-4(d)(ii), as long as the child is actually enrolled in the spouse's plan, coverage for the child can be dropped mid-year. But under what 125 provision can the employee drop his coverage?

This has to come up occasionally.

Thanks.

BACKGROUND: I am a California employee - I have a work injury (shoulder), dating back to October, 2007, which was accepted/covered by Work Comp, for future medical/surgery. I returned to work initially, trying to work with the injury, when the pain came back with a vengence on 9/9/09, and I have been off work, waiting for surgery ever since. No, I did NOT take any additional time off for this injury other than the initial week after the injury until 9/9/09. The doctor, MRI, CT Scan, and all tests and documents have proven I need surgery to fix this problem.

PROBLEM: This is at the end of the initial 2-year coverage from Work Comp, when my time off work would be covered/compensated by Work Comp, so I need to transition to State Disibility to compensate for my time off while I wait for all the 'red-tape' to be processed for the surgery.

First Question: Should I back-date my request to State Disibility to 9/9/09, or should I date it for when the Work Comp initial 2-year work-time coverage expired (10/15/09)?

Second Question: How long does it take for the State Disibility benefits to be processed - in other words, when should I expect a check? (assuming all paperwork is in order and approved).

Any answers, suggestions or website link referrals would be GREATLY appreciated!

The plan document (Sungard) requires participating employers to give written approval for all amendments. This has not been done. Only the primary employer and trustee have been executing amendments. The plan has terminated and will be submitted for a letter of determination. How big of an issue will this be? Should some type of corrective action be taken in advance of the submission?

Acronymns: someone has a sense of humor.

I am trying to find out what firm/attorney submitted the PLR request that resulted in Private Letter Ruling 200836035, interpreting the 401(m) regulations as prohibiting the use of surplus assets to fund matching contributions in a qualified replacement plan. I am dealing with a similar issue and would like to find out as much information about the 2008 request and ruling as possible. Any ideas on how to find the author of this PLR request?

Company decided it didn't want to deal with 409A--was going to undergo a change in control in early 2006--and so decided it would go ahead and terminate it's deferred comp plan in 2005 and distribute the amounts in accordance with Q&A 18© of 2005-1. Company adopted resolutions terminating plan in 2005 and apparently paid out and reported all distributions in 2005 except for a couple of relatively small amounts. Those amounts for whatever reason did not get paid until mid-January 2006. Company reported distributions as income in 2005 or 2006 as they were made. Question is what to think of the failure to make all distributons prior to 2006 under the Plan and how to read the deadline requirement included in 18©.

18© says that all the amounts deferred under a plan be paid and reported as income in the taxable year in which the termination occurs so as not to have the amendment treated as a material modification. I read the "taxable year" portion here to mean the employee's taxable year so that all amounts are paid and distributed to employees in the year of termination. Here that would require all distributions to have been made in 2005 and recognized and reported in income in 2005 since employees are all on a calendar tax year. (Note, however, that the company is on a September 30 fiscal year so all amounts were paid out within the same year as termination if looking at the company's tax year.)

If having termination and pay out within the company's tax year argument does not work, what does the failure mean. All of the distributions under the Plan (including those paid in 2005) were paid out in violation of 409A and would be subject to 20% excise tax? Alternatively, only those amounts not paid in 2005 would be in violation? What are the risks to the company here where it timely reported and withheld on the distributions. Since it doesn't have duty to withhold on the 20% excise tax (if applicable) is risk simply that maybe it should have reported all distributions in income in 2005 rather than a couple in 2006?

A rare plan that is still over funded in this market is interested in using the qualified replacement plan (Profit Sharing) approach under IRC 4980(d). They will meet all the requirements (e.g., 95% of current participants will benefit, 25% or more of the excess will be transferred).

Logistically, since they are moving over a portion of the excess assets not attributable to any particular participant, so it's not all participant rollovers, does this then necessitate filing Forms 5310-As with the IRS giving the IRS a 30 advance notice of the transfer of excess assets ?

Thanks in advance for any opinions.

I work for a pediatric hospital and we are planning to introduce a HDHP with HSA next plan year. We wanted to have all domestic benefits (non-preventative services rendered at our facility) covered at 100% but it appears that is not possible.

Would it be possible to use a low co-pay that applies towards the deductible? The low co-pay is intended to incent members to use our facility. Or would this plan design make members ineligible for an HSA since the plan is covering services prior to the deductible being met?

Any guidance would be appreciated.

Filling out a EGTRRA restatement (prototype). Employer has had plan frozen since 1/1/2008. Should effective date of restatement be 1/1/2009 (as suggested in restatement agreement) or 1/1/2008? Any help is greatly appreciated need to get this done ASAP and brokerage house doesnt have the answer

I have a client who had a 401(a) plan with a 6% employer contribution (it's not a match). They have been including the parsonage allowance as part of employee's compensation - meaning this parsonage allowance

Does anyone know if a parsonage allowance is included in an employee’s compensation? I have a client who has a 401(a) plan with a 6% employer contribution (it's not a match) and they have been including the parsonage allowance in the employee's compensation and the employee has being receiving a 6% match on this. Is this allowed? Also, if you could point me into the right direction of the IRS regs that would be great.

Can I switch from a beg of year Val to and end of year Val in 2009?

The plan I was working on had a loss in Dec 2008 that creating a sizable minimum contribution if I keep the Val at the beg of the year!

Someone asked me to post this

In the webcast today I gave an example of interest on excess contributions for the year of deposit.

The excess contribution that is truly in excess of the gross MRC is credited with interest at the effective rate while the portion of the excess contribution that is excess only because of a prior application of the PFB is credited at the actual rate

Consider a plan that has the following

1/1/10 MRC 25,000

1/1/10 PFB 17,000

2010 Contrib 60,000 made 1/1/10

PFB election On 1/1/10 the employer elects to apply $10,000 of the PFB to offset the MRC

Since 10,000 of PFB is utilized to offset the MRC, the remaining amount of MRC is $15,000 after the offset

This means that the 60,000 contribution consists of $15,000 to satisfy the MRC and $45,000 of excess contributions.

The excess contribution of $45,000 consists of $35,000 of true excess (60,000 - 25,000) and 10,000 of additional excess due to the PFB utilization that adjusted the MRC from 25,000 to 15,000.

When rolling these contributions forward to 1/1/11 to add to the prefunding balance, the 35,000 will be credited at the effective rate for 2010 and the $10,000 will be credited at the actual rate of return.

Caveat- this assume the contribution is made on 1/1... if it was made later, the 60,000 would be discounted back to 1/1 using the effective rate and the discounted contribution would be divided into true excess and excesss due to a PFB utilization as of the 1/1 dates. These present values would then be brought forward to 1/1/11 at the effective and actual rates respectively