Ok, this is a first for me...

One of my clients (who has a high turnover rate due to the line of work), had several terminated participants with small balances. The client requested from the investment company that they be forced out of the plan (which the plan allows for balances under $1,000). For the distributions over $200 (but under $1,000), 20% federal withholding was taken out and sent to the DOT. A few of the participant checks were redeposited (voided checks) at the investment company because they weren't cashed within 6 months. The issue I have is that no 1099 will be issued for those whose checks were cancelled since the participant did not receive the check (or cash the check whichever the case may be). However, I would have to report the withholding on the 945 correct (since the DOT did receive the withholding)? How will this work? If the IRS tries to tie out the 1099's reported withholding with the 945 reported withholding it will not match.

Has anyone ever had this issue? If so, how did you handle it?

Thanks so much in advance!

The 10% Penalty exception for Distributions applies to employees who terminate employment during or after that year in which they turn age 55. I get that.

But what happens when the PLAN terminates? Do those who are age 55 get an exception? And what date to use – plan term eff date or plan distribution date?

Can a QACA plan, which has the auto enrollment provision and safe harbor, have a one year waiting period for the safe harbor match? I assume it operates the same as a traditional safe harbor plan, but wanted to see if anyone had a different opinion.

I realize that a husband and wife who both have day care accounts, whether from the same company or different companies, can only have $5000 in total elections and the rest would have to be treated as taxable income. However, is there anything preventing a case where husband and wife both work for the same company and each elect the max for their individual medical FSA's? The only thing I can see at the moment is that the plan administrator would have to ensure that there is no double-dipping of claims.

I have a corporation that made its first distributions (to owners) in 2009 from a Target Plan, a Keogh plan and a DB plan. I don't see where any of these plans applied for separate EINs in the past. Do these plans have to have EINs that are separate from the corporation's EIN in order to complete the 1099-R? Or can they merely file using the corporation's EIN?

Are there regulations relating to how a funding deficiency is allocated within a multiemployer plan? For example, one reasonable interpretation may be to allocate the funding deficiency as a percentage of contributions made to the plan. Maybe the answer to my question is included in the participation agreement?

Any direction would be greatly appreciated.

Thanks,

Doug

This may be a silly question, but...

A plan has 25% deferral limit and 25% after tax limit with a combined 25% limit for both sources. If the person goes over the combined limit, can pretax money then be reclassified to become catchup to bring them below the 25% combined limit?

Does anyone have any thoughts on whether someone responsible for determining if a DRO is a QDRO would be a plan fiduciary under ERISA? I would tend to think they would since this determination involves exercising discretionary authority in the administration of the plan, but just wondering if there is any black letter law or at least a consensus on the issue.

Specifically, we represent an annuity provider who believes they might be responsible for making QDRO determinations with respect to ERISA 403(b) plans. I'm trying to explain to them that this should be the plan administrator's responsibility and it would be a bad idea for them to do it because it would make them a plan fiduciary.

Any thoughts are appreciated. Thanks.

What is the recourse if a participant requests a hardship from their plan and submits that appropriate proof that later turns out proved to be fraudalent. Participant already received the money. I believe this is correctable under SCP with the participant required to pay the money back. What if the employee is terminated because of this act? Still have to pay the money back? How do you get it from them? They now have a separation from service and are requesting a distribution. Can you hold it up until the repay?

For purposes of the STD exception, is a life annuity considered a "single payment" such that there is no deferred compensation where the annuity is scheduled to commence (and actually commences) within 2.5 months following the end of the service recipient's fiscal year?

A life annuity is clearly a single payment for purposes of subsequent changes to the time/form of payment (1.409A-2(b)(2)(ii)), but what about for purposes of the STD rule?

Anyone have any thoughts or know of any guidance that I'm unaware of?

Suppose a corporate plan sponsor contributes their required 2009 Safe Harbor contribution on December 31, 2010 (due to cash flow reasons). The plan document requires the contribution and the notice was issued timely. They have lots of room under their eligible compensation for doubling up their 2010 and 2009 contributions since they are only planning on contibuting the SH amounts.

By doing this, they will miss the deduction deadline for their 2009 tax return. I assume this would be deductible on their 2010 return?

If so, I don't see the section under 404 that quite gets me there - any ideas?

Also, if a participant quit in 2009 and the deduction for that person occurs with the 2010 return, that's not a 415 issue, right?

I have a question that came up on a defined benefit plan holds a life insurance policy. The participant is 90 years old. He has been advised by his financial advisor that it would be good to get that policy out of the plan before it "matures." I received this voicemail and was hoping someone could direct me to appropriate sections dealing with life insurance held in a DB plan as I have no experience with it. He will have to contact his attorney about this, but was hoping to somewhat intelligently answer some questions for him off the clock. I don't know anything about this plan other than what was provided in the voicemail.

A doctor has a retirement plan and would like to convert some of his assets to a Roth IRA. He is in his 30s and looking for ways to have some retirement income that is tax-free down the road. If his plan is amended to allow an in-service distribution of his vested profit sharing account (say an age 35 requirement and the contributions need to be in the plan for at least 2 years), can he take those assets and convert them to a Roth IRA? Administratively, this sounds burdensome so I would like to discourage it. Are their AGI limits that could restrict this?

This is a specific Relius Cycle D question.

It's my understanding that Cycle D submissions will review PPA provisions (i.e. they are on the applicable Cumulative List). If anyone that uses Relius didn't notice, their original DB PPA amendment was a load of crap and they corrected it with a new release in December sometime.

The problem is that the Cycle D documents have that load of crap PPA language in them. The 436 language is the biggest culprit. They also come with a PPA amendment that seems to incorporate some of the provisions not already in the document. In other words it's a cut-down version of the full PPA amendment because many of the provisions are in the document body.

Has anyone noticed this? If so, what are you doing, assuming you don't want to have the client sign a document that has bad 436 language in it? My initial thought is having the client sign an entirely new PPA amendment, even though they signed a good PPA amendment previously. That new amendment would override the bad language in the document.

DB plan with a career average formula integrated with covered compensation froze benefit accruals on 8/31/09. It is a calendar year plan. The benefit accrual for 2009 is based on compensation from 1/1/09 - 8/31/09. Should the covered compensation used in determining the benefit accrual for 2009 be prorated for the 8 months?

Curious as to why the IRS released rates today, but didn't provide the 2010 Funding Transition rates (Jan-10 only shows for plan year 2009). Oversight?

Funding Yield Curve Segment Rates

When is a defined benefit valuation required to be completed? For example, a 2009 valuation with a calendar year plan year end is due when? Is there a 5 year rule where for the first 5 years you do not have to meet this date? Does it matter if it is a sole proprietor plan with a Schedule C? The reason I ask is the actuary is requiring Schedule C income for 2009 before preparing the valuation. I thought the val. was due in Sept. of 2009. Thank you.

What happens if a participant is due a 415 or ADP refund, but they don't have enough money in their account because they took a 401(k) loan? I assume you can just adjust the outstanding loan balance and create a 1099 for the participant. That seems to be the only alternative.

Does anyone know if there is any guidance regarding this?

Employer A sponsers an HSA program with employee contributions through a Cafeteria Plan. Employee X wants to cover his family under the HDHPlan. Employee X spouse also covers the family under her employers (B) traditional HMO plan. The question which our HSA provider can't answer with any cites is: What is the contribution limit for employee X? Is he limited to employee only limits ($3,050), because the family has "other health coverage", or can he elect the family limit of ($6,150)? I know this is an odd situation, because most folks no longer are double covered but we have run into this on two occasions recently and don't have an answer. Any enlightenment will be greatly appreciated.

Employee_Contribution_limits_HSA.doc

Seeking opinions on non-safe harbor floor/offset plan designs.

Lately I have see many floor offset proposals and fairly new plans done by others. Some floor offset plans appear to comply with the Schultz memo ( .5% accrual before offset and uniform offset) and some clearly comply with nothing. I admit to a bias against non-safe harbor floor/offset plans on the grounds of concerns about the consistent interpretation of 401(a)(26) by the IRS, some ambiguity in the regulations, and the general "thin ice" that I perceive them to be bullt upon when there is a $0 net accrual.

In contrast, a DB/DC combo (cash balance or traditional) can do much the same with the complication that lots of people might have small benefits in the DB plan. But a CB accrual is less powerful for testing purposes.

Do others share my view or are others ok with full offsets and general testing of non-safe harbor floor/offset plans?