I have a 11/1 - 10/31 DB plan that due to layoffs experienced enough of an active participant reduction that it is considered a partial plan termination at 11/1/09. There has always been less than 50 participants. In the past the plan would get a waiver from reporting to the PBGC for the active participant reduction due to small plan status but now that the proposed regs are out is the Form 10 required to be submitted?

My company used to have a Cafeteria plan that offered Medical Reimbursement FSA, Dependent Care Coverage and Premium Conversion. We are switching to a HDHP with an HSA. We understand we cannot have the FSA any longer (we don't want to bother with a LFSA). Can we keep the other two parts? the Dependent Care Coverage and the Premium Conversion? I am getting conflicting advise on this from advisors. One says we have to switch to a Premium Only Plan and get rid of Dependent Care Coverage. The other says we can keep both.

Thanks in advance!

Hi. Has anyone heard whether the IRS has issued procedures for high income employees to "permanently waive" the COBRA premium subsidy in order to avoid having to pay it back later? If a former employee didn't waive the subsidy in writing, could he still be entitled to it?

A client (consisting of business owner and 1 employee) has maintained a PS Plan for years. PS Plan has a 2 Years of Service requirement for eligibility to participate, with 100% immediate vesting. Employee (thus far) has never been credited with 1,000 Hours of Service. Consequently, only the business owner has been covered by the PS Plan to date.

Owner is appproaching retirement age and is considering adding a 401(k) component to maximize/optimize her contributions from here on out. I realize that eligibility to participate in the 401(k) component cannot exceed 1 Year of Service, although the plan will continue to require 2 Years of Service for the "profit sharing" component.

I am going to recommend that this client go safe-harbor 401(k), using the 3% safe-harbor non-elective contribution only for NHCE participants (i.e., to both eliminate ADP testing and meet T-H minimum contribution requirement). Then, IF her employee were ever to complete 1 Year of Service (she's been getting closer and closer to the magic 1 ,000 hours mark) and become eligible for the 401(k) and employer 3% safe-harbor components, I am assuming (hoping?) that there would be no non-discrimination or other issues with the profit sharing component, since the employee had not completed the 2 Years of Service requirement for same?

In other words, if the employee were to become eligible for 401(k) and safe-harbor - no biggie. Profit sharing, however, would be an entirely different story.

Seems obvious - but I've been tripped up by the seemingly obvious before!

Thanks for any and all input.

Someone sent to me a scan of question 2:220 of the 401(k) answer book. It says that for match calculated on a annual basis, you have 12 months after the Plan Year End to contribute the match.

I remember:

Deductible under section 404 is the due date of the tax return counting extensions.

Section 415 requires payment within 30 days after the due date of the tax return counting extensions to count in that year's annual additions.

Where does the "12 months after Plan Year End" come from?

This sounds almost too simple, but I have to ask? If a Church plan accidently omits a few participants from sharing in the employer contribution, they have to go back and make those contributions, plus earnings, correct? Wasn't sure if there was a difference because this is a church plan (compared to a PS plan).

Thanks

I have heard several DB/DC combo speakers make comments that both DB and DC plans, if combined for nondiscrimination testing, should avoid benefits, rights, and features (BRF) testing by making sure the plans have the same/similar BRF provisions. From an grey book Q&A, a 3-year cliff and a 6-year graded schedule are considered comparable and thus not subject to BRF testing.

I think BRF would include in-service distribution timing options? Suppose the DC plan has age 59.5 for an in-service option for all acoounts, but the DB has age 62. That appears to be a BRF, but how/what gets tested there?

What about an accrual requirement - suppose the DB requires 1000 hours for accrual, but the DC plan has no accrual requirement - is that a BRF that must be tested, and if so, how/what gets tested there, doesn't the 401(a)(4) test itself do exactly that?

This is a new one to me. My client can no longer make a match and has discontinued it with all proper notices, amendments etc. Of course, between that and the economy, deferral's dropped. He would like to hold an annual raffle for non-highly compensated employees who defer into the plan for some prizes as an incentive to defer. He might raffle monetary prizes (1,000 to the first person picked from the hat) or he might buy some prizes (a WII, or IPOD).

My suspicion is that this may not be allowed but am curious as to your (collective) thoughts. thank you.

Treas. Reg. 1.7476-1(b)(6)(i) says that "In the case of an application to which paragraph (b) (1) or (2) of this section applies, an employee who is not eligible to participate in the plan shall not be an interested party if such employee is excluded from consideration for purposes of section 410(b)(1) by reason of section 410(b)(2)(B) or ©."

Should the bold part be 410(b)(3)(B) or ©? It doesn't make sense to me as is.

From my understanding, that last required update to SEP plan documents was required by EGTRRA. Can someone confirm?

More -- I previously worked with 401K plans and given their popularity, it was always easy to stay atop of legislative/regulatory developments and new requirements since information filtered down from so many sources. I'm new to the SEP world and would be interested in hearing ideas/thoughts from individuals on what resources they rely on to stay current on any SEP related developments. I would also me interested in any favorite resources(e.g...books, online resources, etc) you count on or any suggested training that might be available. I'm new to SIMPLE IRAs, so same question would apply.

I am happy I found this forum as I can see this being valuable as well.

Are employee pre-tax payroll deductions to pay the employee's share of group medical insurance premiums in either a fully-insured plan or self-insured plan considered "plan assets?" If "yes," and the employer is the named fudiciary, is the employer (named fudiciary) subject to ERISA's Prohibited Transaction rules? Is a COBRA premium payment made by the Qualified Beneficiary also considered to be a "plan asset."

My mind is tangled up--hopefully someone can untangle me!

The maximum employer contribution=25% of eligible comp. for the plan. If this amount (for a small plan)=$50,000 but the employer wants to put in a $100,000 profit sharing contribution, is that allowed??

Or does the maximum employer contribution amount reign over all?

A client wishes to maintain separate plans for two company divisions that are separated by several thousand miles but otherwise are engaged in the same business. The two divisions would have different benefits.

Can anyone suggest what potentially harmful issues the client should be especially aware of?

Hey Ya'll - Drs P&Q have a 401k with self-directed accounts. In 2009, they moved from Brokerage Firm to Large Insurance Carrier. SOX Notice was properly given. Brokerage firm liquidated assets on the worst trading day of the year. Losses were, of course, dependent on the investments of each participant. Investments were wire transferred to Large Insurance Carrier.

Dr. Q wants to know what legal obligation does he have as trustee to notify participants of the investment loss. I don't know of any requirement to send a notice that specifically addresses investment losses due to the movement of plan assets from one investment firm to another. Is there any need or requirement for him to do so?

Thanks for your help on this.

No 401k deferrals have ever been made to the plan. They want to change the plan to take out the 401k provisions.

Can they make an amendment to the current plan or do you suggest that they write up a new plan document that allows for profit sharing only? I'm assuming that they don't have to terminate the 401k plan first?

Thoughts on what to do?

We have a handful of participants that recently learned they defaulted on one of their plan loans. Here is the situation: we have a 403(b) and a 401(k) plan. For around a dozen participants, they had plan loans through both plans. The TPA handles the entire plan loan process. When the TPA set up the repayment, they only set up one of the loans (the 403(b)). The participant saw loan repayments coming out of the paycheck each pay period. However, the payment was only coming out for the 403(b) plan loan, not the loan through the 401(k). The TPA just notified these participants that they defaulted on their 401(k) plan loans.

Technically, it is the responsibility of each participant to know what their repayment amount should be. So I suppose it could be argued that each participant should have known that their repayment didn't look right. But practically speaking, people are only going to see that some amount is coming out. If it is slightly off of the correct amount, employees wouldn't notice.

I find more fault with the TPA in not setting up the repayments properly. But the TPA says we have to treat it as a default. There must be another option.

Any thoughts?

The plan document limit's the number of loans to 1.

The participant currently has a loan amortized over 10 years (primary residence, 8 years left) and wants to take a new loan.

Does Sal Tripoldi's Chapter 7, Section IX, Part C.1.b, 1.b.4)c, (page 7.306, 2009 edition) indicate that we can refinance with unequal payments as long as the interest rates are the same and the original loan does not extend pasted the orginal repayment period, all limits are met, and the new loan is within 5 years?

Similar to Treas. Reg 1.72(p)1 Q20, section b, example 1, iii?

This is a question that came up in a discussion. I'm currently operating on nearly zero information, so my apologies for that.

Say you have some sort of association/organization that is tax exempt - say the Boy Scouts or Girl Scouts. Apparently the local troops have the option to participate in the plan "sponsored" by the national organization. From what came up in the discussion, (now relayed to me 4th hand!) the local troop can set up their own private, "outside" DB plan if they prefer to do that instead. I'm assuming that if this is true, the Scout plan must be a "Multiple Employer Plan."

If the troop already has a plan through the Scouts, are there any particular problems that you know of if they want to get out of that one and establish their own separate plan? I'm not sure I see any special problems, (difficulties moving assets, perhaps, for example?) but I thought I'd see if you DB types have any special caveats?

Thanks!

I have a client (the wife) who is still working at her job and will retire some years down the road. She and her husband are getting a divorce, which should be finalized relatively soon. The husband is retired and is currently receiving his pension in the form of a J&S annuity. They each want to keep their own pensions after divorce and remain each others J&S beneficiaries so that if one remarries, the new spouse would not receive the 50% part of their benefit. Each is listed as the others spouse right now.

Is a QDRO needed for either/both of the pensions? I assume there may be different answers b/c his pension is in pay status???

Tried to find this. Actually went to the 2009 instructions before I got on here. I'm also not sure if this should be a 5500 or DB question.

At any rate, for 2009 do one man DB plans file a 5500 or an EZ with their Schedule B? Yes, I know it's supposed to be called something else.

thanks

Christopher