"Your Rollover Options" in Notice 2009-68 does not included the notice of the 30-day period that is required by the following 1.402(f)-1 A-2(a) to allow waiver of the 30-day period.

Following is the notice of the 30-day period in the Special Tax Notice in Notice 2002-3:

"Your Right to Waive the 30–Day Notice Period. Generally, neither a direct rollover nor a payment can be made from the plan until at least 30 days after your receipt of this notice. Thus, after receiving this notice, you have at least 30 days to consider whether or not to have your withdrawal directly rolled over. If you do not wish to wait until this 30-day notice period ends before your election is processed, you may waive the notice period by making an affirmative election indicating whether or not you wish to make a direct rollover. Your withdrawal will then be processed in accordance with your election as soon as practical after it is received by the Plan Administrator."

1.402(f)-1 A-2(a):

"(a) This paragraph (a) is satisfied if the plan administrator provides a distributee with the section 402(f) notice no less than 30 days and no more than 90 days before the date of a distribution. However, if the distributee, after having received the section 402(f) notice, affirmatively elects a distribution, a plan will not fail to satisfy section 402(f) merely because the distribution is made less than 30 days after the section 402(f) notice was provided to the distributee, provided the plan administrator clearly indicates to the distributee that the distributee has a right to consider the decision of whether or not to elect a direct rollover for at least 30 days after the notice is provided. The plan administrator may use any method to inform the distributee of the relevant time period, provided that the method is reasonably designed to attract the attention of the distributee. For example, this information could be either provided in the section 402(f) notice or stated in a separate document (e.g., attached to the election form) that is provided at the same time as the notice. For purposes of satisfying the requirement in the first sentence of paragraph (a) of this Q&A-2, the plan administrator may substitute the annuity starting date, within the meaning of section 1.401(a)-20, Q&A-10, for the date of the distribution."

I am trying to figure out what effect a spin-off of some subsidiaries has on the annual ESOP allocations. As it stands, there was a parent with 5 subs. 4 of the subs were sold off and employees left with them. The subs appear to still be part of the plan because the participation agreements have not been terminated.

The issue involves the paying off of the remaining liability on the exempt loan owed to the parent corp which will be paid at the end of the plan year (12-31). Allocations to accounts are made at the end of the year for the contributions made throughout the year. When the exempt loan is paid off, all of the shares in the suspense account will be allocated. My question is to whom does it go-- does any of it go to the formerly affiliated employees? Previously, allocations were made to all affiliated employers (so if parents made contribution, it was deemed made on behalf of parent and all affiliated subs). Any clarification on these rules would be greatly appreciated.

Is there any negative effect from making a Top paid group election. If we were considering making a top paid group election to help pass testing, is there any potential negative consequences for doing so. It appears to me that the election may be made and changed pretty freely. I realize it's a very general questions, but I was wondering if anyone has any general thoughts or comments.

Nevermind-- miscatagorized post!

Thanks Janet.

Can an employer avoid having a complete withdrawal where all union employees quit by hiring replacement workers and entering into a CBA that requires contributions at the same level?

Companies A, B and C share common ownership and the same health plan. Company A is being sold in a stock sale. Company B is being sold in an asset sale. Company C will continue to exist and remain as the sole sponsor and its employees the sole participant in the health plan as 1/1/10. Which Company's employees need COBRA notices?

I was advised that an married employee has enrolled in our Dependent Care FSA effective for January 2010 as he is expecting his first baby in May. At this time, he does not have a qualified dependent so I have said that he is not eligible to participate in the plan (and have deductions withheld from his paycheck) until the birth of the baby. Am I incorrect?

I have a client with a Cash Balance plan that is only one year old. He's been given a range of contributions for 2009 and I've told him that anything over the minimum contribution would basically go toward investment gains in future years, thereby possibly decreasing the contribution range in the future as well.

If he consistently funds the plan over the minimum amount and an excess of dollars accumulates in the plan and he decides to retire and terminate the plan, what is the excise tax for the excess funding?

Thanks

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.