ER is making a retroactive wage adjustment to an EE's salary in that the EE's position was deemed to be of a higher salary grade. The retroactive wage adjustment is going back several years. Does the ER have an obligation to make an increased ER contribution to the EE's 401(k) plan based on the EE's adjusted salary for those years. The Plan document does not require the same?

An employer had what they thought was a non-ERISA 403(b) arrangement where they made employer contributions to individual 403(b) annuities on behalf of each employee. There is no plan document and no contract or agreement between the employer and the various 403(b) providers. This was really operated like a non-ERISA salary deferral 403(b) (other than the fact that they made employer contributions).

So an employee passed away and the annuity was paid out to the beneficiary. The employer attempted to make its contribution, but was too late as the annuity contract was paid out. The insurer will not provide the employer with the beneficiary information so now the employer has this money ear marked for the employee, but has its hands tied. Since there is no plan document there are no plan provisions that require the employer to make the contribution. I don't see anything wrong with simply paying the amount ear marked for the contribution out to to the employee's spouse. Any thoughts?

A client terminated and paid out all participants from their 401(k) plan in mid-December 2008.

They now want to start up a PS only plan (no deferrals) with a January 1, 2009 effective date.

For vesting purposes in the PS plan, they want to exclude years before this new plan is established.

I think there are some problems with this, but haven't found the guidance. I don’t think a new PS plan with a January 1, 2009 effective date can exclude years before the plan starts if just a few days earlier in December 2008 the company had terminated another qualified plan. I also have this feeling that there's something else causing a problem here, but it eludes me (other than December 28 being an eleventh-hour time to finally decide to set up a plan for the year).

Thoughts?

This question is an attempt to coordinate limits for an individual who wants to make 401k roth and roth ira contributions for 2009.

Say a 1 employee/participant/owner corporation provides compensation of $24,000 for its one employee/owner.

The employee is over age 50.

Say individual makes a designated Roth 401k contribution of $22,000 for 2009. $16,500 plus $5,500 catch up.

Issue #1

Regarding employer deduction limits and annual addition limits the catch up contribution of $5,500 is not counted. Do we agree?

Therefore, a 25% employer contribution of $6,000 is acceptable since the annual addition would be $22,500 ($16,500 plus $6,000) which is less than the 100% compensation limit of $24,000.

Now say the employee is below the AGI limits for a Roth IRA contribution.

Regarding the 100% of compensation IRA contribution limit; is it equal to $24,000 since the 401k contributions were all Roth contributions?

If the 401k contributions were made on a pre-tax basis would the 100% limit be $2,000 ($24,000 less $22,000)?

Thank you.

Plan sponsor decides today that they want to elimiate the safe harbor match in their clandar year plan. Safe Harbor Notices were provided for 2010 already. I know that generally plan sponsor must give a 30 day notice to eliminate. Is that true even if they want to eliminate prior to the beginning of the plan year? If we can amendment signed by 12/31 can plan sponsor eliminate match effective 01/01 or does it need to 01/31 at this point?

Thanks for any guidance.

I have conflicting information, so I just wanted to get things straight.

Are the PPA, HEART and WRERA Amendments required to be signed by December 31, 2009?

Thanks in advance for your help.

Comments?

http://blog.nj.com/njv_johnbury/2009/12/actuaries_suck.html

Taxpayer on 12/31/09 has a Traditional IRA of $30,000. Basis in this IRA with nondeductible contributions is $30,000. So the IRA has no appreciation.

Taxpayer also has a 401k with $200,000 in which he plans to roll over into Traditional IRA from former employer in 2010 or 2011.

Question - Taxpayer wants to convert Traditional IRA to Roth in 2010. Doing so would result in no additional tax liability since the FMV = tax basis. Lets say they convert in January, 2010. What effect, if any would the transfer of the 401k plan to IRA have on the ROTH conversion if it is done AFTER the conversion but in the same 2010 tax year. I assume you look at the value of all IRAs at the time of conversion and that any amounts added to traditional IRA's after the conversion have no effect?

Edited later - answered I believe lies in the form and instructions to form 8606.

In computing the basis used in the conversion, you divide the accumlated cost basis by the IRA distribution during the year PLUS the balance in the IRA as of the END of the year. therefore, if you happen to empty out the IRA earlier in the year, then transfer from a 401k to the traditional IRA later in that same year, the 401k would effect the out come of the conversion. So it would make sense to hold off rollovers from qualified plans until a later year.

We have a 401K plan with a 3% non-elective Safe Harbor contribution. I know that this 3% will count towards determing the contribution amounts for cross testing. So, in a simple case, if a 5% total allocation rate for NHCEs is required to meet the gateway, the 3% match will count because the plan has a 3% non-elective Safe Harbor as opposed to a matching Safe Harbor. So we would have to provide, in this case, a 2% profit sharing allocation.

But 3% is the minimum contribution. What if our plan contributes 4%? In the simple case above would this mean that we would only need to provide a 1% profit sharing allocation to NHCEs. The software we currently use to cross test, uses a fixed 3% Safe Harbor contribution, so I can't test the effects of increasing it to 4%. Perhaps, 3% is all that can be used for cross testing. I don't know, hence this question. Thanks.

Is it possible to switch from the matching safe harbor 401K plan to a nonelective 3% safe harbor 401K plan during the plan year? Currently, our plan provides the typical 3% match up to an employee's elective contribution of 3% of compensation and then 50% of additional elective contributions up to 5% of an employee's compensation. So the maximum match is 4% of compensation. If we can make the switch to the nonelective 3% safe harbor, then we will actually contribute 4% this year for all eligible employees. This is because some employees have already received the 4% match based on the elective contributions they have made to their 401K plans and we wouldn't want to reduce the match as a result of the proposed safe harbor switch.

We would like to make this switch effective for the 2009 plan year.

A prior recordkeeper has just provided a check to the current recordkeeper, along with an explanation that the prior recordkeeper had overcharged participant accounts for the prior record-keeper's fees back in 2008. At that time, the recordkeeper’s fees were paid from plan assets.

The current recordkeeper, upon receiving an allocation breakdown from the plan sponsor, has been directed by the plan sponsor to deposit the overcharged fees pro rata into the appropriate participants' account.

The problem is: The correct money source into which the funds should be deposited for each affected participant.

It can't be in the employer's money source because the funds would be subject to a vesting schedule.

Should these assets be treated as pre-tax?

Any other alternatives?

Any guidance would be grately received and appreciated.

Suppose the owner of a small corp that sponsors a DB plan is also a participant in the plan. He also happens to be the trustee.

He owns 7% of the stock of a privately held company (not the company that sponsors the DB). Can the plan invest in that stock?

Something tells me that it may be a prohibited transaction. Use of plan assets for the benefit of a disqualified person. The disqualified person being him as a plan fiduciary. Suppose instead this was a publicly traded company. Then would it be a prohibited transaction?

Is there a best Website Roth conversion calculator?

Employer merged with another company (new company still considering k plan), old plan had 8 people was safe harbor all contibutions made before all employees including owner went into new merged companies. Owner still had A/R due which has now been collected money could be converted to payroll and was curious about whether he could fund prior 401 k plan. All participants have been paid out except him investment issue delaying his distribution. it sort of brings up questions prior plan was top heavy but only safe harbor match was made he would be only employee in (old company) 14 months with payroll made. thanks for review

Plan has four owners who all receive K1s and W2s. There are no other employees. When running the K1 calculations (by individual) I am getting a negative number for two employees. I am not sure how to handle a negative K1. . .For example:

K1 compensation totals $2,700 (before any deductions)

W2 compensation totals $35,000

After running the K1 compensation thru the self-employment earnings calculation and deducting self employment and the profit sharing contribution for the year I am left with a negative number ($9,500). Can I then add the W2 compensation of $35,000 to the ($9,500) and use the $25,500 as the participant's total compensation for the year?

Also, does anyone know of a good resource to read up on K1 and Schedule C compensation? I feel like I get caught up on this stuff every year. . .

Thanks!

if my client is 1/31/2010 cycle and currently using an individually designed plan but intends on adopting an EGTRRA prototype plan, is it entitled to the april 30 deadline or the January 31 deadline?

Does anyone have a sample irrevocable election out of a plan that they are willing to share?

Hi,

I have a MERP that allows post tax premiums to be submitted for reimbursement.

I was looking for clarification on what is meant by "post tax"

Thank you!!

Can you have different distribution schedules (e.g., 6 month vs. 12 month) for deferred compensation amounts that are distributed upon a separation from service but vary depending upon whether it is an involuntary termination by employer versus a voluntary termination by the individual.

Treas. Reg. 1.409A-3© would seem to prohibit such distinctions to the one time and form of payment rule but I am trying to determine exactly what 1.409A-3©(3) means in this regard. It seems to open the door very broadly to permit distinctions based on any sort of separation from service. Would appreciate any thoughts on how to parse that language.

I want to be clear.

Calendar year DB plan with lookback month of November.

Participant terminated this month (December 2009). If they are paid out in January 2010, it is my understanding that the 417(e) lump sum should be valued using 2010 mortality. But would I use the December 2009 segment rates or the Novemeber 2008 segment rates?

Thanks in advance.