A plan sponsor implemented a 412i insurance funded plan, thought the fact that it is intended to be a 412i plan should not be relevant as the matter pertains to death benefit limits.

The plan includes the husband and wife as the only employees/participants.

For each participant a total contribution of $200k was made, where $100k was for the life insurance premium and the additional $100k was to an annuity poicy. If the participant lives until NRA then the amounts in the two policies is to fund the retirement benefit. And if the employee dies prior to NRA then the life insurance and value in the annuity policy is the death benefit.

This seems to comply with the incidental death benefit limits of rev rul 74-307.

My understanding of 74-307 is that less than 50% must be applied to life insurance. So that would mean if the annuity policy contribution was instead $100,001 it would technically mean that the life insurance premium is less than 50% of total contribution. Not sure if such a technicality is truly meaningful or relevant, but just an observation.

I've even seen where a DB plan could have as much as 66% of contribution be applied to the life insurance policy.

Any views on the compliance of such a death benefit provision?

Thanks.

As you know, due to attribution (for example, between husband and spouse, or between child and parent), two companies can form a controlled group. My questions include

1. Can the plans meet 410(B) coverage requirements separately? For example, if, without aggregating the plans, one plan achives a 80% 401(B) ration, while the other plan achieves a 100% coverage ration, will that cover the controlled group as a whole for 410(B) coverage requirements?

2. What if the two plans have different plan years? Say one plan has a fiscal year that ends in September (so, for example, the plan year would end on 9/30/09), while the other plan runs on a calendar year and thus has a plan year that ends in December (for example, 12/31/09)? How does one figure out the 410(B) required coverage then? Would one compare the plan year that ends within the calendar year of the latter plan?

I have a client that would like to merge their existing Keogh (HR10) assets into our MEP. Their Keogh is set up as a QRP and is a DC Plan. I've consulted with my counterparts and they indicated a merger of this type is not allowed in our plan but cannot provide proof within the code as to why. I reviewed Rev. Rul. 2004-12 but it specifically addresses Rollovers and not mergers. I've also reviewed Treasury Regulations, Subchapter A, Sec. 1.414(l)-1 but can't locate anything concrete to prove to the client why we cannot allow this type of merger.

The only piece of information I may be able to rely on is Rev. Rul. 94-76 and Rev. Rul. 2002-42, 2002-2 C.B. 76. "§ 414(l) transfer between dissimilar § 401(a) plans (or a plan amendment treated as such a transfer), the characteristics of the transferor plan continue to apply to the transferred assets held in the transferee plan"... although it specifically addresses merging profit sharing and money purchase pension plans the argument we may be able to rely on is that we cannot guarantee the characteristics of the transferror plan will continue due to the fact that we are limited to the plan design of the MEP and cannot make amendments for individual Adopting Employers.

Any thoughts or suggestions are appreciated.

We are using high 3 average compensation to test in a cross tested plan.

Plan Specs: YOS for eligibility, dual entry, 1/1 and 7/1. Comp from entry for contribution calculation.

A participant hired on 5/1/07 had the following data:

2007 total annual compensation = $20,000.

2008 total annual compensation = $30,000.

2008 compensation from 7/1/08 entry date = $15,000.

What compensation is used for testing? In other words, what is the "high 3 average" for this participant?

In this situation, is the plan paying the distribution responsible for coding the distribution as taxable? How in the world would the sponsor know whether or not the rollover account relates to a Roth IRA?

Unfortunately I did not notice it right away and I have missed out on three or four contributions. I received a loan on 7/31 and am now being told my deferrals stopped automatically because it forbidden under federal regulations to continue deferrals while I have a loan.

I am not aware of any such regulations and have asked the plan administrator to provide them.

In the event no such regulations exist, can anything be done to make my account whole?

A plan sponsor failed to make their $97k minimum required contribution for the 2007 Plan Year. Up until 2007 we had been doing end of year valuations. We switched to a 1/1/2008 valuation date for 2008 and the plan was frozen effective 1/1/2008. We filed a Form 5330 for 2007. However, my question is do they need to file another Form 5330 for 2008 if he makes no contribution for 2008 either? Does he need to keep filing Form 5330's until the 2007 MRS is contributed in full?

Mostly because this snuck up on me... remember the election to add to the prefunding balance must be made by the due date of the previous year's 5500.

In other words, if you are using a prefunding balance in your 2009 valuation, the sponsor must elect to create it (from excess 2008 contributions) before the due date of the 2008 5500, even though it doesn't show up on 2008 SB.

Just one more thing to do, along with 5500s, AFTAPs, Elections, participant notices, all at various dates before 10/31.

We're seeing more DC/401(k) plans offer these types of annuities as an investment option so that a minimum account balance can be locked in. Is it possible to use these in a DB plan that has more than one participant? If so, how would it work?

If an ER establishes a profit sharing plan without 401k and 401m features, has no vesting requirement, and allows in-service withdrawals of amounts that have 'seasoned' in the plan for just two years, is the plan subject to ERISA Title I?

After all, ERISA § 3(2)(A) defines

the terms "employee pension benefit plan" and "pension plan" mean any plan, fund, or program ..., to the extent that by its express terms or as a result of surrounding circumstances such plan, fund, or program—

(i) provides retirement income to employees, or

(ii) results in a deferral of income by employees for periods extending to the termination of covered employment or beyond,

regardless of the method of calculating the contributions made to the plan, the method of calculating the benefits under the plan or the method of distributing benefits from the plan. A distribution from a plan, fund, or program shall not be treated as made in a form other than retirement income or as a distribution prior to termination of covered employment solely because such distribution is made to an employee who has attained age 62 and who is not separated from employment at the time of such distribution.

Since withdrawals may be made under a plan as I described before retirement or termination of employment, is the plan subject to ERISA Title I?

As I understand it, the law does not allow someone to maintain both a model SEP and another retirement plan. Does anyone know of any official documentation forbidding this?

True scenario: Mr. X has a 401k loan from his employer's plan, which being a tiny company does not do payroll deductions. So Mr. X has to make payments himself. Loan is for 5 years, with monthly payments.

Early June 2009 - 401k loans are reviewed by recordkeeper/trustee for any beyond 90 days delinquent. Find the last monhly payment from Mr X was December 2008. A letter is sent, telling X he has to make 3 months payments by June 30th, or it's taxable distribution time. He makes the 3 payments in time.

Early September 2009 - No other payments have been made by X. So now April. May, and June (not to mention July and August) are due. He will get another letter telling him to pay for 3 months by September 30th. He will make it once more, just in time.

This routine has been repeated every quarter since the loan was issued, and it's pretty likely to keep replaying over and over. My questions is : Even if technically Mr X is avoiding a deemed distribution, isn't the envelope getting pushed a little too far? Since his payments are being made quarterly rather than monthly, as specified in the note, could it be deemed due to violation of the terms? Is our shop too soft of heart?

Calendar Year Plan. 2007 ADP test failed and correction method chosen was refunds. Testing was done disaggregated between Stat EEs and OEEs. All refunds were initiated and all were processed in 5/2008 except for one participant who had a self directed brokerage account. His refund was never processed. In 8/2009, the oversight was discovered. What is the correction? It would appear to be a self correction under EPCRS, but it is not specifically addressed. Here are the options that I have come up with. I think #3 would be my chosen conservative correction, but I would consider #2. I think #1 is a bit aggressive and #4 a bit conservative.

1) Refund the calculated amount with gap earnings and stop there.

2) Refund the calculated amount with gap earnings and process a 1-to-1 qnec based on the calculated refund amount.

3) Recalculate the refund amount for the one participant under an aggregated test run, include gap earnings, and process a 1-to-1 qnec based on the revised calculated refund amount.

4) Recalculate the refund amount for all of the participants under an aggregated test run, include gap earnings, and process a 1-to-1 qnec based on the revised calculated refund amount less any amounts previously refunded. (Refund the ommitted participant as in #3.)

Please provide opinion or please feel free to suggest another option. If possible, please provide any back-up to justify the response.

Thank you in advance.

Can they participate in a Cafeteria Plan? Subject to discrimination?

I have a plan that currently has compensation defined as W-2 Compensation. They wanted to make the change to Section 415 "safe harbor" compensation, but when can I make the amendment for?

If I did it today, could it be done for the 2008 Plan Year or does it have to be for 2009?

Thanks for your help!

A participant is still working with the company and has not met the age requirmenmt for an in service distribution.

They want to Rollover their account from the 401k into a Roth IRA , becauase they think Roth IRA offers better investment selections.

Is this Allowed?

May I presume that a DB plan that covers only HCEs is not subject to the restrictions on pre-termination distributions to HCEs? I.e., these rules are to prevent discrimination against NHCEs, not against HCEs.

Even though the plan document contains the boiler plate language (the IRS will likely not approve without). may I presume it does not apply? That is if an HCE were to die, we could pay the benefit even though the plan is not funded 110%? Obviously, it's undesirable to have the plan that provides the maximum statutory benefit funded 110% owing to the excise tax implications on plan termination.

Any thoughts about going against my standard bromide of "you must follow the plan document?" Has anyone walked down this road?

Company X provides medical benefits to its active and certain retired employees. Company X is changing its post-retirement medical plan so that if a retired employee who is eligible for such coverage declines to enroll in it, s/he will be forever barred from electing into such coverage. In addition, it is intended that such retired employee cannot get back into the plan through the occurrence of an event that would be a change in status for active employees under its cafeteria plan or that would entitle the retired employee to elect back in through HIPAA special enrollment rights. The only concern is whether HIPAA's special enrollment rights rules apply to retired employees. The Code and ERISA refer simply to "employee" while IRS regs at 54.9801-6 refer to a "current employee." There is nothing in the preamble to the regs which clarifies this.

Any thoughts?

We have a sponsor that wants the option for the participant to be able to drop any or all elections anytime during the cafeteria plan year and cease payroll deductions, but they cannot re-enter until the anniversary date, is this allowed under IRS rules?

We are filing a determination letter request for a terminating DB Plan. The plan sponsor is an LLC taxed as a partnership. The LLC has two equal partners, which are covered by the DB Plan, and no other employees.

Does the plan sponsor have to provide a Notice to Interested Parties concerning the filing?