Is it possible for a safe harbor 401(k) plan currently using a standardized document to switch to a non-standardized document, without that switch triggering a requirement to file for a determination letter (as is required when a change is made to a prototype - standardized or not - that converts it into an individually-designed plan)? The employer is a Cycle D filer. The switch would be prospective, going into effect in caledar/plan year 2010. Thanks.

Can a plan that has adopted a safe harbor 3% in 2009, change the plan specifications to a basic safe harbor matching plan for 2010 without affecting the status of the plan?

Thanks for any guidance you can provide.

Hypothetical: Although furnished by a recordkeeper, a retirement plan’s document isn’t a prototype or volume-submitter document; it’s an “individually-designed” document. The plan changes to a new recordkeeper, which is unwilling to restate the plan’s document. The employer engages a lawyer to restate the retirement plan. The lawyer discovers that the employer never operated the plan according to the plan’s terms, and never tried to do so. The failures were operating the plan according to unwritten provisions that could have been consistent with the Internal Revenue Code and ERISA had the provisions been stated by, or at least not contrary to, the plan’s document. The lawyer tells the employer about opportunities to correct the plan’s tax disqualification, but the employer tells the lawyer that it won’t pursue correction and won’t amend or disaffirm any of the many writings that describe the plan as a tax-qualified plan. Instead, the employer’s chief executive and 100% shareholder instructs the lawyer to do only the task she was engaged for: restate the plan for proper and accurate provisions for the future.

Assuming that the lawyer will not submit an application for an IRS determination, is there any professional-conduct rule that would preclude the lawyer, with her client’s informed consent, from limiting the scope of the lawyer’s work to a drafting job that deliberately sets asides all other issues?

In the absence of an application for an IRS determination, is the drafting job “practice before the Internal Revenue Service” within the meaning of Circular 230?

How might our thinking about professional conduct change if the lawyer is the employer’s representative to present an application for a determination letter?

If the Form 5300 truthfully answers every question, does the practitioner have any duty to tell the IRS that the plan wasn’t tax-qualified in the past?

A participant's spouse received life insurance death benefits from his policy held within the plan. I understand that the difference between the proceeds and the cash surrender value are non-taxable, since PS-58 costs have been paid. The cash surrender value is not being rolled over. My questions are:

1) What is reported on the 1099-R issued by the plan? Just the cash surrender value in the total distribution and taxable distribution amounts (which makes sense since the plan didn't receive and distribute the total death benefit)? Or are the total proceeds reportable as the total distribution, and the cash surrender value reported as the taxable amount?

2) Will the insurance company attempt to report anything on a 1099-R directly, and we should make sure they don't? We're having a difficult time obtaining the cash surrender value at the time of payment from them, which makes me wonder if they don't understand that the plan has to issue the 1099-R.

Thanks

Safe harbor 401(k) plan was established in 2007 for a group of doctors who represented that they were an affiliated service group. Office space and employees are shared. Doctor A is the plan sponsor, Doctor B is an adopting employer.

One doctor wants to make different contributions than the other for 2009. In response to the news that the plan requires them both to do the same thing, they have now decided that they never were an affiliated service group and Doctor B's part of the plan should be spun off into a new plan.

If they truly never were an ASG (which I doubt) what potential problems do we need to fix for the years when unrelated employers participated in the same single employer plan?

I am planning to make a fairly large Roth IRA coversion in early 2010. If I elect to have it taxed in 2010 will I need to make estimated tax payments throughout 2010 on the conversion amount - or can I just pay the tax due on 4/15/2011 when I file my return? If I decide to split the conversion amount over tax years 2011 and 2012, do I need to make estimated tax payments in those years? Thank you.

Do NQDC deferrals reduce eligible earnings available for a 401(k) deferral? Which scenario is correct, both using a 10% NQDC deferral and a 10% 401(k) deferral:

Scenario A:

$200,000 Earnings

($20,000) Deferred Comp

($20,000) 401(k)

Scenario B:

$200,000 Earnings

($20,000) Deferred Comp

($18,000) 401(k) (10% of earnings after deferred comp)

If my client uses the wrong method, what are the corrective measures/repercussions?

Thanks and Happy Thanksgiving.

We are the TPA for a non safe harbor 401(k) plan. The plan sponsor is a member of a controlled group with another entity that sponsors their own 401(k) plan. That plan is a safe harbor match plan. The client asked us to do a projected coverage test to determine if there will be any issues for the 12/31/2009 plan year.

The ratio percentage test for our plan (the non safe harbor plan) will pass.

The ratio percentage test for the other plan fails, miserably.

The solution offered up by the other TPA is to aggregate the two plans for coverage. I don't think this is allowable due to Treas. Reg. 1.401(k)-1(d)(4)(iii)(B):

B) Plans with inconsistent ADP testing methods. Pursuant to paragraph (b)(4)(ii) of this section, a single testing method must apply with respect to all cash or deferred arrangements under a plan. Thus, in applying the permissive aggregation rules of §1.410(b)–7(d), an employer may not aggregate plans (within the meaning of §1.410(b)–7(b)) that apply inconsistent testing methods. For example, a plan (within the meaning of §1.410(b)–7(b)) that applies the current year testing method may not be aggregated with another plan that applies the prior year testing method. Similarly, an employer may not aggregate a plan (within the meaning of §1.410(b)–7(b)) using the ADP safe harbor provisions of section 401(k)(12) and another plan that is using the ADP test of section 401(k)(3).

The other TPA says that the safe harbor plan is just not going to rely on the safe harbor provisions for the 2009 plan year, thus we can aggregate for coverage and do an ADP/ACP test on the combined plans.

I just don't think it is as simple as saying we decided not to rely on the ADP safe harbor provisions for the plan year.

The only thing I could think of is if they say they are going to suspend the safe harbor match for the year and rely on ADP testing. After giving a 30 day notice before suspending the match the other plan would have one payroll before the end of the year.

Any thoughts?

What are the penalties (DOL & PBGC) if a plan sponsor pays out lump sums while the funded percentage is less than 60%?

Bob, Inc provides actuarial services for only two companies (TPA, LLC, and LOAN, LLC). Robert owns 100% of Bob, Inc, which in turn owns 5% of TPA, LLC (a Third party administrator) and 20% of LOAN, LLC (a loan processing company)

The remaining ownership of TPA, LLC and LOAN, LLC is owned by unrelated investors.

Which company(ies) satisfies the defintion of a First Service Organization? Which company(ies) satisfies the definition of an A-org?

I have two companies, both owned by the same four owners in the same percentages. It is definitley a controlled group. They were set up with two separate plans which are identical and only have a 401(k) feature.

Don't I automatically pass coverage since there is only 401(k) and everyone who is eligible is considered 'benefiting' and so I can perform ADP/ACP Testing separately for each plan?

I have two groups of employees who work for XYZ Corp and for whom I am trying to decide if either group should be included in my non-excludable count for 410(b) coverage for Corporation XYZ:

Group 1: 4 Employees who are paid by ABC Leasing Company and worked for XYZ Corporation 20 hours a week for at least one year. Daily duties are determined and directed by XYZ Corporation.

Group 2: 16 employeeswho are paid by ABC Leasing Company and worked for XYZ Corporation 30-40 hours a week for more than a year. Daily duties are determined and directed by XYZ Corporation.

Group 2 full under the definition of 'leased employees' And so I believe Group 2 is included in my count, but I am not sure about Group 1. Can anyone provide guidance.

I have 4 companies (A, B, C, D) all owned by the same 4 people (Owner 1, 2, 3, 4) in differing percentages.

Owner 2 is the daughter (age 30) of Owner 1. Owner 1 owns more than 50% of each company (looking at each company separately). Is my reasoning correct, that the Owner 1 'owns' Owner 2's shares since he owns more than 50% of the shares of the company?

If my reasoning is ok so far. Now, I am down to three owners to do determine if a controlled group exists. Owner 3 does not own any of Company C, so he is dropped from the testing when I am testing for a CG with all 4 companies together. There is still a greater than 80% controlling interest when I remove Onwer 3.

If I pass the 80% 'controlling interest' test, and then pass the 50% 'effective interest' test, then I have a Controlled Group consisting of all 4 companies.

Then am I right that only 1 coverage test needs to be performed OR do I need to look at other sub Controlled Groups that might exist and perform other coverage tests?

We're considering taking over a plan that has had a ROBS transaction in the recent past and were reviewing the memo released by the IRS on 10/1/08 regarding their guidelines on this matter. It details the many possible design flaws that ROBS plans have, as well as the IRS' intention of intensifying their investigations of these types of plans. It seems that the IRS is now backtracking on an idea that they originally approved of, (kind of like the 412i plans)? The employer's attorney, who sold them the plan, is also backtracking.

The plan's approved prototype document allows the plan to invest up to 100% of its assets in qualifying employer securities; the plan appears to have been operated as the document dictates in every respect. The IRS memo makes it hard to believe that even if everything was done right, the employer may still not escape unscathed from an investigation. What would be the best way to insulate the employer in this situation - a private letter ruling, EPCRS - or is there nothing that can be done after the ROBS transaction has occurred? All help is greatly appreciated.

Plan Sponsor adopts resolution during 2009, to terminate 401k plan. Employees will be able to salary defer on all pay periods through the end of 2009, w/ no 2010 pay periods eligible to be deferred from. Early 2010 plan sponsor plans to wind down affairs and process the distributions.

Does an employee who met the eligibility req'ts prior to 12/31/09, but who has never had an account balance, count as of 1/1/2010 for the 2010 5500.

Noone can "participate" in 2010. I realize those w/ balances certainly do count for the 5500.

If yes, the plan count will be high enough to require an independent audit (the plan sponsor would like to avoid the expense if possible). I'm not locating anything definitive that answers this question. If anyone has any thoughts I would be very appreciative, thank you.

I assume that an individual who makes the maximum Roth deferral into a 401(k) Plan (whether or not the individual is over or under age 50) can also put the maximum into a Roth IRA (if the individual meets the compensation limits for a Roth IRA.

In other words, someone over 50 could put $22,000 into a Roth through a 401(k) plan & then, if eligible under the Roth IRA compensation limits, could put another $6,000 into a Roth IRA.

Correct? Or am I smoking something?

It is my understanding that for a calendar year plan all PPA amendments must be made by the last day of the 2009 plan year. Am I right that there has not been any extensions that would allow the Plan to wait until its cycle filing date to adopt such amendments?

Let us rise up and be thankful, for if we didn't learn a lot today, at least we learned a little, and if we didn't learn a little, at least we didn't get sick, and if we got sick, at least we didn't die; so, let us all be thankful. - Attributed to Buddha

The Pilgrims made seven times more graves than huts. No Americans have been more impoverished than these who, nevertheless, set aside a day of thanksgiving. - H. U. Westermayer:

(Please feel free to add your own.)

We have a small calendar year DB plan. Do we have to pay our 2009 PBGC premium in 2009? MAY we pay our premium in 2009? What is latest possible date to pay?

Company A has a DB plan and a 401(k) plan. Company B has a 401(k) plan. Company B is looking to acquire Company A.

If the acquistion takes place, can the Company immediately merge just the 401(k) plans AND still use the transitional period for the DB plan?