Just looking for consensus since I don't believe we have any real guidance, but how are people doing the AFN for an EOY val?

The instructions seem to call for the AFN to report the FTAP for the year which the notice relates. So lets say we are doing the 2008 AFN. In the Funding Target Attainment Percentage section do you report the 12/31/2007 numbers (which we used to determine the 2008 AFTAP) or would we show the 12/31/2008 numbers (which would really be for the 2009 AFTAP).

Or would you show both 12/31/2007 and 12/31/2008 as two of the three year's of history?

Am I correct that we do not have regs for 2009 AFTAPs for plans with EOY valuations? If so, do we just do the same as we did for 2008: use the previous 12/31 values and adjust appropriately?

Clergy members of a for-profit organization does not want to receive the nonelective profit sharing contribution to which they are entitled. The plan is not using a standardized prototype document (so irrevocable elections not to participate not so much an issue).

Can these priests elect not to receive profit sharing contribution? If so, would a mere plan amendment address this? Does anything else have to be done?

Thanks for your input.

Clergy members of a for-profit organization does not want to receive the nonelective profit sharing contribution to which they are entitled. The plan is not using a standardized prototype document (so irrevocable elections not to participate not so much an issue).

Can these priests elect not to receive profit sharing contribution? If so, would a mere plan amendment address this? Does anything else have to be done?

Thanks for your input.

We got past PROBLEM 1, thanks to this forum, which was the IRS denying the 1st year plan contribution in year 2000. They have withdrawn that from their list of problems with The Plan.

NOW, the argument is over The Plan's use of a DC to DB converssion in the Plan's 1st year. A major national actuarial firm presentd this technique at the ASPA meeting in about 1999. (copy attached)

It worked like this:

At participant age 56

$519,689 was transfered into the 412(i) DB from a terminating DC Plan.

At 8.5% projected growth, at NRA age 62 the $519,689 would grow to $844,670.

Using the 1971 GAM Male mortality and 8.5% interest, the $844,670 would result in a monthly benefit of $7,484.

The life insurance and annuity funding contracts guarantee $5.34 per $1,000 at NRA 62.

To pay the $7,484 monthly benefit the insurance contracts must generate Guaranteed Cash Value of $1,401,455.

The level premium required by the life and annuity guaranteed cash value was $149,500.04. (Rev.Rul. 74-307 was used to calculate life insurance inclusion)

When the IRS takes this technique away, we have a "listed transaction" problem with the life insurance.

ANYBODY GOT ANY IDEAS? ALL HELP APPRECIATED!

2_Pages_ASPA_handouts_regarding_DC_to_DB_conversions.pdf

DB plan with after-tax employee contributions.

Participant retires 1/1/00, leaves contributions of $25,000 w/out interest, $60,000 w/interest in the plan and elects single life annuity of $500/month which consists of $200 employer + $300 employee portions. $80.65 of each payment is nontaxable for 310 payments.

Participant dies 6/30/09, having received 114 payments. He has received $9,194 in nontaxable, $34,200 in ee portion, and $57,000 in total payments. Would his beneficiary then receive a one-time payment of total ee less total paid to date ($60,000 - $34,200 = $25,800)?

We have a cafeteria plan, which is a calendar year, and an underlying health plan, which is a fiscal year. The employer allows health FSA and DCAP elections in December and election for the health premium in July when there is an open enrollment period for the health plan. Does the employer have to allow employees to make an election for the health premium in December, before the start of the cafeteria plan, or is the July election enough? Is the mid-year election allowed under 1.125-4(f)(4)(ii) change in coverage under another employer plan?

The individual is an HCE and the plan specifically names him as an excluded individual. Is this permissible? I thought you could only exclude based on some sort of broader classification, like job class, hourly/salary, etc.

A client of mine is interested in hiring one person as both an independent contractor and as a part-time employee. The individual needs health coverage and will participant in the client's health plan. The plan defines "eligible individual" as any employee who works at least 24 hours per week and is included on the employer's regular payroll. The problem is that some, but not all, of the 24 hours to be worked by the individual per week will be "on call" hours such that he will only be required to work if he is called in by the client.

If the IRS challenges the arrangement and determines that the individual is not an employee, what are the risks and/or penalties for the health plan? Could the insurance company who provides stop-loss coverage to the plan seek reimbursement for claims paid by the Plan to this individual and his defendants? Are there any monetary penalties that can be assessed by the IRS for misclassification? The client is trying its best to make the arrangement work and believes that this individual will meet the IRS employee classification test.

I know that there is a lot of guidance available for the reverse situation (individual misclassified as an independent contractor), but I have not been able to find guidance on this situation.

Thanks.

I know I have seen many "ideas" bandied about in recent months, but have there actually been any additional exceptions to the 10% premature distribution penalty (on distributions from IRAs and/or qualified plans) actually authorized by Congress/IRS as a result of the current "economic crisis?

Thanks!

Hi,

Company A purchased company H. Both have 401(k) plans. All of the employees of Company H joined Company A's plan on the first day of 2008. All of the Company H participant contributions were made during 2008 to their new individual 401(k) accounts in the Comapny A plan.

The assets of the Company H plan were not transfered to Company A during 2008. Thus, each Company H participant received two plan statements.

Is an audit still required for Company H's 401(k) plan? The only transactions are loan payments and investment earnings.

Thanks,

TW

Assuming a calendar year plan, with an EOY valuation, and a very large COB:

Assume there is a deemed reduction in COB in 2008 in order to have an 80% AFTAP.

If the 2009 AFTAP is not certified by 3/31/2009 (or, even by 9/30/2009), I believe that there would be another deemed reduction to again get an 80% AFTAP, avoiding the presumed underfunding of 436(h).

Does this seem like a correct reading of 436(f)(3) and 436(h)?

Can anyone recommend a message board similar to benefitslink but focusing on securities law? A Google search was not particularly helpful. . . .

On 8/11/2009, federal district judge David Katz entered an interesting ruling that I thought I would briefly mention. UMB Bank runs a master trust. The Toledo Clinic has a QRP that uses the master trust. The plan and trust documents permit individual direction of investment by plan participants in any investment permitted by law. The plan and trust documents also permit them to appoint anyone as the investment manager and delegate thereto investment direction authority over the participant's plan account. Two MDs, Tullis and Mack, participated in the QRP appointed Wm Davis as their investment manager.

It turns out that Davis began instructing trades that were causing losses, were benefiting Davis personally, and otherwise fraudulent and inappropriate.

UMB Bank, as trustee, learned about this mischief by Davis and brought suit. In the meantime, UMB continued taking instructions from Davis re the plan accounts of Drs Tullis and Mack as held in the master trust.

Judge Katz granted summary judgment to UMB Bank, finding:

1-ERISA 404c provided UMB Bank a defense because it is a directed trustee and Drs Tullis and Mack each had a reasonable opportunity to give investment instruction and had the opportunity to obtain sufficient into to make informed investment decisions. The appointing documents signed by Tullis and Mack spelled out that they understood that it was their sole responsibility to establish, monitor and police limitations and restrictions they each desired regarding the assts which the agent (Davis) was thereby authorized to manage and direct.

2-UMB Bank had not participated in a prohibited transaction by implementing a directive from Davis that benefited Davis. Judge Katz wrote UMB Bank "simply did not cause the plan to engage in those transactions. As Plaintiffs' agent, Mr Davis caused the plan to engage in transaction used for the benefit of a party-in-interest, Mr Davis himself."

3-To the doctors' argument that UMB Bank had a duty to provide a fair and accurate value the assets and that failing to do that caused the doctors their losses, Judge Katz again appealed to ERISA 404© and the provision that a fiduciary shall not be liable for any breach resulting from the beneficiary's exercise of independent control.

4-As for the doctors' claim that UMB Bank had gathered non-public info about the investments during UMB Bank's litigation against Davis but then not turned that info over to the doctors, Judge Katz noted that the only prior cases where courts have found a plan fiduciary had an affirmative duty to disclose and was liable for omitting to do so involved some inquiry initiated by the participant. Since the doctors had never made an inquiry of UMB Bank, UMB Bank had no affirmative duty to disclose the non-public information it learned from its lawsuit against Davis.

Plan utilizing a QACA for 2009 plan year using 3% nonelective to satisfy the 'ER contribution. Question is - can they stop the automatic enrollment portion of the QACA mid-year but continue to make the 3% nonelective for the remainder of the year and remain safe harbor? Or must the plan keep the QACA in tact for the full 12 month plan year?

Company has laid off several workers with the intention of rehiring, but no guarantees. Any good argument that this is a leave of absence so loan repayments can be suspended? I can make the argument that if their was some certatinty that they would the employees would be rehired, but without the certainty I have difficulty doing that?

Thanks for any guidance.

Trying to figure out the rationale for a program that was set up. The persons who originally set the plan up are retired and no longer with the organization. There is a 403(b) and a MPP plan. The MPP is setup to hold a fixed contribution and also a matching contribution which is based on the 403b deferrals. Both plans have PYE 6/30. The comp limit is measured on a plan year basis. When someone hits the comp limit they no longer receive the fixed MPP contribution or the match. However, the amounts that they should have received continue to be tracked by payroll, but are not sent to the trustee for investment. Instead, at the end of the plan the aggregate amount of of what was accumulated is invested in taxable personal annuities at TIAA-CREF. Before the funds are sent to T-C the amount is run back through payroll and treated essentially as wages. Federal, state, and FICA taxes are withheld. The employee does not receive any of this money it is sent to T-C for investment. Questions are, is this something that should be done? Should taxes be withheld from these amounts? It is not deferred compensation. The employee still receives the full amount of their compensation over the comp limit. The amounts that are taxed are what the employer would have contributed to the plan in a fixed and match contribution had there been no comp limit to restric the employee. Has anyone ever heard of such a situation?

I have done some research on the anti-cutback rules and, if I have to go that route, I understand (basically) what needs to be done. It is a pain to recordkeep that, however.

I have a simpler idea from a recordkeeping standpoint. Existing vesting schedule is 2-6 year graded. On 1/1/09, there is an amendment to make it 3-year cliff. Depending on your years of service, some years are better with one schedule than the other. So one cannot make a blanket statement that the new schedule is better.

Why can't I just create a new source of money called ER#2 with the new vesting schedule and any ER contributions made after 1/1/09 go to that new source? All existing balances will still have the old schedule?

The only possible downside is that if I were a participant with 3 years of service, should all the ER contributions made to my account BEFORE 1/1/09 be 100% vested based on the NEW schedule. My idea seems to be the most fair and the easiest to implement. Is it allowed? Am I missing anything?

Thanks in advance.

Happy Friday!

Back in 2003 I recall that the IRS gave DB an indefinite extension of time in which to adopt the 401(a)(9) good faith amendment.

1. Is this extension still in effect?

2. I take it this means that DC plans are required to adopt such amendment. Does anybody know what the deadline was? I may have a plan that did not timely amend.

3. If the plan did not timely amend, should they simply amend now (late) and then "face the music" when they file the amended and restated plan for EGTRRA?

Thanks!!

Is a health plan required to offer open enrollment every 12 months. We are an October renewal but making plan changes for January 1st. We'd like to push back open enrollment until November this year, but that makes it over 12 months since our last open enrollment.

In scouring the DOL and various web sites, it talks to special enrollment as mandatory to enroll outside of initial hire, and mentions open enrollment but does not appear to require an open enrollment period every 12-month.

Thoughts?

Thanks,

Amber