Regs. 1.411(d)-4, Q&A-2, subparagraph (d)(1) provides an ESOP exception to the protected benefit rules. "The employer eliminates, or retains the discretion to eliminate, with respect to all participants, a single sum optional form or installment optional form...."

QUESTION: Does this also allow the employer to change the commencement date of payments in the event of termination of employment from the end of the plan year in which the separation occurred to the year after the close of the plan year which is the fifth plan year following the plan year during which the participant separated from service?

Any thoughts on this and on (d)(2)(ii) of this same Q&A-2 (which seems to impose quite an administrative burden) would be appreciated.

If this has been discussed in the past, and a conclusion reached, please give me a link to that discussion.

In the past, we have utilized the same criteria to determine HCE as we used for the 401-K plan, therefore only pulling information once and using it for both tests. Since our plan year runs on a 7/1 to the following 6/30, we are preparing to do the year end testing. However, in the cafeteria plan regs effective 1/1/09, it defines HCE as :

"Any individual or participant who for the preceding plan year (or the current plan year in the case of the first year of employment) had compensation from the employer in excess of the compensation amount specified in section 414(q)(1)(B), and, if elected by the employer, was also in the top-paid group of employees (determined by reference to section 414(q)(3)) for such preceding plan year or for the current plan year in the case of first year of employment)."

Current plan year if the first year of employment is ignored for testing our 401K and pension plan. Is this a change in how the testing for flex spending plans is done?

I currently have a end of the year cash balance plan. The AE interest rate is the 30 year treasury with a 3 month look back. The interest rate for crediting interest is also the 30 year treasury.

How complex would it be to change from the 30 year treasury to 417(3) 3rd segment rate?

I have a Floor Offset arrangement where the DB and the DC plans are both effective 1/1/08, but the DB grants one year of past service credit to 1/1/07. My HCE will be at 1/10th of the $ limit both at the beginning of year and at the end of year after the offset of the 12/31/08 DC contribution. I'm doing an end of year valuation. The other participants have accrued benefits at 1/1/08 since there is no offset at that time ( and therefore have A TNC) but are completely offset out by 12/31/08. (i.e. one years DC contribution exceeds 2 years of DB benefit accruals. I therefore am getting a FT at 12/31/08, a cushion amount based on the FT, and a negative normal cost equal to the FT for all those participants who were zeroed out at the end of the year. I don't beleive that 411(b)1(g) protects the accrual at the begining of year ,yet am uneasy about a negative normal cost and the fact 'm getting a cushion amount on benefits that are zeroed out by years end.

Has anybody run into this situation before?

Any help would be appreciated.

Thanks in advance

Sam

Company seeks to adopt an adoption assistance plan. Does the plan have to have its own plan document or can it be part of the cafeteria plan document with the adoption ssistance plan having its own SPD? The plan currently has a main plan document with SPDs for domestic partner benefits, life ins., etc. Also can the plan be instituted mid plan year or does it have to begin with the start of a new plan year? Thanks.

Hi all,

We have an overfunded, terminated DB plan with surplus assets, and we're looking for creative ways to avoid a reversion to the employer. A qualified replacement plan isn't viable, because the employer is now dormant and doesn't expect to have any payroll in the future. Allocating some of the surplus among the participants also won't work, because both participants (H/W) are already at 415 limits. Both are at the 100% of pay limits, and the plan's normal annuity form is J&S. The effective date of plan termination was 12/6/05, believe it or not.

I think we're going to buy a J&S annuity for the husband, because the premium will be much higher than his max permissible lump sum under IRC415. That works well because his wife is much younger than he is. But even after the purchase, there will be about $75k of surplus left. The wife doesn't want to annuitize any of her own benefit.

Here are a few random thoughts and questions. Any ideas that you might have would be most welcome.

- Am I correct that the 50% tax (vs. 20%) would apply to any reversion, since we're not able to allocate any of the surplus among the participants (already at 415 limits) and there can be no qualified replacement plan? These seems like a harsh result, but I don't see any relief provisions in the Code.

- Is it possible to use up more surplus by including a COLA in the annuity purchased for the husband? If so, are insurance companies issuing such animals? And how does the COLA typically work? A flat % per year? Must it be limited forever to increases in the 415 dollar limit?

- If we can demonstrate that husband and/or wife terminated employment with the Employer (a corp) prior to 2009, may we increase their percentage-of-pay limits for the period between year of termination and 2009? For example, if they terminated employment in 2006, may we increase their 415 limits to 100% x 195/175 of high 3 average comp? (they both had 10+ YOS)

TIA for your help and ideas.

Best!

Scott

I recently received a letter regarding the forfeitures of contributions to my 401k due to failing the annual contribution percentage (ACP) test for 2008. This is my first time experiencing this situation and I have the following questions:

1)Does the ACP test that is performed take into account any contributions that I make (i.e. pre-tax & 401k roth post-tax)?

2)Regarding #1, according to what I found on the internet, it includes employer matching and employee after-tax contributions. Does the 401k Roth option fall into the employee after-tax category and is therefore included in the ACP test?

3)If the 401k Roth option that is offered by my company is included in the ACP test, would changing my contribution percentage to pre-tax deductions possibly eliminate this problem in 2009 and beyond?

4)Is my company required to pay out the forfeited money back to me?

A)Is this tax free money or pre tax money?

Thanks in advance!!

Fidelity Bond Question for retirement plans; any special exceptions for plans with separate accounts as opposed to a pooled account?

Does any special exemption for having a fidelity bond pertain to a retirement plan where the amounts reside in separate accounts instead of a pooled account? Does such an exemption exist if the business owner sets it up so that he cannot access the accounts? Each employee has a separate account, receiving his or her own asset statements monthly? Any special fidelity bond exemptions for money purchase plans?

This time, I hope to figure out retroactive entry. The idea entails this situation; if someone works 1,000 hours during the first six months of the plan year, they retroactively enter the plan as of the first day of the plan year. However, if they do not complete the 1,000 hours till after the first six months of the plan year, they do not enter until the first day of the next plan year.

I already have a file set up for entry, but I have not figured out retroactive entry yet.

John_Eastland_revised_1.xls

We are the TPA for an employer who sponsors a money purchase plan. The only contributions made to the money purchase plan are prevailing wage fringe contributions.

The employer would like to give the employees the option of receiving their prevailing wage fringe benefit in cash or have it contributed to the plan (or a combination thereof).

I know that the employer can satisfy the prevailing wage fringe by making an additional cash payment to the employee or by making a contribution to a plan, but they can allow the employee to choose between the two?

To me this screams CODA as I do not know of any exception to the CODA rules for Davis-Bacon plans.

I just received the BenefitsLink Retirement Plans Newsletter. One of the articles ("Retirement Plans Work Differently for Highly Compensated Employees ") states that 'The regulations define an HCE by compensation. The limit is adjusted for inflation each year. If you earned $105,000 or more in 2007, you would be an HCE for 2008, and if you earned $110,000 or more in 2008, you will be an HCE for 2009.'

I think that the above is incorrect. I believe that if you earned $100,000 or more in 2007, you would be an HCE for 2008, and if you earned $105,000 or more in 2008, you will be an HCE for 2009.

Does anyone disagree?

(I have always found this issue to be troublesome as the way the figures are displayed on any chart are misleading.)

Does anyone know the answer to this question from one of our employee's?

I currently have money coming out of my check for my dependent mother's day care. I just found out that she is going to need surgery and then rehab so she will not be able to attend day care for a few months. Is there any way that we can stop withholding for dependent care from my check?

Thanks.

Does anyone know the answer to this question from one of our employee's?

I currently have money coming out of my check for my dependent mother's day care. I just found out that she is going to need surgery and then rehab so she will not be able to attend day care for a few months. Is there any way that we can stop withholding for dependent care from my check?

Thanks.

I have clients who have two or more Traditional IRAs set up with different investment companies. They are, for estate planning purposes, considering converting one or part of one Traditional IRA to a Roth IRA after 1/1/2010, which marks the elimination of AGI limits on IRA conversions. I did not think this would be a problem until I stumbled across professional commentary regarding the inability to make partial conversions after 1/1/2010.

Some advisors are under the impression that all IRAs maintained by a taxpayer will be treated as one IRA by the IRS for purposes of a 2010 conversion. The problem they're warning against is that, upon conversion, the IRS will tax amounts held by all of the taxpayer's Traditional IRAs rather than just those amounts which are converted, essentially eliminating the taxpayer's ability to convert only part of his Traditional IRA or convert only one of two or more Traditional IRAs.

Has anyone else heard about this? Can anyone point me to actual IRS guidance regarding this (as the commentary did not cite to any guidance)? I wouldn't be as concerned if I only encountered one or two articles, but there were many of them out there.

Any help would be greatly appreciated.

I have two attorneys giving me different answers to this question:

A group of employees is specifically excluded from receiving a matching contribution. The 410(b) test for the 401(m) group passes easily (90% level) so coverage is ok. When we determine who is to be included in the ACP test, are the excluded employees in the test with -0- match, or are they not in the test at all?

My opinion is that they are not in the test since they are not eligible to receive the match. Which attorney can I give a cite to support my contention?

If a person begins his or her required minimum distributions after age 70.5, then after a few years deceases, what happens with the distributions? May the designated beneficiary roll the whole remaining amount into his or her own IRA? Do the assets have to stay segregated or may he or she (the beneficiary) commingle the assets with their own funds?

I have a plan where an HCE who is terminated has arranged an IRA account that will serve as escrow for the restricted amounts under the plan. If he is below the normal retirement age in the plan is his unrestricted amount the age 65 benefit payable as a straight life annuity (12 payments) or is the age 65 benefit actuarially reduced to his current age?

I am working on my first PPA cash balance plan termination. The plan is only 4 years old but the business closed it's doors. The interest crediting rate and actuarial equivalence has always been the 30 year Treasury Rate.

In order to calculate the annuity options, it looks like I have to use the average of the rates used under the plan for the five year period ending on the termination date, is that correct? If so, even though the plan is only four years old would I use a five year average?

I thought I'd read something that changes the latest employer contribution deposit deadline to 8 1/2 months after the close of the Plan year (impacting sole props, partnerships, etc). I've not been able to find any information to that extent. Has anyone heard of deposit deadline changes for 2008 or 2009?

As everyone knows the economy is hitting the certain construction trades hard on unemployment. Alot of the membes maybe losing their homes, has outstanding medical bills, etc. Our union is in a money purchase pension plan under the Internal Revenue Code. I have be reading that money purchase pension plans may not make hardship distributions. Can the trustee's adopt loan provisions under which participants can take loans against their individual accounts for hardship purposes like how much or how often?

Is there any others multiemployer union plans that you can make hardship distributions other than 401(k) plans?