A business owner implements a DB plan.

Do we agree that he must obtain an EIN for his pension trust and then when he opens a pension account at say Schwab he should provide plan name and trust EIN?

Now let's say the owner merges with another company and the surviving company (not the original owner's company name) sponsors the plan and the plan is amended to be renamed.

Regarding that original Schwab retirement account: SHould the plan sponsor now have the name of the account re-titled to the new name of the plan and should they (or is it required) that a new trust ID number is applied for for the renamed plan? Or can they just keep the original trust ID #?

Thanks.

Is there any guidance on how 436 benefit restrictions interact with a terminating plan?

If the AFTAP is <60%, but the owner has the majority of the benefits and is willing to waive receipt of any benefit not able to be funded by the plan assets, can the lump sums be paid out?

I have a plan where someone who has irrevocably waived her participation in the plan (and all other plans provided by the Employer).

She has otherwise satisfied the eligibility and entry requirements for the plan.

Is she considered a participant for testing and 5500 purposes?

If so, why? It's not like she is temporarily declining to make a 401 deduction and may decide later to do so. She could not even if she wanted to...even if they terminate this plan and put in another a year from now.

Never having filed electronically before, we have questions on this just like anyone else. Does anyone know:

If you are using a "third party web-based system" - once you enter all the 5500 data and send the e-mail to the plan sponsor to invite them to a "signing ceremony" - is this something that must be done immediately, and will you need to be on the phone with them or something crazy like that? Or, will they then be able to do their thing and file at their leisure (within the deadlines, of course)?

I'm assuming the latter. But, thought I'd see if anyone has better information! Thanks.

This particular Cash balance Plan excludes non-owner HCEs, and has dual entry. Let's say an employee is an HCE and meets the eligibility requirements on 6/1/2009. Normally they would enter on 7/1/2009 (next entry date), however they are NOT an owner, so thus excluded from plan participation. However, they become an owner on 9/1/2009. Would they then become a participant on 9/1/2009, or would they become a participant on 1/1/2010? The plan document isnt specific on this situation, and it seems like it could go either way. Thoughts?

A client got busy and did not fund a solo MPP and 401(k) in 2001 thorough 2006. He did fund 2007, but was low due to a miscalculation. 2008 tax return is due next week.

Also, he can find no documents. Plans were first funded in 1996.

5500's were probably never filed since Plan has never had a total over $100,000. Obviously there was small contributions and some bad luck on investments.

For these questions we are just looking at cleaning things up the simplest way:

1. Would you recommend he put anything into the 401(k) to meet the ongoing contributions requirement?

2. When filing EPCRRS, would you do documents for TRA '86, GUST and EGTRRA?

3.Since he is the only hurt by the underfunding of the MPP, do you think we still need to go back and correct all of the underfunding?

The following link from the IRS indicates that S Corporation owned ESOPs are required to report the S corporation's income from the taxable year on Form 5500. See the section titled "FACTS".

Generally the only income within the trust is the stock value change and some interest income.

I'm uncertain as to how the S Corporation's pro rata share of income would be reflected on the Form 5500.

Does anyone have experience with this? If it's true what is the other side on the entry on the plan accounting?

http://www.unclefed.com/Tax-Bulls/2003/rr03-27.pdf

Thanks,

erisaauditor

We need to file a late form 5500 for a plan not subject to Title I of ERISA, and so the DFVCP is not available. We want to submit statements of reasonable cause with our filing, but we want to make sure it gets to the IRS. Has anyone ever dealt with this situation before, i.e., do we just file with the EBSA and hope the EBSA sends the reasonable cause statements over along with the form 5500?

I have just become involved with helping a plan that has the following investments, and I am concerned that this is a prohibited transaction.

It is a defined contribution plan with individual accounts, over which the participants exercise control in directing the investments. Two of the participants directed that part of their benefits be loaned to an LLC that owned an undeveloped piece of property with a high development potential (before 9/2008). At the same time, the one of the two participants and his wife also loaned other, personal money to the LLC. A single note was issued to the plan and that participant/wife, secured by a 2nd mortgage on the property and personal guaranties from the LLC owners.

Then when the financial crisis began in 9/2008, the bank holding the 1st mortgage threatened to foreclose and sale off the property. To avoid that, the two participants directed more of their plan benefits be loaned to the LLC and the participant who had already loaned to the LLC other funds, loaned yet more other funds to the LLC. The new loans were not made in the same proportions as the initial loans. With the additional funds, the LLC paid off the 1st mortgage (at a discount).

The LLC and its owners are not themselves disqualified persons or parties in interest vis-a-vis the plan. It yet looks like there could be prohibited transactions due to:

1-Use of personal and plan benefits together to make one and the same investment, i.e. each of the two loans that resulted in the notes.

2-Use of personal and plan benefits in different proportions exacerbating the first note situation in an attempt to save the first note's value.

I'm wondering if anyone else has faced issues raised by this situation and what IRS rulings there might be addressing these issues. Thanks.

ER sponsors a calendar-year Safe Harbor 401(k) with 2% NEC.

They want to change to a SIMPLE IRA for 2010.

I understand that you cannot contribute to a SIMPLE IRA in the same calendar year that you make contributions to a qualified plan.

An associate believes that means you cannot make deposits to the 401(k) in 2010 for contributions accrued for the 2009 plan year.

Does the ER really have to make all contribution deposits for 2009 before 12/31/09 in order to avoid violating the exclusive plan rule?

Thanks.

I have a client that is part of a controlled group. One entity (A) is a mix of HCEs and NHCEs and has adopted the plan I am testing. (It is immeidate eligiblity and immediate entry.) The second (B) is NHCEs and has adopted another plan which we do not administer. I am testing coverage on A's plan. For the Statutory Employees (Age 21+ and 1YOS+), the plan is passing the ratio test for both the 401(k) and match (no allocation conditions). For the OEE group (<21 and < 1YOS), I have one HCE who falls into the OEE group and did not defer in 2008 and, therefore, does not receive a match. However, he would still be considered benefiting because he has the right to defer. (DOH 7/2007; DOT 1/2008). Based on the data that I have, it appears that the OEE group will fail the ratio test and the ABT at approximately 8%. ABPT for the OEE will automatically pass as the HCE does not receive any contributions for 2008.

Short of adding in some of the participants from entity B, is there any other way to pass coverage? (I cannot combine the Stat EEs and OEEs as the ADP tests have been completed and I believe that the entire plan would fail anyway based on the number of NHCs in entity B.)

If I do have to include a number of NHCs from B, I would think that there is a cost for including them. Without looking it up, I would think that I would have to provide a QNEC contribution of some kind. (I have not reviewed this as I am hoping for another solution.)

Any help would be greatly appreciated.

A couple of questions related to COBRA's gross misconduct exception which I've seen discussed some in general on the board but have not been able to find definitive answers.

1. Realizing the lack of a clear definition of "gross misconduct" for COBRA purposes and other risks associated with denying COBRA coverage, assume a plan sponsor is determined not to provide COBRA and has fairly reasonable grounds for invoking gross misconduct, is there any legal obligation to notify the terminated participant that they are not being offered COBRA due to gross miscoduct? For example, by sending a modified notice of unavailability of coverage indicating that gross misconduct is being invoked? Although I certainly think it best practice and serves many useful purposes to provide participants some timely notice that they are not being offered COBRA, I am not aware of an actual legal requirement to notify the individual. An insurance carrier, however, has indicated that they called DOL (don't know who or where) and the DOL said the plan MUST inform the individual in writing that they are being denied COBRA due to gross misconduct.

2. What if the plan sponsor decides that relying on the gross misconduct exception is too risky even though they think they have clear grounds for gross misconduct. Are they legally required to deny eligibility for the ARRA COBRA subsidy even if they are willing to be more generous than COBRA requires and let the terminated individual elect COBRA without the subsidy?

Thanks.

A qualified plan that is a partner or limited partner is potentially subject to UBTI since there is an "unrelated trade or business" if the qualified plan is a partner (IRC Section 513(b)(2)). I believe the same would apply in the case of the plan that is a member of an LLC which is taxed as a partnership.

1) Does the same rule apply to IRAs? Specifically, is it an unrelated trade or business if an IRA is a partner, or a limited partner, or, in my case, a member of an LLC taxed as a partnership? (I think the answer is No, but that doesn't make a lot of sense to me.)

2) Related issue . . . The IRA uses cash to become a partner by investing in a partnership, or to become a member by purchasing a membership interest in an LLC. If that cash is then used by the parthnership/LLC as security for a loan, does that cause the IRA (or a portion of it) somehow to lose its status as an IRA (under IRC Section 408(e)(4))? (I think the answer is No.)

With respect to a plan that is in the red zone, if the default schedule is imposed (as opposed to being adopted as part of a CBA), will the surcharge continue to be assessed?

Are there any written rules regarding the allocation of fees among participants?

We normally process these pro-rata based on account balance (a 0.5% fee is taken from each participant's account, for a total fee of 0.5% of plan assets).

Now have a client asking if the fee can be taken per-capita:

$2,000,000 in assets x 0.5% fee = $10,000 total fee / 20 participants = $500 paid from each participant's account

I have performed a limited scope audit based on the reliance of a SAS 70 certification. I thought we were to issue a qualified opinion based on inability to apply audit procedures. Or do we issue a disclaimer of opinion? I'm having trouble deciphering the rules. Any clarification would be greatly appreciated. Thanks!

HI,

I have a physician client who is considering rolling her 401k account into a roth 401k account. She had a financial adviser that I believe told her she could do this so that her money would be over a spread period of time? I don't believe this is true. I would think that the total contribution would be taxed in the year that the rollover occurs. Is this correct?

I'm not sure if there would be any benefits concerning withdrawing the funds by converting to a Roth 401k. Does anyone have a good understanding on why her fin. adv. would tell her this would be beneficial to her? I know there could be specific account reasons here, but does anyone know what benefits generally exist for someone who decides to roll their traditional 401k into a designated Roth? The only thing I could think of is that if your tax rate is lower at the time of the rollover than what you expect it to be at the time you would withdraw funds from the traditional 401k account. But, I know this physician is approaching retirement, so I do not see any benefit here. Is there something I am missing? Any advice or suggestions are appreciated!

Thanks

A multi-employer group health plan received an audit notice from the IRS relating to the COBRA subsidy application. They want copies of the "Request for Treatment as AEI" forms submitted by those eligible for the subsidy.

As counsel we reviewed the audit request and assumed that one of the HIPAA exceptions would apply. However, no exceptions appear to cover a general information request that is not accompanied by a summons or subpoena. We also found an IRS memo (2004-034) from the Office of Chief Counsel confirming that plans cannot supply PHI pursuant to a simple information request. (Note that the same information in the hands of an employer is not PHI-- per EBIA and regs).

This problem was brought to the attention of the IRS and the agent is attempting to help us work through these issues. However, they are apparently unwilling to issue a subpoena or summons. Instead the plan is being told that if it chooses not to comply, it will lose the subsidy. Their office is apparently being told that the COBRA subsidy applications are not PHI, even though the DHHS preamble to the HIPAA regulations states that enrollment and disenrollment information is PHI.

Any great ideas on how to proceed? Is there a HIPAA exception that would allow the group to comply without risk of violating the privacy regulations? The group doesn't want to lose the subsidy, but is also aware that HIPAA enforcement is going to ramp-up next year.

It would seem that the Service would need to have some mechanism to deal with this problem. It is not reasonable to ask a GHP to risk violating the HIPAA regulations to collect a subsidy to which it is entitled.

Any suggestions on where I might be able to locate some sample compensation statement formats? Most of the sites I have seen say they are free, but at the end require a payment to view the results. I just was looking at formating ideas and maybe wording ideas.

Thanks!

Has the IRS invented a new way to count?

Notice 2009-77 includes the yield curve and segment rates for August 2009, issued ~ September 11, 2009.

Notice 2009-76 includes the yield curve and segment rates for September 2009, issued October 6, 2009.