An employer has a 401k plan in place right not. They want to change investments and will do so. However, some of the employees do not want their existing money to go to the new investment platform. The employer would like to give them the option of taking their money out of the plan or moving it to the new investments. Because there is not a distributable event, this will not work.

So another option that was presented was to start a second 401k plan. Terminate the first plan, start the second plan with identical provisions to the first plan. Now there is a distributable event so the participants can roll their money into the second plan or take it in cash or roll to an IRA. Thats what they want, but I know this won't work, just not sure why. Anything I can point to prove this won't work?

Another option that I'm not sure about. What if they freeze instead of terminate the first plan, and start the second plan. but the second plan is written to not allow for transfers into it. Does that open up options on what to do with the money in the first plan?

Thanks for any comments

PTE 92-6 allows for the sale of a plan's insurance policy to the participant covered by the policy as long as certain conditions are met. One of those conditions is that "the contract would, but for the sale, be surrendered by the plan". I'm not sure I understand what that means. Any thoughts on what the DOL might be getting at here? Thanks.

If a 401k plan specifies in its adoption agreement that it is safe harbored and the employer will make the match, but then did not give the annual safe harbor notice before the 2005 plan year began, is the matching contribution required for 2005?

The ADP/ACP tests would apply because there was no safe harbor notice.

But does the plan also have to make the safe harbor match specified in the adoption agreement?

Does the employer have to make a contribution equal to 50% of 3% (or actual ADP) and then the match to correct for 2005? The 50% employer contribution is what EPCRS currently calls for if the employee had no effective opportunity to make elective deferrals. Does not notifying employees of the safe harbor match deprive employees of an effective opportunity to make deferrals (or more deferrals) to then be entitled to the match? The employees nevertheless could make elective deferrals even without the safe harbor notice.

Revenue Procedure 2008-50 asks for comments about how EPCRS ought to be modified in the future to add a correction for such a failure. The IRS is auditing this particular situation and the agent asserting that 50% employer contribution by analogy and requiring it in addition to the safe harbor match in order to avoid disqualification of the plan.

What experience has anyone had with other IRS auditors dealing with this type of situation?

Thanks for any information or suggestions you make.

A client currently maintains a 401(k) plan. Because of the changes in the Roth IRA rules for next year, many of the partners and other HCEs would like to take a distribution and roll over to a Roth IRA. I advised that distribution can only occur if the plan is terminated, and then they cannot establish a new plan for 12 months. The partners/HCEs would be okay with that, but they don't want the NHCEs to go without a plan.

What if we spin-off the NHCEs to a new plan that excludes HCEs, and then terminate the original plan and distribute benefits to the HCEs. Does this work under the successor plan rules? The new plan is a successor plan with respect to the NHCEs, but is it a successor plan with respect to the HCEs who aren't eligible.

I have a client who is one of three persons in an S corporation owning a farming operation. They have no employees and approximately 4 independent contractors. Client wants a ball park estimate of what it might cost to set up a DB plan for the business. I have no experience in setting up DB's and deem them to be more complex than DC plans. Can anyone venture a ball park range for setting up a DB plan based on the sparse info provided above? Thanks for any help.

We have a question about how to address a response to a 2nd level appeal that has been sent to us (the employer) for a self-insured health plan. The appeal package was prepared by an attorney on behalf of the subscriber who is appealing a denied claim for his dependent (age 17). Should the response be addressed to the member (the dependent) and sent to the attorney with a copy to the subscriber? Should the response be addressed and sent to the subscriber since he is the one appealing with a copy to the attorney? The initial claim denial through the health plan was addressed to the member (the dependent) but sent to the attorney.

Appreciate any advice.

Calendar year PBGC covered plan with a plan termination date of 12/31/07. The termination was submitted to the PBGC and IRS. The plan assets have not yet been distributed. Is a DOL funding notice required for 2008, and if so what do I do about the FTAP since there was no 2008 actuarial valuation required?

With a twist!

She lives in Puerto Rico - I gather the rules would be applied the same as if she lived in Arizona, is that true?

A company has been shutting down its operations for the last few months and never provided a safe harbor notice regarding the July 1, 2009 plan year because they intend to close their doors soon.

In a non-pension DC plan, a 401(k)/PS plan, the plan can be terminated without any required advance notice. However, for a safe harbor 401(k) plan to terminate mid-year, a 30-day advance notice is required.

What about a termination of a safe harbor 401(k) plan on the last day of its plan year, not mid-year, when no safe harbor notice was provided for the next plan year? Is a 30-day advance notice required to terminate? So far, I only see the 30-day notice reference with regards to mid-year terminations.

Plan year ends 6/30/09. Employee makes deferrals of 15,500 in late 2008 and 16,500 in early 2009. Therefore, he has not exceeded the 402g limit. Do we count 32,000 in deferrals in plan year ending 6/30/09 and show that he only has 17,000 remaining to reach his 415 limit for pye 6/30/09?

Treas. Reg. §1.401(k)-3(g)(1)(ii) says the following:

"The reduction or suspension of safe harbor matching contributions is effective no earlier than the later of 30 days after eligible employees are provided the notice described in paragraph (g)(2) of this section and the date the amendment is adopted;"

I read this to say that the effective date of the suspension of safe harbor match cannot be effective until the later of:

1) 30 days after the notice is provided or

2) the date the amendment is adopted

So if the employer wants to stop safe harbor match August 1, 2009 the notice needs to be provided by July 1, 2009 and the amendment must be signed on or before August 1, 2009.

I have seen commentary (including in Sal's ERISA Outline Book) that interprets the regulations to say that the effective date of the suspension of safe harbor match cannot be effective until the later of:

1) 30 days after the notice is provided or

2) 30 days after the amendment is adopted

I would interpret the regulation this way if it said "effective no earlier than the 30 days after the later of the date the eligible employees are provided the notice described in paragraph (g)(2) of this section and the date the amendment is adopted;"

What is your opinion? Does anyone know of commentary from the IRS which verifies how the regulation should be interpreted?

Thank you!

Laura

So how many actuaries do you get when you make a Wats Tower?

http://en.wikipedia.org/wiki/Watts_towers

In refusing to re-hear the appeal by the employee class in Hecker v Deere, the 7th Circuit addressed some of the DoL's concerns expressed in its amicus briefing. For context, this is one of the Schlicter employee class action suits against large employers alleging that 401k benefits have been depressed by improper revenue sharing and excessive fees. Unlike the other Schlicter situations where a limited number of investments for an investment menus had been set for employees to choose from, the Deere plan allowed employees to choose from 2600+ funds available through Fidelity--highlighting about 19 'for your consideration'. Judge Shabaz of the Wisconsin Western District dismissed in favor of Deere, finding that among the 2600+ there had to be some lower cost funds than the higher fees associated with some of the 19 highlighted investment choices. The 7th Circuit in February affirmed. The DoL has all along amicus briefed the case, and a re-hearing en banc was sought. To this request, the 7th Circuit denied re-hearing, en banc or otherwise, but explained in deference to DoL:

1-the Deere decision by the 7th Circuit was not a "definitive pronouncement on 'whether the safe harbor applies to the selection of investment options for a plan.'"

2-the DoL admitted the 7th Circuit's primary holding, i.e. that

3-the February decision of the 7th Circuit does not stand for the proposition that ERISA 404c shields a plan fiduciary from imprudently "selecting an overpriced portfolio of funds".

4-the 2600+ Fidelity funds at play in the Deere plan provided too much variety and too much variation in associated fees for allegations of imprudent selection of funds to stand.

The 7th Circuit muddied its February ruling a bit, but the essence remains.

A senior management employee and his (her) employer entered into an agreement regarding retirement benefits. The provision covering retirement benefits was part of the overall agreement.

Would the retirement benefits portion of the agreement generally be covered under ERISA?

Any ideas on the following scenario would be greatly appreciated!

Company B is a wholly-owned subsidiary of Company A. A and B each maintain their own health and welfare plans. Company A has been selling off the businesses/assets of Company B over the past few months. Eventually, all of the busiensses/assets of Company B will be sold off and only a few employees will remain with Company B to wind down its affairs. All of the employees who went with the sold businesses will get coverage under their new employers' plans. So, my questions relate to those employees who are left winding down the business of Company B.

1. I believe the COBRA rules require that Company A provide COBRA coverage for the remaining employees once their coverage is terminated under Company B's plans (since their is still coverage under the "controlled group"). Is that correct?

2. If Company A is required to provide the COBRA coverage, must it provide only the plan options that were similar to what Company B offered its employees (e.g. PPO to PPO coverage) or must it give the former Company B employees the option to enroll in any of Company A's plan options (e.g. PPO, HMO, HRA, etc.)?

3. Any thoughts on how healthcare FSAs should be handled?

Thanks in advance for your comments!

Does the Annual Funding Notice replace the Summary Annual Report?

If yes, for a small plan, do we need to add the language required to waive the annual audit requirement (line 4k of the Schedule I)?

This should be simple and probably is but I can't seem to find anything that would allow for a change of election in the case where a dependent child starts school. Is this a qualifying change event?

An attorney drafted a new 401k profit sharing plan for a company to take effect in early 2009.

The company never used the plan and came to my firm to have us administer the plan.

The owner would have wanted plan to be a safe harbor match plan so they could make a maximum deferral.

SInce plan never used, no deferrals made yet, what is thought about amending plan to be effective say 8/1/09 as a mid year new safe harbor match plan with deferrals first beginning at that time?

I realize an ordinary on-going 401k plan cannot make a mid year conversion, but thought this has different applications.

Any thoughts?

Thank you.

What happens if employer and employee disagree regarding whether a particular expense was adequately substantiated to qualify for accountable plan treatment?

Client has $400k in an IRA and wants to invest it in real estate. The real estate in question costs $600k. If the IRA borrows $200k to buy the real, it will have UBTI.

Client has the $200k but is prohibited form lending it to IRA under the prohibited transaction rules.

Can client and IRA simply purchase the property together (or form an LLC to purchase the property)?