Does the 402 (g) limit run according to the calendar year in which the plan year ends or the calendar year in which it begins? I intend to set up an Excel file regarding this matter, so I wanted some brainstorming as to how i could go about taking this situation into consideration.

Can a plan sponsor make a contribution and allocate it towards 2009, and then make contributions after that and allocate them towards 2008? For example, let's say a plan sponsor makes a contribution of $10k on July 1, 2009 and would like it to count towards the 2009 plan year. But then makes another contribution on 9/15/2009 that he would like to count towards the 2008 plan year. Can the 2008 Schedule SB show the 9/15/2009 contribution and the 2009 Schedule SB show the 7/1/2009 contribution?

They have had a 403(b) since about 1992. Its an Alzheimers Day Care center with less than 60 employees. Initially the plan was set up as NonERISA deferral only. Well, around 1995, the center started giving the employees the option of taking a $150 monthly payment towards health insurance. Alternatively, if they did not need the insurance, the employer just put the $150 in a TSA contract for them. At this time the plan would have become an ERISA plan and should have started filing 5500's. They didn't. I know how to go back and fix the missing 5500 situation, DFVC, pay the $1500 sanction and file the 5500's. That's no problem. My issue is with the employer contribution. Obviously there are some discrimination issues....or are there. Just for argument sakes, if the participant was given the option of having the funds go towards the cost of health insurance or towards the TSA, would it really be a discrimination issue? My thinking is yes and that you can not have a stipulation as such associated with a plan. If so, then how is the employer contribution defined within the confines of the plan? How does the employer go back 14 years or so and determine who should have received a contribution and who should not have. Currently, the employer only contributes on behalf of one employee, the director of the center, and the $150 a month is now $250 monthly. There are about another half dozen or so employees deferring into the plan and not receiving an employer contrbution.

The agent on this plan is VERY worried that he may get sued and/or have an E&O situation here. I guess if they did NOT want to follow the government procedures for correcting the plan defects, they could just shut the plan down and hope the statute of limitations runs it course. Obviously I would never formally advise them of that course of action, but it would seem that the government would not even be aware of the existence of the plan at this point in time.

I suspect with the new document regulations and the more extensive reporting requirements, there are a slew of TSA's that are now finding themselves in similar situations.

A plan uses the 190 hours/month equivalency for crediting service.

The 410(b) regs. prescribe the circumstance whereby certain terminating employees may be treated as excludable, one of which is the employee must not be credited with more than 500 hours of service during the year. 1.410(b)-6(f)(2) indicates "If one of the equivalencies . . . is used for crediting service under the Plan, the 500-hour requirement must be adjusted accordingly."

Can anyone shed light on what "adjusted accordingly" means?

So I see where you can now have multiple groups and call them by individual names but can you have a partnership with 3 partners and 2 clerical and identify each group as Partner 1 2%, Partner 2 20% and Partner 3 20% and 5% to Clerical 1 and 5% to Clerical 2? On the adoption agreement it lists that the allocation method will be based on pro-rata compensation or equal dollar amounts. I guess if you reflected %s it would be pro-rata based on compensation but my concern is can you do this and NOT create a partnership 401(k)? Partner 1 always makes less $ than the other 2 partners so having different %s is beneficial to them. Also I'm wondering if you could have a 0% for a participant? Thank you ---greatly appreciated --- whoever you are!

Client has an old sarsep plan with a major mutual fund company.

Employees in the plan do salary deferrals and also contribute to an Health Savings Account ( HSA).

Social security wages include the sarsep deferrals but do not include HSA contributions ( no SS contributions on HSA contributions).

How does the HSA play into the definition of compensation for the sarsep plan ?

Do I take the social security wages and add back HSA contributions ?

THank you.

I'm not sure if this is a Correction question or an Ethics question. As a TPA we have a client who won't make their 2008 Safe Harbor non-elective contribution. They didn't use a 'maybe' notice; they just can't afford to make the contribution. If (after our explanation of the potential ramifications) the company still won't / can't make the contribution are we (as the TPA) under an obligation to report this to the government? It seems wrong to facilitate this behavior, but becoming a 'whistle blower' seems like a bad idea as well.

Thanks,

Scott

I posted this original question on the Health & Welfare Plans General board. Could this be a VEBA? If not, could you recommend the board most appropriate to post? Thank you!

http://benefitslink.com/boards/index.php?showtopic=43432

I'm sure these answers are easy (especially for TPAs), but I'm also sure it won't be easy for me to find the appropriate regs:

A) Calendar year plan. ADP fails for 2008. Return to HCEs occurs in February, 2009. Does that mean that TH for 2009 is based on account balances as of 12/31/2008, including any excess contributions made during 2008 (and not returned until 2009)?

B) Same facts as B. When calcualting for TH in subsequent years, is the 2009 distribution of excess contributions added back in for purposes of determining TH for 5 years (rather than 1) (pursuant to IRC Section 416(g)(3)(B))?

Does anyone know how to treat ER paid Health Insurance premiums for a self funded plan who allocates a liability on their payroll records for the ER portion of the Health Isurance premiums, but does not actually contribute this allocated amount to the self funded plan? They are just tracking the ER cost as a liability on the payroll reports. The question at hand is whether or not these allocated ER premiums should get taken into account when running the Key Employee Concentration Test when they are NOT actually paid; or should the EE portion of the premiums be the only item included in the Key Employee Concentration Test?

My understanding is the ER is just tracking these costs on their payroll. The only amounts being funded into the Self Funded Health Insurance plan are the various EE premiums being paid.

Thanks -

Nathan

Company A maintains 2 separate plans - Profit Sharing and 401(k) Safe Harbor (using nonelective). Both calendar year plan years. They want to merge them effective 11-1-09. Setting aside whether that makes sense with only 2 months left in the plan year, is it permitted?

The existing 401(k) Safe Harbor does not provide for any Employer contributions other than the SHNEC and a discretinary Match, so if they wanted to add a PS feature to the 401(k) that would be a change to the provisions mid year and that may prevent a merger mid-year.

What if the 401(k) doesn't permit any other contributions or changes to the Plan mid-year and it's basically the PS assets merging into the 401(k), would that make a merger acceptable?

Employer made contributions to a SIMPLE and a qualified plan last year. This was the only year in which contributions were made to the SIMPLE. What exactly happens to the SIMPLE plan now that there was a violation of the exclusive plan rule? Can distribution of those amounts be made now or must they stay in the SIMPLE until a distribution event? Must the employees recognize the amounts in income even if the contributions have to stay in the plan?

I have a plan that provides for a 3% SH Profit Sharing contribution to all employees. In addition, they provide for an additional ps contribution that has 1000 hours/last day requirement. Based on their formula, General Testing is required. My question is when performing the rate group test, do I include both contributions or just he additional contribution? Also, since the additional contribution requires a last day/hours requirement, must it pass coverage separately or can it be aggregated with the SH Contribution?

Any help would be greatly appreciated!

My understanding was that Notice 2008-73 provided one year relief to small plans to switch from a 2007 EOY val to a 2008 BOY val. If this is correct, was this change of val date automatic, or did it have to be applied for with the IRS?

I have a multiple employer plan. I test the companies separately, but do I have to submit separate 5500's for them? It seems in the past they were filing two returns, but in 2006 it was reported that company B "transferred" its plan assets to company A. In 2007, only one for was done with the combined assets.

Todays Federal Register

This is a clarification???

Hi,

Client called with this question. They have an employee who wants to know if their retired spouse's medicare premiums can be reimbursed through the employer's Sec 125 medical reimbursement plan.

I am not sure. I know there's been a lot of discussion about medicare, but since these premiums are for the employee's spouse, I think they may be allowable.

Any help would be appreciated.

Thank you!

In order to avoid realizing some of the losses in their funds, many companies are asking if they were to leave their current provider and trustee and go with a new provider and trustee, can the mutual funds move in-kind. This is not a brokerage type arrangement.

Is it possible to transfer plan assets in-kind between trustees?

Anyone care to weigh in on the following?

An employee is still working (i.e. no separation from service) at age 62 and wants to take a lump sum ESOP distribution at age 62.

I am confused as to how to read IRC 402(e)(4)(D)(i)(II). It says that a lump sum (for purposes of being able to exclude NUA) means a distribution 'within one taxable year' of the balance to the credit of the employee which becomes payable to the recipient after attaining age 59 1/2.

I know that 'within one taxable year' has been interpreted in various IRS rulings to mean payments included, literally within the same taxable year (i.e. two different payments, if made within the same taxable year, could still qualify as a lump sum for this purpose).

BUT, I am wondering whether 'within one taxable year' in the age 59 1/2 context ALSO means that an amount must be paid within 12-months of attaining age 59 1/2?

If so, then I guess the age 62 employee in this case can NOT exclude the Net Unrealized Appreciation from income.

If NOT, then my thought is that we are now in the time period "after" attainment of age 59 1/2, so bring on the NUA treatment.

Anyone else ever looked at this before?

Thanks for any thoughts.

Does anyone have data as it relates to auto enrolling employees with NO match? I am interested in how many plans are actually doing this and the success rates of keeping folks in the plan with the absence of a match.

Thanks!