A client has a VEBA with a reseve for retiree medical. When the employer money was contributed to the VEBA, it was taken as a deduction under 419A's provision for funding post-retirement medical or life insurance. When the money was contributed to the VEBA, the purpose was to fund retiree medical only. Now, the employer wants to use part of the money in the VEBA (only money currently in the VEBA is the retiree medical reserve) to buy up permanent life insurance for the retirees. Would using the money to buy permanent life insurance "inure to the benefit" of the employer b/c otherwise, the employer would use its own funds to buy the life insurance?? Obviously, the employer could have prefunded the VEBA to create a reseve to pay for retiree life insurance, but since the reseve was actually created to fund only retiree medical, is it a problem to now use it to pay for retiree life insurance?

Many thanks!

Is a rollover from a deceased spouse (both participants in the same plan) considered a related rollover for the Top Heavy Test?

Have a DB Plan with life insurance. Just found out from the insurance broker that one of the employees is not insurable!! Are there any other options? If so, what are they? Have never encountered this before.

(If) When do you need to provide amended SAR's to participants when doing an amended Form 5500?

My client has a 401(k) Corbel Prototype Plan that allows for hardships only under the safe harbor hardship rules. A Plan participant has mold damage from her residence. She is the renter (not owner) of her principal residence. Her residence was flooded last spring and now has a considerable amount of mold, etc. plus her personal possessions were damaged by the flood. She has no renters insurance and neither does the lessor (owner of the residence). The owner of her residence refuses to make any repairs. She sent the Plan trustee pictures of her damage in her residence requesting all of her plan balance to make repairs. My problem with this request is the hardship reason as quoted in the plan document is for "Expenses for the repair of damage to your principal residence that would qualify for the casualty deduction under the Internal Revenue Code." When I read the IRC Section 165 it specifically states that only an owner of the damaged property can claim a casualty deduction. The Plan participant states that the distribution request is to replace the molding drywall, clean the carpets and replace her furniture. She works in a law firm and has given her employer a copy of an IRS 401(k) document that states that the definition of "principal residence" includes a residence that is rented but does not designate that it only applies for the eviction clause. Is she eligible for a hardship distribution to make repairs to the home she rents and to replace her furnishings, or only to replace her furnishings? I am only the TPA, not a plan trustee but they have asked me for a better explanation of whether she is eligible for a distribution to pay for these items and for this hardship "casualty" reason. Does "damage to your principal residence" include replacing her furnishings and making repairs to her rented house?

Does anyone know of any guidance as to what constitutes a "related educational fee" under 1. 401(k)-(d)(iii)(B)(3) for purposes of a 401(k) hardship distribution? Would the purchase of a laptop computer that is required for enrollment at a post-secondary school be a "related educational fee"? (I assume that a laptop would not be an immediate and heavy financial need if the school allowed you to check out a laptop for the library rather than buy one; however, if the laptop is actually required, does that make it a "related educational fee"? - seems a bit of a stretch to label it as a fee without any guidance to back me up).

Many thanks!

I'm trying to sort out the implications of including clergy's housing allowance in plan compensation per Rev Rul 73-258 in a safe harbor 410k non-electing church plan. This rev rul says you can treat it as plan comp; however, the IRS does not consider it part of 415 comp according to PLR 200135045. Since the plan is a safe harbor 401k, our definition of plan compensation must satisfy the requirements of 414(s). It appears we would not include housing allowance in 414(s) comp given the use of 415 comp as the starting definition for 414(s). Regardless, it seems it should always be ok to include housing allowance in plan comp if the participant is an NHCE. Further, the determination of HCE status is based on 415 comp, thus housing allowance must be excluded for the HCE determination. I appreciate any guidance on the 414(s) analysis in particular. Thanks!

I need some assistance in determining a grandfathered amount in a non AB plan. Plan provides that participants receive a pro-rata share of an aggregate amount (determined pursaunt to a very complex and non-discretionary formula that is set forth in the plan). The formula is based largely in part on the compensation paid to all participants in the year prior to the year in which installment payments from the plan begin (which is on termination of employment). (I'm paraphrasing, of course) Plan was in existence during 2004 and all participants were fully vested at all times. Regs say that it is determined as if the participant voluntarily terminated w/o cause on 12/31/2004.

Thanks.

This is an easy one, but I just want a comfort level. Suppose an employee has elected to make the maximum deferral necessary to fund their dependent care assistance plan. Ideally, they will make regular payments throughout the 12-month period. However, is there a problem with funding the entire amount early in the year? There is always the possibility that the employee will not be able to use the entire amount and will have to forfeit the unspent portion. However, in my situation, that is extremely unlikely. The employee wants to pre-fund because she is going on medical leave soon. Thanks!

So, the title may say it all...I think I'm overthinking this, but if there's a controlled group with a Cash Balance Pension Plan (calendar Plan Year), and one of the subsidiaries is on a fiscal taxable year (ending 3/31), when would that company need to make its portion of the contribution? I'm going around and around in my head about whether the Plan Year controls or whether each participating employer's individual taxable year controls. Any quick suggestions on where to focus my thoughts?

We discovered a plan that filed their 2007 and 2008 return under the incorrect EIN. There were 2 numbers transposed in the EIN. Do you have any suggestions on the best way to correct the filings? I searched the board, but did not find anything that really addressed this issue. Thanks!

Can an ERISA 403(b) plan avoid the qualified joint and suvivor annuity requirements by offering a lump sum and requiring spouseal consent on any change of beneficiary just like a 401(k) plan?

We have an employee who was incorrectly marked as terminated in August 2006 in a feed that went to the TPA. For whatever reason, the correction did not make it to the TPA. TPA sent distribution packet to employee, who requested an immediate distribution of her account balance. EE also had 3 outstanding loans at the time that were deemed distributed. TPA issued applicable 1099's for 2006. EE resumed deferrals in January 2008; however, because TPA showed EE as terminated, they kept sending her checks every pay period for her deferral and match, minus withholding and early withdrawal penalty. TPA issued 1099 for 2008 distributions. EE did not contact ER or TPA to question the 2006 distribution or any of the 2008/early 2009 distributions. EE called TPA in June 2009 to request her account balance so she could take out a loan, which is when the problem came to light. Apparently TPA provides a web-based report for ER which shows action items, but no one in the HR department was aware of this report until now. It seems that we have multiple operational failures, beginning with the improper distribution in 2006 and then again beginning in 2008. I think we start by asking the employee to repay the distributed amounts, but expect we will be wholly unsuccessful. Do you think this needs to go through VCP? If not, any other SCP suggestions? Thanks!

In 2008 a participant in a 401(k) plan made salary deferrals of $24,000 instead of $20,500. We informed the plan sponsor / trustee to remove the excess in early March 2009 but they failed to do so.

I believe VCP/SCP is the only way to correct this now.

If they distribute the excess plus earnings now, the amount is double taxed. How is this done? Does the participant receive two 1099's in January 2010 (one showing $3,500 taxable for 2008 and one showing the excess + earnings taxable for 2009)? If this is the case and the participant has still not filed his 2008 tax return, could the additional $3,500 be reported now on the tax return even though he will not have a 2008 1099 reporting this yet?

Thanks a million.

A 401(k) plan covers an owner and his spouse. The owner also owns a second company with zero employees. The 5500-EZ instructions state that an EZ can be filed if the plan does not cover a business that is a member of a controlled group. However, it does not make sense to me that the plan would have to file a regular 5500 just because the owner happens to own another company (since the company doesn't have any employees). Is there any official IRS guidance or clarification on this issue?

I have a plan with an owner and a child, who would both be eligible. The owner only wants the plan for themselves, but I am concerned about meeting 401a26, mainly the "at least 2" part of it. Is there an exception since it is only owners/family or do I need to include both the owner and child.

I need some direction...

Here is the situation: Plan A and B are part of a Controlled Group. Each plan on passes Coverage.

Plan A: Match formula is 100% up to 3%

Plan B: Match formula is 100% up to 4% for Location X and 50% up to 10% for location Y

Since there are differenct formulas within Plan B a BRF test is needed. When running the BRF test, do I only consider the employees of Plan B? Or do I have to considered all employees in the controlled group.

I have always been under the impression that once a plan passes coverage ALL discrimination testing is done on the plan basis not the controlled group basis.

Any thoughts would be greatly appreciated as well as regulations for reference!

Does anyone know when the new, promised PPA regs (300+ pages?) will be released?

Company A's stock was held mostly by another public company. On June 26, 2009, the assets of Company A are acquired by a group of investors that are unrelated to the previous stockholders and a new company is formed to continue Company A's operations. The employees transfer to the new company and it's business as usual.

Company A sponsors a Safe Harbor Nonelective plan. 401 (k) contributions to the plan ceased on June 26th and no SH nonelective contributions have been made to the plan for 2009. The plan has not yet been terminated and the new company does not want to sponsor the plan. The new company however would like to create a Safe Harbor Match plan.

Since this is an asset acquisition, it appears Company A could terminate its plan (assuming all required contributions have been made) and distribute assets to participants, even though the same participants are now covered under the new company's (k) plan. I just want to make sure I'm understanding the successor plan rules correctly.

Does anyone know what the earliest retirement dates are that a participant in CalPERS or STRS can receive "unreduced" benefits, for purposes of electing the 457(b) catch-up?