In some of our U.S. qualified defined benefit plans, we have forfeiture provisions along the lines of:

In the event that all or any portion of the distribution payable upon a Participant's Mandatory Commencement Date or upon the date that payments must commence under the Plan to a beneficiary cannot be paid because of the Plan Benefits Administrator's inability to locate such person, after diligent efforts to determine such person's location, such person's benefit shall be forfeited and shall be used to reduce the cost of the Plan. In the event that such Participant or beneficiary is subsequently located, such benefit shall be restored, and payment retroactive to the applicable date shall be made.

The above seems to be consistent with Treasury Regulation 1.411(a)-4(a)(6) which I've cut and pasted below:

6) Lost beneficiary; escheat. In the case of a benefit which is

payable, merely because the benefit is forfeitable on account of the

inability to find the participant or beneficiary to whom payment is due,

provided that the plan provides for reinstatement of the benefit if a

claim is made by the participant or beneficiary for the forfeited

benefit. In addition, a benefit which is lost by reason of escheat under

applicable state law is not treated as a forfeiture.

We've never forfeited a benefit but for some participants we've exhausted our internal efforts at finding them (including locator services) and are preparing to use either the IRS or SSA letter forwarding service as our final effort...before declaring such participants as lost. We would not escheat the benefit.

Questions...

If a benefit is declared forfeited, may we 1) remove the participant from PBGC participant rolls, 2) remove the participant's liability from the Plan (and remove the participant from 5500 counts), etc.

Our plans are large and the number and average benefit size of the group that would be forfeited would be relatively immaterial from the perspective of the plan's liability.

I know the DOL doesn't necessarily agree with the IRS/Treasury on forfeiture...but most commentary I've read indicates that since the participant or beneficiary will be paid the benefit if they "pop up later", then...."what's the problem"...

I am just looking for any formal/informal guidance from any regulatory bodies on this topic (other than the Treasury regulation itself) that someone may know of and seek the experience of others who may have forfeiture provisions and actually have forfeited benefits under such provisions.

Thanks for any help.

Does the Federal Mental Health Parity Law apply to outpatient behavioral health services if a plan has outpatient limits on Chiropractor and short-term Therapy services like OT, PT?

Facts (simplified):

Calendar Year Plan terminates 8/31/08

All assets distributed by 10/31/08

Valuation Date: 12/31/08

I don't believe I am required to change to a BOY-Val. If I don't, is there any reason I can't just show zeroes (0's) on the Schedule B since my Fair Market Value of assets is $0 and my benefit liabilities as of 12/31/08 is $0 too ? The only reason I question it is that I had an accrual for 2008 which would produce a normal cost but on 12/31/08 all benefits and liabilities are $0. I don't think it would make sense to show a normal cost on the Schedule SB if all assets & liabilities are paid out before 12/31/08. Any thoughts ?

Is this another "no current guidance" question ? If so, opinions are still appreciated.

Plan allows employees to pay their portion of health premiums pre-tax. The company pays 100% of health premiums for 65 out of 115 employees. The remaining 50 ees utilize the POP and pay their portion pre-tax. I have read that the participant count should be 50, and that makes sense, but I cannot find anything definitive.

Also, I assume the 100/120 large plan rule would apply if the 115 count was used?

Any insights would be appreciated, I am from the Pension side and the Welfare rules do not seem as straight forward.

Thanks.

A participant received a hardship distribution which he used for a non hardship purpose.

The distribution will be repaid to the plan.

Are the repaid funds considered "after-tax" contributions in the participants account?

Under 404© what requirements, if any, are there when a plan sponsor changes the investment options available to participants based on the advice of an Investment Consultant?

If we have a plan that previously covered only the owner, and then a rank-and-file employee enters the plan, but the plan is frozen before there are any benefit accruals for the plan year, is the plan required to be PBGC-covered? The rank-and-file individual is still employed. There seems to be some indication that if the person did not accrue any benefits, they are not "covered". Any thoughts appreciated!

A small employer with 7 employees cannot find a copy of its profit sharing plan (adopted in 2004). Has anyone successfully corrected this type defect through the IRS Voluntary Correction Program? Rev. Proc. 2008-50 does not address it.

I know this has been discussed before, but...

If the Aftap is 75 w/o cb, and 71 with cb... there doesn't have to be a deemed reduction of credit balances, correct?

however,

if the Aftap is 81 w/o cb and 79 with cb... there is a deemed reduction of cb to get the aftap to at least 80, correct?

I am an S Corp owner who just set up a simple K.

When I make my simple K contribution, do I write the check from the corp or my personal account?

Is the contribution subject to FICA?

On the W2, is the contribution amount included in Box1?

Thanks,

Jerry

I am relatively new to the field of Non Discrimination Testing.

The 2009 limits for determining a key and HCE are $160,000 and $110,000 respectively.

My understanding is that for a plan year beginning 1/1/2009, determination of key employee will be based on the 2009 limit but for the HCE, I should lookback to the 2008 year limit of $105,000 (since my plan uses retro salaries). Am I correct or getting confused?

TIA.

I think I know the answer to this, but I'm having trouble finding anything to back up my theory.

We have an employer that will terminate their profit sharing effective August 1, 2009. They want to establish a SEP for 2009.

I understand that they can not use Form 5305 SEP if they maintain a qualified plan. Is it correct that by "maintain" another plan means to allocate contributions in a calendar year? If so, where can I find that in the regs?

So what I need to know....if we terminate the plan in 2009 and allocate no contributions in 2009 (but allocate gains and losses), can we use the Form 5305 SEP to establish a SEP for 2009? We will distribute the profit sharing plan assets in 2009.

Thank you.

I have seen different answers to this question -

Can an ACA (non-EACA or QACA) be added to an existing 401(k) mid-year? There is not a lot of literature devoted to the straight ACA!

Thanks for any responses!

A profit sharing plan will be tested for discrimination on a contributions basis under 401(a)(4) because the plan sponsor does not want to contribute the gateway. There are two tests:

(1) The ratio test that considers rate groups (based upon contribution rates) taking into consideration only the plan being tested and

(2) The overall average benefits rate test for the group being tested taking into consideration contributions allocated under certain other DC Plans.

Am I correct that conducting the average benefits rate test (2) on a benefits basis does not require a gateway contribution? That is, the gateway contribution is requried only if rate groups are to be determined on a benefits basis

Does anyone know the process/repercussions of "dissolving" a SIMPLE IRA plan and starting a 401k for your firm? Are participants left with their IRA and have to "start over" in the 401k? Common sense tells me they can't roll their SIMPLE balances into a new 401k but I can't find the information anywhere. Thanks!

Is the HEART ACT provision that a person who goes on active military duty for more than 30 days be treated as a severance from employment for the purpose of making a 401(k) withdrawal a required or elective provision. I have seen it described both ways.

Client has a 401(k) plan with safe harbor match.

Plan compensation is defined as wages, tips and fringe benefit comp as reported on W-2.

Client paid 2008 Christmas bonuses to all rank and file employees in a fixed net amount ($250), and grossed them up for FICA and Medicare.

No deferrals were withheld from the bonuses.

Then on the last paycheck of the year, some employees' deferrals were REDUCED by the amount of deferrals that should have been withheld from the Christmas bonuses.

So deferrals for a lot of people are incorrect, plus the related SH match - small amounts for each, but sizable for the plan as a whole.

The plan is being audited by a CPA firm.

Does this need to be corrected?

If so, how?

Thanks!

Here's the situation - an active employee was allowed to receive a total withdrawal of his 401(k) account in error. This was caused because recordkeeper did not update status from terminated back to active when the employee was rehired, although it appears there was direction from employer/plan sponsor to do so. Participant filed distribution paperwork with recordkeeper and since status indicated terminated, the distribution was processed.

Distribution was paid directly to participant, there was no rollover. We are still checking, but this appears to have only happened to just this participant. Based on in-service distribution language in the plan document, the participant could have received most of his account while still employed, so most of the distribution was allowable as an in-service. Only the employee's deferrals shoulld not have been distributed.

I'm unclear on how to fix. Most of what I've seen in regs about this type of thing specifically references hardship withdrawal errors, but I'm applying the same principles because it seems like the closest example I can find.

Does anyone know if this can be corrected under SCP, or do we have to go the VCP route? I've reviewed both IRS SCP and VCP regs, and I'm unclear. Distribution occurred last year, we would be fixing it now. It appears that only 1 participant out of a plan that covers about 2300 has had this type of error (we are still checking), and the impermissible portion of the distribution was only about $5000 (an insignificant percentage of the overall assets).

For correction, we will ask participant to repay that portion of the distribution which he should not have received. However, I am certain this employee will NOT repay the amount. It appears that if the participant refuses repayment, the employer would need to make the repayment. But would the repayment be made to the particpant's account, creating a windfall for that participant? It doesn't seem right the employee should end up financially ahead in this type of scenario.

Or would employer make repayment to the Plan - to a forfeiture account within the plan for example? Since plan doc allows for forfeitures to reduce future company contributions funding, that doesn't seem to make much sense either. The company could make the repayment to the Plan, and then immediately use those same monies now in the forfeiture account to reduce that week's wire transfer for company contribs. It seems to make the repayment option pointless, however, I suppose if your plan doc didn't have this wording, the monies would be in forfietures and have to stay there.

And in any repayment scenarios, should the repayment have an earnings calucaltion worked into it to cover the period from the impermissible distribution to the date of repayment?

Appreciate any help that can be provided.

Company A is owned equally by three other entities: B, C and D. All 4 companies adopted one 401(k) plan.

80% of the assets of Company A are sold to Company E. 80% of the Company A employees are also transferred to Company E as part of the sale.

Company A continues to exist with the other 20% of the assets and employees.

As part of the sale, Company E agrees to become successor plan sponsor of the Company A, B, C and D 401(k) plan. Company A, B, C and D will no longer be participating employers in the plan.

For the 20% of employees who stayed with Company A, there has been no severance from employment. They are still working for Company A.

In order to distribute the 401(k) assets from the plan that belong to the Company A, B, C and D employees is it necessary to spin-out the portion of the plan with their assets into a new plan and then terminate that plan?

I read through some prior posts and it was suggested a few times that since Companies A, B, C and D are no longer participating employers in the plan, that distributions could occur. But this does not make sense to me. Discontinued sponsorship in the plan I suppose could be construed as a plan termination of sorts with regard to just those entities, but I do not think you can terminate only a portion of the plan. Does anyone have support for the conclusion in the prior posts? Or support that you cannot distribute due to "plan termination" if the entire plan is not being terminated?

Thank you!

Laura

Does anyone have an idea why Notice 2009-9 states that "most participants and beneficiaries...are not required to withdraw any amount in 2009"? Are some participants excepted from the waiver? I have heard some people saying that they think 5% owners can't take advantage of the waiver(?).