A new comparability plan is not top-heavy and each participant is their own rate group. The owners are getting maximum allocations, the NHCEs are getting 5%, and certain non-owner HCEs are not getting any allocations. I'm thinking this is OK if all the testing passes but wanted to ask since it looks kind of strange. In the same vein, if the plan were top-heavy, these HCEs could be allocated only 3% and not be subject to the gateway rules, correct? All help is greatly appreciated.

436(j)(3) discusses how the AFTAP transitional rule allows for plan years 2008-2010 to calc the FTAP without a reduction for the credit balance if greater than a certain transitional % instead of the normal 100% rule (2008=92%, 2009=94%,2010=96%), but ONLY if each preceding plan year was not less than the applicable percentage (emphasis added on this last part).

Was there anything in the technical correction bill (WRERA) that modfied and soften this "preceding plan years ALL must also be over the transitional % for those years" ?

I thought I remember something being modified on this preceding years requirement via technical corrections, but I could easily be wrong, or maybe there was something that only applied to shortfall gain/loss calculation. Thoughts/opinions appreciated. thanks.

We have a client that made late contributions 4/06 and 10/06. The contributions were made but they did not include the earnings missed. The missed earnings are $20.52 and $112.55 and have been added to accounts this week.

I understand that they need to file a 5330. I believe that they only need to complete line 3a and schedule C.

It is my understanding that they will need to file a 5330 for 2006, 2007, 2008 and 2009. Would you agree?

Now the big question. How should I calculate the tax? I think it should be 15% of the prohibited amount. (20.52 plus 112.55 times 15%.) Would it be the same calculation for all years?

Also, what description should I use under the "Description Of Prohibited Transaction"?

Any guidance would be appreciated. As you can probably tell, I have never completed a 5330.

Thanks in advance!

If I have a client with $500,000 in their 401-k with $50,000 in outstanding participant loans, is the ending balance reported as $500,000 or $550,000? Also, I know the loan is reported on the Schedule I, but is there anywhere on the Form 5500 itself the outstanding loans are reported as well as loan payments made during the plan year?

Any help would be appreciated.

Client is a 12/31/08 plan year end. They failed ADP - refunds have not been processed. One of the pariticipants is planning to take his refund from his Roth account - does the employer still have to pay the 10% penalty on the refund from Roth? I couldn't find anything specific in the instructions regarding Roth. I would think/hope the 10% penalty would NOT apply to Roth. . .

Thx!

Will be filing a terminated plan soon for a determination letter on 5310. Can the amended/restated plan document be submitted to the IRS unsigned?

We added an unfunded health care reimbursement program to our group benefits plan last year and I'm a little stumped on reporting it on the 5500. I don't see where it would fit on any of the schedules, so the only change I'm seeing to prior 5500s that didn't have it is adding checkmarks to "General assets of the sponsor" on lines 9a and 9b of the primary Form 5500. Is there some other reporting location I am missing?

Thanks for any input.

Employee participates in Company's cafeteria plan and elects family medical and dental coverage. Employee's spouse is convicted of an offense under state law and imprisoned for up to 5 years. While spouse is incarcerated, medical expenses will be covered by the state. In addition, Company's medical plan provides that it will not reimburse medical expenses incurred while an individual was covered under another governmental plan or program. Can the Employee validly drop the spouse's medical and dental coverage due to a change in status event or is the Employee required to continue covering the spouse until the next open enrollment period?

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?