Our DB val provider is telling us that the FTAP and AFTAP on schedule SB (lines 14 and 15) are to be computed using only vested benefits in the denominator for the funding target. Section 430(d)(1) and 430(d)(2) define the Funding Target and the FTAP, respectively, and make no mention of using only vested benefits.

Are there regs out there saying that the FTAP and AFTAP should be computed using only vested benefits? I believe this goes against the line-by-line instructions for the SB. Has anyone else run into this?

Joseph

I am confused. Each participant gets quarterly statements but vesting is not shown on the statement.

Annually, we (TPA) prepare a vested balance statement showing vesting.

In late 2006, the multiple source notice was sent to EES advising them of this.

How often and when does this "multiple source notice" need to be provided.

Is it quarterly? 45 days after quarter?

Help!

Employer sponsors a SARSEP. Employer called us recently concerned about several potential issues with their plan. I just want to make sure that I have a firm grasp of possibe repercussions of the potential errors:

1. Document has not been updated since 1993. I think we can correct using VCP.

2. Potentially less than 50% of the employees participated in a given year. If that occurred the employer ceased to be an eligible sponsor. Is the IRS just going to allow the plan sponsor to cease contributions at this point? It seems like that from reviewing Rev. Proc. 2008-50.

3. Potentially the plan could have failed the deferral percentage test in any number of years. Under VCP employer should be able to correct in any such error by making nonelective contributions for any such and adjusting for earnings.

4. Potentially employees may not have been provided with an opportunity to participate. Under VCP this requires nonelective contributions adjusted for earnings.

5. Potentially excess contributions (elective deferrals) could have been made. Under VCP this requires refunds adjusted for earnings.

Am I grasping this correctly; particularly point #2?

Thanks in advance for any guidance.

An employee terminated employment and has sued the plan sponsor of a group-term life insurance plan for failure to notify the employee of his right to "convert" to an individual policy. Clearly, COBRA does not apply to life plans. My questions are:

1. Does ERISA preempt this claim so that it does not matter what State law may require (i.e., require conversion rights, require advance notice, etc.)? If so, there would be no remedy for the employee, because to my knowledge, ERISA does not require conversion rights or advance notificatin.

2. If the life insurance contract itself provides for the conversion right, but does not specifically require the plan sponsor to notify the former employee of his conversion rights, has the plan sponsor, by its failure to notify the individual, breached any "fiduciary duty"?

I realize there are sub-issues galore, but I thought I would ask if anybody has encountered this issue and has any opinions that could help us navigate through this grey area.

Thanks much.

Lyme disease is rarely fatal. Since it affects people's health adversely, however, it must affect their mortality. Does anyone have ideas how to approximate this effect?

Thanks for any help!

Hello to all. Can we have a Last Day Rule, 1000 hour requirement, and Vesting schedule on a discretionary match to satisfy the ACP testing requirement, when used in conjunction with the 3% Safe Harbor??

Our normal formula is 100% on the first 3% deferred plus 50% on the next 2% deferred. I know there are requirements of this discretionary matching (can't match on more than 6% deferred; HCE's cannot get more than NHCE's, etc., etc., etc.)

Thanks. One of us has been reading the CCH and is getting the rest of us confused. Have we been doing this wrong??

I'm soliciting opinions on this. Most plans that provide for a safe harbor nonelective (or match, for that matter) will be either prototype or Volume Submitter plans.

Technically, this is not a required amendment. So if a plan sponsor adopts it, will this remove the plan from prototype or VS status?

Common sense would be that it would not. This new relief in the proposed regulations is predicated upn the idea that it is better to have an employer continue to maintain a plan, rather than have to terminate it. Yet many small employers, when faced with filing for a determination letter, would simply opt to terminate the plan. When they truly have a business hardship, they surely won't want to pay extra fees associated with "custom" documents.

Any thoughts on this issue? Anyone discussed this with the IRS yet?

Many thanks.

Does anyone here have any insight to establishing and admisistrating a Self funded disability policy?

What laws must a retirement plan amend for after 12/31/2006? What provisions of the Pension Protection Act of 2006 must one amend for after 12/31/2006?

We all know that all participants must be notified when a 436 restriction applies within 30 days from the date the restriction applies. It does not appear, however, that there is any parallel obligation to notify particpants that a restriction has been removed One might ask, "What's the difference? The participant will know this when he/she gets a benefit election package." However, notifying the participant of the benefits restriction removal might affect the participant's financial planning.

Is anyone aware of a legal requirement to notify participants that restrictions have been removed?

I hope this is not too much of a bonehead question..

In a Defined Contribution plan

Is it required to have an early retirement provision in the Plan Document

To have the ability to waive the 10% early withdrawal penalty when a distribution (due to separation from service) occurs at age 55

Thanks

Small plan (25 particippants) failed to make it's $10,000 contribution for the 2007 calendar plan year. Suggested to revise the 5500 and corp tax return showing no contribution. Other options????? make the contribution ($10,000 would have lost money)late or file SCP?

Is there any difference between a "Former HCE" referenced in Reg. 1.401(a)(4)-5(b)(3)(ii) (Restricted Employee Defined) and a "Highly Compensated Former Employee" defined in Reg. 1.414(q)-1T, A-4 and IRS Notice 97-45 (for purposes of IRC 414(q)(6))?

The answer I want is that a "Former HCE" is the same as a "HC Former E!"

Thanks!

Employee sponsors typical medical fsa, which is subject to COBRA, and an excepted benefit under HIPAA. The amount available for reimbursement during a plan year is exactly the same as the amount the participant elects to pay fo the coverage. Participating employees who elect to participate are entitled to receive reimbursements for qualifying expenses incurred for themselves, their spouses and other dependents. However, as is almost always if not always the case with these plans, only the participating employee can claim and receive reimbursements. Neither the spouse nor the dependent can perfect a claim or receive reimbursements.

Assume participating employee and spouse divorce. I believe there are two alternative reasons why the spouse does not have COBRA rights vis a vis the FSA.

1. Spouse was not a qualified beneficiary at the time of divorce, because the spouse had no independent rights under the plan; only the participating employee had rights under the plan. The employee could claim reimbursements for expenses incurred by the spouse, but the spouse could not claim or receive any reimbursements.

2. Even assuming the spouse is a qualified beneficiary, a reasonable interpretation of the regulations (if not an obvious interpretation) is that the spouse's COBRA right, if any, is to establish his or her own FSA account for the balance of the plan year, unrelated to the employee's account (because the employee is entitled to maintain his or her account for the remainder of the plan year and receive reimbursements from that account for expenses incurred by the employee, his or her dependents, and a new spouse if the employee remarries fast enough). Therefore, because in the case of the FSA I have described the spouse's cost of COBRA coverage for the remainder of the plan year is exactly equal to the amount of the reimbursements which would be available to the spouse for the remainder of the plan year (or maybe 102% of the amount available for reimbursements), the spouse does not have COBRA rights.

Any thoughts?

Can a plan be amended to provide that Hardship Withdrawals that are obtained to prevent foreclosure on a principal residence be submitted directly to the Bank or mortgage holder? We've had some employees present the proper evidence of an impending foreclosure and then not forward the distribution to the bank.

It seems like we're trying to help people that won't help themselves. The client was reluctant to have hardhsip withdrawals at all. In fact they are limited to prevention of forfeiture of a principal residence.

Any and all help would be appreciated. Thanks.

A company is insolvent and the assets are being sold out of a receivorship, the PBGC will take over the orphan plan from the insolvent company. When is the plan termination date? Is the plan considered terminated automatically when the PBGC assumes responsibility?

The DOL investigation revealed a prohibited transaction. Client will file 5330 and pay excise tax. Query: do we have to file a corrected 5500 to properly report the non-exempt p-i-i transaction?

Hello there. Would appreciate some input into my topic posted. OK for a 4k safe harbor to allow in-service from basic and/or enhanced match and also in-service from 3% non-elective? Document seems to allow but has some caveat language that makes me think it may not be permitted. Thanks. DN

Before PPA if the employer's taxable year did not coincide with the plan year, the deductible limit would be one of the following:

(1) The deductible limit determined for the plan year commencing within the taxable year, or

(2) The deductible limit determined for the plan year ending within the taxable year, or

(3) A weighted average of alternatives (1) and (2).

Once chosen, the method cannot be changed without the Commissioner’s approval.

1. It appears that PPA changed so that only the 2nd method is allowed. Correct?

2. Does the client need the Commissioner’s approval if he used 1st method in the past and now is forced to use 2nd method?

3. Can client continue to use 1st method?

If I have restricted stock that vests on a Saturday, do I value the stock as of the close of business on Friday? Monday? Do I average the two (like with gift tax)?

Any direction or authority would be much appreciated.