Good Morning,

The participant elected HSA, made a $4,000 contribution early in 2009, and then as of April 1 elected to enroll in the company's PPO. Looks like a problem to me. Any suggestions? Thanks.

We use Accudraft for our document software. It mentions briefly a 90 day run-out period for submitting claims but doesn't detail it further. The EBIA manuals don't seem to discuss it either. Here is my question. Someone submits an incomplete claim on 3/31. Are we allowed to close the books at that time and forfeit his balance since he did not get a complete claim in by the deadline? Or, like with IRS filings, if they get it by the deadline but it is incomplete, there is time to correct? We can't leave our previous books open for so long. Clients want their totals. Without proper guidance I have been relying on the fact that, as long as I properly communicate this rule, we are OK. After all, the Doc says 90 days but I worry that it says to submit (not for it to be complete and accurate). Anyone have any thoughts on this issue (preferably with some guidance I can cite)? Thanks in advance.

I know there are certain circumstances where you can reclassify a discretionary contribution to something else, after the fact, but I can't remember if QNEC is one of them.

The plan makes a 4% contribution to all eligible participants, regardless if they defer or not, but unfortunately failed their ADP Test for the first time. Can a portion of the ER contribution be reclassified as a QNEC to correct for the failure?

With regards to the 2006 Funded Current Liability Percentage, should the credit balance be subtracted from the assets before dividing by the Current Liability. Reading through the regs is very confusing and it seems there is an argument for both subtracting and not subtracting. Thank you.

1. Does an employer have to elect to create a "Carryover Balance" (COB)? If so, what is the date of the election?
   
2. What is the the determining FTAP condition for an employer to use the COB to offset the quarterly contribution, Minimum required contribution (MRC) or avoid a section 436 benefit restriction?
   
3. If contributions are in excess of the MRC, can an election be made by the employer not to create a "Prefunding Balance" (PFB)? In this case does the amount of excess contributions get added to the plan assets for the beginning of the following year? Where is this to be indicated on the Schedule SB?
   

• What is the most logical situation for a BOY valuation?
  

1. Elect to use the COB to offset the quarterly required contribution.
   
2. Should an employer elect to create a PFB if contribution is > MRC?
   

If any of my questions are improperly worded let me know so I can reframe them.

Thank you,

Naveen

In 2008 I recieved a salary of $104,000. In 2005 I was relocated and recieved moving expenses and a housing allowance over 3 years. The last $2500 in 2008. The salary and allowance brought my total compensation to $106,500.

I am now considered a highly compensated employee. Is there anything I can do or am I just out of luck.

Individual A is a statutory employee of Financial Institution. A accrued benefits under the nonqualified deferred compensation (NQDC) plan. A has reported and continues to report his commission income as a Sched C to his f1040. A also has his own QRP. The Financial Institution is now paying out the NQDC.

Will the NQDC payments in 2009 count as earned income for purposes of QRP compensation purposes?

Is there a problem with setting up a SEP for 2008 (by 4/15/2009 when sole proprietor's f1040 will be filed), and then promptly set up a 401k QRP for 2009 and never fund further into the SEP?

We'd like to capture an ER contribution deduction for 2008, and then have a solo K for 2009 and later. There are no other EEs.

A plan has had a vesting schedule dating back to the 80s that is the usual 2-6 year graded, 20% increment schedule with one twist. Those with less than 2 vesting years are 1% vested. (I presume this was to have an actual cash out and thus forfeiture following termination of employment by those with less than 2 vesting years before the deemed cash out rule was adopted.)

However, the ER would now like to amend out the 1% vesting. Otherwise, the 2-6 year graded, 20% increment schedule will remain unchanged. Understandably, those currently just 1% vested cannot lose that 1% vesting. So the change will only impact those who enter the plan as participants after the date of the amendment.

My question is whether we need to go through the rigmarole of giving those with at least 3 vesting years the option to remain with the old vesting schedule rather than being subject to the new vesting rules. Either way, it makes no difference. Someone with 3 vesting years will be 40% vested both under the old and the new schedules; someone with 4 vesting years will be 60% vested under both; those with 5 vesting years will be 80% vested under both; and those with 6 or more vesting years will be 100% vested under either the new or the old vesting schedules.

We'd like to avoid the 'election' because of (a) the administrative burden, and (b) the confusion by employees being asked to elect the old or be in the new schedule--and the suspicions some will no doubt have if we explain there's no impact, but the federal pension laws require us to 'jump through this hoop'.

Is the election required in this situation where none of those that would have the right to make the election would be effected one way or the other?

In 2003, I rolled a 401k from a former employer to an IRA. I neglected to account for roughly $1,000 in after-tax contributions when I completed the 8606 for that year’s after-tax contribution to my IRA.

In 2008 I converted a portion of my traditional IRA to a Roth IRA and would like to be able to benefit by not being taxed on the appropriate portion of the unaccounted after-tax contributions from 2003.

Should I just include the additional amount of the after-tax contribution as basis in the calculation or do I need to amend my 2003 return to modify the 8606 from that year?

Is it too late to modify a return for tax year 2003 if there is no change in the amount owed or refunded?

Thanks.

Permitted disparity and self-employment earned income, to some people, present a Gordian knot. However, it seems that I somehow stumbled onto a relatively easy solution. However, I steel uncertain of the mathematical validity of my results. Does someone feel willing to contact me off the boards and see the file I came up with?

How to correct overstated compensation used to calculate allocations? This resulted from the calculation of self-employed earned income. The participant got more money that allowed by the plan for many years (11% of his or her compensation had it gotten calculated properly), but not over 404 or 415 limits. This happened for many years, so how would one correct it under current law?

Have a small DB plan where the 2008 and 2009 AFTAP is <80%.

A terminated participant has a lump sum benefit of $1,400. Even though restricted, I believe lump sum benefits of under $5,000 can be distributed under WRERA.

Question: Must it be an involuntary cash out to qualify for this? Can lump sums of < $5,000 be made to any terminated participant?

This a new one on me. I have just discovered that client has had a long practice of requiring that an applicant for a Plan Loan demonstrate a financial hardship (and they use the safe-harbor definitions of hardship, i.e. 213(d) medical expenses costs, costs related to purchase of principle residence, costs for tuition, and expenses to prevent eviction).

Now they want to expand the list of loan application criteria and asked about the risk of doing so.

Since there are no such limitations required on plan loans, the only 'risk' I see is that they'll get more loan applications. But by making the loans more broadly available, I think they'll actually better comply with the requirement that loans be available on a 'reasonably equivalent basis.'

Any thoughts?

Has anyone else ever seen a plan limit loans using a 'hardship'-type test?

IRC 436(f)(8) states

(8) Adjustments for investment experience

In determining the prefunding balance or the funding standard carryover balance of a plan as of the first day of the plan year, the plan sponsor shall, in accordance with regulations prescribed by the Secretary of the Treasury, adjust such balance to reflect the rate of return on plan assets for the preceding plan year. Notwithstanding subsection (g)(3), such rate of return shall be determined on the basis of fair market value and shall properly take into account, in accordance with such regulations, all contributions, distributions, and other plan payments made during such period.

Comment by Mr. Holland at 2009 EA Meeting (as nearly as I remember the quote):

"I don't think you want more than you already have."

So, it appears we won't have IRS regulation on this. IMHO, that is a good result; Mr. Holland is correct.

Issue

I have a spreadsheet to perform this calculation. I'm willing to post it, for public domain. Is this a good idea? If so, should it be protected? Any other comments? Anyone (actuary, attorney, etc.) see any problems with this?

I believe I have seen some conflicting info ....... can someone clarify please>

Assume 2008 AFTAP was 100%. Assume the 2009 AFTAP is certified on 7/1/09 as 70%, thereby limiting prospective benefit payouts to a 50% lump sum (or the PV PBGC Cap if applicable). Assume the participant takes the OTHER HALF as an annuity. Assume the AFTAP stays at 70% until year 2013 whereupon the AFTAP exceed 80% and the lump sum restriction ends.

Can the participant that retired in 2009 with half of his/her benefit as an annuity INSIST on being offered the PV of the balance of their annuity as a lump sum in 2013? Does the Plan have to specifically ALLOW this ? If allowed, which lump sum interest & mortality rates apply in the 2013 lump sum calc., the 2009 or 2013 year rates.

Thank you ..........

Also, in addition to IRS 436, can someone provide a link to the latest IRS guidance on the 2006 PPA, and more specifically on AFTAP calculations. More than one source or link is welcome ! (still learning).

Can someone help me understand whether or not a church could set up a SEP for its priests. The church has been putting money aside to pay for contributions on behalf of two priests who can no longer receive contributions to the Church Pension Fund because they are no longer a part of the Church.

For two priests, there is approximately 10,000 for one in a savings acct and 5,000 for another. Can this money be put into a SEP for these individuals? There is one other employee who has been at the church part time for the past 3-5 years, would he have to be put into the plan as well? There are no deferrals just church contributions. I am not sure what else they could do. It is too much money to put into an IRA and the money would have to be given to them first and then put into the IRA, correct? So it would have to be taxed as income?

Any advice is appreciated.

Under our Section 125 Plan we offer a Flexible Benefit Medical Reimbursement Plan. An employee elects to have 38.00 withheld for the 2008 Plan Year. After employee quits on 5/20/08, we find out that Payroll did not withhold ANY money for the flex account and former employee never told Employer about the mistake.

Can we deduct the amount that WOULD have been withheld from his payroll check from the Flex Reimbursement Check?

Come March 31st and former EE turns in $988 flex claims for reimbursement. What is our Legal Obligation?

Do we pay because payroll didn't catch the mistake? Do we NOT pay because the Employee did not catch the mistake on his pay stub?

HELP!!

{This was also posted to the distributions board.}

I am having trouble understanding the language of treasury reg 1.402©-2, questions/Answers 5 and 6 regarding rollover eligibility of payments involving annuitized qualified accounts.

I am trying to determine iwhether a surviving spouse can roll the commuted value of an annuity into an inherited IRA after his/her spouse dies - and whether the decision depends on whether the decedent had already annuitized the account prior to death and had begun receiving substantially equal periodic payments.. The decedent had received an annuity for 8 years until death, and now the spouse apparently has an option of taking a commuted value instead of income stream. The surviving spouse wants to know if the commuted value can be rolled to an inherited IRA.

Link to the 1.402©Link to 1.402©

Answer 5 states, in part.......

© Changes in the amount of payments or the distributee. If the amount (or, if applicable, the method of calculating the amount) of the payments changes so that subsequent payments are not substantially equal to prior payments, a new determination must be made as to whether the remaining payments are a series of substantially equal periodic payments over a period specified in Q&A–3(b)(1) of this section. This determination is made without taking into account payments made or the years of payment that elapsed prior to the change. However, a new determination is not made merely because, upon the death of the employee, the spouse or former spouse of the employee becomes the distributee. Thus, once distributions commence over a period that is at least as long as either the first annuitant's life or 10 years (e.g., as provided by a life annuity with a five-year or ten-year-certain guarantee), then substantially equal payments to the survivor are not eligible rollover distributions even though the payment period remaining after the death of the employee is or may be less than the period described in section 402©(4)(A). For example, substantially equal periodic payments made under a life annuity with a five-year term certain would not be an eligible rollover distribution even when paid after the death of the employee with three years remaining under the term certain.

Answer 6 states, in part......Similarly, if an employee's surviving spouse receives a survivor life annuity of $1,000 per month plus a single payment on account of death of $7,500, the single payment is treated as independent of the payments in the annuity and is an eligible rollover distribution unless otherwise excepted.

Feedback is very much appreciated..

What notice do the qualified beneficiaries who terminated employment voluntarily between 9/1/08 - 2/16/09 receive? It's my understanding that all qualified beneficiaries who terminated employment between 9/1/08 and 12/31/09 must receive notice of the subsidy, but this group appears to be left out of the DOL model notices.

An informal discussion with a DOL representative suggests the notice for extended election period should be provided to those who terminated employment voluntarily between 9/1/08 - 2/16/09. Then if there is a dispute between the employee (who thinks he was involuntarily terminated) and the employer (who thinks the employee voluntarily terminated his employment), the employee can request an expedited review by the DOL.

I would appreicate any and all thoughts. Thanks in advance.