Notice 2009-27 has a lot of interesting information.

For example, if the loss of coverage is after December 31, 2009 [not just the involuntary termination], then the individual cannot become an AEI (Q & A-13).

(Maybe you all knew this already, but I miss it.)

Employer pays premiums to a third party insurer to pay short term disability to employees. Third party makes the payments to the ees. Third party sends quarterly statements to the employer detailing what benefits were paid and the FICA withheld. Employer adjusts W-2 at year end to reflect the amount paid and the taxes withheld.

Can these payments be excluded from plan compensation without doing the compensation ratio test?

A Plan Sponsor recently swithced payroll companies and just realized that they did not do the 401k contributions for February and March 2009.

They made these deposits into the trust yesterday.

I am looking for Guidance on how to calculate interest on the late deposits.

Any help would be greatly appreciated. ALEX

I am having trouble interpreting the meaning of the following language of treasury reg 1.402©-2 Question/Answers 5 and 6 regarding rollover eligibility of payments invoving annuitized qualified accounts. I am trying to determine if 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..

Link to the 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.

Feedback is very much appreciated..

The deferrals are deductible the year paid. I understand that, I think.

The excise tax is not deductible: Correct?

How about if an amount equal to the excise tax is paid into the plan as a gain instead of paying the excise tax: Deductible?

The lost earnings put into the Plan: Deductible?

The fee for my time filing VFCP application: Deductible?

Can anyone think of any other costs?

What is the best way to deal with a plan-owned legal entity (LLC) that has no value? We'd like to terminate the plan, but really don't know how to deal with this interest. Can we divide that membership interest up by creating individual membership interests for the participants and then distribute "in-kind"? Or would it be better to dissolve the entity completely? I really have no clue here.

I just want someone to tell me that my thinking is correct.

In this case we have a person who's FMLA will end in two weeks. He is on Short Term Disability and has applied for Long Term Disability. He has a terminal illness and is not able to physically return to work.

My answer for this case would be no because the employer has not initiated termination of employment - the employee is not returning due to a illness or disability.

In reference to Notice 2009-27

A1: An involuntary termiantion meas as severance from employment due to the independent exercise of the unilateral authority of the employer to terminate the employment, other than due to the employee's implicit or explicit request, where the employee is willing and able to continue performing services...

A1: "... In addition, involuntary termination does not include the death of an employee or absence from work due to illness or disability"

Q4: Does involuntary termination include an employer's action to end an individual's employment while the individual is absent from work due to illness or disability?

A4: Yes. Involuntary termination occurs when the employer takes action to end the individual's employment status (but mere absence from work due to illness or disability before the employer has taken action to end the individual's employment status is not an involuntary termination)

Please let me know your thoughts!!

Anything on quarterlies, Notices, interest discounting, anything of note? Anything confirmed as unclear?

What (if any) are the Plan's obligations in these circumstances (assume 2008 AFTAP>100% and 2009 AFTAP will ultimately be between 60 & 80% when calculated sometime before 10/01/09 but has not yet been done):

(1) Participant has 100% lump sum quote in hand from Plan administration (given to him in early April 09), on 4/10 puts in ALL paperwork to retire with 5/31 as last day of employment & with 6/01 as lump sum payout date. Meanwhile, Plan Actuary certifies on 5/20 that 2009 AFTAP is 70%, and no required notification has gone out. Note that the 30-day notification period ends AFTER the requested payout date. "Can", "Should", "Must" the plan give tha participant the requested 100% lump sum.

(2) Would your answer to (1) above differ if participant's submission-timing is the same, but the Certification was completed on 4/25 with notification sent out on 5/20 (this date being BEFORE the requested payout date).

(3) Now to complicate things ....... how about if the Plan gave the participant an unqualified lump sum quote AFTER the Actuary had certified and told plan administration of a 70% 2009 AFTAP but BEFORE a notice went out.

I'm guessing the answer to ALL OF THE ABOVE is that the plan CANNOT payout a 100% lump sum, but some of these situations will certainly lead to litigation & some really bad press

If a business informs employees it will cease a SIMPLE IRA plan at the end of 2008, but continues to allow employees to make deferrals in 2009, with the intention to put them into a new 401(k) plan, only the 401(k) plan never comes to fruition, what's the easiest way to rectify the situation?

1. return the "deferrals" as income to the employees?

2. deposit the deferrals into the SIMPLA IRA (and wait another year to establish a 401(k))?

3. something different?

Please let me know if you agree with my conclusion, or if you don't agree tell me why I am wrong. (Actually, I hope I am wrong, but I'm afraid I am not wrong.)

414(b) controlled group of corporations. One employer within the controlled group wishes to terminate its account balance deferred compensation plan for its employees under the "elective" termination rule in the regulations. Among other things, this rules requires that the service recipient terminate all plans that would be required to be aggregated under the 409A regs if the same service provider participated in those plans. Because of the definition of "service recipient" in the 409A regs (i.e., it includes all entities aggregated under 414(b) and ©), I believe that all plans of the entire controlled group that would be required to be aggregated must be terminated in order to use the elective termination rule.

What (if any) issues would occur if we failed to deduct 401k on qualified compensation according to the plan document? We paid bonuses and did not deduct 401k even though we should have. Are we obligated to correct it? Thanks.

My wife teaches at a public school. She maxes her 457b contributions. This $1,375 contribution is the majority of her monthly pay. 3-4 weeks ago, we contacted the 457 plan administrator because we thought her January contribution was missing. Turned out the January contribution hit her 457 on 2/24/09. She still doesn't have her contribution for February (payday was 2/13/09).

Is there a deadline for her employer to make these contributions?

Thanks.

My weary eyes are unable to find a reference that prescribes that the Employer or Plan Administrator must elect whether to use the annuitant/nonannuitant or combined tables. Must there be an election to use the combined table?

Plan make a resolution to terminate on 12/1/2008 and distributes all of the assets before 12/31/2008. Can any amendments be made after all the assets have been distributed?

Question re quicky estimate of 2009 AFTAP to see if Benefits restrictions will be triggered.

Suppose the 2008 AFTAP is 110%, no material COB, Plan liabilities at 1/01/09 are down 5% from 1/01/08, Plan assets as of 1/01/09 are down 45% from 1/01/08.

Looks like (based just upon asset & liability changes) the 2009 AFTAP will be below 80% trigger (maybe even below the 60% trigger), BUT .... does asset smoothing (ala funding rules) come into play in the AFTAP calculation to LESSEN the AFTAP drop so that the 2009 AFTAP may still be over the 80% trigger ?

This is a strange set of events, participant in plan (self directed investment control) invested in Pearlman's Ponzi scheme unknowingly. as TPA we asked who are these people you invested with (original date 03/98 additional amts next 4 years) we advised perhaps prudence would be get your money back and stay with known entities. account closed out in full 11/03 after several requests. Now comes trustee of bankruptcy (filed 3/07) who asks funds be returned under "unjust enrichment payments". question is can bankruptcy court sue participant under 401 k plan since it is generally exempt from creditors claims? One little guy (70 + years of age got out skin intact) be held liable for pearlmans scam?He does not have a lot on money to hire attorney any help is appreciated!

I posted a question yesterday that involved spreadsheet-style data: Name, Comp, Contribution, etc. for two people.

I could line the data up into columns using spaces, but "Post Preview" shows all the spaces removed. I tried Tabs, but hitting the tab key kicks me out of the post-box. I tried a fixed font (Courier New), but that didn't help.

I could have uploaded a .pdf or .xls, but it wasn't THAT important.

Almost drove me crazy, but it wasn't far, so I walked.

Our client received their letter yesterday - the IRS is auditing their Safe Harbor New Comparability 401k Plan. I briefly reviewed the Plan document & the plan year under audit (2006) - and everything looks good with the exception of one thing. The mandatory rollover amendment lowering the cash-out amount to $1,000 was signed on 10/18/06. I'm not sure why this was late.

It's the only thing I expect the agent will find - this plan is very clean and well maintained. Is there anything I can do? We do not have a date for the audit yet - this will be scheduled once our power of attorneys are sent.

Thank you!

A potential new client contacted me. His accountant has informed him that, because of amendments to Section 415, his contribution allocations starting 2008 have changed. I received an allocation report for 2007 and the proposed 2008 report.

Without getting too specific, it's an Integrated MP Plan, 8% base plus 13.4% over TWB of $97,500. Here are some 2007 numbers the accountant provided:

Gross Comp to TWB Excess Comp Base Cont Excess Cont Total

Doc 345,000 97,500 247,500 7,800 33,165 40,965

Other EE 15,024 15,024 0 1,202 0 1,202

Straight Profit-Sharing was used to get Doc to $45,000

I have two problems with this.

1) I would have started the calc with Gross at $225,000. Excess Comp would be $127,500. So Base = 7,800 (same), Excess is 17,085, Total = 24,885.

2) Why 5.4% of TWB? I'm used to 5.7% of TWB, or 5.4% of (80% TWB +$1)

The accountant believes that prior to 2008, the above calc is OK. I think 401(a)(17) always controlled, regardless that 415 now refers to 401(a)(17) comp. He would apply the 2008 comp limit of $230,000 - 102,000 TWB as the Excess Comp.

I don't want to get into a pi**ing contest. Maybe I'm missing something?