For our 401(k) plans, we do not do a coverage test if certain conditions apply: no HCE’s, no NHCE’s, only collectively bargained employees benefit, no last day requirement, exclude only union/nonresident aliens, no controlled groups (or all participate), exclude only Termed with < 501 hours.

Do any of these exceptions apply to a 403(b) 410(b) coverage test? Are the exceptions identical or are there some that apply only to 401(k) or 403(b)? I don’t want to be running a 410(b) test in a 403(b) plan if I don’t need to.

Thanks!

Hi:

We recently (January 09) switched to a HDHP with HSA and offered a Limited-Purpose FSA for dental and vision expenses.

An employee elected to contribute $1000 to the Limited-Purpose FSA earlier in the year and is only now realizing what that actually means (i.e. needing to spend $1000 on dental and vision expenses as well as pay for her HDHP expenses). She has been contributing since January 09. She does not anticipate having $1000 worth of dental and vision expenses from now until the end of the calendar year and wants to know if she can end the FSA contributions. As far as I understand the system, because she does not have a change of status, she does not qualify for a termination or change of the FSA.

Are there any other options out there for her to utilize?

Can she pay a penalty or tax and use the FSA funds for other expenses?

Can she roll the funds over to her HSA? We do have a grace period at the end of the plan year. I've tried to do some research on the transfer of funds to an HSA, but see nothing about a Limited-Purpose FSA, only a Medical FSA. I'm also not sure that I fully understand this option in general.

Would she be able to use the funds for retirement (she is over 65)?

I wasn't able to speak with our plan administrator today, but I wanted to answer our employee's question as soon as possible. Any help on this would be greatly appreciated! Thank you!

Would EACA permissible withdrawals be considered a protected benefit under IRC 411(d)(6)?

For example, the Employer allows EACA permissible withdrawals during the Plan's 2008 Plan Year. During that year, the Employer decides that permissible withdrawals are too administratively burdensome and will no longer permit such withdrawals for the 2009 Plan Year.

Plan is top heavy for years 2004 thru 2007 and the Employer failed to make contributions in the amount to satisfy the top heavy minimum. The Employer now wants to make the top heavy minimum for those years.

Since there is no absolute deadline for making a top heavy minimum can they ever be considered "late." If they are not considered late, must the top heavy contributions due be adjusted for earnings (and I assume losses)? What would the starting date be for determining earnings? For example if the t-h contribution was for the 2004 year, would earnings be calculated from say the tax filing date for the 2004 year up until the time the contribution is made to the Plan?

Our client recently received a CP-403 notice from the IRS stating that her husband, who past away in October of 2007, never filed a 5500-EZ for the plan year ending 12/31/06. He had filed returns in the past and the total value of the plan at 12/31/06 was over $100k. She has never had any envolvement with the returns and has no idea why her late husband did not file. Does anyone have a idea of how we can avoid IRS penalties? Any suggestions on a good reasonable cause?

Thanks.

61 year old participant dies leaving a benefit of about $400,000. 47 year old spouse is sole beneficiary. In the following few months, she has withdrawn about $138,000, most of it going to children and who knows what. Broker would like to help her protect what is left (really).

From a tax aspect, may she roll the balance of the account into her own IRA and begin taking substantially equal installments and avoid the 10% penalty? I believe she can roll into an inherited IRA and withdraw without the penalty but she may run into the RMD rules sooner than later.

Thank you.

Kate Smith

Company A (large national co.) ownes company B. Company B acquires company C through asset sale. Company B also owns Company D which will merge with company C to become Newco. All companies have 401(k) plans which Newco can adopt or merge assets into. If Newco continues with Company C existing plan, TPA says it will only require an Amendment to plan to change name, tax ID, waive 90 day waiting period for Company D employees.

Assuming Company C is the one chosen, given the new name & tax ID, can current participants be given the right to take a distribution at time of transition? What are employee rights at a time like this?

If Newco goes with either Company A or B plans, can Newco force all existing participants in C & D to merge into the chosen plan?

From what I have read, if the plan is terminated, employees have option of distribution or rollover into qualified plan. But if plans merge, the rules change? How does same desk rules apply here.

I am very new at this and have been asked to participate in the discussions as the "employee voice" and just want to make sure I have a full understanding.

Thanks in advance for your help!

Is it permissible for a loan policy to limit plan loans to only fully vested participants?

Does having two matching formulas, one with allocation conditions, cause BRF testing due to different rates created by the allocation conditions?

For example, plan has payroll by payroll match of lets say 50% up to 5% of pay, no allocation conditions. Then plan has a discretionary match for anyone employed on the last day. Lets say the formula is 50% of pay up to 6% contributed. Under the first formula, coverage will be passed, but not the second formula. Do you apply one ACP test to both matches, and then BRF test the rates, or just do a coverage test on the second match?

Any help would be appreciated!

I was wondering whether anyone knows of a good resource that discusses the security law issues of nonqualified deferred compensation plans? I have the Corporate BNA entitled "Securities Law Aspects of Employee Benefit Plans" authored by Mr. Maldonado right in front of me but it seems to focus more on qualified plans.

The issue is whether a salary deferral plan for executives which allows the participants to elect to forego a portion of their annual salaries, have such amounts placed in a rabbi trust or some other vehicle, and then have such amounts paid to them at some specified time in the future (death, disability, separation from service) will be deemed an offering of securities such that an exemption is required.

No employer securities would be involved in the arrangement. The cash placed in the rabbi trust would probably be invested in mutual funds.

Any thoughts?

Can I simply convert an IRA distribution to my Roth? I retired this year at age 75. Also may want to convert part of the distribution next year.

A DB call center operations function will move from location A to location B. There will be 100% turnover in assigned staff because of the location change (driven by consolidation on the part of the service provider). Would it considered prudent to visit the new call center on site? Would that protect the fiduciaries in any way or demonstrate fiduciary prudence?

Conversely, do you think not visiting the new call center operation on-site would be imprudent or expose the fiduciaries to any risk?

The fact that location B is in a very attractive location, especially in January when it would be very nice there and could snowing where I live, is irrelevant.

I have a situation where the participant is the child's grandmother. The child is the grandmother's tax dependent and the child's parents are not in the picture.

The grandmother is employed full time.

The grandfather, however, is retired, but older. He is not able to take care of a 4 year old at all.

Can she participate in the dependent daycare account, or is she prohibited because she is married and her husband is not gainfully employed?

(I personally would never leave a 4 year old with a 70 year old).

Thank you.

Can someone explain to me the difference between a 401(a) and a FICA / Social Security Alternative Plan? Doing various searches on the web I cannot find a clear distinction between these. In some cases I'm thinking that a FICA / Social Security Alt Plan is also a 401(a).

I've noticed that TIAA Cref, Fidelity and other large carriers provide these plans typically to universities, some non-profits. Some plan descriptions explain that their plan mandates participation and the previous employee FICA payment of 6.2% will now become a 7.5% contribution into the new plan thus eliminating Social Security. Other 401a plan descriptions never mention this.

So, is a FICA / Social Security Alternative Plan an option within a 401(a)? Can this also be an option within a 403(b)?

Thanks in advance for your time.

DOL audited employee deferral contribution for 2006 - 2008 and came up with a penalty for late transmittal of $12. Now they have sent a letter recommending filing 5330 so when they send their findings to IRS in Ogden, we will already have filed. For 15% of that $12.

Anybody have experience with 5330's for these miniscule amounts? Does IRS really look for small amounts like this?

Could we donate to our favorite charity instead?

A client has a DB plan that he wants to terminate.

The plan was effective around 2002 or so.

Over the years the attorney may or may not have kept up with all required amendments, such as GUST, EGTRRA, PFEA, PPA, HEART, WRERA and so forth.

My thought is to restate and terminate the plan using the approved Sungard Relius document with all pertinent amendments in the plan and of course the salient plan provisions re: plan formul included, instead of trying to patch the old plan with various amendments.

The approach of using a Sungard document with their approved and/or current amendments seems like a clean and efficient technique without trying to sort through the old document and its amendments or lack thereof.

Does this seem like an acceptable approach?

Thanks.

Is there any commentary or authority on the treatment of an annulment as a COBRA qualifying event (i.e. the same as a divorce)?

We wanted to talk to someone about it, as we are considering doing this in-house to cut-out the expensive middleman (i.e., recordkeeper), particularly on small plans.

We use relius for admin work right now....

Please send me an email if you would be willing to talk to us.

Plan's AFTAP was determined without regard to FSCOB on 1/1/2008 and was certified as 147%. This is in accordance with IRC 436(j)(3). Instructions to completing line 15 of Schedule SB, however, indicate that AFTAP should be computed in accordance with IRC 436(j)(2) -- i.e., subtract FSCOB from assets, which in this case would be 57%. My inclination is to show 147% under the assumption that the instruction is inappropriate and than showing 57% suggest all sorts of nasty stuff applies, which don't.

Note that Schedule SB instructions indicate FTAP, line 14, are to subtract credit balances. AFTAP line 15 is not as clear.

Any thoughts?

Calendar Year Plan has 2008 quarterly contribution requirement of $50,000. 2008 contribution requirement is $300,000. Plan also has substantial FSCOB which could be applied to take care of $300,000 minimum.

Plan fails to pay $50,000 on 4/15/2008 and 7/15/2008. On October 1, sponsor contributes $300,000. Plan assets decrease 30% over 2008. ERGO, sponsor elects on 4/1/2009 to apply FSCOB to cover $300,000 minimum in 2008 and add $300,000 to PFB and forego pouring $75,000 of FSCOB down the water closet.

It appears since election to apply FSCOB was made well after quarterly due dates, PBGC should have been notfied of missed quarterlies (at least once).

Question: In determining excess contributions 1/1/2008, what should be the discount rates? I.e., should 5% penalty apply? I argue "no" since funding obligation was honored effective 1/1/2008 when 4/1/2009 election was made to apply FSCOB. So, PBF 1/1/2009 is simply $300,000 x (1+EIR)^(3/12).

Comments?

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