We are auditing the December 31, 2008 financial statements for a defined benefit plan. The plan was formed Aug 11, 2008. The actuary did not do a valuation since the first valuation for the plan will be based on beginning year balances ( 1/1/09 for the period of 8/11/08 – 12/31/08). The report received from the actuary states "Actuarial Valuation for Funding Purposes as of 8/11/08. Does anyone know how to footnote the Accumulated Plan Benefits? Usually, this footnote would state the vested benefits, non-vested benefits and then the changes between valuation periods. Would you just disclose that no valuation was performed?

Should TPAs be using circular 230 disclosure on letterhead/e-mail/fax correspondence?

Happy 4th of July to all. Take a minute to appreciate what a great country we live in.

We have a group of doctors-emergency room docs. They form a corporation (Corp) to negotiate with the hospital. Each doc or his/her corp owns a part of Corp. Hospital pays Corp providing a detail of which doc performed the service. Corp pays this money to performing doc after a small administrative fee. Corp issues 1099 to doc.

I've looked at Sal's EOB and also Watson's "Who's the Employer". The conclusion is that Corp is not A FSO. However, in EOB the last sentence on page 1A.4 and in 6.f.1)a on page 1A.7 there is an aguement that this is not the case.

Any experience or thoughts on this??

If part of the definition of a FSO is that it is "organized for the purpose of providing professional services" does that mean the that Corp has to actually perform the services or is its activity of negotiations etc an act of providing the service?

There are a couple of DB plans involved in this.

If the address listed for the alternate payee (AP) is "c/o J. Doe" and AP is not J. Doe, does this belie the requirement that the QDRO list the AP's address?

Probably more significantly, does the plan need AP to sign a written authorization for the plan to send any information about the QDRO or awarded benefits to "J. Doe" as a representative of AP before the plan can use that address?

Venture-backed client is putting together a cash long-term incentive plan. The basic terms they want are (1) service-based vesting over 5 years, (2) payment upon the first to occur of an IPO or a change in control, with accelerated 100% vesting if a payment event occurs before year 5. The amount of the bonuses will be based on the proceeds received in the liquidity event. CIC will be defined to meet 409A change in ownership of corporation and change in ownership of assets rules.

A few questions:

1. My understanding is that the occurrence of an IPO or CIC may be a substantial risk of forfeiture, if the possibility that these events will not occur and the employee not getting paid is substantial. My concern is that since the service-based vesting would end after 5 years, how can you get comfortable that the 409A SROF would continue until an IPO or CIC occurs (which would seem necessary in order to comply with 409A since IPO is not a permissible payment event). While there is no sale or IPO contemplated, I am not sure you can say that the risk one will not occur in the next 10, 20 etc. years is substantial.

Anyone have any thoughts on when a CIC/IPO is a valid SROF where employment is not required through closing, especially when the corp. is substantially owned by venture capital investors?

Any articles or commentary on this subject anyone is aware of?

Does this just boil down to risk tolerance -- in other words, to avoid any risk, only pay on CIC and not IPO?

2. If I can get past the first hurdle, it would seem necessary to require payment either within the short-term deferral period after the IPO/CIC or on a fixed schedule tied to the IPO/CIC. It appears that I could not use the "transaction-based compensation" payment rules on a CIC. Is this correct?

Thanks for any help that can be given.

Sole proprietor establishes a safe harbor 401(k) plan in 2007 for which we are the TPA. While reviewing the 2008 Form 5500 the trustee calls us to say that we have used the wrong EIN on the form. After further questioning, it seems that the client became an LLC in February 2008, but never mentioned it to us until now. The LLC has never been added as a participating employer, but it issued all of the 2008 W-2s, including reporting salary deferrals. The LLC also made the SH match contribution.

This is a tiny plan with 4 participants (including the owner and his wife) and less than $10,000 in assets after almost 2 years. Any suggestions about a fix it that won't cost more than the plan is worth?

Mr. Rigby was kind enough to point out that their are PPA act sections that for some reason were not included in the revisons to the IRC and were not noted in WRERA. Act Section 115, for example, provides relaxed transition (e.g., 90% rather than 92% of FT in 2008; 92% rather then 94% in 2009; etc.) under certain circumstances for employers engaged in interurban or interstate public bus transportation. You will not find reference to this treatment in IRC Sec. 430©(5). Not a biggie unless your client just happens to be one of the affected employers.

The point is not to get too comfortable relying just on the IRC and regulations. It also begs the question of whether or not the act should be followed to the extent it has not been codified in the IRC. Clearly, technical corrections should address this.

Company A maintains a NQDC plan subject to 409A. Company A is the sole member of LLC B. LLC B is a "participating employer" in the NQDC plan. The Plan's relevant payment trigger is a separation from service.

LLC B is a disregarded entity for most federal tax purposes and is treated as a division of Company A.

Company A sells its membership interest in LLC B to an unrelated Purchaser. For Company A's tax purposes, the transaction is treated as an asset sale.

Question: Do the LLC B employees who participate in the NQDC plan have a separation from service under 409A?

Zero guidance on this issue in the final regulations and the preamble to same and no commentary to date on the topic.

In the qualified plan world, I'm always leery of disregarded entities, e.g., if a parent with a 401(k) plan wants to extend the plan to the employees at the disregarded entity level, it's a safe practice to have the disregarded entity adopt the plan, etc.

Thanks.

What is the difference between a merger and a consolidation?

Hi,

Question regarding auto enrollments, if participant is auto enrolled and then opts out and receives distribution, I am assuming that they are considered as 'to never have deferred' for ADP purposes, so they are zero for tests?

Also, since it was auto enrolled, then opted out, a contribution will show going into/ out of trust. How is this reflected on the 5500? Do they negate one another and therefore not shown as a contribution or as benefit paid?

Thanks,

Jasofk

A small employer with only 3 participants in a PSP goes ot of business. Each of the three participants still have an account balance in his/her PSP account.

The business no longer exists, the former owner has moved to Flordia, and the three plan participants have found employment elsewhere.

I realize that plan still exists because it has assets. The three participants seem to have no desire to request a distribution. And the former owner (who is also the sponsor/ administrator) tells me that he does not have to file any more 5500's because the business no longer exists.

Can anyone tell me the consequences to the owner (fiduciary) if he fails to continue to file 5500's for the PSP, as long as the PSP still has assets? I want to inform (scare) him into realizing that just because his business has closed, he still has fiduciary duties.

The owner tells me that the plan automatically terminated when the business closed. He is wrong, isn't he ?

Also, would the $1,000 per day penalty for not filing have to be paid personally by fiduciary or from the plan's assets?

Thanks

A corporation is dissolving and terminating the plan July 31st due to substantial business hardship. They currently have an end of year 3% non-elective safe harbor feature.

Since the plan is terminating due to a substantial business hardship it is my understanding they can eliminate the 3% non-elective contribution and use the ADP test.

Does anyone see a problem with my analysis?

DB plan has employee contributions. Participants wants to receive monthly employer benefit and withdraw employee contributions+interest and then rollover only the interest portion. In that case, no part of the cashout will be taxed now, however, am I correct that since taxes are spread out between cashout and monthly payments, the basis is different from the rollover amount in this case? Here is a simplified version of the calculation:

Post tax employee contributions 10,000 Already taxed

Interest 20,000 Not yet taxed

Total 30,000

Monthly Benefit

EE Part 500

ER Part 1,500

Total 2,000

# payments 210

Excludable from tax 2,500

Taxable 27,500

Total 30,000

Excludable from tax (10,000 - 2,500) / 210 = 36 (of monthly benefit)

So, although $20,000 is rolled over, only $2,500 of that is actually taxable upon withdrawal?

A small employer has a calendar year. They have never had a plan and want to adopt a safe harbor 401(k) plan for 2009.

1. It is our understanding that if the plan is actually adopted 7/15/2009 as a new plan, safe harbor notices can be provided just before that date.

2. Must the effective date be 7/15/2009 or can it be 1/1/2009 with safe harbor provisions effective 7/15/2009? In this case SH NEC's would be based on salary for the entire year.

3. If the plan is adopted 7/15/2009, must comp limit and 415 limit be pro-rated for the short year?

Thanks a million!

We have a Corbel SUngard plan document for a pension client where such document includes a resolution to adopt the plan. The plan also had a tack on amendment (and separate resolution) to reflect changes due to EGTRRA, PFEA and Rev Rul 2001-62, which also was provided with the plan. And subsequently we added another amendment to adopt the 415 regulations, along with yet another resolution for that amendment.

All the above materials are provided by the Corbel system.

We are now in the process of preparing a plan restatement that Corbel provides that allows for the plan to be amended to include an automatic annual plan freeze provision, where the plan can be unfrozen at any time to provide accruals and then automatically frozen again at the end of such year.

The question is regarding document logistics.

I expect to provide the newly restated plan with a resolution, along with the tack on amendments for the 415 final regulations (and separate resolution) and the EGTRRA (et. al stated before) amendment with separate resolution. And if it is appropriaate I will add yet another tack-on amendment (and separate resolution) which is for PPA.

Does anyone have comments regarding the appropriateness of the above approach? Of coourse I could consider preparing one resolution that applies to the restatement and all tack-on amendments.

Thanks.

I have a Plan Document that was Amended and Restated as of 1/1/2006.

The vesting on the ER Match and Profit Sharing Contribution was a 7 Year Graded Vesting Schedule.

When was the Plan required to go to a 6 year graded Vesting Schedule?

Took this on 6/26-Passed

Many QDRO questions, lots of 415 limit, 2 questions on calculating future balance in Cash Balance plan. Relatively few math questions.

Test needs a GOOD spell check and grammar check!

The client has not funded their 2007 non-elective SH contribution. If we run the ADP testing the test fails and the owner will get a refund of $14,000.

I understand we need to contribute the 3% SHNEL ($20,000) with earnings. Do we also need to run the ADP testing and process the refund, pay the excise tax on the late withdrawal?

Do we have to fund the SHNEL plus a QNEC? If a QNEC is required, would that be calculated under a scenario for late correction of ADP/ACP testing (with refund of the HCE’s deferral, as described in EPCRS), or would it be the QNEC that would have been required to bring the NHCE’s to high enough percentages to pass ADP testing without refunds?

This seems to be a bit of a grey area and not specifically addressed in EPCRS. Any help would be appreciated.

Thanks,

401(k) Plan has match formula of 100% of deferrals up to 1% of compensation with last day and 1,000 hour requirement and allocated on the last day of the plan year.

Owner wants to suspend match August 1, 2009 and pay match through July 31, 2009.

Based on the discontinuence of safe harbor match contribution guidance I believe it is ok to use compensation and deferrals up to July 31, 2009 to determine the match but how would you deal with the last day, 1,000 hour requirement:

1. Allocate the match to those employed on 12/31/09 with 1,000 hours using comp through 7/31/09 OR

2. Allocate the match to those employed on 7/31/09 with 583 hours using comp through 7/31/09.

Any thoughts on the above options or different ideas would be appreciated.

Thanks

Medical practice has a 401(k) plan.

The plan operates on a calendar year basis.

One physician retired as of 6/30 but will be receiving payments based on A/R receipts for 18 months.

Plan defines compensation as 3401(a) comp.

A/R payments are included in the physicians' W-2 income.

Should the plan continue to treat the A/R payments as compensation for this physician under the plan even though he is no longer working?

Thanks!