Some participants who were eligible to defer into a 401(k) plan made no salary deferral elections until late in the plan year - mid-to-late December. At that time they elected to defer from their end of year bonus/commission (a large percentage of their pay for the year).

The IRS auditor stated something like this

Any suggestions? I am especially curious as to just what code or reg the IRS auditor may be using to back up their assertion - I assume they must back up their comments with something official, right?

I have a medical practice with a PS/401k plan. Three of the participants have ongoing loans. The medical practice is being bought by the local hospital effective 5/1/09. The hospital says since they are a 403(b), they cannot assume these outstanding loans.

The plan's loan policy says the outstanding loan balance is due and payable upon termination of employment.

Are there any other options for these participants with loans other than to either pay off or take as a taxable distribution?

Thanks.

Apart from the issue of tax deductibility, when is the last date that 401k safe harbor contributions for a plan year may be made without being delinquent?

A local health club has approached my local church and offered to provide free health club memberships to all church employees - if the employee wanted to have a family membership, the employee would pay the additional cost beyond a single membership. I am wondering if this is taxable income to the employee and whether there is a citation someone could provide to back that up?

We put all our plans (almost all) on investment platforms like ING,A Funds etc

for ease of admin for us and what we feel is sponsor protection re investment choices

Q;sponsor wants to leave HIS monies at Schwab.

Is that kosher or what is a solution?

Does anyone know if there is some sample language for amending a Plan in light of the waiver of required minimum distributions under Section 401(a)(9) for calendar year 2009?

I inherited a 401k Profit Sharing plan from a colleague that ran for the hills last summer. This plan maintains insurance policies as part of the trust for some of the older participants as a holdover from a past reincarnation of the Plan. Every year the sponsor pays the insurance premiums out of the assets put aside for a profit sharing allocation. The premium was deducted from the PS allocation payable to the participant. This year however, he has elected not to make a PS allocation to the Plan. He's asking how to go about paying the insurance premiums since they are now due. I want to be careful; this is the first time I'm dealing with insurance as part of the trust. I would think that the premiums should be paid by accessing a fee against the balance of the vested assets in the participant accounts, but I want to be sure this is OK. Anyone have thoughts on the subject?

Mahalo for your insight! Excerpt from Plan doc:

"(d) Payment Of Premiums: If Employer contributions are inadequate to pay all premiums on Policies, the Trustees may, at the direction of the Plan Administrator, utilize other amounts remaining in the Trust Fund to pay the premiums, allow the Policies to lapse, reduce the Policies to a level at which they may be maintained, or borrow against the Policies on a prorated basis if borrowing does not discriminate in favor of Policies issued on the lives of officers, Shareholder-Employees and/or Highly Compensated Employees."

If a series of substantially equal periodic payments are taken, then distributee avoids the 10% early distribution penalty. In researching this (trying to assist a client who may be subject to the 10% penalty that he already took in 2008), I found that there are 3 ways to calculate the distributable amount. My question is whether that amount can be exceeded? For example, if I use the RMD method and that results in a figure of $10,000, can the distributee actually take out $20,000 per year as long as he/she maintains that level for at least 5 years or age 59 1/2?

p.s. Happy April Fool's Day to all my fellow pension fools.

Employer A maintained a 401(k) filed for bankruptcy and terminated the Plan and employees have been given the opportunity to take a distribution or roll over. "A" essentially reemerged as Employer B - different TIN, name, but providing the same product with the same employees and employer B is establishing their own 401(k).

Do you agree that B is a different Employer and no issue with successor plan rules?

And if B is a different Employer than A, any rollovers would be unrelated?

Controlled group has separate 401k plans for the two related entities. One plan has safe harbor match, the other plan has no employer contributions. Because of this I do not have the option of aggregating for coverage.

The non-safe harbor plan has no HCEs, so coverage is automatically passed.

The ratio percentage test for the safe harbor plan is failing, so the average benefit test was completed. The nondiscriminatory classification test passes, however, the average benefit percentage test does not.

The plan document allows for discretionary QNECs to be given to only the NHCEs employed on the last day of the plan year. However, most of the NHCEs terminated in 2008.

Under Treas. Reg. 1.401(a)(4)-11(g) can the plan adopt a retroactive amendment to remove the last day requirement so that more of the NHCEs are eligible for the QNEC? This would reduce the total dollar amount of the QNEC because the youngest NHCEs are the terminated ones and we are using accrual rates for the average benefit percentage test.

I am determing if we should have a 401(k) audit for 2008 and need help. The plan had 65 employees participating in 2008. Of course, some of these employees were terminated before 12-31-2008. The plan has 29 eligible to participate in 2008, but did not. Of course, some of these employee were terminated before 12-31-2008, but all was elgible to particpate before reaching termination date. In addition, we have 16 terminated (terminated prior to 2008) employees with account balances. Are we considered a small or large plan?

I just had a broker call and ask if I would set up a 401(k) plan for a one member LLC that wants to terminate his 412(i) plan and roll the proceeds to the newly established k plan. The assets to be rolled over consist of a paid up whole life policy and an annuity. There are no other employees of the LLC and there will not be any other employees in the future. Also, there will not be any future premiums on the insurance policy.

Does anybody see any problems with this? I have no desire to work with 412(i) plans but am concerned I may end up getting involved with this one in a round about way.

Sources say it appears that Henry Winkler was charged last week with running a giant Fonzi scheme.

Apparently, not all securities were rated Aaaaaaay.

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?

In today's economic environment, it is apparent that soon, the Treasury Department will run out of TARP funds. As a supplement to TARP, the Committee is introducing HR 4109, the Corporate Recovery of Assets Program, or CRAP. CRAP is not the same old stuff; this is a strong, bi-partisan CRAP. It is intended that CRAP flow from Washington to all tax payers. We think that once this gets started that corporations can't wait to be full of CRAP. Many state governors will be reluctant to take CRAP from Washington. We understand if you do not want to take any CRAP, we will not give you any CRAP. Once the economy is flush again, we will be taking the CRAP back. To our critics, we do not believe for a minute that CRAP stinks. While we aren't sure whether CRAP will unblock the economy or how much it will eventually cost, we are certain we can work it out with a pencil.

I have two different situations I am currently working with.

1) Our client is a Temp Agency. They have about 30 "staff" employees that are allowed to participate in the plan. (of the 30 staff employees 5 are HCEs-2 of which are owners that are excluded by plan design) They have 1300 "non staff" employees (they are the folks that go temp at other employers). They exclude these people from the plan. We were able to work down the number to 42 people who would have otherwise been eligible had they not been in an excluded category. My coverage ratio is 65% but unfortunately they do not pass average benefits. I am stuck on how to advise how to fix. Can they make the 3 participating HCEs distribute their money due to the coverage failure? I know they can make a qnec or allow these non staff into the plan to fix it, but that would be very costly. Any other ways to correct?

2) Different employer: The plan has multiple divisions. 2 of the groups do not provided for a match. Of course these 2 groups have most of the NHCEs. On top of the coverage issues, the groups that have a match, they have multiple matching formulas. The most generous formula is the one most of the HCEs receive. They client wants to retroactively amend their plan so that the HCEs do not receive a match for 2008. Is this possible?

Any help or guidance would be greatly appreciated!

Thoughts greatly appreciated on the following scenario: Single employer plan files funding waiver application for the 2007 plan year. The 8 1/2 month deadline for making contributions to avoid a funding deficiency for that year has expired, but the application is still pending. Absent a favorable outcome on the waiver application, a funding deficiency exists. Is a Form 5330 with 10% excise tax now due, or only if/when the waiver application is denied. Same question with respect to PBGC notice under Section 4043©(5). ERISA Section 101(d)(2) provides an exception to the participant notice requirement while a funding waiver is pending, but cannot find a similar exception for the excise tax or reportable event notice.

One local colleague indicates that the IRS requires reimbursements to be honored for any plan participants up to the total of the committed annual contribution. Another says the company is not required to pay out reimbursements in excess of the amounts withheld year to date from the participant's pay checks - it's purely at the company's option.

For example, a participant has had $400 withheld from their pay through March. They submit expenses of $650. Colleague one says it must be paid. Colleague two says it's the company's option - not required by the IRS.

IRS Pub 969 sees to match the advice of colleague one, but that might mean tapping assets outside the plan. I'd like to do it the right way. Can anyone point to the definitive answer on this one?

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