Can you amend a plan to remove the EACA provision mid year?

OK, lets see if I can get this simplified, have a client who is under random audit, everything seems to be in order except timing of 401 k deposits. they were generally made on the 10Th of the month following calculation from prior month. IRS is asking that (audit year is 12/07) that employer provide breakdown of 401k amounts from weekly payroll for years 2006,2007,2008 in order to calculate and assess penalties for late deposits. the issue is who determines "reasonably segregate amounts" versus the employers pattern of the 10th of month following? total plan assets are about 500,000.00 all 401 k contributions about 18 participants total. Plan is not top heavy 2 key/owners have small amount of benefit in plan. Any input appreciated.

I was asked to look at a strange animal.

a target benefit with mandatory contributions????????

the regs have instructions on safe harbor targets which say that you can't fund the benefit with ee money.

does that mean you can do this , making it non safe harbor plan, and if so, how the heck would you even test?

In 2009 the PBCG guarantee is limited to $54,000 at age 65, and assume it is $27,000 at age 59. Also let's assume that in 6 years (in 2015) the PBGC Limit at age 65 has increased to $75,000. A question:

If someone currently age 59 retires in 2009 with a straight life annuity of $65,000 annually, and the plan terminates in 2015, is that person's PBGC guarantee in 2015 limited to the $27,000 since he/she was 59 at the age of retirement, $54,000 because that was the age 65 Limit in the year she/he retired, or is the full annuity of $65,000 guaranteed because the reference number is the increased PBGC limit of $75000 at age 65 in 2015 (noting that this person reached age 65 in 2015)?

Does anyone see an issue with setting the interest rate for a loan intentinally high such as prime plus 3% to discourage people from taking a loan? I realize the rate is supposed to be commercially reasonable rate - but there is next to no guidance as to what that actually means. Looking at various entries in this message board it appears that prime + 1 is the most common rate but is there anything to preclude a higher rate? Loans aren't a protected benefit so I can't come up with a reason that it couldn't be high.

any insights would be helpful.

thanks

I have a corporation that files taxes on a calendar year basis. 2008 taxes were filed timely without an extension. No deduction for employer contributions was taken. They now want to make a contribution for 2008.

2 questions:

1. Is the 30 day allowance to allocation contributions for prior year based on 3/15 if no extension was filed? Or based on 9/15?

2. If they did decide to allocate a contribution in 2008 and deduct it for 2009, could they also deduct the 2009 contribution on an accrual basis in 2009? This would result in the deduction for 2 plan years in 1 tax year. The deduction wording appears somewhat ambiguous, but it seems the alternative would be to perpetually deduct employer contributions on a cash basis.

Thanks for any help!

Wes

Need to allow someone to enter the Plan early and give them a contribution to pass testing. Is this allowed? And if so, how would the corrective amendment need to be worded to allow the early entry?

I have a retirement plan with a 1k mandatory cash out. I'd like to up that to 5k and comply with the roll-over to IRA requirements. Can the mandatory cash-out for all accounts with 5k or less be made retroactive? (I don't think it violates 411(d) but can't be sure). Or can it be only for future terminations?

Any insight would be appreciated.

thanks

We are going to try the IRS service

Can we send 49 letters to them and then another couple batches of 49 without being charged?

What other services including locator services , websites, etc... are out there?

thanks

Laxy

Hello All,

I recently posted this question, but received no responses. Let me rephrase and hopefully somebody will weigh in. This is a new area to me, and obviously I haven’t found a definite answer in the HSA guidance.

The participant elected HSA for 2009 and made a $4,000 contribution early in 2009 to cover the entire year. However, as of April 1 he elected to enroll in the company's PPO, a low deductible plan.

1. Can he remain covered by both plans for the rest of 2009? I’m not sure what benefit this would be, except that he would be able to roll over the entire $4,000 into the next year.

2. In a related matter, can he split his coverage and cover his family under one plan and himself under the other?

3. If he cannot be covered by both arrangements, should he be required to receive a refund of 75% of the $4,000, representing the 9 months during which he was no longer covered by a high deductible plan?

Your thoughts would be most appreciated. Any cites would be as well!

Thank you.

Calendar year Cash balance with no allocation requirements is frozen 2/28/2009.

Is there any answer to how the partners compensation for CB allocation purposes should be determined?

Is it

a. $0

b. 2/12 of what the year end numbers turn out to be

3. Something else?

Thanks for any help.

We are a mid-sized company looking for recommendations for Stock Plan Administrators (or those we should avoid). We’d prefer a full-service model where they offer both the brokerage services as well as the recordkeeping platform but are open to all recommendations.

Haven't had any experience with Self-Directed Brokerage until now. Is there supposed to be something in the Plan Document stating what % of a participants account they can invest in self-directed brokerage? Also, do many of the institutions (ING, John Hancock. . .) limit the % an individual can put into self-directed brokerage portion of the plan?

We are looking for a new COBRA TPA. Does anyone have experience with Ameriflex's COBRA administration? They use Mongoose software. On the surface, their technology capabilities seem good. Thanks!

We are modifying the 2007 year end assets to reflect Madoff losses in a DC plan, so that the owner's first RMD due 4/1/09 (based on 12/31/07 acct balance) is not greatly overstated. We are now working on the amended 2007 Form 5500, and item 4f states " Did the plan have a loss, whether or not reimbursed by the plan's fidelity bond, that was caused by fraud or dishonestly?" Not sure how to answer this question.

The instructions to the 5500 state that a willful failure to report is a criminal offense under ERISA section 501. Hence, this question may only relate to plan fiduciary actions, and not outside fraud, which is what this is. However, if we do answer this question with a yes, it probably could result in a plan audit!!

Has anyone dealt with this issue yet??

Thanks.

We were ready to set up a one-man DB Plan (owner and spouse) but he mentioned that he has another employee. She works for him however, is paid by a different company. The client reimburses the other company for a portion of her salary. Seems like she would be defined as a "leased employee". Assuming this is the case, can she or can't she be excluded from the new DB Plan for this client?

A plan has always used permitted disparity to allocate the profit sharing contribution. When the plan was restated for GUST, a pro rata allocation method was selected (prototype). The administrator continued to apply permitted disparityas provided for in the pre-GUST document. We were recently retained as TPA and found the error.

1) Can the problem be corrected by retroactive amendment filed under VCP? My initial response was "sure, why not". However, it concerns me concern is that the NHCEs would have received higher allocations under pro rata, which the document required. It can be argued that the rectroactive amendment will benefit only HCEs. Will this be ok with the IRS?

2) Is the answer to #1 is yes, can the streamlined application procedures be used?

I have been researching potential correction alternatives for discounted stock options and am having a difficult time finding recent guidance. In particular, I am concerned with discounted options granted last year that have not yet vested. Correction under the discounted option provisons in Section V (E) of Notice 2008-113 does not appear available because (1) some options were granted to "insiders" and no correction was made in 2008, and (2) all options were granted under a plan / agreement that did not expressly require options to be granted with exercise price at no less than FMV (i.e., the plan says the Board can determine exercise price of NSOs). Both of those seem prerequisites for correcting under 2008-113's express provisions regarding discounted stock options in Section V(E).

Because the express correction provisions for discounted options under 2008-113 do not seem available, we are looking at whether there are other possible alternatives for correcting or modifying unvested discounted options at this time in order to avoid or limit 409A liabilty. Our general theory being that since the options have not vested, they have not triggered taxes for 409A or other purposes yet and there should be something that can be done prior to vesting to avoid 409A issues. Some possible considerations include:

1. Is it possible to correct the discounted options under Sections VI and/or VII of 2008-113 if the options otherwise qualify even though the options do not qualify for correction under Section V(E) of 2008-113. Unlike Section V(E), correction under Sections VI or VII would result in a 20% penalty / excise tax on some amount. What would this 20% tax be assessed on in such cases--20% of the spread between the exercise price and what the exercise price should have been on the date of grant, 20% of the spread between the exercise price and the FMV on the date of the correction, or something else?

2. Could we argue that since the options have not yet vested, under 2008-115 and the proposed tax regulations that we should be able to amend the awards prior to vesting to comply 409A (e.g., by simply increasing exercise price to what it should have been on date of grant or maybe leaving the exercise price but requiring the options to be exercised upon a 409A-defined change in control)? (Seems that would only have chance of working, however, to the extent the amendments could be made prior to the beginning of the year the options otherwise vest. Unfortunately, many of our options will vest in 2009 so it may be too late to amend unvested options?)

3. Could we cancel or terminate the discounted stock options prior to vesting and then simply regrant participants new restricted stock shares to make up the difference (or alternatively arrange for an option exchange program prior to vesting to swap out the discounted options for restricted stock)? Would this constitute a prohibited modification of a stock right under the 409A regulations or otherwise subject the replacement stock grants to 409A and 409A excise taxes?

In short, I am confused about whether the limited provisions in Section V (E) of Notice 2008-113 addressing correction of discounted options is the sole correction alternative for discounted options such that if you do not qualify under that, there is no other fix. If 409A tax event does not occur until discounted options actually vest, can you do something outside of the express discounted option correction procedures outlined in 2008-113 to fix them?

Plan compensation definition excludes bonuses, overtime and commissions (does not meet compensation ratio test). When testing ACP with any other 414(s) definition, the test fails. Since this is considered the general test for matching contributions, would the following be true:

1. Plan Compensation would need to be amended to a definition that meets 414(s) - for example, the definition is amended to include bonuses and the comp now meets 414(s). Additional contributions would need to be made to participants.

2. I need to re-test ACP, now to include the additional contributions.

I know this issue has been covered with respect to testing comp, but I could not find any discussion with respect to a failed ACP test under these circumstances.

Thanks!

Plan permits in service distributions at age 65. Plan also provides for annuities. Must a spouse consent to a participant's request for in service distributions?