The plan document allows for in-service distributions on account of disability. Disability is defined as the inability to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment that can be expected to result in death or which has lasted or can be expected to last for continuous period of not less than twelve months.

The participant has been on social security disability for about 12 years and works part-time (apparently making less than the amount which would affect his social security disability benefits). He has work for the company under this arrangement for about 15 years and is currently requesting an in-service disability withdrawal.

What I am having a problem with is the fact he is and has been employed for the last 15 years with this company. However, am I suppose to be reasoning that he is only able to work part-time and that his position cannot be defined as substantial gainful employment?

Assume he is entitled to an in-service disability distribution. Does the fact he is on social security disability automatically qualify him for the 10% waiver?

I have a small 401k plan that had a couple of late 401k deferral deposits in 2008. The deposit was made within 2 months.

I used the VFCP calculator to determine the amount of "lost earnings", using the 7-day rule. The amount of "lost earnings" is less than $100 in total, but it affects 60 participants who are in various self-directed mutual funds.

Is self correction an option?

I would disclose late deposits on Form 5500 and file Form 5330 paying the small excise tax.

Is it permissable to deposit the lost earnings into the plan's forfeiture account?

Thanks for any and all input.

Here is the situation:

There is a small business owner who would like to adopt a plan where he can maximize his contributions. He doesn't have a problem matching, but would like to limit the matching to only the full-time staff. He has over 150 employees but the majority of those work marginally (PT to less than PT) throughout the year.

I thought a Safe Harbor 401(k) best, but (now here's the simple question) even after reading IRS Notice 2000-3 I don't know whether or not it is even possible to limit those who are able to participate in a Safe Harbor 401(k) by age or hours worked?

Father currently owns two companies. Co. 1 is sponsor of a (k) plan and Co. 2 participates in that plan. Father will soon will sell 99% ownership of Co. 1 to his two sons (> 21). The once controlled group will no longer exist. This will occur 7-1-09. A couple of questions -

1. The intent is to avoid a multiple employer plan so Co. 2 doesn't want to co-sponsor the Plan but if they don't, would the Plan violate the exclusive benefit rule immediatey? Or does the 410(b) transitional rule provide any relief to dispositions such as this and permit participation by Co. 2 in Co. 1's Plan, without either treating it like a multiple employer plan or violating the exclusive benefit rule?

2. Assume Co. 2 is going to start a new plan and spin-off their assets from Co. 1's plan during the plan year. As far as ADP testing - would Co. 1's plan include the Co. 2 employees for the part of the year they participated in Co. 1's plan? Or would it be acceptable to test Co. 2 contributions made while participating in Co. 1 plan under the spin-off Co. 2 plan?

Thanks.

“Bob” worked for ABC Corporation. When “Bob” left ABC, he established a Profit Sharing Plan and rolled his $100,000 401k balance into his new plan. He then withdrew $95,000 in order to purchase and operate his new business. I have read Sec. 4975© and (d), and 406 and 408(e). I’m not clear on how to treat the money “Bob” withdrew. Is this treated as purchase of an investment by the plan? If it’s not a distribution, how do I show this on the 5500?

A fiscal year plan ending in May 2009, reported as 2008 on the tax return.

For the top heavy test, are key employees determined in reference to the 2008 limit which is the tax return year or the 2009 limit which is the end of the plan year?

Hi,

If someone goes out on their own to get dental insurance because the employer does not offer dental, can they pay for the dental insurance premium out of their HSA?

Our HSA allowable expenditure sheet only says "Dental Treatment". It does specify that COBRA premiums are allowed, so this makes me think that dental premiums are not allowable expenses. Any thoughts?

Thanks!

I got discrimination testing results back from my company's 3rd party testing service.

I thought I understood that "otherwise excludable" employees were determined by looking at actual plan entry dates compared to a mid year plan entry date.

When I questioned why some employees were in this group of employees not meeting the IRS statutory minimum I was told that based on census data the statutory minimum calculation goes back 18 months from the end of the plan year. This is not anything I have read about before and I don't understand it. Could someone help me with a reading reference or explanation about this rule and process?

Examples:

Fiscal year plan, May08 to Apr09. Mid year would be Nov08.

Employees with plan entry dates of Nov 1, 2006 and Aug 1, 2008 and Sep 1, 2008 are being placed in the otherwise excludables of NHCEs who do not meet the statutory minimums. I am trying to make sense of that because it does not match the procedure described in this testers written testing steps.

Under the 409A regs, if an employee must include deferred comp in income because 409A rules are not met, and later the account balance is permanently lost (employer becomes bankrupt, for example), an income tax deduction equal to the lost deferred comp is allowed. The regs. don't say whether it's an above the line deduction or misc. itemized deduction. Any insight on which it is would be appreciated.

Second question. Suppose the 409A rules are met, but the deferred comp must be included in income under 457(f). Does the employee get a deduction under 457(f) if the deferred comp is later permanently lost?

Thanks,

Ken Davis

Client deposited more into the salary deferral account than what the employees actually deferred (as reflected on their W-2s, and salary deferral elections). Because the deferral was overstated, the safe harbor match was also overstated. How do you correct this?

In 2008, calendar year plan was 99% funded so quarterly contributions apply for 2009. 2008 minimum was $400,000. Plan sponsor indicated will make contribution on 9/15/2009. FT on 2009 is $3 million; Assets on 1/1/2009 are $3 million, excluding $400,000 accrued contribution. TNC 2009 = $360,000. 2009 contribution is $0 when discounted 9/15/2009 contribution is included in assets.

Minimum quarterly contribution is lesser of $400,000 and $0, so quarterly contribution is $0. Or is it? For purposes of determining quarterly contribution, can you include contributions that have been accrued but not yet made? That is, should quarterly contribution due 4/15/2009 be $90,000 rather than $0?

How would the cushion benefit be calculated under a cash balance plan?

I understand the funding for the funding target (the benefit accrued at the beginning of the year - assuming a BOY valuation) and the increase in the benefit is the target normal cost. However, assume the cash balance plan has been in effect for a couple of years and now the owner starts taking a very large compensation. Does this affect the cushion benefit as it is the accrued benefit recognizing compensation increases??

Any help would be appreciated.

This is probably more of a question on the process of true-ups than it is a question on the safe harbor aspect.

Employer overcontributed for one of the participants. It's my understanding that a true-up can only result in an additional contribution for participants, and not the distribution on any excess contributions. Is that correct? If so, should we just leave the overage as a safe harbor contribution or change the source to discretionary and run ACP?

DB Plan terminated in late 2008. Assets distributed early in 2009, so final filing would normally be due August 31, 2009. Can I use the 2008 Forms to file the final 5500? Or must I wait for the EFAST2 system to come out? I should mention also this is a one-man plan, EZ filer.

The employee was enrolled in the employer's HDHP and made contributions to his HSA for himself and children through March 09. As of 4/1/09 his wife met the eligibility requirements to participate in her employer's family Non-HDHP. The husband dropped his coverage with his employer and went to her plan. I know that a change in insurance does not warrant a change in the FSA Medical account, but what about the FSA Limited Medical. That account was created as a means to allow employees to keep their HSA eligibility, but what happens when they do not need to worry about their eligibility anymore? Can the cafe plan documents be written to allow such changes? Has anyone found any informal or formal comments from the IRS on such a change? Any help is much appreciated.

thanks!

This is new area for us:

it appears to us a church plan is not exempt from erisa;but just title I of Erisa.

Is this correct?

Does this mean no 5500 is done?

Is actuarial valuation done?

Is there any 401a4 and 410b testing?

Stan

We have a client who purchased an annuity contract as part of his 401(a) plan in 2006 and signed off that a qualified plan was in place beginning that year. In 2009, it has been determined that the client's accountant never actually had him adopt a plan. So for a couple of years he has been funding a plan and taking deductions accordingly, but with no plan document in place. Does anyone know if there any way to remedy this situation through any of the correction programs? Any help would be appreciated. Thanks.

I have a plan sponsor (with many, many loans) changing the frequency of payroll from weekly to bi-weekly. I'm trying to determine if I should be reamortizing all of these loans. From a technical perspective, I lean towards yes. The loan note and amortization schedule no longer apply. Also, what would an auditor say if looking at the loans? I'm just having trouble doing all of this work for a probable repayment change of pennies each payroll period.

As a secondary idea, what do you think of doing a generic plan sponsor initiated amendment to the note and amortization schedule? It would basically say that the payment schedule changed and that payments would be twice the payment listed on the original note (ignoring the minute payment difference). Each participant with a loan could sign the form. That way both parties agree to the change of terms without having to customize a form for each loan.

Anyone have any experience with this issue?

Thanks!

The regulations under 401(a)(4) state that a component plan is deemed to pass the ABPT if the plan of which it is a part satisfies the ABPT. I have a plan that satisfies the ABPT on a cross-tested basis. If I can restructure the plan into component plans and somehow satisfy the general test on a contributions basis for each of the component plans, am I all set? Satisfying the ABPT on a cross-tested basis doesn't throw me into a gateway contribution requirement, does it?

I am seeing some insurance companies offering groups a step rate increase based on previous claims experience. For instance, if a fully insured plan for Company A is given a 19% increase, the carrier is offering to only increase 8% the first 6 months of the plan year (the plan year is also the COBRA determination period), they will review claims after the first 6 months and at that time determine how much (if any) of the remaining 19% to pass on (could be an additional 11%). My research has confirmed that the COBRA rates can only be increased to QBs one time during 12 month determination period so we advised client of that (we administer their COBRA). Insurance carrier came back and offered to send client 12 month Final Underwriting Approval Form that shows the 19% increase as the amount the client is charging employees off of and to be used to calculate the COBRA rates.

If the carrier is only requiring the client to pay the rates with the 8% increase for the first 6 months, can the COBRA rates be determined based on the 19% rate increase per the Underwriting Form?