X is the 100% owner of C-Corp business that has employees. X also 60% owner with unrelated Y of LLC business with no employees. Business activities of each entity are unrelated...Y has no connection with C-Corp. C-Corp has an existing SIMPLE. X would like to make a maximum SEP contribution based on share of LLC business income without involving C-Corp employees or violating exclusive test for SIMPLE.

It appears that this could be done in this case as the control group (brother-sister) test (1563 and 414(b)) is not met since X as the 100% owner of C-Corp only owns 60% of LLC, so the 80% test is no met.

I am uncertain how, or if, to apply the 415(h) test where 50% is substituted for 80%. Does this cause the above to fail?

Also, does X's spouse taking a salary at C-Corp pose any problems (community property state)?

Thank you for your thoughts.

For those that took the exam, are the review materials a must? Or can you buy the study guide and then review with Tripodi's books? The review course is pretty expensive, that's why I am asking.

Please provide your input and cite for if a notice is required for a suspension of employer match? I know that there is the Safe Harbor Plan requirement, but I can't seem to locate information on notification for non-safe harbor plans for suspension of 401(m).

EB Gardener

Does the DOL provide a safe harbor with respect to prohibited transactions that occur when a plan service provider gives nonmonetary compensation greater than $250 to a plan representative who is an employee of the plan sponsor? If so, can anyone point me to the relevant authority/guidance on this issue?

We administer a small DB plan that terminated 12/31/2007. However, the client failed to provide us with necessary information to complete the termination in 2008. He was divorced and had medical problems. This also lead to no AFTAP as of 10/1/2008. The plan has only existed for 4 years. We sent the client the notice of benefit restrictions to provide to the 4 participants including his former wife.

The plan would have had a 2008 AFTAP of 98%. However now the plan has lost about 45% and any 2009 AFTAP will surely be less than 80%.

We received a QDRO ordering the plan to distribute benefits to the Alternate Payee as a lump sum. They cannot do this due to the AFTAP < 80%. Has anyone run into this problem yet?

I just found out a doctor client has an interest in a clinic where he regularly performs services. I'm gathering details, but it looks like an affiliated service group. Four docs own around 9% each of the clinic with the balance owned by a large corporation. I'm getting more details on them.

The clinic apparently has a 401(k) with employee deferral only-no employer contributions. For 2008 my doc's plan is a 3% safe harbor and this year also contributed a SH match along with maximum deferrals.

The question is what is the fix? Do you include 9% of the eligible clinic employees salaries in my doc's plan? Do you look at the best plan of all AFS members, calculate a contribution for the eligible clinic employees have the clinic deposit it? I've looked in "Who's the Employer" by Watson but don't see the solution.

Thanks for any help.

A company makes contributions to their profit sharing plan until 2006. They do NOT have a 401k, there are no deferrals, it is profit sharing only. The last year they made a substantial contribution was for 2005.

In 2006, 2007, and 2008, they make no contribution to their profit sharing plan. They have forfeitures each year. The plan uses forfeitures to reduce employer contributions. The employer contributes nothing so the forfeitures are therefore allocated each year.

So far, $300,000 of forfeitures have been allocated since 12/31/2005. I looked at 411(d)(3) and 1.411(d)-2(d) and IRS Announcement 94-101.

1. Suppose they actually had profits in 2006, 2007, and 2008, but they just did not make a contribution. What must happen now to the amounts that were forfeited in 2006, 2007, and 2008? Would they have to be restored to the plan if they terminate the plan in 2009?

2. Suppose they did NOT have any profits in one or more of the years 2006, 2007, and 2008. Now what happens to the amounts that were forfeited in 2006, 2007, and 2008? Would they have to be restored to the plan if they terminate the plan in 2009?

3. Now suppose they are a non-profit organization. Now what happens to the amounts that were forfeited in 2006, 2007, and 2008? Would they have to be restored to the plan if they terminate the plan in 2009?

Follow this link to see that rarest of creatures - not only an ERISA cartoon, but a funny one.

http://courtoons.wordpress.com/2009/03/19/erisa/

A law firm has two shareholders that hold their ownership interests in professional corporations. There are also two associates with their own professional corporations. The law firm also has some support people. I am assuming that the two non-shareholder professional corporations receive at least $105,000 from the law firm. As such, it would appear that an ASG exists as the law firm would be a FSO and the non-shareholder professional corporations would be B organizations.

If that is the case, are the two non-shareholders treated as HCE's for purposes of the ADP test? Of course they made deferrals while the two older shareholders did not make deferrals.

More importantly, are the two non-shareholder attys treated as key employees for top heavy purposes?

Thanks in advance. Ed

We have a plan that in 2003 (under a prior service provider and prior HR staff) somehow allowed an employee who had not reached eligibility to make deferral contributions and a matching contribution and a 3% nonelective Safe Harbor contribution were also made. We tripped over the situation because we saw an existing balance which came over in the plan transfer (the employee remains employed but has never worked more than about 700 hours in a year) but the employer did not for 2008 allocate the Safe Harbor contribution. The new HR person indicates she has "never worked enough hours" to become eligible and receive the contribution.

Given that this happened in 2003 and we are currently working with the 2008 plan year, where should we start to fix this? No Safe Harbor or other contributions have ever been made on behalf of this employee since 2003.

We have a plan using a Corbel volume submitter document that was not amended for the Final 401(k) in 2006. The IRS has just requested information to audit the plan for the plan year 2006.

This probably a dumb question, but does anyone have any idea of what the repercussions of this will be. Just want to give the client a heads up.

Thanks

I am assisting an actuary whose client wants to file their 5500 now for 2008. This will automatically trigger the Annual Funding Notice filing even though they are a small plan. Does the following appear to be correct:

For 2008 (Schedule SB numbers)

Total plan assets 2b

Carryover balance 13a

Plan liabilities 3d

At-risk 4b

For 2007 / 2006 (Schedule B numbers)

Total plan assets 1b2

Carryover balance 9h

Plan liabilities 1d2a

At-risk N/A

This seems too easy but it seems to provide the answers requested in DOL Bulletin 2009-01

DOV = 12/31/08. Carryover credit balance from 2007 Sch B = 45

2008 Sch SB lines

Line 2b: Value of assets @ DOV: 85

Line 3: Funding Target @ DOV: 100

BOY balances

Lines 9 & 13 = 45 (no reduction balances @ 01/01/08, i.e. line 12 = zero)

Following the Sch SB instructions,

Lines 14 & 15:

FTAP & AFTAP = (Assets minus Credit Balances)/Funding Target = (85-45)/100 = 40% @ val date!??

40% FTAP/AFTAP on Sch SB doesn't look good!

Also, the AFTAP of 40% is not correct because, per S436(f)(3) the credit balance is deemed to be reduced down to 5 so that AFTAP is 80%!

Do I show 40% on lines 14 & 15 or 80% but show reduction in balances of 40 on line 12 and balance of 5 on line 13?

Does anyone have a [preferably recent] comprehensive RFP template for DB plans that they are willing to share? We may be sending out an RFP for comprehensive DB services including actuarial, admin, custodial and trust services, and DB plan document and consulting services. Thank you.

Plan B accepted rollovers from Plan A, thinking they were eligible for rollover treatment, and then later found out that a portion of the rollover distribution was NOT eligible for rollover treatment. Plan B must distribute the ineligible rollover amount back to the employee. My question is whether Plan B would be required to withhold under Code Section 3405 when it distributes the portion of the rollover that was ineligible? I think that because this is a distribution of an amount that shouldn't have gone into the plan to begin with that there is no withholding obligation on part of Plan B, is this correct?

The reason I ask is that Plan A is trying to recoup a mistaken employer contribution in the Plan, in which some participants took distributions of their accounts and rolled them over into Plan B. If Plan B withholds, the employee will not have enough cash on hand to return the funds to Plan A that he was not entitled to to begin with.

We missed starting an active employee/participant's required minimum distributions in 2008. We plan on using VCP (so that the Service will waive the excise tax on participant) to correct under EPCRS. However, from the participant/taxpayer side....does the participant need to complete and submit the IRS form 5329 (the instructions to which are confusing) by the tax filing date for his 2008 return? That seems duplicative of the plan's correction but...???

Any other help/guidance on correction is appreciated. Luckily, we haven't had a failure to start rmds for many, many years.

Thanks.

I have a governmental 401(a) plan. It is my understanding that the remedial amendment period for 415 required amendments is the later of 7 months after end of plan year (in which remedial amendment period begins) or the last day of the next legislative session beginning after the amendment's effective date in which the plan amendment can be considered. Our remedial amendment period begins 1/1/09 as that is effective date of the amendment for our govt plan and we have a fiscal year plan year. Therefore, we think the due date for our 415 amendments is 7 months after June 30, 2009. Any confirmation or thoughts would be appreciated.

Employer has single-employer defined benefit plan for hourly union employees. In 2006, employer verbally agreed with union as part of collective bargaining arrangement to increase contribution amounts by specific dollar amount each month per employee. Due to other matters consuming management's attention, the verbal agreement fell off the radar screen and the plan was never amended to reflect the agreement and the additional contribution amounts were not made. Employer wants to correct this oversight, amend the plan and catch-up on the contributions. Can this be done retroactively without impacting the plan's qualified status.

Any thoughts would be greatly appreciated.

I've been working with my various COBRA Continuation packets. The second, abbreviated notice (for employees aready on COBRA) has no deadline mentioned that I can find for the former employee to return the completed "Request for Treatment as an AEI" form.

The 'full general' notice and the 'extended' notice both also include the "COBRA Continuation Election Notice" which has the 60-day deadline. (One would assume, in this case, the former employee would return both forms at the same time.)

I've searched and I cannot find anything that definitively states how long a former employee who is already on COBRA has to return the "Request for Treatment" form.

Any help with this would be much appreciated!

Is there a DOL default interest rate that can be applied to 4k accounts when gain/loss cannot be determined? This case is trying to reconcile accounts when inv statements are not available as all of this is being done for years beginning 2003. Greatly appreciated. DN