Medical Practice 1 had a 401(k) Plan (Plan 1). Company dissolved and plan is instance of terminating. Most doctors went to work for Medical Practice 2 (new unrelated company.) Practice 2 sets up own new 401(k) (Plan 2.) Dr. K had self-directed brokerage account in Plan 1 (SDA1.)

Practice 2 sent deferrals and PS contributions to SDA1 for about six months. Then Dr K established a new SDA for Plan 2 (SDA2) and all assets were rolled over from SDA1 to SDA2.

What issues should I be concerned about? Does this constitute a PT? How do you book these transactions in the Forms 5500 for Plan 1 & Plan 2?

Does a POP (Premium Only Plan) need to file a 5500 if they have over 100 participants?

If a terminated participant is 40% vested but never takes a distribution and the plan decides to amend to 100% vesting....would this terminated participant automatically be bumped to 100%? Or could the plan still honor the 40% vested amount when the participant takes the distribution. I know a participant is essentially anyone with an account balance however I can see the plan sponsors side of this.

Hello,

I have never seen this question in this form before.

Participant wants to change his own account to a Trust. I suppose he has established a trust for all his assets and wants to change his SSN to the FID issued for the trust, and then use the name of the trust.

I know that a participant can designate a trust as his beneficiary, but changing the participant's account itself to a trust is not allowed, correct?

It seems to run afoul on two counts -

(1) the idea that he has deferred compensation and that he will owe ordinary income tax based on his individual tax situation for the year(s) of distribution. Changing to a trust would very possibly avoid or change that ordinary income tax treatment.

(2) It seems that it would be a prohibition under the Anti-Alientation clauses of 401(a) of IRC and 206(d) of ERISA, but want to make sure I am on the right track here as well. If the law allowed him to change his account to a trust, and he was the beneficiary, he could not be the sole trustee and that could potentially allow a change to a beneficiary without his authorization, thus alienating his account from him.

Thanks in advance for any feedback.

andmik

My understanding is that if a 403(b) plan is written to offer ' 'Unviersal Availability', as described in 403(b)(12)(A)(ii), that it is excluded from Title I and need not do annual non-discrimination testing.

If so, and there is no ACP testing, what prevents a school board from picking and choosing select employees to receiving a match or even an elective ER contribution?

BruceM

The IRS Q & A from the 2008 ASPPA annual conference included the following:

Question:

"A plan's audit revealed insufficient plan administrator documentation of the actual hardship distributions on file. The benefits manager disputes this responsibility, saying it is between the individual and the IRS. Are there any minimal requirements that plan administrators must conduct before allowing a hardship withdrawal?

"

Answer:

The plan must have sufficient information to adjudicate a claim. Reasonable evidence is needed. See, e.g., regulations relating to Katrina hardships for what you need to show.

I cannot find the regulations the IRS referred to. I read KETRA and IRS Notice 2005-92. Can anyone help?

Thanks!

Laura

Hi - I was wondering if it is allowable for a COBRA participant to change their elections mid-year. Our Health Plan rates are 2-tier...Single Coverage and Family Coverage (Family being more than one person). A COBRA participant currently has Family coverage (spouse and 1 child). They have applied for the State to insure the child, so he was wondering if he could change his election to just his wife and himself. First, is this allowed or does he have to wait til the annual Open Enrollment? Secondly, if allowed, would it still be family coverage or can they enroll separately under 2 single COBRA health plans to save money?

Thanks for any input!

If you want to cancel a 401k what are the procedures if any you would have to file with the DOL. Company doesn't provide a match and doesn't want to pay for it anymore. Can you abolish it in the middle of the year, or do you have to wait until the end of the year? Also, if the company wants to establish a SIMPLE instead, are there any time restraints they have to adhere by once they cancel the 401k?

Thanks in advance...

I subscribe to Sungard Corbel and use their plan document admin system.

I created a 401k safe harbor plan.

I chose the option where the client provides the "maybe" notice and the output provided a plan amendment that enables the client to reserve tje right to adopt a plan amendment no later than 30 days prior to the endo fo the plan year to provide the 3% nonelective formula.

However, the Corbel documents did not provide a sample plan amendment to actually adopt the safe harbor provision if they decide to do so late in the plan year.

Am I missing something. Doesn't the plan sponsor need to adopt an actual plan amendment later in year to apply the 3% safe harbor? Or is the supplemental notice sufficient?

Thanks.

I need help with the use of carryover balance for quarterly contributions.

My example is as follows:

Minimum contribution as of 1/1/2008 is $9,039 (also maximum contribution).

Carryover balance of $136,219 as of 1/1/2008.

Actuarial Value of Assets are $285,780 as of 1/1/2008.

Quarterly contributions are required for 2008 since there is a funding shortfall for 2007 (Curr Liability (1/1/07) - ((AV assets 1/1/07 - credit balance 1/1/07))) > $0. The AV assets was 241,088, CL 1/1/07 is 172,064 and credit balance is 116,030. Assets are greater than CL 1/1/2007 but due to the credit balance there is a funding shortfall, no exceptions???.

The client made a contribution of $9,058 on 12/26/2008 and $520 on 1/13/2009. Effective interest rate is 6.03%. We originally calculated the amount to deposit adjusted with interest ignoring the interest on late quarterly contributions.

The client can elect to reduce the carryover balance as of 1/1/2008 and apply towards the minimum contribution to reduce the cash required. Can the client elect to use $9,039 of the carryover balance as of 1/1/2008 to reduce the amount of the cash required to $0? If so, and using the above deposits are we all set for 2008? Isn't the amount of the interest on late quarterly contributions based on the minimum required contribution (prior to election by plan sponsor)? What am I missing?

Or can the carryover balance be used to satisfy each quarterly contribution? How does that work?

Hi, I work on several 401(k) plans and review the 5500's from recordkeepers (TPA's). I know that starting for 2008, the FAS 157 is now required - does this apply for both large and small plans? From what I have read, I can't tell if this disclosure applies to large plans only (as these would be required to be audited) or if this also applies to small plans. The TPA's have only provided the 5500, but are they required to also provide the FAS 157 disclosure or is this something that the plan sponsor has to provide? Has anyone else had an issue with this? Thanks

Our plan docs are being restated and we have the option to elect the ACP split testing method. I understand the basics of it, but can't find any good info on the pros and cons. For example, if I elect this method of ACP test, can I change it every year? Thanks.

We have a Safe Harbor New Comparability 401(k) Plan that was recently audited by the IRS. Upon completion of the audit, the only problem found (and they looked at a lot!) was that the 2005 Interim Amendments was signed late. The amendment was signed on 10/16/2006 and there was no extension to file the 2005 corporate tax return - so the amendment was signed roughly 7 months late.

In September 2005, the human resources manager from the company had retired and a new employee was hired. This new H/R manager was not aware of the deadline to have the amendment signed. We included the deadline date in our cover letter - but clearly, our office should have followed up and so, the error falls on both of us.

I handled the audit as far as I am qualified and feel that negotiating with the IRS is out of my area of expertise. A senior member of our Firm will handle this from here on out.

Is there any advice anyone can offer? I am concerned because although this seems like a minor error, the fee listed under Rev Proc 2008-50 Correction on Audit is listed as $7,500 for a plan with 71 participants. The IRS agent told me to expect the sanction to be double this amount - so $15,000. This seems so severe for a plan that is being run so well. So many things where checked and not one other problem was found.

Any advice would be appreciated. Like I said - I am passing the next phase of this on to someone with more experience dealing with IRS negotiations but would like to offer some pointers.

Thank you!

While thinking about the implications of freezing a DB plan to new participants (accruals will continue for current participants) an idea was suggested that we could give existing participants the option to cash out the lump sum value of their DB benefit provided they rolled it over to a 401(k) plan, concurrent with an election to choose to participate in the DC plan in lieu of the DB plan. While the DB plan currently has a lump sum option, that suggestion seems problematic on several issues: immediate, potentially heavy cash drain on the plan that could trigger higher required contributions, how to value early retirement subsidies, spousal consent issues, can that choice be offered without a distriubutable event, and would that trigger a partial termination in the eyes of the PBGC are just a few questions that come to mind immediately.

Does anyone have any experience in doing what I have described? Is there another critical issue besides the questions I identified above that I am missing?

If a sponsor wants to change from 6month to 1 year waiting period, is a notice required and if so, how far in advance. The hope is to amend that anyone hired on or after July 1, 2009 will have a 1 year wait. The argument is that when the amendment is made it will affect no one who is currently employed and therefore it would be more of an announcement than a required notice.

It just seems to me that everything should have an official notice at least 30 days ahead of time.

Any thoughts?

Jimmy

We are in the midst of rearranging our health benefits at our company from an FSA to a HDHP HSA. We have received conflicting information as to whether or not this can be accomplished in mid year. Our plan is to stop the FSA and then implement the HSA without overlap. Can this be done?

I have a borderline top heavy plan that is thinking of going to a safe harbor match only for 2010. This plan hovers in and out of top heavy. They have the following idea.

In November, 2009 notice goes to all employees about the safe harbor match;

In February, 2010 we prepare the top heavy calc as of 12/31/2009;

If the plan is top heavy all goes on as planned. If the plan is not top heavy they (with proper notice) stop the top heavy match and revert to ADP/ACP testing. They would fund the match up to that point.

So far - I'm with them -- but they are talking about applying this procedure year after year. I'm wondering if there is a problem with this. Too frequent changing of method?, Too many amendments (assuming they keep bouncing in and out of top heavy?).

Also, I have researched the following on The ERISA Outline book but would like any contrary opinions:

a) You cannot exclude statutory ineligibles from the safe harbor match and maintain the exemption from top heavy (deferral eligibility is immediate);

b) You can exclude certain HCE's - even if not key - from the safe harbor match.

Thanks for any and all thoughts

S

Participant wishes to insure his spouse. I believe that this would be a violation of the "exclusive benefit" rule and possibly some other rules. However, I cannot find a specific citation for this particular scenario. Can anyone help?

Under 1.401(k)-1(d)(3)(iv)(E) a distribution is deemed necessary to satisfy an immediate and heavy financial need if "the employee has obtained all other currently available distributions..." and is prohibited from making elective contributions for the following 6 months.

Does anyone see a problem with structuring a plan to provide that a participant may not take an in-service withdrawal from his or her profit-sharing account until he or she takes any available 401(k) hardship withdrawal? In some ways this seems to be drafting around the 401(k) rule that provides that other distributions (like profit-sharing distributions) should come first. However, the 401(k) rules say that all other "currently available" distributions must be taken first - so if the plan doesn't permit profit-sharing withdrawals before 401(k) withdrawals, then the profit-sharing withdrawal isn't "currently available" when the participant is seeking a 401(k) hardship withdrawal.

Any thoughts or links to guidance would be greatly appreciated. I didn't see any PLRs on point, but if someone knows of one, I would love to have the cite.

Many thanks!

Investment oriented institutionally priced life insurance (ILI) is now available for personal ownership if an employer validates the role and compensation of the employee. ILI is only available to mid-upper income white/gray collar employees. Hence, just as you can't buy retail life insurance without your doctor validating your health, you can't buy ILI without your employer validating your employment and compensation to qualify for the ILI GI risk class. Employers have no costs or administrative requirements ... simply validate employment.

Is an employer legally obligated to validate employment, role and compensation if an employee requests it, or merely a convenience?

If convenience, if employer refuses to validate thus denying coverage, is the employer at risk if the employee becomes uninsurable while employed? Obviously the employer has a credibility problem, but do they have a legal problem?

Thanks.