Last year we consolidated several good sized plans into a single successor. The final filings for several of those plans had gaps in their SSA schedules.

Specifically, we did not report those participants who had earlier been reported as Adds to the big plan, but which now have to be reported as Deletes to that plan and C's for the new plan.

QUESTION 1: So all that is simple and straightforward, but what raises the question is that there will be about 14,000 D's to the old plan and C's to the new plan. Does anyone have any experience with eFast filing an SSA that is that large?

Question 2: We've had so many unfounded inquiries from former participants, based on letters from the Social Security Administration that we'd like to do a final sweep, coding D for all past distributions to make sure that we did not miss any. But that sweep would give us about 280,000 D's. Anyone wih thoughts on the concept or the reality of trying to do the filing?

Thanks for any thoughts.

I have a client with a SH 401(k) plan. They staisfy the SH via the SHNEC. The Plan also has a profit sharing allocation as an integrated allocation of 81% of the TWB. They want to "Max out" the HCEs who make 230,000.

Questions

1) My understanding is that if this were a non SH plan (standrad 401(k) plan), the regular PS allocation would be considered a design based safe harbor as far as 401(a)4 is concerned. (As long as the integration portion does not exceed the 5.4% on the excess and is not more that than the % on the base. For example 7% on base comp and 5.4% of comp in excess of the 81% of the TWB.) Correct?

2) Because it is a safe harbor, each person is required to receive the 3% SHNEC first and then the integrated allocation of 7% on base plus 5.4% on excess. This combination allocation requires 401(a)4 testing as it is now not a safe harbor allocation design. (There are people who are not getting the "uniform" allocation soely under the permitted disparity formula.) Correct?

3) Based on #2, this plan fails the allocation method of 401(a)4. Therefore, the plan must be cross tested to ensure passage. Therefore, those employees who have qulaified for the SHNEC and not the integrated NEC would have to receive an additional allocation to ensure that they meet the gateway contribution. Correct?

Any responses are greatly appreciated

A 401(k)/PS plan just received an $8,000 check from a mutual fund company for their 401k plan as part of the SEC settlement with the mutual fund company to reimburse mutual fund holders for excessive trading costs, etc. for the period 2000 to 2003.

Since the date that is being used to determine the $8,000 figure is what the mutual fund company shows as recorded on September 30, 2003, who gets the money and how is it to be allocated? Do we need to go back to September 30, 2003? Could it just go into the current plan to allocate to current participants or to offset current plan expenses?

Many of the participants back in 2003 have retired or terminated. Do you think the IRS/DOL would accept a reasonable cost/benefit analysis to determine if it's really worthwhile to try to allocate an $8,000 check on balances that are almost 6 years old and to participants who are no longer in the plan?

I am working with my colleagues on a take over 401(k) PS plan that has language regarding a mandatory 2% contribution as defined by 401(m). (I did not know this was allowable in a DC plan. If someone could point me in the right direction to read more about this I would greatly appreciate it.) Based on what they have told us:

1) They first said is a pre-tax contribution. However, I do not see how this is possible based on the referenece to 401(m). I would think that it has to be an after-tax contirbution. Can this be confirmed?

2) They then said that it is a non-elective contribution. I assume that they meant that the participant could not waive out and it was required. I do not think they meant a non-elective (PS) contribution as I would think of it. Does anyone see how this type of contribution could be the "standard" non-elective contribution (including the idea that it is under 401(m))?

Any replies are greatly appreciated. I have some other issues which I may address based on the answers to the above.

Thanks in advance.

We administer a 30 participant DB that had recent investment losses.

The corporation that sponsors the plan is 100% owned by a family trust. The four beneficiaries (the kids) each have a 25% interest. I believe each are then deemed to own 25% of the corporation. Only one of the siblings (James) is a participant in the plan, and he is age 68. He is entitled to about 60% of the benefits.

The business will be sold at the end of next year and it is unlikely the plan will have sufficient assets to pay benefits. If he were a greater than 50% owner he would have no problem waiving a portion of his benefit. Given the fact that the trust owns the corporation, that will not be possible.

Could James (with spousal consent) execute a suspension of benefits notice to stop receiving an actuarial adjustment in the meanwhile and thereby stop the bleeding? He has never been in pay status.

Plan requires year of service w/ 1000 hours and computation period changes to plan years. Plan year is calendar year and we are using the Corbel prototype.

Employee was hired 7/19/07, terminated 12/28/07 and worked 582 hours during this period. Employee was rehired 4/28/08 and worked 1000 hours by 12/31/08. He did not meet 1000 hours during period 7/19/07 through 7/18/08.

Does this person meet a year of service on 4/27/09 or 12/31/08?

Basic plan doc states that computation period shift to plan years unless prior service is disregarded under the break in service rules section. That section only relates to excluding prior years of service due to the rule of parity, but this person never earned a year of service to be disregarded under this section.

For our 401(k) plans, we do not do a coverage test if certain conditions apply: no HCE’s, no NHCE’s, only collectively bargained employees benefit, no last day requirement, exclude only union/nonresident aliens, no controlled groups (or all participate), exclude only Termed with < 501 hours.

Do any of these exceptions apply to a 403(b) 410(b) coverage test? Are the exceptions identical or are there some that apply only to 401(k) or 403(b)? I don’t want to be running a 410(b) test in a 403(b) plan if I don’t need to.

Thanks!

Hi:

We recently (January 09) switched to a HDHP with HSA and offered a Limited-Purpose FSA for dental and vision expenses.

An employee elected to contribute $1000 to the Limited-Purpose FSA earlier in the year and is only now realizing what that actually means (i.e. needing to spend $1000 on dental and vision expenses as well as pay for her HDHP expenses). She has been contributing since January 09. She does not anticipate having $1000 worth of dental and vision expenses from now until the end of the calendar year and wants to know if she can end the FSA contributions. As far as I understand the system, because she does not have a change of status, she does not qualify for a termination or change of the FSA.

Are there any other options out there for her to utilize?

Can she pay a penalty or tax and use the FSA funds for other expenses?

Can she roll the funds over to her HSA? We do have a grace period at the end of the plan year. I've tried to do some research on the transfer of funds to an HSA, but see nothing about a Limited-Purpose FSA, only a Medical FSA. I'm also not sure that I fully understand this option in general.

Would she be able to use the funds for retirement (she is over 65)?

I wasn't able to speak with our plan administrator today, but I wanted to answer our employee's question as soon as possible. Any help on this would be greatly appreciated! Thank you!

Would EACA permissible withdrawals be considered a protected benefit under IRC 411(d)(6)?

For example, the Employer allows EACA permissible withdrawals during the Plan's 2008 Plan Year. During that year, the Employer decides that permissible withdrawals are too administratively burdensome and will no longer permit such withdrawals for the 2009 Plan Year.

Plan is top heavy for years 2004 thru 2007 and the Employer failed to make contributions in the amount to satisfy the top heavy minimum. The Employer now wants to make the top heavy minimum for those years.

Since there is no absolute deadline for making a top heavy minimum can they ever be considered "late." If they are not considered late, must the top heavy contributions due be adjusted for earnings (and I assume losses)? What would the starting date be for determining earnings? For example if the t-h contribution was for the 2004 year, would earnings be calculated from say the tax filing date for the 2004 year up until the time the contribution is made to the Plan?

Our client recently received a CP-403 notice from the IRS stating that her husband, who past away in October of 2007, never filed a 5500-EZ for the plan year ending 12/31/06. He had filed returns in the past and the total value of the plan at 12/31/06 was over $100k. She has never had any envolvement with the returns and has no idea why her late husband did not file. Does anyone have a idea of how we can avoid IRS penalties? Any suggestions on a good reasonable cause?

Thanks.

61 year old participant dies leaving a benefit of about $400,000. 47 year old spouse is sole beneficiary. In the following few months, she has withdrawn about $138,000, most of it going to children and who knows what. Broker would like to help her protect what is left (really).

From a tax aspect, may she roll the balance of the account into her own IRA and begin taking substantially equal installments and avoid the 10% penalty? I believe she can roll into an inherited IRA and withdraw without the penalty but she may run into the RMD rules sooner than later.

Thank you.

Kate Smith

Company A (large national co.) ownes company B. Company B acquires company C through asset sale. Company B also owns Company D which will merge with company C to become Newco. All companies have 401(k) plans which Newco can adopt or merge assets into. If Newco continues with Company C existing plan, TPA says it will only require an Amendment to plan to change name, tax ID, waive 90 day waiting period for Company D employees.

Assuming Company C is the one chosen, given the new name & tax ID, can current participants be given the right to take a distribution at time of transition? What are employee rights at a time like this?

If Newco goes with either Company A or B plans, can Newco force all existing participants in C & D to merge into the chosen plan?

From what I have read, if the plan is terminated, employees have option of distribution or rollover into qualified plan. But if plans merge, the rules change? How does same desk rules apply here.

I am very new at this and have been asked to participate in the discussions as the "employee voice" and just want to make sure I have a full understanding.

Thanks in advance for your help!

Is it permissible for a loan policy to limit plan loans to only fully vested participants?

Does having two matching formulas, one with allocation conditions, cause BRF testing due to different rates created by the allocation conditions?

For example, plan has payroll by payroll match of lets say 50% up to 5% of pay, no allocation conditions. Then plan has a discretionary match for anyone employed on the last day. Lets say the formula is 50% of pay up to 6% contributed. Under the first formula, coverage will be passed, but not the second formula. Do you apply one ACP test to both matches, and then BRF test the rates, or just do a coverage test on the second match?

Any help would be appreciated!

I was wondering whether anyone knows of a good resource that discusses the security law issues of nonqualified deferred compensation plans? I have the Corporate BNA entitled "Securities Law Aspects of Employee Benefit Plans" authored by Mr. Maldonado right in front of me but it seems to focus more on qualified plans.

The issue is whether a salary deferral plan for executives which allows the participants to elect to forego a portion of their annual salaries, have such amounts placed in a rabbi trust or some other vehicle, and then have such amounts paid to them at some specified time in the future (death, disability, separation from service) will be deemed an offering of securities such that an exemption is required.

No employer securities would be involved in the arrangement. The cash placed in the rabbi trust would probably be invested in mutual funds.

Any thoughts?

Can I simply convert an IRA distribution to my Roth? I retired this year at age 75. Also may want to convert part of the distribution next year.

A DB call center operations function will move from location A to location B. There will be 100% turnover in assigned staff because of the location change (driven by consolidation on the part of the service provider). Would it considered prudent to visit the new call center on site? Would that protect the fiduciaries in any way or demonstrate fiduciary prudence?

Conversely, do you think not visiting the new call center operation on-site would be imprudent or expose the fiduciaries to any risk?

The fact that location B is in a very attractive location, especially in January when it would be very nice there and could snowing where I live, is irrelevant.

I have a situation where the participant is the child's grandmother. The child is the grandmother's tax dependent and the child's parents are not in the picture.

The grandmother is employed full time.

The grandfather, however, is retired, but older. He is not able to take care of a 4 year old at all.

Can she participate in the dependent daycare account, or is she prohibited because she is married and her husband is not gainfully employed?

(I personally would never leave a 4 year old with a 70 year old).

Thank you.

Can someone explain to me the difference between a 401(a) and a FICA / Social Security Alternative Plan? Doing various searches on the web I cannot find a clear distinction between these. In some cases I'm thinking that a FICA / Social Security Alt Plan is also a 401(a).

I've noticed that TIAA Cref, Fidelity and other large carriers provide these plans typically to universities, some non-profits. Some plan descriptions explain that their plan mandates participation and the previous employee FICA payment of 6.2% will now become a 7.5% contribution into the new plan thus eliminating Social Security. Other 401a plan descriptions never mention this.

So, is a FICA / Social Security Alternative Plan an option within a 401(a)? Can this also be an option within a 403(b)?

Thanks in advance for your time.