DOL audited employee deferral contribution for 2006 - 2008 and came up with a penalty for late transmittal of $12. Now they have sent a letter recommending filing 5330 so when they send their findings to IRS in Ogden, we will already have filed. For 15% of that $12.

Anybody have experience with 5330's for these miniscule amounts? Does IRS really look for small amounts like this?

Could we donate to our favorite charity instead?

A client has a DB plan that he wants to terminate.

The plan was effective around 2002 or so.

Over the years the attorney may or may not have kept up with all required amendments, such as GUST, EGTRRA, PFEA, PPA, HEART, WRERA and so forth.

My thought is to restate and terminate the plan using the approved Sungard Relius document with all pertinent amendments in the plan and of course the salient plan provisions re: plan formul included, instead of trying to patch the old plan with various amendments.

The approach of using a Sungard document with their approved and/or current amendments seems like a clean and efficient technique without trying to sort through the old document and its amendments or lack thereof.

Does this seem like an acceptable approach?

Thanks.

Is there any commentary or authority on the treatment of an annulment as a COBRA qualifying event (i.e. the same as a divorce)?

We wanted to talk to someone about it, as we are considering doing this in-house to cut-out the expensive middleman (i.e., recordkeeper), particularly on small plans.

We use relius for admin work right now....

Please send me an email if you would be willing to talk to us.

Plan's AFTAP was determined without regard to FSCOB on 1/1/2008 and was certified as 147%. This is in accordance with IRC 436(j)(3). Instructions to completing line 15 of Schedule SB, however, indicate that AFTAP should be computed in accordance with IRC 436(j)(2) -- i.e., subtract FSCOB from assets, which in this case would be 57%. My inclination is to show 147% under the assumption that the instruction is inappropriate and than showing 57% suggest all sorts of nasty stuff applies, which don't.

Note that Schedule SB instructions indicate FTAP, line 14, are to subtract credit balances. AFTAP line 15 is not as clear.

Any thoughts?

Calendar Year Plan has 2008 quarterly contribution requirement of $50,000. 2008 contribution requirement is $300,000. Plan also has substantial FSCOB which could be applied to take care of $300,000 minimum.

Plan fails to pay $50,000 on 4/15/2008 and 7/15/2008. On October 1, sponsor contributes $300,000. Plan assets decrease 30% over 2008. ERGO, sponsor elects on 4/1/2009 to apply FSCOB to cover $300,000 minimum in 2008 and add $300,000 to PFB and forego pouring $75,000 of FSCOB down the water closet.

It appears since election to apply FSCOB was made well after quarterly due dates, PBGC should have been notfied of missed quarterlies (at least once).

Question: In determining excess contributions 1/1/2008, what should be the discount rates? I.e., should 5% penalty apply? I argue "no" since funding obligation was honored effective 1/1/2008 when 4/1/2009 election was made to apply FSCOB. So, PBF 1/1/2009 is simply $300,000 x (1+EIR)^(3/12).

Comments?

SEE REVISED POST BELOW

We administer a 401(k) profit sharing plan where the plan sponsor is a real estate agency (corporation). Several of the agents in the office have the opportunity to purchase shares of the corporation. One of the sales agents wants to purchase shares with his account in the 401(k) profit sharing plan (this sales agent is a non-owner and does not have an operational title).

Does this constitute a prohibited transaction?

Any thoughts would be greatly appreciated.

Thanks!

Can hardship distribution be take from Employer 401K safe harbor contributions?

Document says yes but insurance company says IRS says no and will not allow.

Small employer with 4 employees (1 owner and 3 employees) who were all employed on 12/31/2008. It's time to file the 2008 Form 5500 and make the 2008 3% safe harbor contributions, but the company is out of business and there are no corporate assets. The owner has filed personal Chapter 7 bankruptcy. Do the participants become creditors for their 2008 safe harbor contribution? Do they have to file something with the bankruptcy court?

We recently took over a 401(K) plan and the definition of compensation is W-2 Gross (Box 5).

The client also sponsors a Section 125 plan.

The previous TPA was using W-2 box 5.

The plan document states that the ADP/ACP tests shall be based on Gross W-2 w/o reduction for employee deferrals or employee contributions to a 125 plan.

Client wants to reduce W-2 by contribution to the 125 plan.

Would this be OK??

Section 504 of PPA 2006 requires plan sponsors to begin posting their 5500 forms for all plans subject to Title I (retirement and welfare) "on any intranet site maintained by the plan sponsor." If the sponsor is a member of a controlled group of corporations and all members of the controlled group participate in the plan, do the controlled group members need to post the 5500 on their intranet site? They are not the sponsor but their employees participate in that plan. Would anyone like to opine?

2008 calendar year plan. SH match plan to start the year, but SH match was suspended 3/31/08 after proper notice. After the amendment to suspend the SH match, a discretionary match is available for 2008, requiring 1,000 hours and employment on the last day of the year. Two new participants enter the plan 7/1/2008. They complete 1,000 hours in 2008 and are employed on 12/31. No discretionary match is made for 2008 and no forfeitures are allocated. They were not participants while the SH match was in effect, so they get no matching contributions for the year.

Are these two considered as benefiting or not benefiting for the 410(b) test on the 401(m) portion of the plan?

Our valuation software counts them as benefiting, but I'm thinking they should be counted as not benefiting. I don't see them as being directly or indirectly eligible to receive an allocation of matching contributions since there is no match for the portion of the year they were participants.

Anyone else have an opinion?

A plan sponsor adopts a new defined benefit plan effective 1/1/09. The plan's benefit formula grants prior service credit. As such, each eligible participant has an accrued benefit as of 1/1/09. The purpose of granting prior service credit is to create a cushion amount and increase the maximum deductible contribution. Lets assume the following:

Funding Target as of 1/1/09: 200,000

Target Normal Cost for 2009: 0

Assets as of 1/1/09: 0

Shortfall Amortization Balance as of 1/1/09: 200,000

Since the plan grants prior service credit, the benefits are accrued as of 1/1/09 and there is no target normal cost for the year. In this case, each participant accrues 1/10 of the 415 dollar limit as of 1/1/09.

Two questions -

(1) Does it make sense that the Minimum Required Contribution is the amortization of the $200,000 shortfall amortization balance (or lets say about $40,000)? If the plan had not granted prior service credit, the Minimum Required Contribution would be $200,000.

(2) The AFTAP as of 1/1/09 is 0% (0/200,000). Is there an exception for new plans or would the plan have benefit restrictions the first year?

Under a partial plan termination, vesting of the affected participants is required TO THE EXTENT FUNDED. I take this to mean that vesting is granted to non-vested affected participants only if the plan's assets exceeds the Priority Category 5 plan termination liability. Is this a correct interpretation? If so, I would guess that in the current environment, not much extra vesting will be happening. Or said another way, if the assets are below the PC5 liability, who cares if a partial plan temination has occurred?

Does anyone have or know of any spreadsheets that show all the calculations for cross testing a dbdc combo. We are trying to create one for plan design use and thought maybe we wouldn't have to invent the wheel all over again.

Has anyone dealt with the situation where the actuarial value of the remaining distributions to a DB plan participant is not sufficient to recoup an overpayment? Our participant has been overpaid by almost $30k. The actuarial value of the remaining distributions is only enough cover about half of that.

I know EPCRS generally permits a fiduciary to recoup overpayments by reducing future benefit payments, but does this include reducing them to $0? If not, any thoughts on where the floor is?

Our options seem to be either: (1) start paying the correct benefit amount and try to recover the $30k from the participant, or (2) cease paying benefits altogether and try to recover the $16k from the participant.

Thoughts?

I have a client who forgot to default a loan during 2008. They discovered this and want to know how to correct. Can they issue the 1099R in 2009 showing the correct amount of the loan default, or do they have to do a late 2008 1099R and have the participant revise his tax return for last year?

Plan currently doesn't allow for a distribution prior to actual retirement or separation from service even if the participant has attained normal retirement age.

One of the partners in the firm has attained normal retirement age and would like a distribution. If the plan is amended to allow for in-service distributions upon attainment of normal retirement age, is it an issue if no one else has attained normal retirement age? Is that a benefits, rights, and features issue?

Why does the IRS insist upon pain of sanction that one may not maintain a model SEP alongside another retirement plan?