What actually is a 410(d) election? Is it simply an irrevocable written election to be covered by ERISA and to have participation, vesting, funding etc. provisions apply to the specific named plan? Is there any formal requirements as to what all has to be included (a sample)? What does the sponsor do with it once completed?

Plan Year 6/1/2008, plan has less than 15 participants, and one of them carries 80% of the liabilities. This one participant was diagnosed with terminal cancer April of last year, and passed away in August. Are we allowed to recognize events like these in the fas158 amounts as of 5/31/08?

Adopted 401(a) profit sharing plan as sole proprietor. IRS says 1. no deduction if there is a loss 2. should be reported as SEP on 1040 line 28 instead of Sch C and 3. advance contributions are subject to 10% penalty. Help! I see they are wrong on various "summary" overviews but sure could use a code section. Thanks

I'm helping a 401(k) plan that provides for matching contributions. It turns out that in a past year the plan administrator used an incorrect limitation on "compensation" (higher than the applicable 401(a)(17) amount), and therefore some employees had elective deferrals (and matching contributions) in excess of what the plan documents allow.

The plan will be refunding the improper contributions to employees, but the question has come up about what options are available for handling the matching contributions. The guidance I've found points to forfeiture, but this is in the context of elective deferral refunds related to 415 failures or ACP/ADP failures -- which, as far as I know, have not occured with this plan.

I'm assuming that forfeiture is the appropriate correction procedure, and that a refund to the employer would be a PT.

Questions:

Is forfeiture appropriate (and if so, is there a citation)?

Should there be a refund to the participant of the excess match to the extent the participant is vested?

If forfeiture is appropriate, should the forfeiture take into account gains and losses?

Assuming the excess match is properly forfeited or distributed, should the excess match nevertheless be taken into account for testing purposes?

Is there anything else I'm missing here?

We have a Cross-Tested 401(k) Profit Sharing Plan where most NHCE's receive prevailing wage contributions and all NHCE's receive the 3% safe harbor non-elective contribution. HCE's are excluded from receiving the 3% SHNEC. There is no profit sharing contribution for 2008. One of the HCE's (son of the owner) received 9.3% in prevailing wage contributions for the year. When running the a4 test, do the NHCE's have to receive 3.1% of pay (gateway) or just the 3% SHNEC? I think it's the 3.1% but just want to confirm.

Thanks!

This particular Plan was frozen effective 1/1/2008. The amendment to do so was adopted in May 2008 before anyone hit 1,000 hours. They would like to unfreeze the Plan effective 1/1/2008. With 412(d) they can still do this by 3/15/2009, correct? I just wanted to make sure before we went ahead and unforze the PLan for 2008. The effective date of the unfreeze would be 1/1/2008 and adoption date of the amendment would be today. THis is just a 1 person plan so no worries baout notice requirements.

Unfrozen calendar year plan.

2008 AFTAP = 80%

Plan sponsor intends to make 2008 minimum required contribution by 9/15/2008.

If 2009 AFTAP not certified by March 31, 2009, then effective April 1, 2009, 2009 AFTAP deemed to be 70% and lump sum restrictions apply. If contribution, had been accelerated, 2009 AFTAP would have been 82%.

However, 2008 accrued contribution cannot be included because will not be made by time of certification.

So, as of March 31, can you make a range certification "80 percent or higher" that anticipates the 2008 contribution and then issue a final certification after 2008 accrued contribution is made?

The firm that I work for seems to routinely allow retroactive plan termination dates for defined benefit plans (non-Title IV). For example, they are trying to terminate some now, effective 12/31/08, on the basis that there haven't yet been any 2009 benefit accruals. I say no and am becoming very unpopular.

Am I correct that there is simply no basis at all for doing a retroactive plan termination? This is one of those things that I thought everyone knew but now I'm starting to doubt myself.

Following a foreclosure sale of his residence, EE signs a "short-term" note in favor of ER that gives $3,000 to EE to use to pay first and last months rent and security deposit on a rental home. The note provides "The funds may only be used as an initial payment on the rental home. It is expected that EE will withdraw the funds from his 401(k) in order to repay the loan. Requiring payments from EE's future payroll does not appear possible because those funds will be needed to sustain his family with the daily expense."

Now, three months later, the ER has seeked assistance on the processing of the hardship withdrawal request by the EE so that he will have funds with which to repay the loan. The intervening note process is explained as having been need due to the last minute timing, and problems the EE had in trying to assemble the supporting documents to request a 401k hardship withdrawal at the time.

The plan's hardship provisions are safe harbor.

Thoughts on whether the 3 months since the loan was extended blows the possibility of this being a hardship for purposes of acquiring a principal residence?

Am I correct in my understanding that the excise taxes under Code Section 4975 do not apply to a 403(b) plan?

A 403(b) plan is not among the types of arrangements specifically listed as a "plan" under 4975(e)(1). It is also not listed in the instructions to Form 5330 as a plan subject to Code Section 4975. The Internal Revenue Manual also does not list a 403(b) plan as being subject to 4975. However, I have been unable to find anything that affirmatively states that 4975 does not apply to a 403(b) plan.

My specific issue is whether the excise tax applies for late remittance of participant contributions to an ERISA-covered 403(b) plan. Certainly, the ERISA penalties (20% under ERISA 502(l) and 5% under ERISA 502(i)) could apply, but it looks like the Code Section 4975 excise tax does not.

Any thoughts?

Thanks.

I have a control group of 2 plans. One is a SH NE Plan and the other is tested on Current. They pass 410b, do I have to combine both plans when doing the ADP test for the group that is not SH?

An employee has an HSA...and the employee and her dependents continue to be covered by a HDHP. The employee's husband (one of the dependents covered by the employer plan (HDHP) of his wife) has an IRA with a small account balance. No IRA rollover to the employee's HSA has occurred. May the husband's IRA be rolled over to the HSA of the wife/employee in a trust to trust transfer subject to the employee's maximum annual HSA contribution amount based on the type of HDHP coverage (single or family) at the time of the rollover? The issue is that the IRA is that of the husband...not the wife/employee. I can somewhat read the guidance to allow this but I couldn't find such explicitly stated...don't know if there is other guidance on this matter or if there is general interpretation of the guidance to allow/disallow this type of rollover. Thanks.

I have a small Retirement plan that has 5 participants with a 2008 decretionary contribution of $62,000. Isn't this over the $46,000 415 limit? What are my options to get back to compliance? Can some contributions be considered for 2009?

client owns 100% of S corp 1 and he, wife and 2 kids own 100% of S corp 2 , which does minimal business. S corp 1 has 2 plans, money purchase and profit sharing. both now have combined assets of about 120K. he has filed 5500s in prior years, does he still have to file based on the asset value of 120K? I think the answer is yes because of the controlled group situation......any way around this? He filed late last year and I was looking for a way for him to get around the penalty by not actually being required to file. ($775 penalty for each plan x 2).

Construction company currently sponsors a 401(k) Plan for the benefit of its non-union employees, as well as contributes to a bevy of various "union" plans for the benefit of its union employees.

A couple of former union employees reached their NRA under the union plan and are now receiving pension benefit payments from same. These same employees are continuing to work for the company - but now as non-union employees (i.e., the employer is no longer making contributions for these individuals to the union plan).

There are other former union employees who are also now "company" employees and are covered under the "company's" plan - but have not as yet reached NRA under the union plan and are not receiving pension benefits from the union plan.

The company would like to consider (unless it's more hassle than it's worth) excluding the "former union-now company" employees who are receiving benefits from the union plan from the company plan.

Definition of the "excluded class" would be something like: "Any employee who is currently receiving retirement benefits from Union Local 000 Pension Plan".

Their exclusion will not create a "minimum coverage" issue.

Just trying to see if this definitional approach for excluding these individuals sounds o.k. to those of you with more experience than I with such matters.

All comments, concerns, etc. most welcome.

Thanks!

OK, so I know there is no prohibition on having a -11(g) amendment add the lowest paid NHCE to the allocation first, and so on until coverage testing is passed.

My question is, are there any additional restrictions for -11(g) amendments on prototypes in terms of reliance on the pre-approved document? Or would this be OK?

With so much going on during this "economic downturn", I admit I have not been able to stay "current" with the all of the goings on coming out of Washington.

Does anyone know if there has been any "waiver" (authorized or proposed) of the 10% pre-mature distribution penalty on cash distributions to participants (under age 55) who have been terminated due to an employer's "downturn in business"?

What about a "hardship withdrawal" to prevent foreclosure on a mortgage?

Thanks!

This is a small town. The town bank serves as a trustee to a company's pension plan. The company is borrowing money from the bank/trustee and will be paying no more than a commercially reasonable rate on the loan.

Is this a prohibited transaction because both entities are plan fiduciaries? If so, is there an exemption?

Will the answer change if the bank knows that the company is going to use the loan to fund the plan, even though the plan sponsor, not the plan, is taking the loan? We are all very confused!

Thank you very much!

IRC 430(h)(4):

"For purposes of determining any present value - - - - , there shall be taken into account-

(A) - - - ,

(B) any difference in the present value of such future benefit payments resulting from the use of actuarial assumptions, - - - , which are different from those specified in this subsection."

For a Cash Balance Plan, with

i) the accrued benefit equal to the Hypothetical Account Balance, and

ii) 100% probability of the benefit being taken as a lump sum,

I want to use actuarial assumptions that result in the TNC being equal to the Contribution Credits, and the FT being equal to the Hypothetical Account Balance.

Does IRC 430(h)(4)(B) provide leeway to do that?

What do the words that I left out mean: "in determining benefit payments in any such optional form of benefits" - particularly where the benefit is the Hypothetical Account Balance?

Has the IRS issued any guidance for calculating 2009 AFTAP for EOY valuation?

In the absence of guidance, do we continue with the "good faith compliance" calculation in line with what was done for 2007 & 2008?

That is the 2009 AFTAP = adjusted assets/(Adjusted FT + Target NC) where assets, FT & NC are taken from the 2008 Sch SB and adjusted for balances, transitional FT % etc.

In that case, for EOY, the AFTAP shown on line 15 of 2008 Sch SB is of no consequence and is misleading as it does not apply to 2008 or 2009!, and one need not worry if the % is less than 60% - correct?

Where does the FTAP on line 14 come into play? Is it of any consequence?