I have an employer that wants to stop the current match. The match is discretionary and is deposited each pay period. However, they want to amend the Plan to allow for a match at year end and apply a last day rule. My concern is that employees have already accrued the benefit. They are laying off employees near the end of the year and I feel this could pose a problem if they are not given the match. Any suggestions?

My company was listed in BrightScope (www.brightscope.com), a new company that ranks mid-to-large 401(k) plans based on plan costs, investment fund quality, employee generosity etc. My company ranked poorly, and in my opinion and that of our investment advisor, unfairly. I was able to submit updated data to them (data was as of the 2006 5500) and we improved, but I still disagree with several of their scores.

You may want to check out their site to see if your plan is mentioned. You may be surprised with the results.

Wondering if anyone has worked with them. Their business model is fee-for-service, advising plan sponsors on what they can do to improve their plan. Most of the data they use is public but they also use some proprietary data and in-house analysis to arrive at their scores.

Just received a question and I would like someone to speculate on why an organization would consider taking a particular action that has been recommended by a hired consultant.

Would some smart and experienced accountant please tell me why an organization would ask whether a cost basis can be changed without actually selling/buying securities. The one making the inquiry would like to establish a new cost-basis.

This seems very odd. Does the consultant's suggestion seem sound?

To me, not having an accounting background, it seemed that the only way to re-set a cost basis would be to buy or sell securities.

Also, what would resetting the cost basis do to a book value?

Thank you.

My least favorite topic - compensation. I would appreciate any help.

1. If a plan is using W-2 wages per the adoption agreement, and the employer is taxed as a partnership where the partners only receive K-1s, do I have an issue with the partners receiving an allocation?

2. Doctor leaves the practice and is receiving trailing income which they are calling "continuing compensation". It will be reported on a K-1. This is a standardized DC plan, he is eligible for an accrual at year end. Would I include the continuing compensation when calculating his contribution? One attorney told me this would be "deferred compensation" and excluded under the 415 amendment but I can't come to that conclusion.

3. Generally speaking, the final 415 amendment clarifies/modifies the definition of 415 pay. 415 pay is used for various nondiscrimination tests and top heavy. However, if plan is using W-2 pay for allocation purposes, how do I justify looking to the 415 amendment for issues on severance pay, last few weeks rule, etc. for purposes of pay used for contribution calculation?

Thanks!!

Hi - I don't know if anyone can advise me but thought I'd give this forum a try.

The company I used to work for (call it Company A) was bought out 2 years ago this July 1st. At that time I was 100% fully vested and the ESOP was bought out at 3X the stock price if I remember correctly. We were told that the IRS had to review the sale of the company before any ESOP checks would be disbursed (at least that's they way I remember it being explained to me, I'm no financial genius). Any time I asked the HR dept at Company A they just say the IRS is still working on it and don't have any other information. I find it hard to believe that it would take almost 2 yrs for this to be reviewed/approved.

Who would I call/email/mail at the IRS to get some information on this and what sort of information will they need me to provide?

Thanks!

Client terminated a 412i plan and rolled the Life Insurance policy and an Annuity Contract from the 412i into a brand new the 401(k) PS. The client is the only participant, and there are no other monies in the 401(k) Plan.

According to the ERISA Outline Book (2009 version Volume 2, page 3b.75). There is an exception to the incidental benefit rules if the insurance policy is purchased only with seasoned contributions--with the idea being that the plan can allow seasoned contributions to be distributed immediately.

The client intends to use the cash value from the annuity contract to pay premiums for the Life Insurance Policy.

I know that rollover monies are not the same as seasoned profit sharing contributions, but if the plan allows for the distribution of rollover monies immediately does the same logic apply.

I submitted a question to TAG on how the incidental benefit limits work on a rolled over insurance policy, and they said that the incidental benefit limits still apply to all insurance policies regardless of whether they were rolled over or not.

Anyone thoughts (even better a lead to some reading material) would be greatly appreciated!

Would it be permissible for an employer to add a Prevailing Wage (davis bacon) source to a plan but only use that source for some of the davis bacon employees? For example, if the employer has several offices in different states, could they only put the davis bacon fringe for the workers of 1 state in the plan and simply pay the fringe in cash to the davis bacon workers in the other states. I don't see a reason why they could not do this but not sure.

An ERISA-governed 401(k) retirement plan provides participant-directed investment, and is meant to meet the conditions for ERISA 404© relief. The plan's sponsor and administrator would prefer to provide in the plan and its written investment-direction procedures (and describe in the summary plan description) that a participant, beneficiary, or alternate payee may give his or her investment direction only by computer or telephone, and not by paper. Allowed? Is a rule against paper consistent with the ERISA 404© condition that a participant must have an opportunity to give his or her investment instruction? Does anything else in ERISA make this no-paper rule impossible or impractical? (For clarity, the plan administrator understands that disclosures to a participant must allow a paper option, but is asking rather about whether plan procedures may restrict the form in which a participant renders his or her investment direction to the plan.)

Does anybody have a "sample" claims procedure or know where I might be able to find some good language? I have to update a large number of H&W SPDs and I know the old claims language is inadequate.

Thanks again and have a great day!

Client has a plan year ending 12/31/08 and has now elected to make a discretionary match to the plan. Based on the amount the client wishes to contribute, the ACP test is projected to fail.

Can the allocation of ER Match be reduced for the HCEs that would be scheduled to receive a refund of excess aggregate contributions, thus avoiding the 10% penalty and the return of the excess contribution to the participant? I'm getting two different opinions on this matter. Thanks.

When applying the 401(a) & 410(b) test to a Hybrid 401K/Cash Balance Plan do you; 1) include the Hypothetical Cash Balance Allocation in the total allocation/contribution as a basis for determining the Benefits as a % of Comp for the purpose of establishing rate groups?; and 2) Do you include the same Hypothetical Cash Balance Allocation in the calculations for the Average Benefits Test?

One man Plan. Terminated March 2008. Assets were distributed March 2009. Will file a 5500-EZ and prepare Schedule SB for 2008, and a 5500-EZ for 2009. Does a Schedule SB need to be prepared for 2009?

I have a small DB plan where the benefits were frozen in 2007. There are no more benefit accruals, but there are still life insurance premiums to be paid.

For the plan year starting in 2008, is the TNC equal to $0, or is it equal to the term cost of the insurance?

If we change our eligiblity requirements for a self-funded health plan to be from "normally works 24 hours" to normally works "32" hours - is that a qualifying event for COBRA for the employees who lose coverage as they no longer have the requiste number of hours? I don't see how it is but want to be sure. DOes anyone see an issue with this assuming this doesn't discriminate in favor of the HCEs.

thanks

We took over a db plan with 4 attys (partners)and 10 staff.

partners assumed they would each get what they put into plan when they left.

we told them dbs dont work that way;especially after assets have been lowered by market "downturn"

Besides a cash balance plan;does anyone see "outside agreements" that partnership agreement puts in to "equalize" these inequities?

We are TPA for Company D and this the scenario:

Company D was acquired by company E and is now considered a legal entity of E.

D had a 401(k) plan before being aquired.

After the merger, participants of D's plan make contributions to E's plan.

D is currently operating as D, Inc. a division of E, Inc. sending out invoices and paying vendors and paying employees as D.

The merger happened almost a year ago and participant's are wondering if they can take their money out of D's plan. Are there general rules regarding this, or would something be stated in E's document? E has not contacted us regarding D's plan.

We have not had to deal with anything like this in the past. Any thoughts would be appreciated.

Does anyone use the Lincoln National Life prototype document? We are looking at a takeover client and the SPD states participants must work 1000 hours in a six month period to be eligible. We were wondering if the 1000 hours and six months was an option which was hard coded into the document or if the document utilized blank lines to fill in the hour and month requirements.

We usually prorate the 1000 hour requirement with additional language stating if the participant works 1000 hours during any eligibility computation period they are eligible to enter the plan to avoid any IRS challenge regarding discrimination. However, I cannot find any documentation which states requiring 1000 hours in a period of less than 1000 hours is not allowed. Does anyone know where I might find some documentation?

Assume small TPA firm has services agreement with small 401k safe harbor plan to provide compliance testing, calculate contributions, and process 5500. Plan sponsor advises TPA that Plan Sponsor is undergoing bankruptcy. 2007 completed services, have not been paid for. 2008 5500 coming due soon (7/31/09).

Relationship is good, no acrimony, and amount of past due invoice immaterial to TPA's practice and TPA willing to just let it go in order to not spend time trying to collect.

TPA wishes to terminate agreement to provide services so as not have to complete 2008 work (eg knows won't be paid).

Service agreement doesn't cover specific time periods and says that written notice may be provied by either party to terminate. Service agreement doesn't specifically state how much advance notice must be given. If notice were given now (eg May 2009) that services are terminated and the written notice states that the 2008 services will not be performed, does this alleviate the TPA from having to complete the 2008 work.

I know technically this is a request for a legal opinion that but that is not what I am really after. I am more or less curious if others have run into this issue and how they have handled from a timing standpoint in terms of what is "reasonable notice."

Thank you for any assistance.

I have a client (files the Schedule I) that has it assets held with a collective trust (CCT). My question is do they need to file a Schedule D for 2008 (more than 25 participants in the Plan)? Everything I read about the Schedule D is conflicting on where or not it needs to be files for a small plan and CCT.

Company A is the parent of Company B. Both A and B operate in similar segments of the same industry. They each have collective bargaining agreements with the same union. However, each collective bargaining agreement provides for contributions to a different pension fund. Company B wishes to transfer a substantial number of employees from its payroll to Company A's payroll where the CBA provides for substantially lower contributions to that penson fund (there's no 70% issue here). Company B will continue to be liable to make contributions under its CBA for the remaining employees. Is there a partial withdrawal under Sec 4205 (b)(2), including the PPA "contract out" amendment?

Company B is trying to shift employees from the higher contribution CBA/pension fund to the lower CBA/pension fund. Both Funds have substantial withdrawal liabilities.

Comments would be appreciated.

RHB401