"The proposed regulations would provide that a plan’s prefunding balance and funding standard carryover balance as of the beginning of a plan year are adjusted to reflect the actual rate of return on plan assets for the plan year. This calculation of the actual rate of return on plan assets for the plan year is determined on the basis of fair market value and must take into account the amount and timing of all contributions, distributions, and other plan payments made during the year." I would interpret "other plan payments" as expenses paid out of the fund, for example.

Taken literally, this has the potential to be one laborious, tedious, and nasty mess. If you had to go transaction by transaction, then for a large plan, you would need a feed from the asset provider or providers. Some of my plans have assets with 4 to 5 fund managers each having its own unique reporting system.

Has anyone heard (e.g., at a meeting or teleconference) that the IRS would accept ye olde i = (2 x I) / (A + B - I) as reasonable?

One of our physician groups added the Roth 401(k) feature. The assets are held in self-directed brokerage accounts at Schwab. Schwab insisted that the Roth contributions go to a separate brokerage account, even though we do the trust accounting for the plan and the other sources are co-mingled in one brokerage account.

Does anyone know if there is a federal requirement that Roth contributions be held in separate brokerage accounts? It doesn't make sense since the funds are comingled when invested in platforms like American Funds or MassMutual.

Thank you.

I have a client who has one contract with an insurance company that covers LTD, AD&D and Life. The insurance company sent one Schedule A with the premiums broken out. Can this be filed on one Form 5500 or should a separate return be filed for each benefit?

I always do an EOY val for my cash balance plans. I have a takeover that is BOY, and my first year will be for the 2008 plan year.

1. For a 1/1/08 val, can I use end of year salary 2008 in determining the cash balance allocation, since my document defines the allocation as a percent of plan year pay? I thought I read somewhere that BOY vals can no longer use end of year salary post-PPA, but this doesn't make sense for a CB plan. If not, then what benefits would I use to do combined testing of the CB plan with my 401k/ps for 2008?

2. My thought was to switch to EOY val for 2008. Under 1.430g-1f4, automatic approval for a change in val date is given for the first effective plan year for any change made that is "...not inconsistent with the requirements of section 430". If I read this literally, it is not "required" by 430 to have an EOY val, so is this section really reserved for those plans that are over 100 lives and must be changed from EOY prePPA to BOY post-PPA?

3. Furthermore, client can't find their 2008 AFTAP but is still looking. If the prior firm did the AFTAP based on BOY numbers, am I not allowed to change to EOY since my AFTAP was done BOY? If I make the change to EOY, what is my 2008 AFTAP based on, I guess the 12/31/08 numbers.

If anyone has patience to read this and respond, I would appreciate it.

thanks

Submit comments to any of these issues. I've included my own "answers" to date, based on reasonable speculation, but we are all learning.

1. Stand-alone dental and vision plans. Covered? They would seem to be, because they are ERISA plans subject to COBRA. Is this just a drafting error? It is inconsistent with the rule that participants may not downgrade coverage to stand-alone dental and vision plans.

2. Same-sex spouses and civil union partners. Covered? It seems pretty clear they do not have rights to elect separately. They are not COBRA benficiaries.

3. Subsidy available if same-sex spouse or civil union partner is the other member of the family unit? I don't think so. In fact, the employer who advances 65% of family premium may not get back all the money. The subsidy only applies to single life coverage cost in this circumstance.

4. What if the family unit includes a dependent child and a same sex spouse, and what if there is no incremental cost for the same sex spouse coverage (over family cost)? What if there is an incremental cost? This will be different than calculating imputed taxable income, which looks to the cost of single coverage. The employee should be entitled to 65% of the cost of a family plan which covers the "traditional" members of the family. If there is an incremental cost for the same sex spouse, that portion of the premium is not eligible for the 65% reimbursement.

5. What if non-dependent children are covered due to state law requirements which permit employees to cover children for a period of years after loss of dependent status? The same result as in No. 4. There is probably no subsidy for the incremental cost.

6. In a mini-COBRA state, where coverage is not due to federal COBRA, how does the employer get reimbursed? The statute reads as if the reimbursement goes to the insurer in non-federal COBRA situations. However, that must be a drafting error in cases where the employer pays the premium. Otherwise, it's impossible administration for employers who go above and below the 20 employee test for federal COBRA coverage.

Regards,

George Chimento

I am resending this as a new topic as there was no response to it when it was added to another thread.

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Plan year was changed from 05/01 - 04/30 to the calendar year with a short PY from 05/01 - 12/31 to align with plan sponsor's fiscal year change (no other devious reason).

The plan says (which is pretty much general language) that hours requirements will be proportinately reduced. So 1000 hours requirement for year of participation would reduce to 666.67 hours.

For anyone with more than 667 hours, is the S415 accrued $Max based on n+1 years of participation or n+0.667, where n is the accrued participation years at the start of the short year. It makes a big difference when n is on the low side, like 1!

Year of participation for S415 is the same as for the plan benefits.

I was wondering if anyone knows of any case, regulation, or advisory opinion that suggests that the mere act of calculating and paying benefits is not a fiduciary function.

Anyone have a good write-up on the stimulus bill as it affects 401ks? Just got a call from a client regarding the "penalty free withdrawal" provision that seems to have made its way into the bill.

Give-backs were used to correct failed ADP test for PYE 06/30/07. Our client now informs us that the "Gross Compensation" used on that year's census was miscalculated and was actually net after deducting cafeteria and deferrals. We have rerun calculations with correct gross compensation and the results are that 3 or 4 HCEs were refunded about $104 too much.

We are now almost 2 years past PYE. How is this corrected?

Husband and wife are each 100% owners of their own professional corporation. I am told that neither has any management responsibility for the other's company, they do not live in a community property state and do not have minor children. They claim this makes the controlled group rules not apply to their situation.

However, since both are physicians and could own the other's stock without violating any professional licensing or other legal requirements, I'm having a hard time agreeing with them. Am I overlooking something?

Is the Target Normal Cost prorated, especially for the Max, for short plan year?

I think not, because the TNC is the value of benefit accruing during the plan year, short or not!

I don't have the excuse that it is too late. Today my excuse is computers. Gosh!! I love them.

What is the equation to add up to the preliminary profit number for a sole proprietor?

Employee's contrib+Owner's contrib+owner's reduced comp+ 1/2 of SE income = preliminary profit

Is this right or am I missing something?

It is my understanding that an ER may make ineligible certain EE's from the company's QRP based on certain statatory limits relating to age (<21), length of service (<1yr), coverage under collective bargaining or foreign EE's when the company is located off-shore. The ER does not have to include these ineligible EE's in the plan's annual non-discrimination testing. In addition, the QRP document may exclude certain groups from plan participation, based on some job related criteria such as geographic location, hourly vs. salaried, job description, etc., but all of these EE's, excluded and non-excluded, are used in annual non-discrimination testing.

If my above assumptions are correct, may the ER also use these criteria in the FSA plan, whether day care, medical or adoption? Of course, the actual non-discrimination tests are entirely different...but I'm really more concerned here with who the FSA plan may consider ineligible, who may be excluded and who must be used in 'the denominator' in plan non-discrimination testing.

Thanks for any enlightenment :-)

BruceM

I have a one person DB plan that terminated during 2008. As of 1/1/2008, there was a minimum required contribution, which was not made prior to termination. The plan was underfunded and the participant waived benefits at termination.

Is there any way that the valuation date can be switched to the end of the year to allow for the waiver to be taken into consideration for the 2008 valuation? Would we need to apply for an approval for a change in funding method? Is it likely that this would be approved? The plan has always used a 1/1 valuation date. Can we automatically switch to any day of the plan year in 2008, or does it require approval?

Assuming we have to stay with the 1/1/2008 valuation date, can we use a 100% turnover assumption? Any other ideas?

Has anyone done a distribution where part of it was ROTH?

If they roll it over, (and presently have no where to roll it to)do they have to set up a traditional IRA and a Roth IRA?

Should the money be sent as two checks?

I remember that I am required to report basis to new IRA within a short time. Is there a specific IRS form for that?

What Am I missing?

I was on a conference call where they suggested that SPDs need to be updated to include language about the Subsidy. I re-read Title III - COBRA Premium Subsidy section and the only notices I can find reference to are the QB notices. Do we really have to update the SPD for this "short term" change to COBRA?

An existing Profit Sharing Plan is amended to a Safe Harbor 401(k) on 7/1/2008. Although the 401(k) deferrals start effective 7/1, the 3% Safe Harbor contribution is based on the full year compensation. A participant terminates employment on 2/28/2008. Is this participant eligible for the 3% Safe Harbor? The Plan defines eligibility for the Safe Harbor as "a Participant who is eligible to make Elective Deferrals under the Plan for any part of the Plan Year." Since the participant terminated prior to being able to make any Elective Deferrals, I'm thinking that the terminated participant may be excluded here. Any thoughts?

Thanks.

Employee dies in 2009, NQDC plan indicates his balance is to be paid to surviving spouse. Per 2009 IRS instructions, this now gets reported on a 1099-MISC. I think it goes in box 3 Other Income. Is the distribution subject to FICA, Medicare or SE (Self employment) tax?

Any assistance is appreciated.

a client makes a contribution in excess of its allocation formula but it is deductible and it is not in excess of 415. is there an excise tax if it is not allocated but left in a suspense account and applied to next years contribution?

I am middle aged and I have been able to achieve a good level of success in buying foreclosed properties over the years. Currently, I rent all the properties out to tenants, and maybe I will sell a few of the homes in a couple years when the market picks back up. But for now, I am most concerned about what would happen to these properties if I were to, heaven forbid, fall down with a heart attack, or get hit by a car.

I have three kids, and only one of them lives in California. So, I think I need to create some kind of living will and trust. My question is that if I create the living will and trust in California, will it govern my wishes in all other states? Will my kids be included?

My neighbor worked with James F. Sexton here in San Diego, has anyone heard of this Living Wills and Trust Attorney?