We have a New Comp/401(k) requiring Y/E employment for PS. ER making 3% SH contribution and PS of add'l 2% to EEs and max to owner. We have one person term'd in November, 2008 w/over 1,000 hrs and so he is eligible only for SH not for PS.

Because of this, the plan does not pass Minimum Allocation Gateway. Does this mean I have to give term'd EE an additional 2% even though he doesn't qualify for PS?

An HCE has elected lump sum payment under a plan that provides the pre-termination restrictions prescribed by 1.401(a)(4)-5(b). The plan funded ratio is 93% and the employer will not contribute to increase the percentage to 110%. The Plan also does not presently provide and will not be amended to provide for one of the alternatives (e.g., escrow arrangement) presented in IRS Rev. Rule 92-76.

(1) Is it correct that the life only payment is not elibigible to be rolled over to a Roth or Traditional IRA?

(2) If (1) is correct, is this payment subject to voluntary rather than mandatory FIT withholding?

(3) Presumbably, once the restriction is lifted, the balance may be rolled over? In such case, has the practice been to have the participant make the election to rollover at the annuity start date but then make an election at the time the restriction is lifted in regards to where monies should be invested?

The question is coming up about whether a "landscape architect" is a professional employer for purposes of exemption from PBGC coverage. Any thoughts? What, if anything, can we ask them to help clarify? We have been told that none of their employees "uses a shovel"....

Med

In determining a partial plan termination - do you count all eligible participants or just the participnats that are deferring and have a balance (terminated employees). I get confused in the rev ruling 2007-43 exactly what they mean by participating participants and the affected participants. Everyones determination of the wording is different.

Would I count up all the participants with a balance in the plan and then divide it by the participants that terminated within that year that had a balance (due to layoffs). Or do you count all eligible participants (deferring or not) and then divide it by the participants that terminated due to layoffs?

This could make a big difference when there is dual entry dates versus 401(k) - immediate eligibility, and profit sharing (1 year wait).

Thanks

Does anyone have any insight into the following situation:

An employee is fired from the employer and enrolls (for him and his spouse) and pays for COBRA coverage beginning 2/1/2009. The former QB passes away on 2/15/2009 which creates a 2nd QE and allows the spouse to elect COBRA (but for the additional time (total of 36 months). Is the spouse eligible for the subsidy since the original QE was involuntary termination of employment?

Hello all,

I have a contact that was advised that the employer must fund 25% of a deposit in a 457(f) Plan. They (advisor) further pointed my contact to IRS *NOTICE* 2007-62 to support what they were saying. I am trying to figure out what the misfire is here. My first instinct told me they were really referring to creating an amount with a SROF substantially greater than the pay the participant could have otherwise received , but I'm sure there may be something more. Any thoughts or comments?

Technically, what does "as soon as administratively feasible" mean?

Plan documents usually state that distributions will be made "as soon as administratively feasible".

We work with a calendar year plan and received information that the actuary wants to change the plan year to May 1 through April 30. It appears we would have a short plan year from January 1 through April 30 and would need to file a 5500 for this short year. Do we need some justification from the actuary as to why he wants to do this?

A plan covers both union and non-union employees. For testing purposes they are treated as separate plans and tested separately. Can the plan specify that the test for union employees use the current year method while the test for the non-union employees use the prior year method?

Can an employer stop the SIMPLE match midway during the year? We are getting bombarded with this question from brokers and accountants. Employers are just trying to keep their doors open, and the least of their problems right now is their retirement contribution. They don't want to reduce the match to 1% (IRC 408(p)(2)©), they want to stop it completely. The safe harbor match can be stopped with 30 days notice. What about the [not so] SIMPLE? Plan termination seems to be the only way. Does anyone have any other ideas??

A self-directed IRA plan holds various investments including an annuity. The client takes distribution of the annuity changing it from one under the umbrella of the IRA custodian to a non-qualified Annuity owned directly by the Individual. The annuity is not being annuitized at this point. Without discussing the approprietness of holding an Annuity within a custodial/trusteed self directed IRA, how does one report that transaction.

I'm aware of the paragraph in publication 590 that discusses the IRA custodian or trustee purchasing an annuity for an IRA account owner and it not being taxable until the annuity company distributes it to the owner. I'm not questioning taxability but the actual reporting on form 1099-R of the removal of the annuity from the IRA and the change of ownership to a non-qualified annuity.

Is it reported? If so is there any special code for box 7. ( i can't locate one) This is not a 1035 exchange in my opinion. Does checking the "taxable amount not determined" box place the issue in the hands of the individual.

Or is the answer to treat it as a trustee/custodial transfer and not report it at all?

I've put this questions privately to other colleagues in the industry, some of who may participate on this board and I appreciate their opinions. I'd just like to get a broader view of this type of transaction.

Thank You.

Forgive me if this seems simple but are contributions to Medicaid HSA's only coming from the State? Therefore, the indivdual would not receive any tax deduction, correct? Are there any tax implications for the individual when considering a Medicaid HSA versus a "regular" HSA? Thanks

Company X maintains a 401(k) plan for its employees. In an effort to revitalize interest among its employees, X is considering the adoption of a design-based safe harbor 401(k) plan. Based on the way it compensates its employees, it has generally used a list of certain items that are eligible to be counted as benefitable compensation and the remainder of such items are not counted. In testing compliance with 415 and certain other requirements, including ADP/ACP testing, X uses the W-2 earnings definition. In order to be able to use a safe harbor approach, the plan must amend the definition of benefitable compensation to meet one of the 415 alternatives or to subject such definition. As a result of the test, the inclusion percentage for HCEs is between 1 and 2 percentage points higher than the percentage calculated for the NHCEs. From your experience is this a more than de minimis difference sufficient to cause the plan to fail the 414(s) nondiscrimination test and therefore preclude the use of a safe harbor design?

Thanks.

I have the following questions concerning the application of the COBRA premium subsidy:

(1) Company maintains a medical plan for its employees. Bill works for Company and participates in its medical plan. Bill's wife Karen works for Another Company and participates in its medical plan. In March, 2009, Bill is involuntarily terminated from Company. At all times, Bill was eligible to be covered as a dependent under Karen's medical plan but had not done so prior to losing his job. Under these circumstances, does Company have to provide Bill with COBRA? Does Company have to provide Bill with the COBRA premium subsidy?

Based on my reading of the legislative language and the Conference Committee report, in my view, the answer should be that Bill should be offered COBRA but that the COBRA subsidy would not be available to him because he is eligible to participate as a dependent in Karen's medical plan. Prior to ARRA COBRA permits employers to cut off COBRA if an individual becomes enrolled in another group health plan after electing COBRA. My reading of the COBRA premium subsidy rules is that the COBRA subsidy does not even have to be offered if one is eligible to participate in another group health plan on or before the qualifying event. Therefore, the answer to the first question should be yes and the second question should be answered no. Anyone disagree?

(2) Company maintains a medical plan for its employees. Bill works for Company and participates in its medical plan. Assume that Company also maintains a severance plan for certain involuntarily terminated employees which, prior to ARRA, provided for a COBRA subsidy for 6 months equal to the employer's portion of the cost of coverage while the employee was active. As a result of ARRA, Company decides to restructure the severance plan to provide for a COBRA subsidy determined under the ARRA provisions. However, if an employee files a waiver, the employee will become entitled to the preior COBRA subsidy but only if s/he signs a separation agreement which has become final. Assume that Bill's adjusted gross income, after taking the severance pay into account will cause his adjusted gross income for the year to exceed $290,000. Bill therefore decides to waive the ARRA subsidy and negotiates a separation agreement with Company providing for the higher COBRA subsidy for up to the first 6 months following his termination of employment. Is the COBRA subsidy provided to Bill taxable?

Based on my reading of the legislative language and Committee report, the answer should be no because the income limitation applies solely to subsidized COBRA provided "under this section" and does not extend to any COBRA subsidy negotiated as part of a severance agreement after the subsidy is waived. Anyone have any different views on this?

The specific question is if a participant has received a complete distribution of his/her benefit from the plan (that plan being subject to Title IV of ERISA) by the end of 2008, is such person a participant for purposes of having to be provided the annual funding notice (AFN) by the Plan Administrator? I don't think FAB 2009-01 sheds much light on this. It seems to simply state that such notice shall be provided to each participant and beneficiary. Perhaps the assumption is that for the AFN, we should rely on the guidance for who should get the Summary Annual Reports when such was the method for providing similar (but a lot less) information to participants. That guidance is at 29 CFR 2520.104b-10 - Summary Annual Report. It doesn't define participant or beneficiary. The term 'participant' is defined as "any employee or former employee of an employer, or any member or former member of an employee organization, who is or may become eligible to receive a benefit of any type from an employee benefit plan which covers employees of such employer or members of such organization, or whose beneficiaries may be eligible to receive any such benefit" (ERISA 3(7)). The term 'beneficiary' is defined as "a person designated by a participant, or by the terms of an employee benefit plan, who is or may become entitled to a benefit thereunder" (ERISA 3(8)).

Similarly, would a person who took a complete distribution from his/her DC plan say before the end of 2008 need to receive the SAR for that plan in 2009 for the 2008 plan year?

We have historically provided SARs to such folks (DB and DC) even if they cashed out prior to the end of the plan year. The AFN requirement and guidance just got me to wondering what others do, is there other guidance on the subject, etc.

Thanks.

Here's a good one...

1/1/08 to 12/31/08 plan year. Match has an active at year-end requirement.

John has a termination date of 1/5/08 - however he earns no compensation in 2008. He has no deferrals and no match for 2008.

Can he be excluded from the Ratio Percentage test as a Certain Terminated Employee? One of the requirements of a CTE is that the employee fails to receive the match "solely because of the failure to satisfy the last day requirement."

Well, the reason he didn't get a match can be attributed to the fact that he didn't earn compensation. Without compensation you aren't able to defer - and thus can't get a match.

Or is this a bit nit-picky?

Thoughts?

Now that we will have to file the expanded Form 5500, we are looking at the statements Vanguard provides for us to file the return.

They send us a multi-page report for each participant, which is basically a 12-month statement. There is no summarization of transactions at the participant level.

And they provide absolutely no information at the plan level. The firm that prepares our filing wants to quit doing our work because they don't want to deal with these Vanguard reports.

I'd like to hear from other posters who have accounts at Vanguard. What type of information do you receive?

I have just been informed that a terminated Participant with a Roth wants a distribution. Is there anything special required in the forms or notice?

A client wants to use a prototype document to establish their 403(a) plan. Looking at the opinion letter it seems very specific that the document and opinion letter are specific to plans qualified under 401(a). Could a plan rely on the opinion letter if they are 403(a) instead of 401(a)? If not, can they use the prototype document and have it be considered an IDD?

Thanks for any help.

Must an employer use the 190/month equivalnce set forth in 29 CFR 2530.200b-3(e)(1)(iv) for purposes of determining hours of service or can the employer adopt a different equivalnce if it is reasonable and accurate (such as 173 hours for each month of service)?