An employer sponsors two different 403(b) plans. Based on how I read the regulations, the employer could not terminate one of these plans but continue to allow elective deferrals to the other one for at least 12 months. Would you agree? Can you merger the two plans, and is this essentially a plan to plan transfer?

Im trying to get a definative answer to what seems would be a very common circumstance. If a person has a qualifing event date of 11/30/07.The person has been on COBRA from the qualifing event date of 11/30/07. COBRA end date is 5/31/2009.

NOW...is this person eligable for the federal subsidy? Most everything I read is refering to the Sept. 1, 2008 mark. Everything refers to AEI's AFTER 9/1/08 and before 12/31/09. Where does this leave the people who would meet the guidelines but have a qualifing date before 9/1/08? Are they not eligable for this? Is it just so blantantly obvious that of course those people are eligable that they dont feel the need to elaborate?

Thanks

For profit company A is wholly owned by for profit company B.

Pauly Putz was president of "A" and signed the DB plan 5500 for years both as plan administrator and plan sponsor. The Putz departed suddently and "A" is being run by Ima Ferener who while she resides in location "A," is on company "B's" payroll. Ima is not an officer of company "A" though her title is VP under company "B." Can Ima validly sign the 5500? Is it true there is no issue if Ima is an officer of company "A?"

Can anyone point to IRS/DOL guidance of who may or may not validly sign the 5500?

Been thinking about this one and not sure of the correct answer.

Say I have an existing 1-man DB plan which we have been valuing as of the end of the year using Individual Aggregate Actuarial Cost Method. Owner is a sole proprietor so that we have had to do some iterative calculations to determine Net Earned Income (Sch C less SET deduction less contribution) for the year.

We now turn to PPA 430 and 404(o) calculation methodology for minimum and maximum funding. As we've seen in examples, there can be a pretty wide range of calculated contribution between minimum and maximum. Seems to me, thinking about it, that to determine 430 minimum we would again do our iterative methodology to determine NEI for 2008 based on assumed minimum contribution (in order not to drive myself mad, probably would use minimum payable @ 9/15/2009 plus any possible quarterly interest charges). However, when determining maximum funding, would think that I would need to do another set of iterative calculations solving for max funding, with a different (lower) NEI for 2008 than the resultant NEI for 430. How is everyone interpreting this? If you just plugged in the NEI you developed for minimum funding into your 404 calcs, think you would end up with an "out of balance" NEI calculation.

I'm working on a plan where the total deferrals deposited into the plan do not match the total deferrals withheld on the year to date payroll reports. I'm still trying to get to the bottom of where the discrepancy is, BUT...

Let's assume that the deferrals on the payroll reports are correct per the participants' deferral elections. In this case, more deferrals were deposited into the plan than what the payroll reports show. Can someone lead me in the direction of the proper correction? None of the participants are hitting any limits. The deferrals were just calculated wrong, and too much whas contributed.

Thanks!

Interesting question....

Effective 1/1/08 a plan was amended to exclude the following employees: “All Employees with the status code IPT (Interns/Interim employees who work on an as-needed or on-call basis).”

If I was originally a full time "regular" employee and had been an active participant in the 401(k) plan, I then move to an "on-call" status am I no longer allowed to participate in the plan? Or since I was once eligible than I am always eligible?

Does anyone know if the IRS has prescribed (or hinted at) a definition of "nonrecourse" for purposes of the loan regime rules? (Or, for that matter, a definition of "recourse.") Example: collateral assignment split dollar, where the loan is always recourse, except it is nonrecourse if the executive is fired without cause. (Note: assume this is not a sham; executive has no effective control over his own firing.)

In 2008, a participant, who is over age 50, works for two unrelated employers, A and B. In plan A, the participant contributes $15,500. In plan B, the participant contributes $5,000, and due to 415 limits, plan B treats all $5,000 as Catch-up. If plan A fails the ADP test, can I recharacterize ANY of the deferrals as Catch-up? I think "no," but without asking a lot of questions, how would anyone working with plan A know about how plan B treated deferrals? (apparently, I asked too many questions, because I know about Plan B)

Thank you for your help.

Craig

these will be published in the Federal Register tomorrow.

Have only had a brief chance to look them, but I see in the preamble p.9

"...in an employee makes an affirmative election before the default contribution would have begun, then the initial period does not begin for the employee."

Text of Final IRS Regs on Automatic Contribution Arrangements

We have a partnership with 4 partners: A = 28.33%, B=28.33%, C=28.33% and D=15%. The Plan is a 401(k) with a 3% to all eligibles safe-harbor. The plan also makes a discretionary contribution.

My question has two parts:

Partner C does not make deferrals, nor does he want any of the discretionary contributions. Being a Partner, he either wants to build his capital account or take the equivalent distribution in cash.

1. Are Partners allowed to opt out of receiving their contributions on a year to year basis?

2. What documentation should be put in place?

K plan requires 21/1 and has semi-annual entry dates (calendar plan year, so 1/1 and 7/1).

Owner's wife (ergo, HCE) starts work on November 10, 2007; one of her chores is to handle payroll.

Between November 10-December 31, 2008, she electively defers $4,200 of her $5,000 pay in that period, not understanding that she had to wait for an entry date (and open enrollment period) to make elective deferrals.

It appears that the only IRS-sanctioned correction method for fixing a situation where an employee was allowed to make elective deferrals before eligible and entered per the plan's terms is to adopt an amendment retroactively relaxing the eligibility/entry rules sufficiently that makes that employee to have been properly in the plan at the time that the employee first began making elective deferrals that went into the plan. Rev Proc 2008-50, Appendix B, § 2.07(b)(3). The retro relaxing amendment would have to go further in order to predominantly pick up NHCEs when considering the HCE (wife) that needs to be picked up.

We could amend to allow for immediate entry for the k feature. This would have to be retroactive to at least November 10, 2008. However, to make this predominately favording NHCEs, the date to which this corrective amendment would have to go would be back far enough to let 2 of the 3 NHCEs working there into the plan on the dates that they first satisfied the 21/1.

That would mean that each of the 2 NHCEs would have a missed deferral opportunity re elective deferrals from the time he or she satisfied the 21/1 and the entry date allowed into the plan. That would require a company contribution 50% of the ADP for the NHCE's for that year, plus any matching contributions that it would have received for that year--adjusted for earnings. Rev Proc 2008-50, Appendix A.05 and Appendix B, § 2.02.

Does anyone know of an easier fix to this situation?

This plan might not be eligible for SCP if this is a significant operational error. Any thoughts on whether this operational error is significant or not?

(This is the tip of the iceberg. The deferrals are making the average benefits percentage part of cross-testing impossible. And at 84% of compensation for the period in question (November 10-December 31, 2008), there is a fiduciary violation for not observing the plan's imposed limit of 80% on K deferrals. Considered compensation is limited to post-entry for mid-year entrants.)

The participant was paid out in 2008 and rolled her distribution to an IRA. We now have determined that the plan failed ADP for 2008 and needs corrective distribution in 2009. This terminated participant is one who needs a corrective distribution. We plan to notify her that the ADP amount can not be in her IRA and needs to be returned but how do we handle the 1099R issue. Since the ADP correction is taxable in 2009 do we just correct the 2008 to reflect the 2008 amount eligible for rollover and then issue a 2009 1099R for the difference?

If a plan's adoption agreement has a blank where its permitted disparity rate ought to have gotten filled in, can one use an EGTRRA RAC clarifying amendment to correct this situation?

Also, what if the plan document had a specific formula for the plan in top-heavy situation, but one actually used the formula for normal (i.e. other than top-heavy) years? May one use the self-correction program?

2008 calendar year DB plan with a 9/30/08 plan termination date. This plan is not covered by the PBGC. I have read some prior posts regarding whether or not it is appropriate to apply RR 79-237 to prorate the minimum funding requirement under PPA. I do not know of anything in PPA that would invalidate 79-237. Does anyone think that the maximum tax deductible contribution should be prorated? (I don't think so but the plan sponsor may do the max so I want to be sure.)

I would love to pose this question to the ethics folks on the ASPPA board, but since posting there uses my real name and that would risk disciplinary action from my employer, I'll post it here instead. The company where I work is primarily in the mutual fund record keeping business, but also has a small TPA division. The TPA group is mostly comprised of credentialed ASPPA members, but managed by individuals with mutual fund backgrounds who often don't understand that there are differences between SEC rules and ERISA rules.

A plan sponsor who is both a CPA and a stock broker recently called the record keeping part of the company to inquire about a plan loan. He was told that the plan only allowed one loan to be outstanding, and since he currently had an outstanding loan he would need to pay it off before taking another one. Without consulting his written loan policy or the IRS regs that a CPA should know exist, he sent in a payment of $17,000 or so.

A few days later he sent in a request for a new $60,000 loan. The processor, without looking into the history of the account, informed him that the maximum loan allowed by law was $50,000. The next day a new loan request for $50,000 was received. When attempting to process this request the computer accurately pointed out that the individual's maximum available loan (due to the balance outstanding within the past 12 months) was approximately $2,600. At this point the request was given to the TPA unit to handle.

Although the participant had several valid in-service withdrawal options, he did not want to pay tax on his distribution. After he threatened to withdraw several million dollars of business for his own and his clients' accounts, management decided to reverse the $17,000 loan repayment and return those funds to him.

Those of us with TPA backgrounds are left wondering how this transaction could be justified to an auditor. Suggestions?

Someone please tell me the difference.

I think I know what the Carryover Balance is: the >0 number on our 2007 Schedule B - Actuarial Information that represents, as of 12/31/07, how much we have contributed, cumulatively, more than the minimum required by law. It's called 'Credit Balance' on the Schedule B. [Please confirm.]

So what's a prefunded balance? It seems to be more than just a renaming of the Carryover Balance. Can I determine from the Schedule B how big ours is?

When I was at the ASPPA Conference last October, I attended a session on Plan Documents. I wrote a note during the session that said if there is a feature in the plan that is not being used and probably will never be used, then don't put it into the plan on restatement. For example, a discretionary match that never happens.

I know the reason to do this made sense to me as I sat in the session, but I cannot for the life of me remember why it was important to remove unused features.

Can anyone out there tell me why it would matter?

Thank you.

Is there anything in the code that would prevent this? Client has a traditional IRA and is now self employed, as the only employee. He wishes to establish a SEP. Can we simply convert (or re-title) his traditional IRA to a SEP IRA? Any insights would be appreciated.

Regards.

We have a plan with an excluded class of employees, and it passes 410(b) - non-excludable members of the excluded class are considered non-benefitting.

Q: Are the otherwise non-excludable members of the excluded class included in the 401(a)(4) general test with a $0.00 allocation or are the omitted from the test? (EX: 10 participants + 2 EEs in excluded class, does 401(a)(4) cover 10 people or all 12 people?

Can the owner's sons be participants in the company's Profit Sharing and 401(k) plans, defer nothing and get a 0% contribution and still be allowed to contribute to their own individual IRAs?