Small business exemption from having a fidelity bond for the retirement plan?

Small business exemption from having a fidelity bond for the retirement plan?

I know that a sole proprietorship or a p.c. with only one employee does not need a fidelity bond, but what other exceptions occur?

SEP Plans; when can you only have a SEP plan and no other plan simultaneously?

As I understand it, under certain circumstances, one can have a SEP plan, and no other plan simultaneously. What type of SEP plan does this rule apply to?

Does anyone know of a comparable statement from another provider?

tx

bill

If a 401(k) 3% Safe Harbor plan is terminating due to sale of company, does the 3% contribution just have to made through 4/30? I know there's a potential government relief of a Safe Harbor contribution but I thought that only applies to a plan terminating for reasons other than company sale. Appreicate someone making time to confirm with my situation the 3% will only have to be made through 4/30. Thank you.

If an HCE is subject to the restricted benefits provisions under Reg. Sec. 1.401(a)(4)-5(b), and then gets divorced, is the alternate payee under a QDRO also subject to the restrictions? Or can the AP get a lump sum payment, if permitted under the plan? The regs seem to say that the restrictions only apply to the HCE.

Would appreciate thoughts or help on this. Company wants to put in a phantom stock plan for a couple of key employees without impacting actual ownership of closely held company. The plan is really intended to function / payout as a change in control bonus plan--i.e., participants receive cash or other consideration paid by Buyer if and only if there is a CIC as defined in Section 409A. (It is possible that some payout may be made upon a death or a 409A disability but likely that separation from service for those reasons will only simply result in delayed payment upon CIC within a certain period.) Accordingly, I think the plan should basically comply with 409A as it likely will pay out if and only if the participant remains employed through a 409A change in control of the company.

Does anyone see obstacles or problems with that general approach?

If not, my main question is whether there is any way to safely try and accomodate the possibility of an earn-out as part of the consideration. It may be that the company will decide to simply make this a straight cash plan even if there is a mix of consideration paid to actual shareholders. Still, I wonder if it would be possible to structure a phantom stock arrangement like this to track an earn-out, etc. provided it complied with general rules applicable to options or SARs, etc. The phantom nature of this arrangement though makes me hesitant to think the earn-out exceptions provided for real stock rights would apply here.

In their March 31 missive, the IRS indicated that for 2009 can switch character and timing of interest rates. All discussions have been in respect of improving AFTAPS. Any issues if the Plan Administrator elects the interest rate character and timing the produces the worst result.

For example, if the AFTAP would be at 63%, it might be possible to reevaluate and determine an AFTAP of less than 60%. So, rather than restricting lump sums to 50%, lump sums could not be distributed, except for deminimis amounts.

The particular client would just as soon not sell off depreciated investments.

employee has 2 different employers-each with a simple ira. He has contributed $10,500 to one and $5,000 to the other (2008 limits) per his total allowed for aggregate accounts. The question is: can he do $2,500 catch up in EACH acccount for a total of $5,000 catchup? (yes, he's over 50). I have looked at pub 560 and rule 402g and it does not clarify that you can NOR does it say you can't. It never says per or total on the $2,500 catchup allowed.

We have a client that failed their ADP test in 2006 but the prior vendor never corrected the problem. The SCP allows us to fix the problem but the issue becomes the calcuation of gains/losses. Rev Proc 2006-27 (Haven't read 2008-50 but I assume it is similar) appears to allow for actual gains and or losses to be used for the refund as well as the One to One Correction Method for the contribuiton to NHCEs. The prior vendor is claiming Gap period methodology must be used for the period after 12/31/2006 based on 2006 earnings. It makes a huge difference since the funds lost significantly since 12/31/2006. Any ideas as to solution?

As I understand it, the general rule is that a plan administrator must provide a Notice of Early Termination of COBRA coverage "as soon as practicable" after a decision to terminate has been made. Seems in cases where that termination is known prior to coverage terminating (e.g., where the employer decides to terminate all group health plans and thus will terminate COBRA as of some set future date), then the Notice may (must?) be sent even in advance of the termination.

What about the timing where termination is a result of the participant's failure to make timely COBRA premium payments. In particular, if a plan gives folks basically 40 days after the payment date to make a termination decision (30 day grace period plus a few extra days to see if mail postmarked as of deadline date comes in) and then takes a week or so to generate and send the Notice of Early Termination. Is that soon enough? Is anybody aware of cases or rulings where a period of time has been suggested? In this case, failure to send the notice out immediately or very shortly after the payment deadline was missed eats into the participants 63-day period for lining up alternative coverage without adverse consequences.

Can the lump sum option be removed from a DB plan? I have one participant that has reached NRA has not not yet made a distribution election. Would I have to preserve the option for this one participant and be able to remove the option prospectively?

Is it possible to reduce the plan's 401 (k) deferral limit mid-year. Currently, a plan has a deferral limit of 80% for HCEs and the employer wants to reduce the limit to 5% for 2009. This would mean a forced reduction of deferrals for some participants for the balance of the year. Would this be a cutback issue?

Good morning, is anyone familiar with a NQDC arrangement that offers a brokerage window for its participants to purchase securities outside of the plan's fund lineup? I can see where it would be a bad idea - 'unfunded' status, constructive receipt, etc but we have a participant asking if this can be done. Thank you for your input.

The individual has sole proprietorship income from a consulting business. He also has 23% ownership in another business and gets a K-1. The CPA tells me that the tax program is including income from both sources when calculating the SEP contribution. I don't think the K-1 income should be included. That business does not have a retirement plan and no one else is getting a contribution. Does anyone disagree?

Looking at possibly taking over a Plan and after reviewing their current document have a question -

Plan was amended to become Safe Harbor effective 1-1-09. The document uses the Enhanced Match of 100% of first 4% for the NHCEEs.

The document also states the "Safe Harbor" Match for the HCEEs will be 100% of the first 3%. That formula obviously doesn't meet the minimum for a Safe Harnbor contribution and I understand the HCEEs aren't required even to receive a S-H contribution in order for the Plan to be S-H and the S-H minimums are what the NHCEEs must receive.

But would this Match to the HCEEs be considered a S-H contribution and exempt the Plan from ACP? Or would this Match to HCEEs have to be tested under ACP - obvious failure. Would the S-H Match made to the NHCEEs and the Match made to HCEEs be taken together to see if (a)(4) is satisfied?

As we are preparing for an IRS audit, we are reviewing the Plan document for our client. One of the required amendments was signed on time. The problem is, I can't find a corporate resolution in my files. The client is searching their files and will hopefully track it down.

This is a corportion. If we can't find the corporate resolution - but have a signed amendment - what impact does not having the corporate resolution have?

Thanks for your help.

Cash Balance Plans

Target Normal Costs generally will not tie out to the hypothetical allocations anymore.

For instance NHCE’s getting 2.5% of compensation. The target normal cost does not equal that amount for each participant. The hypothetical allocations are converted to target normal costs by

1. Being projected to retirement age using a single interest crediting rate, converted to an annuity amount at retirement using the actuarial equivalence assumptions

2. Then the conversion and discounting goes from the retirement age back to current age using the three segment rates and funding mortality assumptions.

So – going forward is using plan actuarial equivalence, discounting back is using the segment rates.

In past years cash balance plans used the 30 year treasury rate for all portions of the calculation, so the normal cost came out the same as the hypothetical allocation. PPA doesn’t allow that any more.

Client put in $139,356.93 into the cash balance plan – which is the 2.5% for NHCE’s and 36% for owners.

When the 2.5% and the 36% were converted to a target normal cost – the amount is lower ($115,061.31).

Even though the vested accrued benefit is each participants account equals the right percentage

On the first year of a cash balance plan there is no room for extra contributions. The minimum due and the maximum due is $115,061.31. The amount to meet termination liability is $139,366.00.

The actuary is saying that the rules that are in place right now does not allow for the company to fund the termination liability amount of $139,366.00 – only up to the maximum contribution amount of $115,061.31.

The actuary suggests that the tax return be amended and the extra $24,304.69 be used for the 2009 plan year.

What do you suggest? If the plan were to close today and they only funded $115.061.31 – they would not have enough to pay everyone out. If they funded the $139,366.00 – then they would. But new PPA rules do not allow for funding that amount.

My question - can you use the termination liability amount for funding the first year? Has there been final regulations?

Here's the situation: Employee initiated loan in Oct. First payment was due in Dec. Due to an administrative error on the Plan Sponsor part the loan deductions didn't start until March. Warning letter went out in Feb. The loan defaulted 3/20. Employee paid delinquent amount thru 3/30. According to the rule I thought the loan defaulted the last day of the calendar quarter that the loan was delinquent? Wouldn't that be June 30th? Furthermore, even if it defaulted in March wouldn't it default March 31st and not March 20th. Please advise.

I recall that I once saw either an old Treasury Regulation or Revenue Ruling that limited to 30% the amount of rental income that could be treated as earned income. However, I can not remember where I saw this. Please forgive me, but my memory must be fading as I'm eligible to make catch up contriutions for the first time this year <frown>

Any help would be greatly appreciated.

Thanks. Ed

Can an employer adopt a plan amendment that expands the kinds of employment that would suspend benefit payments if a retiree would not permanently forfeit the amount of payments withheld during the suspension period?

I'm trying to figure out whether the Heinz decision would apply where there is no permanent withholding of the suspended amount.