We have a plan that in 2003 (under a prior service provider and prior HR staff) somehow allowed an employee who had not reached eligibility to make deferral contributions and a matching contribution and a 3% nonelective Safe Harbor contribution were also made. We tripped over the situation because we saw an existing balance which came over in the plan transfer (the employee remains employed but has never worked more than about 700 hours in a year) but the employer did not for 2008 allocate the Safe Harbor contribution. The new HR person indicates she has "never worked enough hours" to become eligible and receive the contribution.

Given that this happened in 2003 and we are currently working with the 2008 plan year, where should we start to fix this? No Safe Harbor or other contributions have ever been made on behalf of this employee since 2003.

We have a plan using a Corbel volume submitter document that was not amended for the Final 401(k) in 2006. The IRS has just requested information to audit the plan for the plan year 2006.

This probably a dumb question, but does anyone have any idea of what the repercussions of this will be. Just want to give the client a heads up.

Thanks

I am assisting an actuary whose client wants to file their 5500 now for 2008. This will automatically trigger the Annual Funding Notice filing even though they are a small plan. Does the following appear to be correct:

For 2008 (Schedule SB numbers)

Total plan assets 2b

Carryover balance 13a

Plan liabilities 3d

At-risk 4b

For 2007 / 2006 (Schedule B numbers)

Total plan assets 1b2

Carryover balance 9h

Plan liabilities 1d2a

At-risk N/A

This seems too easy but it seems to provide the answers requested in DOL Bulletin 2009-01

DOV = 12/31/08. Carryover credit balance from 2007 Sch B = 45

2008 Sch SB lines

Line 2b: Value of assets @ DOV: 85

Line 3: Funding Target @ DOV: 100

BOY balances

Lines 9 & 13 = 45 (no reduction balances @ 01/01/08, i.e. line 12 = zero)

Following the Sch SB instructions,

Lines 14 & 15:

FTAP & AFTAP = (Assets minus Credit Balances)/Funding Target = (85-45)/100 = 40% @ val date!??

40% FTAP/AFTAP on Sch SB doesn't look good!

Also, the AFTAP of 40% is not correct because, per S436(f)(3) the credit balance is deemed to be reduced down to 5 so that AFTAP is 80%!

Do I show 40% on lines 14 & 15 or 80% but show reduction in balances of 40 on line 12 and balance of 5 on line 13?

Does anyone have a [preferably recent] comprehensive RFP template for DB plans that they are willing to share? We may be sending out an RFP for comprehensive DB services including actuarial, admin, custodial and trust services, and DB plan document and consulting services. Thank you.

Plan B accepted rollovers from Plan A, thinking they were eligible for rollover treatment, and then later found out that a portion of the rollover distribution was NOT eligible for rollover treatment. Plan B must distribute the ineligible rollover amount back to the employee. My question is whether Plan B would be required to withhold under Code Section 3405 when it distributes the portion of the rollover that was ineligible? I think that because this is a distribution of an amount that shouldn't have gone into the plan to begin with that there is no withholding obligation on part of Plan B, is this correct?

The reason I ask is that Plan A is trying to recoup a mistaken employer contribution in the Plan, in which some participants took distributions of their accounts and rolled them over into Plan B. If Plan B withholds, the employee will not have enough cash on hand to return the funds to Plan A that he was not entitled to to begin with.

We missed starting an active employee/participant's required minimum distributions in 2008. We plan on using VCP (so that the Service will waive the excise tax on participant) to correct under EPCRS. However, from the participant/taxpayer side....does the participant need to complete and submit the IRS form 5329 (the instructions to which are confusing) by the tax filing date for his 2008 return? That seems duplicative of the plan's correction but...???

Any other help/guidance on correction is appreciated. Luckily, we haven't had a failure to start rmds for many, many years.

Thanks.

I have a governmental 401(a) plan. It is my understanding that the remedial amendment period for 415 required amendments is the later of 7 months after end of plan year (in which remedial amendment period begins) or the last day of the next legislative session beginning after the amendment's effective date in which the plan amendment can be considered. Our remedial amendment period begins 1/1/09 as that is effective date of the amendment for our govt plan and we have a fiscal year plan year. Therefore, we think the due date for our 415 amendments is 7 months after June 30, 2009. Any confirmation or thoughts would be appreciated.

Employer has single-employer defined benefit plan for hourly union employees. In 2006, employer verbally agreed with union as part of collective bargaining arrangement to increase contribution amounts by specific dollar amount each month per employee. Due to other matters consuming management's attention, the verbal agreement fell off the radar screen and the plan was never amended to reflect the agreement and the additional contribution amounts were not made. Employer wants to correct this oversight, amend the plan and catch-up on the contributions. Can this be done retroactively without impacting the plan's qualified status.

Any thoughts would be greatly appreciated.

I've been working with my various COBRA Continuation packets. The second, abbreviated notice (for employees aready on COBRA) has no deadline mentioned that I can find for the former employee to return the completed "Request for Treatment as an AEI" form.

The 'full general' notice and the 'extended' notice both also include the "COBRA Continuation Election Notice" which has the 60-day deadline. (One would assume, in this case, the former employee would return both forms at the same time.)

I've searched and I cannot find anything that definitively states how long a former employee who is already on COBRA has to return the "Request for Treatment" form.

Any help with this would be much appreciated!

Is there a DOL default interest rate that can be applied to 4k accounts when gain/loss cannot be determined? This case is trying to reconcile accounts when inv statements are not available as all of this is being done for years beginning 2003. Greatly appreciated. DN

In the past, the PBGC waived the reporting of missed quarterly contributions for certain small plans. This waiver is kaput starting in 2009.

ASPPA reports, "PBGC's experience is that many plans that did not report missed quarterlies because of the automatic waiver later terminated with unfunded liabilities, and that if missed-quarterly reports had been made, PBGC might have been able to work with plan sponsors to avoid the underfunded terminations."

Does anyone, anywhere, anytime in the name of J. Fred Muggs have even a conjecture of how the PBGC could have worked with employers to avoid underfunded terminations? Presumably, to have an underfunded termination, the plan sponsor's financials must have been in the toilet. Other than expediting the plan sponsor's financial ruin, what could the PBGC have done? And, it presumptuous that it would follow that the plan would not be underfunded just because the plan sponsor made timely quarterly contributions.

A sole proprietor client of mine wants to set up a plan--the only participant will be himself (he doesn't employ any common law employees). His attorney (non-ERISA) questions whether he can be the grantor of the plan's trust, the sole trustee and the sole beneficiary. Isn't this a common situation for a sole proprietor. I may not get this all exactly right, but the client's attorney says that if the sole proprietor is the sole trustee and the sole beneficiary that there is a merger of legal and equitable title and the trust evaporates. Does anyone know whether he is right and, if he is, how I should set up the plan? Thanks!

Hello,

We are working on completing Schedule D's for ING plan's under MAP contracts. Does each fund need to be listed on the Schedule D? I am interpreting the ING instructions that you would list the total amount in the seperate account and not list out each fund. ING is not acting as a Direct Filing Entity . . . the other vendors we work with who do not file directly instruct that all of the funds available be listed on the D? What are other firms doing?

Thanks,

IRS National Office issued a favorable opinion letter for 401k prototype (EGTRRA version) that provides:

"If section X of the Adoption Agreement indicates that the 401k Safe Harbor applies, then for a Plan Year as to which a timely 401k Safe Harbor Notice is provided to each Participant, the Plan is treated as meeting the requirements of IRC section 401(k)(3)(A)(ii). If section X of the Adoption Agreement indicates that the 401k Safe Harbor does not apply, or no 401k Safe Harbor Notice is timely posted for a Plan Year, then the 401k Safe Harbor does not apply to the Plan Year."

This is different than the more common language in other prototypes that read in essence that the plan is for a plan year a 401k safe harbor if the adoption agreement provides, not hinging also on whether a 401k safe harbor notice was in fact timely provided for the plan year.

I'm interested in what comments there might be for toggling in and out of 401k safe harbor plan year to plan year solely on the basis of a timely 401k safe harbor notice (or not) for the plan year, if the plan adopts the prototype with the language quoted 2 paragraphs and does not 'amend' from year to year.

Perhaps asked another way, do those that have heard the unofficial comments of IRS representatives that there need also be an amendment think that such applies to all 401k safe harbor plans or just those that use the more common language?

[EDIT: typo]

Hello,

Last year I needed to take out the $20,000 I had put in contributions over the years....I left in the amount that was the profit. I am trying to enter the information on taxcut but it gives me a penalty each time because it is being characterized as an early distribution. I know that I'm allowed to take out the contributions at any time penalty-free. Does anyone know where to report it and how? Thank you very much.

This is a self-funded health plan and some participants are Mexican immigrants. These participants may travel to Mexico during the down season to be with their family. They remain eligible for health benefits during this period and often submit claims once they return to the states. These claims are often in Spanish and the health fund must hire interpreters in order to process the claims. Over the years the cost of interpreting and processing these claims has risen. I thought some Global Benefits practitioners might be able to steer me towards any guidance that may be available for issues like this. The health fund already meets the requirement of having available an SPD in Spanish, but I wasn't sure if there was any other requirements re: processing claims.

Do the various notices going out to COBRA subsidy-eligible individuals have to specify the amount that the individuals have to pay for their coverage (i.e., do they have to give the 35% amount) or can they state the 102% and require the individuals to make the calculation themselves?

I have a situation where a corporation "A" (which has a 401(k) PS plan), has been sold to Corporation "B" and Corp "A" will cease to exist as of March 30th, 2009. The employee's of corporation "A" will become employees of Corporation "B" and will be eligible to participate in Corp

"B"'s 401(k) at this same time (March 31st).

My question is - the owners of Corporation "A" wish to terminate the plan and allow the participants to have the option to eiher cashing out their 401(k) balance or rolling it to another qualified plan. My initial thought is that if the employees have a new (alternative) 401(k) that they are eligible to participate in, we should require a plan transfer of assets and not allow a distributable event. Is there a rule in this situation? Thanks in advance!

It seems clear that when an excess deferral resulting from a 402g violation (deferral in excess of $15,500 for example) had investment losses, the participant must report the gross excess in the year deferred (2008) while the loss is taken on their personal tax return in 2009. However, how is the 1099-R done?

In reading the IRS instructions, it appears that the amount reported on the 1099-R, taxable in 2008, is the actual distribution which has been reduced by the losses. If so, how and where does the participant report the the full excess deferral in 2008?

Any thoughts would be appreciated?