I want to be sure I understand this correctly. I have a participant who terminated in 2008 at age 74. This was not a 5% owner so the RBD is not until 4/1/2009. Since the RMD due 4/1/2009 was actually for 2008, the amount is still due but the 2009 distribution is not. Is that correct?

New corporation started 1/1/09 and owner is only employee. He wants to start a DB plan 1/1/09. He was previously one of three members of an LLC. He was and always has been an attorney. Can his compensation from the LLC be used for purposes of the new plan (establishing a high three year average compensation)?

A one-person plan has a plan year November 1 through October 31. Assets which weren't so wonderful have eroded more.

With regard to the credit balance, the AF TAP as of 11/1/2007 is 51%. However, I presume we can burn part of the credit balance to get this to 60%. Thus, I can certify the AF TAP at 11/1/2007 as 60% with the condition that the part of the credit balance is burned.

Am I correct that with WRERA, the client has benefited from the WRERA relief date and we can determine its AFTAP as of November 1, 2008 as 60% -- the AFTAP I will certify as of November 1, 2007 -- so all is hunky and dory?

I posted this under the wrong area the first time. For employees who are paid "on call" hours at a different rate (usually lower), how do you calculate these hours of service...or are they hours of service. The employer does not want to count these hours.

I have a Plan with a last day rule for the Employer Match. The match formula is 25% of deferrals up to 6% of compensation. I need to allocate the 2008 match now.

When I allocate the match, the plan fails the ACP test. A lot of NHCE’s were terminated in 2008 and not eligible for the match.

How should I handle the ACP test?

Should I allocate the match for 2008 according to the formula even thought the ACP test fails? And then processes the ACP refunds?

Should I only give the HCE’s the match that would pass the ACP test?

Any other suggestions?

Have a client that adopted an individual plan. He does not want to submit for the cycle as business is down. All of his documents are up to date. Under the 5yr cycle, does he have to submit for a LOD? Is there are penalty if he does not submit for a LOD?

I've reviewed some other posts along these same lines, but not exactly the same, so thought I would give this one a try.

Have a frozen DB plan and a profit sharing plan. Any TH minimum is to be provided in the DC plan.

The profit sharing plan is cross-tested and the sponsor is making contributions, but those contributions wouldn't necessarily satisfy top heavy (for example, participants who are still employed at the end of the year but who have less than 500 hours aren't getting them).

Just based on percentages, this is a top heavy group - and I believe I still have to satisfy the top heavy minimum contribution requirement in the DC plan, even though the DC plan would not be top heavy on its own?

I wasn't sure whether the fact that the DB plan was frozen has any bearing on this situation.

My client has three "cafeteria" plans currently in place: a POP plan, health FSA and dependent care reimb. plan. Each plan says it is intended to be a cafeteria plan under section 125. These plans were already in place when we took on the client. The plans need to be updated and restated. Normally, we would use our cafeteria plan format which includes a cafeteria plan document, adoption agreement and summary plan description which incorporates terms from a separate health FSA and separate dependent care reimb. plan docs. My question is in this case will it be too much trouble to move the client to our platform? I think this would entail "restating" the POP plan to a straight cafeteria plan with an adoption agreement listing the premium reimbursement, FSA and DCAP as benefits under the plan, and then restating the FSA and DCAP to our base plan documents. We also need to change the plan numbers for the FSA and DCAP because they are in a "wrap" document. My boss would prefer them to be on our plan document so I am trying to accomplish this in the easiest and cleanest way possible. Any ideas/pitfalls/things to be careful of?

Participant was automatically enrolled at 3% instead of 6% throughout most of 2008. This occurred during a transitional period. Purely an oversight.

Employer wishes to make a QNEC for 50% of the amount of the missed opportunity (6% - 3% actually deferred) + lost earnings + missed matching.

It looks as though EPCRS does not yet have anything specific to a situation like this and has solicited comments. So employer just wants to do the best thing without specific EPCRS guidance.

Are they, or I, missing anything?

Thank you

SIMPLE IRA is terminating at year end and a Safe Harbor 401(k) beginning the next year. All notices have been provided to employees and both the terminationm and subsequest establishment are in good order.. HOWEVER, contribution cannot be made to a SIMPLE and a 401 in the same year.

Employees receive a paycheck FOR HOURS WORKED from 12/15 throgh 12/27 2008 - however these 2008 hours worked are cut to the employees on January 2, 2009, and it doesn't hit their SIMPLE accounts until January 9, 2009. With a 401(k) being established for the 2009 calendar year, how do we avoid any potential problems or 'red flags' with the IRS, since a contribution to both a SIMPLE and a 401 in the same year is not allowed...????

We were informed of a DRO from 1983 (maybe even before QDRO guidelines) that was never handled by lawyer, plan administrator or recordkeeper. Participant balance has just recently been rolled over to an IRA. Ex-spouse is finally bringing up that part of it belongs to her.

Has she waited too long to get this handled? Is there a time frame in which she must act to claim an alternate payee benefit?

A question has arisen for a client regarding when Health FSA must be offered through COBRA. We were always under the assumption that it would have to be a benefit for the terminated employee to be offered. If the employees would have to pay more through COBRA premiums into their FSA account to get a lesser amount, where would the benefit be? Does anymore have a link to the Federal Register where I can find this explanation as to when an employer must offer FSA through COBRA?

Finally, if an COBRA particiapnt elects COBRA FSA, does the uniform coverage rule take effect?

We have implemented a new enrollment process where the newly eligible enrollment notice and all applicable SPD's are on a CD that is sent to eligible employees after one month of service. This mailing includes the initial COBRA notice in the health care SPD. As we read the regs, they specify that the initial notice must be sent within 90 days after enrollment. Since the CD and notice are sent PRIOR to enrollment is there any problem here?

As a practical matter, what is the difference between using the relief under the "limited amounts" section of notice 2008-113 and under the "certain other operational failures" section of the notice? The correction methods and penatlies seem to be the same for each, so what is the benefit of having a "limited amount" to correct.

Also, am i correct in saying that the only time insiders cannot get relief under the notice is in the year immediately after the failure (thus avoiding the tax penalties)?

thanks!!

I have a Safe Harbor 401(k) plan that also has a new comparability allocation provision

ER doesn't know whether they will make a 3% non elective SH or the basic match.

It is my understanding that the "maybe notice" serves as a notice letting the employees know that the ER may elect into safe harbor status.

This is used when the ER doesn't know whether it will elect safe harbor status...not when the employer can't make up it's mind between a SH match or the SH 3% non-elective. Right?

If the ER uses the "maybe notice"...the safe harbor contribution (if the ER decides to elect Safe Harbor) will be the 3% non-elective. The ER cannot decide to do a SH match mid year...right?

If the ER does decide to elect safe harbor, then the supplemental notice must be given to EEs no later than 30 days before the end of the plan year, and the plan must be amended as such.

This stuff confuses me...I just want to make sure I am understanding what I am reading.

Interesting question from a participant and I'm not sure where to look for the answer. The participant is $20,000 underwater on principal residence which they are trying to sell. Does this qualify as hardship to avoid foreclosure? Can the participant take a hardship in this case? The Plan uses the safe-harbor rules on what is allowed as hardship.

I haven't run into this before but with this combination of housing market and economy I have a feeling this might not be the last time I get this question.

The EE died without having affirmatively named a death beneficiary, and without spouse or children. The plan provides then that the EE's probate estate is by default the designated beneficiary.

The personal representative (PR) of the estate of the EE, one of 4 brothers of the EE, thought there would be an affirmative designation by the EE of the PR personally as the death beneficiary of the 401k benefits. He explained that if it goes through the estate, the 4 brothers share equally. Additional searches were made for a death beneficiary designation, but nothing turned up.

Distribution elections were prepared for the estate, as the default beneficiary and sent to the PR, with an explanation that again no death beneficiary designation by the EE has been found.

The PR turns back in the the Distribution Elections, signing them "as personal representative", but electing a rollover to an IRA entitled "IRA of [EE's name], deceased, FBO [PR's name], beneficiary".

It appears that the PR is attempting to have the benefits rolled over to himself, in his personal capacity, even though the default beneficiary is the EE's estate and the PR has explained to plan official that through the estate, it would go 1/4 each to the 4 brothers.

Any suggestions on how the plan ought to respond to the distribution elections turned back in by the PR?

A corporation is composed of only one person who is the only officer, CEO, CFO, employee, whatever you want to call him and it is very likely that he will never hire someone or partner with anyone else. Seems unlikely, but is there any way for this person to benefit from a cafeteria plan in this case?

Has anyone heard of an election a participant must make to either participate in the 401(k) or defined benefit plan? Any citation available?

Question - A 401(k) Plan that I am handling requires that in order for employees to receive matching contributions, they work 1,000 hours of service per year. The problem is that the Company has not enforced this rule and has matched all employees regardless of hours worked. My question is, how is this corrected? Can I do self correction and retroactively amend the plan or do I have to do VCP? If anyone is familiar with a situation like this please help!

Thanks!

CL

(cites are always nice)