Which code section states that a non-qualified plan must file according to the regular calendar year (i.e. January 1 to December 31)?

A topic has caused some discussion in our TPA office and I would like any opinions or ideas.

We are a small regional independent TPA. We run daily plans on relius.

A book of our plans have default funds. If a payroll comes in and the participant is not enrolled, we routinely used the default funds.

Everything was fine until the day 1 participant came back to us and said that he had been invested in the default fund for a year, and it was not what he filled out on his enrollment form. We said we never received an enrollment form, he went to his HR Department and they faxed us a copy of it, saying it was mailed to us the prior year.

Weeks of discussion ensued...who did or didnt get or send it. What really happened? I have no idea. Maybe they did mail it. Maybe not. Maybe someone at our office lost it. Maybe it got lost in the mail. Who knows.

Point is, we wound up paying out a big chunk of money over it.

We instituted a new policy: any plan could have any default fund they wanted, the plan could have a default, no problem...but the use of that default required the instruction by the advisor or the plan sponsor.

It worked to cover us in case a default was not really a default but a lost enrollment form. But now we are growing and the number of plans we are processing is increasing. We are wondering how to manage it.

We have thought about it for days. Maybe send a monthly report to plan sponsors that says who we defaulted? But then we thought, that will require time to run, time to post to the web...about the same 5 minutes we spend contacting the plan sponsor to have them email us that it is ok to default the participant.

Anyone have thoughts on this? We know it seems a bit overkill in the CYA category. But we really dont want to write a check again. And if we cant get plans to enroll online, we are stuck with paper for a certain set of plans and there's nothing we can do about it.

Appreciate anyone else's thoughts or suggestions!

A parent company would like to become the new plan sponsor for a subsidiary. The subsidiary has a health care plan and is going out of business.

Can the parent become the new plan sponsor and avoid any legal issues related to the subsidiary's going out of business, basically continue things as they have been? (Other than collectively bargained issues--this plan is set up with a union as part of a CBA.)

But, solely from an ERISA perspective, since health care isn't a vested benefit, I suppose the subsidiary could just cancel or continue the plan altogether without any liability?

Thanks in advance!

A parent company would like to become the new plan sponsor for a subsidiary. The subsidiary has a frozen pension plan and is going out of business.

Can the parent become the new plan sponsor and avoid any 'termination' or other immediate funding issues related to the subsidiary's going out of business, basically continue things as they have been?

I think it's possible considering 'controlled group' liability. What's the authority for that?

Thanks in advance!

re: 401k loan for self-employed person.

Client is self-employed (he uses an S corp. where he is sole employee and 100% share holder). He wants to start a 401k plan and fund it by rolling over his IRA into the 401k plan. Will he be allowed to borrow up to $50,000 from the plan at 50% of his vested balance? Years ago I read that this is not allowed for self-employed people and I'm unable to find what the current rule is. Do the no cost boilerplate template plans provided by retail Broker-Dealer Custodians allow this or will client need to use a custom built plan?

I'm trying to figure out whether a 2008 excess deferral being distributed prior to 4/15/09 is taxable to the participant as 2008 income or 2009 income. Though it's clear the earning/loss is taxable income in the year distributed, all my research leads to conflicting answers about the actual excess. One contradiction in the same book!

1) What year is the excess deferral taxable to the pp?

2) Can anyone distinguish between these two Q&As?

Q1: How are distributions of pre-tax excess deferrals taxed to the participant?

A1: For plan years beginning on January 1, 2008, or later, distributions of excess deferrals, as adjusted for earnings (including gap period earnings (see chapter 9)), are taxed to the participant in the year distributed. This PPA-enacted rule simplifies the process for plan participants, since they no longer are at risk of having to file an amended return in the event excess deferrals are returned to them after they have filed their prior year's tax return. There is no penalty tax for distribution of pre-tax excess deferral amounts made to participants who are under age 591/2 .

Q2: What is the tax treatment of corrective distributions to employees?

A2: Because the amount of excess deferrals is includable in the participant's gross income for the calendar year in which the excess deferral is made, a timely corrective distribution of excess deferrals is not included in the participant's gross income for the distribution year. However, the income or loss allocable to excess deferrals is taken into account in determining the participant's gross income for the taxable year in which the distribution of excess deferrals occurs.

Our research indicates PPA speaks only to excess contributions and excess aggregate cotnributions (failed ADP/ACP refunds). However, Q1:A1 above implies that PPA also addresses excess deferrals.

thanks so much!

Annie

A new client pops on me SERP docs that do not comply with IRC § 409A.

Does anyone know what the IRS' progress is on developing an EPCRS for IRC § 409A document failures is? How soon the IRS might be to launching such?

Any suggestions on how to handle the document failure in the meantime?

Hi everyone,

I've perused the forums a bit, and there's a lot of good information out there, but I haven't found exactly what I'm looking for. I participate in an HDHP that is self-funded by my employer. If my emplyment changes such that I have a "qualifying event", and qualify for COBRA, how can I find out how much COBRA coverage will cost me?

I don't pay anything as a permium as part of my HDHP, and my employer only pays claims, they don't pay a premium either.

If you need more information to help answer my question, please feel free to ask. I appreciate any and all help!

Is it true that if a governmental employer who has opted out of social security and has now decided to provide a retirement plan, could adversely hurt the social security of an employee that worked in the private sector and paid into SS for 10+ years?

Does it matter what type of plan is started? SEP, MPP, 401a or DB?

I don't have a lot of plans with insurance, just a handful, but I've had a few insurance guys tell me other actuaries are still doing split-funded plans w/insurance. I would have thought with PPA 06 unit credit type funding we're only left with envelope type funding (insurance policy "value" just part of overall plan assets, pure term cost (only) added to normal cost).

Any thoughts on this issue ? I realize you could still use say Ind. Agg for budgeting purposes but I'm talking about funding that impacts PPA 06 min and max numbers.

If you can still do it, what are the mechanics since you don't really have a projected benefit per se under your valuation.

Are governmental entities exempt from the nondiscrimination testing of a 125 plan? If so, can anyone provide the cite to the pertinent regulation?

Thanks!

As part of a severance arrangement, can an employer make HSA contributions for and in 2010 and 2011 to a former employee who terminates employment in 2009? If so, are there any unique issues that the employer should be aware of (other than whether the employee remains otherwise HSA-eligible)?

We got a notice this week that our actuary (a one-man operation) was raising his hourly billing rate to $225. How does that compare to what other actuaries charge for DB plan work?

What is a typical billing rate at the big firms? tiny firms?

Separate question: Is an annual actuarial valuation report legally required? That seems to be the biggest part of his annual fee. Even if not legally required, are there any bad implications to not having one prepared?

A client has a cafeteria plan that has an option to purchase group term life insurance with after-tax dollars. Would an employee be able to revoke such an election part way through a plan year with no change of status event? I couldn't find anything that would allow that even if it was a benefit being paid for with after-tax dollars, but I wasn't sure if I might be missing something.

I have only a basic understanding of HSAs (I am a cpa) and client is asking me something that is beyond my knowledge base. Any help you could provide is appreciated.

The specific question from my client is:

"We have an employer with an insurance plan year of December - November.

Their deductible was set at $1100 beginning December 1, 2008 through

November 30, 2009. The minimum deductible amount changed to $1150 for

2009. Now, our system is telling us the accounts are not eligible because

the deductible is too low.

We contacted the employer (an insurance company) and they maintain their

plan IS eligible and our information is not correct. Can you provide any

guidance with this?"

I found this quote in an on-line article but unfortunately no citation to accompany it:

"Additionally, a fiscal year plan that satisfies the requirements for a high deductible health insurance plan on the first day of the first month of its fiscal year may apply that deductible for the entire fiscal year."

Can anyone tell me if this is true and if so, what is the IRS citation (Code, Regs, Rev Ruling, etc.)?

The participant had named his children as his beneficiaries. He married and died a month later, but didn't change his beneficiary form. We think the new spouse is in favor of having the benefit paid to the children, but it seems that we are required to pay her. Any way we can pay the children?

the plan uses a discretionary matching formula. one of our clients is asking me why he cant contribute the matching contribution to the extent of the vesting percentage. For example if the participant is 20% vested they would only have to contribute 20% of the match. Clearly I know you cant do this but I am having a difficult time explaining to the client the reason other that contributions are allocated according to a formula and the vesting schedule is applied after the fact if and when employees terminate. Is there a regulation or rule that makes this clear?

I work for GE and to my horror, found in my first pay period that for some reason, I was not "re-upped' for my now $5500 Catch-Up contribution. I still don't know how this happened, suffice to say I will make my elections in writing in future years.

Letters to my plan administrators go unanswered. Is there an alternative means for me to take advantage of this $5500 pretax advantage? Any suggestions would be appreciated.

Has anyone been cranking out Schedule SB's on Relius govt forms system? I tried a couple, and seems like the system is rife with problems.

For starters, it carried forward last year's data into Schedule MB, even though virtually all of them had been marked as single employer plans last year. That wasn't very user friendly.

On line 3, the totals aren't working correctly in column 2. I had to override to get the proper result.

Lines 7-13, column (a): How do you enter the FSA credit balance at beginning of current PY? I think you have to override the 13(a) amount, which seems clumsy.

Lines 14-16: Can't enter funded percentages of 100% or higher, even with override. This is a major problem, since these are the AFTAP amounts.

Anyone else having these problems? or other ones?

... S

I would like to know where to find the current Gatt rate listing and how it is calculated into pension plans.