Hi, I have a client who failed to allow a division of eligible participants to enroll in the plan. They want to use the overall plan rate of return for each year (2000-2008) to calculate earnings. This is something I have never seen. Typically it is actual earnings, or for administrative ease, the highest performing fund for the time period. Never overall plan earnings. Is this an acceptable method under VCP?

Does a valuation need to be performed every year for a frozen plan with one participant?... mainly, in regards to the Schedule B

Treas. Reg. 1.401(k)-3(e) indicates that SH nonelective contributions must remain in effect for an entire plan year "to satisfy the requirement of 401(k)(12)". There is limited relief from this rule for terminating plans and for SH matching contributions. We would like to terminate the SH nonelective contribution in 2009 (and only pay what has been accrued to date). Is this permissible? I realize that the safe harbor protection under 401(k)(12) would no longer apply.

I have a question from a financial advisor. His wife is both a W-2 employee and a Schedule C director for a company. Can she max out her 401k deferrals in the 401k plan but also have a SEP where she can contribute the max from Schedule C income? I don't know enough about Schedule C and SEPs and hope you can help. Thanks.

Several unrelated employers maintain a multiple employer plan. Plan calls for a 3% safe harbor nonelective contribution in 2008. Employer A is unwilling/unable to make the contribution. Does this ruin the entire plan? Can the multiple employer plan sponsor kick this employer out and avoid ruining the entire plan? Should the plan sponsor make a contribution on behalf of Employer A?

A was employed by company and made 15,500 in elective deferrals in 2008 before losing job. A is self employed for remainder of 2008 and establishes a SEP. A, as employer (sole proprietor) contributes max amount to SEP in 2008 (25% of comp). Is this permissible?

If I've been self employed and contributed to an HSA over the past 2 years and then began work for an employer who offers an HSA, I understand that I can continue to keep the original savings account even though I've discontinued the associated HDHP, and may make contributions to it or the new employer's HSA, providing I don't exceed that annual contribution limit between the two...correct?

But what happens if I leave the new employer in future years and start another job the provides non-HSA health coverage. May I continue to keep the 2 HSA accounts and use the $$ to pay QME's I pay under the second ER's health plan (deductibles and copays)? If so, I'd assume that because I'd no longer have a HDHP that I would not be able to contribute to them.

Thanks

BruceM

A new cash balance plan is effective 1/1/2009 with a contribution credit of 10% of compensation.

Is there any problem with providing all participants at 1/1/2009 with an immediate past service benefit of 10% of 2008 compensation?

Would this result in the plan having a Funding Target at 1/1/2009, allowing for a range of contributions for 2009?

Is there any sort of de minimus amount below which a plan can choose to ignore lost earnings? My gut reaction is no. Our record keeping folks are howling about dividing small balances among multiple participants with multiple investments taking considerably longer than the value of the earnings, so we're grasping at straws.

Related quandary, now that most investments have losses rather than gains, do we get to adjust down?

A multiemployer plan is going to be certified as critical and their trustees are not going to use the WRERA option to freeze their funding status. In other words, they are critical.

There is a host of secondary information that says any type of accelerated forms of benefit payments must be eliminated. One optional form of benefit offered by this group is a Social Security Level Income benefit. It pays a greater annuity prior to the retiree becoming eligible for Social Security. Once they become eligible, the benefit is reduced. The idea is to give the retiree a stable monthly benefit over the remainder of his life.

My reading of ERISA sections 305(f) and 204(G) leads me to believe this type of payment will NOT need to be eliminated. I think the trustees will have the option to cut it (like any other adjustable benefit) but I don't think it is required. The law seems to have carved out a narrow exception for this type of benefit.

Agree? Disagree?

Section 4.07 of Rev. Proc. 2008-50 provides that "Correction of Qualification Failures in a terminated plan may be made under VCP and Audit CAP, whether or not the plan trust is still in existence." Any opinions out there on whether this should be read to exclude terminated plans from participation in SCP? i.e., is this a case of expressio unius est exclusio alterius?

Consider the situation where settlement accounting is required when total lump sums for a year exceeds the sum of the service cost and interest cost for that year. When is the settlement recognized?

I believe that in this situation it is quite common to reflect the settlement at the end of the year regardless of when the lump sums were actually paid. In normal years, the settlement gain or loss at year-end would not differ substantially from a more precise method. However, for 2008, an X% recognition of the accumulated loss at any point in the year would probably be better than the same X% recognition at 12/31/2008.

Thoughts?

Are assets in a 401(k) plan protected by the $500,000 of SIPC insurance coverage? I realize that this coverage does not protect against market losses--like today--but what if a firm(s) offering the mutual funds or stocks that are in the 401(k) plan goes bankrupt? Would those be protected?

Beginning of year valuation method. Calendar year plan. New plan 1-1-2009 (small: 60 employees).

Accruals are based on plan years with 1000 hours of service, but excludes any years of service earned before the plan year that includes the participant's date of entry.

As of the 1-1-2009 actuarial valuation date, a half-dozen ineligible employees (all with 1000 hours in 2008) have not yet reached their plan entry dates. Since they were hired early in 2008, the entry dates would be in 2009, such as 2-1-09, 3-1-09, etc.

The enrolled actuary would like to include that half-dozen group of employees in the 1-1-2009 valulation for plan contribution purposes, making this an ongoing actuarial assumption. Another enrolled actuary has stated that this is not allowable.

Comments?

Does anyone have reference or a list of the unallowable (or allowable) investments under 404c regarding self-directed brokerages? It may be a list of prohibited actions (eg shorting) but I am not sure

Also, are there things an adviser should be/could be doing on a routine basis with SDBA in reporting to Plan Sponsors?

thanks

There seems to be a difference of opinion in our office as to how to allocate an integrated profit sharing contribution when the plan has a match and is top heavy. Can someone help to clarify?

Plan has a match, 25% up to 4% of compensation. The profit sharing contribution is integrated with social security. Plan is top heavy.

If the client wants to makes a 3% profit sharing contribution, how would that be allocated? Compensation is from date of entry.

Strange situation..

We have 3 Employers A, B, & C. The ownership structure is such that AB are members of a controlled group and BC are members of a 2nd controlled group within the plan. We looked in the ERSIA outline book and this does seem possible. However, it does not offer much guidance on how to complete the testing.

The attorney is suggesting running a two tests--one for each group. We have done that.

Group AB test fails adp/acp and coverage. Within that group, they have employers that do not make a match and/or profit sharing contibutions. It also fails ABT.

Group BC test fails adp/acp but passes coverage.

How do we go about correccting? For the overlapping employees with Employer B. Do we run the test with original precorrected numbers? ie: a participant needs to have a $1000 ROE due to a failed test for group AB. Do we reduce their contribution in the group BC test prior to running?

Any help/guidance would be greatly appreciated!

Is termination and (rollover) distribution of a SIMPLE 401(k) plan subject to the successor or "alternative" defined contribution plan restriction of 1.401(k)-1(d)(4)(i) same as a regular 401(k) plan?

Client A buys target B. Target B has SIMPLE 401(k). Client A has defined contribution plan. After acquisition, client wants to terminate B's SIMPLE 401(k) and let the 2 participants in the SIMPLE rollover to an IRA. Thereafter those 2 SIMPLE participants will participate in client's DC plan. This seems like a problem to me, but I am not wise in the ways of SIMPLEs.

I appreciate the help.

An employer allowed an ineligible employee to make deferrals in 2008. My research shows that the "preferred" method of correction is to forfeit this and make the employee whole outside the plan. Do they change the W-2 for 2008 on this person to show no deferrals or do they increase the W-2 in 2009 when the refund is made to the employee?

Plan purchases annuities to pay retirement benefits other than small cashouts. No lump sums. AFTAP is 70%. If employer can pay monthly benefits from the pension fund rather than purchase annuities, is plan subject to deemed waiver of credit balance if it gets AFTAP to 80%?? Thanks.