can the employer use mistake of fact to withdrawal an unallocated contribution they made wrongfully thinking the plan would be top heavy?

I had always thought that Church plans were exempt from COBRA. Now I am finding out that they may elect to offer COBRA.

Once a Church offers COBRA, can they ever go back and claim that they are exempt?

Would they be subject to the same penalties for noncompliance if they choose to offer COBRA, but do it improperly?

I have gotten an emergency call from the Executive Director of our Temple on this matter, and I am afraid they may have gotten themselves into some sort of trouble.

Thanks.

A closely held corporation promises to pay an executive NQDC. Can the shareholders of the corporation personally guarantee the corporation's obligation to pay, or does this result in economic benefit/constructive receipt? The obligation to pay is not funded by the corporation in any way, nor does the executive have a security interest in any of the corporation's assets. Still, it seems to me that the guaranty is a form of security that would result in constructive receipt.

My client worked for co' for 8 yrs. Co. funded pension plan under ERISA.

Co has let go about 15 individuals this yr alone (join the club, right)

other ee who have been let go and were vested were given the proper forms

for obtaining their pension funds, either to roll-over, or take a one-time payment.

The administrator told client that her share was "frozen" due to a new law

passed by the Senate indicating something to the effect that since there assets

have decreased by more than 80% they can not release her share.???

I didn't think there was any provision that would allow the seperated ee to

not have access to their funds,

i just sent a letter to the plan administrator, am I going to havce to file claim in fed. court?

thanks,

Joe Dadich, Esq, CPA

seepajd@hotmail.com

Southfield, MI 48034

Plan sponsor recieved laon paperwork from employee, including spousal consent that was notorized. For whatever reason the spousal signature was questioned, and a quick check showed that it had been forged. The notary is a fellow employee of the person who applied for the loan.

So the PA has notorized paperwork that they believe to be bogus. First advice, get an attorney. second advice, don't release the check.

But what experience, if any, do other members of the forum have? Plain old opinions are welcome as well.

I have always tried to have an owner or officer sign plan documents and amendments.

I have a Plan where the controller is a trustee, but not an owner or Pres., VP., Secretary or treasurer.

Does a trustee have the authority to sign the amendments? In this case, the 415 amendment?

Fact set: Owner of company signed TEFRA agreement that stated he would start taking his balance out in 15 annual installments starting 2 years after he ended his employment. Our company bought his company and his payments began in 2001 as per the agreement. He had 77th B-day 3 months later.

My opinion is that his TEFRA payment must be made in 2009 or else he violates the agreement and faces penalty.

Am I wrong? If so please point me to the specific section of the regs.

IRA owner had already attained RBD and was taking RMDs. He died in 2008 prior to taking RMD for this year. Does the RMD have to be made for 2008. If so, to whom? The designated beneficiary? The estate?

If the designated beneficiary is the spouse, does that change the answer?

Thanks.

I have a 1/1/08 funding val and wish to amend the benefit formula to increase benefits (1 person plan) and reflect the increase in my FT and TNC for 2008.

According to 412(d)((2) of the code, which appears to have replaced the old 412©(8) of the code, you can amend the plan after the plan year, but within 2.5 months after the end of the plan year, with an effective date on the valuation date, and incorporate the amendment into the 2008 funding numbers.

If you look at the reg. 1.430(d)(1)-(d) - it gives authority to amend the plan with an effective date during the plan year, but it must have been adoped on or before the val date, in order to consider the admendment in your 2008 funding results.

What was left out, which is what most of us do with our small DB plans, is what to do with an amendment that is adopted prior to the end of the plan year, and effective on the val date. A strict reading of the code and reg indicates that this amendment CANNOT be reflected in the 2008 val.

This is odd. If I am considering an amendment now, it appears that I should actually WAIT until after 12/31/08 and have the client sign the amendment by 3/15/09 in order to be in compliance with 412d2.

Has anyone dealt with this issue yet?

Comments would be appreciated.

Thank you.

Assume a plan has a June 30 PYE. An employee made an election to defer compensation earned between July 1, 2008 and June 30, 2009. Employer wants to switch to calendar year plan year beginning with January 1, 2009. Can the employee make a new deferral election by the end of 2008 with regard to compensation to be earned in 2009 or does their initial election to defer until June 30, 2009 need to run its course?

If a NQDC plan is terminated on or before 12/31/08 but accrued benefits will be paid out under the terms of the plan upon the occurrence of specified events, does the plan document need to be updated to comply with the final regs or will operation in compliance with 409A and the regs suffice - its a phantom stock plan with only a few participants and based on the stock value formula (EBITDA based), the phantom stock has zero value, so its unlikely any participant will receive a nickel unless economic conditions change dramatically.

Any thoughts would be greatly appreciated

The regulations permit discretionary cash-outs of a participant's interest if the account balance is not in excess of the 402(g) basic amount (i.e., $16,500 in 2009). You must aggregate all plans of the same type under the "plan aggregation" rules in applying this rule.

Does it go without saying that you can "disaggregate" two "plans" of different types? Suppose you have one document that provides for both elective contributions and employer-funded non-elective contributions, and separate accounts are maintained for the two types and earnings and losses are separately tracked. If each account is less than the 402(g) limit, but the two combined are greater than the 402(g) limit, can you cash-out both under the discretionary cash-out rule?

The following data is used in the example:

Participant age 55 retiring at 65 and has 5 years of accrual / service. The formula is 100% of high 3 with a valuation date of 1/1/2008.

Compensation

2007 200,000

2006 150,000

2005 100,000

Benefit for funding target

(200,000 + 150,000 + 100,000) / 3 * (5/15) = 50,000

Benefit for target normal cost

(200,000 + 200,000 + 150,000) / 3 * (6/15) - 50,000 = 23,333.33

Benefit for cushion

200,000 * 5/15 = 66,666.67

Therefore, my maximum would be the target normal cost plus funding target plus 50% of the funding target plus the difference between the cushion and the funding target less assets.

Now, a different scenario. A similar plan, however, compensation is only recognized while a participant as it is a new plan.

Benefit for funding target is zero (no compensation)

Benefit for target normal cost

200,000 * (6/15) = 80,000 (however, this should be limited to 1/10 of the 185,000 dollar limit?)

Benefit for cushion

200,000 * 5/15 = 66,666.67

Therefore, my maximum would be the target normal cost plus the difference between the cushion and funding target.

The latter example seems to be a strange result.

Posted this on the 401(k) board but did not receive any response:

I have a Plan that terminated effective 12/18/08 which is the last payroll date for the 2008 plan year which is the calendar year.

Plan fails ADP and corrective distributions are required. Is it ok to make corrective distributions tomorrow with associated gain/loss?

What has me a little confused is that corrective distributions must be made after the end of the plan year and the plan year does not end on the date of plan termination. Is there an exception for terminating plans? If the Plan terminated on January 15, 2008, I would have one year to make corrective distributions but it does not make sense that I would have to wait until after 12/31/08 to make corrective distributions.

Is it necessary to amend the Plan to provide for a short plan year 1/1/08 - 12/18/08? This would seem to reslove any uncertainty but is it necessary?

Would 2008 1099-R's for corrective distributions be completed with the code of 8?

Thanks

Would a substitute teacher over age 70 1/2 be considered actively employed, for RMD purposes, if on the "call list", since there is still an employee-employer relationship, even though they may not have worked any toward the end of the calendar year.

Our client has discovered a situation where an ineligible individual has been participating in a DB plan with mandatory ee contributions... for almost 20 years. I am aware of the EPCRS correction procedure in Sec. 2.07 of Appx. B for early inclusion of an otherwise eligible employee, but this individual is not in an eligible class of employees at all.

Is anyone aware of an EPCRS correction procedure for the inclusion of a completely ineligible employee (as distinguished from an employee that was simply let in prematurely)?? I assumed this would be a common problem but I haven't been able to find anything on it in EPCRS or elsewhere.

I know this is a basic question but I can't seem to find an answer anywhere!

We discovered that we need to amend a 2007 Schedule I (Form 5500). With the original filing, we attached the 5500, Schedule I, Schedule R and Form 5558. For the amended filing, on page three of the 5500, do we still check the "Schedule R" box and not attach the Schedule R (since we're not changing it) or do we uncheck the Schedule R box on page three of the 5500 since it's not being amended? I've seen it done both ways but want to know the "right way" (if there is such a thing). This is a paper filing, not an electronic filing.

Our practice has always been to only submit the amended schedules and attach a copy of the 5558 if one was submitted with the original filing.

Any thoughts would be greatly appreciated.

Thanks!

Defined Contribution Plan has a rule that a participant must not have more than a 60% debt to income ratio to receive a loan. If loan proceeds were used to pay off participant's debt, he would meet the 60% debt to income ratio. Participant is willing to assign loan proceeds to creditors to pay off debt.

1.401 (a) -13(e) allows for voluntary assignments of benefit payments. See below. My only question is whether there is a reason for treating loan proceeds different from a benefit distribution for purposes of this rule?

1.401 (a)-13(e)

Special rule for certain arrangements—(1) In general. For purposes of this section and notwithstanding paragraph ©(1) of this section, an arrangement whereby a participant or beneficiary directs the plan to pay all, or any portion, of a plan benefit payment to a third party (which includes the participant's employer) will not constitute an “assignment or alienation” if—

(i) It is revocable at any time by the participant or beneficiary; and

(ii) The third party files a written acknowledgement with the plan administrator pursuant to subparagraph (2) of this paragraph.

(2) Acknowledgement requirement for third party arrangements. In accordance with paragraph (e)(1)(ii) of this section, the third party is required to file a written acknowledgement with the plan administrator. This acknowledgement must state that the third party has no enforceable right in, or to, any plan benefit payment or portion thereof (except to the extent of payments actually received pursuant to the terms of the arrangement). A blanket written acknowledgement for all participants and beneficiaries who are covered under the arrangement with the third party is sufficient. The written acknowledgement must be filed with the plan administrator no later than the later of—

(i) August 18, 1978; or

(ii) 90 days after the arrangement is entered into.

Just need confirmation. 2008 calendar plan year: I'm looking at 2007 compensation to determine if participant is HCE in 2008. Is the threshhold $105,000 or $100,000?? Thanks.

Here are the facts...

The plan is a 401(k) Plan with a June 30th year-end

In January 2006 the sponsor transmitted the deferrals for a particular payroll period to the custodian. The custodian received the money but never credited them to the participant accounts. The amount of the deferrals was a little over $6,000.

The plan changed custodians at the end of December 2006.

In early 2007, when the plan was audited for its 6/30/2006 year-end the custodian's error was discovered and disclosed in the notes of the financial statements as employee contributions receivable, with a description of the error. The old custodian was contacted and subsequently sent the money, which had been sitting in limbo, to the new custodian.

The new custodian received the money in July 2007 and applied it to participant accounts. An analysis was done of missed earnings and these were paid by the old custodian and applied to the participant accounts. It was a little over 550 days from the time of the error to the time of correction.

So, the participants have been "made whole" as of July 2007. My questions are about paying the excise tax due and whether the steps we are taking will prevent further penalties or more severe actions.

I know that the initial error is considered a prohibited transaction, and each subsequent plan year that it goes uncorrected is another prohibited transaction. Will what I am going to file correct all of the problems, or do I need to explore one of the voluntary correction programs? (Or is use of the correction programs negated by the fact that we went beyond 180 days before correction?)

We are filing a Form 5330 for the year ended 6/30/2006 to pay 15% on the earnings missed between January 2006 and June 30, 2006 (calculated at the applicable federal rate).

We are filing a Form 5330 for the year ended 6/30/2007 to pay 15% on the earnings missed for the year ended June 30, 2007 (including compounding).

We are filing a Form 5330 for the year ended 6/30/2008 to pay 15% on the earnings missed for the few days from July 1, 2007 until the correction later in July 2007.

We will list the amount of the delayed contributions on line 4a, Part IV of Schedule H of Form 5500 and attach a schedule listing the amount of the delayed contributions as a prohibited transaction.

Thanks to anybody with advice to offer.