A 2008 Calendar year plan:

On the participant count date (01/01/2008), only the 100% owner is covered. On some date during the year (7/1), two other participants enter the plan. Is it a PBGC plan on 7/1/2008 or at 01/01/2009 when the determination date has more than the owner as a participant?

edited to remove incorrect terminology and date.

I'm wrestling with the provisions of a plan, and trying to reconcile it with the actual administration...

Plan Terms

The Plan is a Cash Balance that suspends benefits paid to retired participants upon re-hire as follows:

• Any benefit being paid ceases
  
• On subsequent termination, benefit is re-calculated using all service/comp
  
• The re-calculated benefit is offset by any prior benefits paid.
  

On its face, it seems fairly straightforward. However, I'm unsure how the case of a purchased annuity would be treated under this provision.

Question

How would a purchased annuity be treated under this plan?

On purchase, would it be treated as a full distribution of the benefit from the plan's perspective, such A) there is no ongoing plan benefit to cease and B) the offset performed on re-employment would mean a reduction for the full accrued benefit as of the original termination?

Authority

The closest thing I could find ot authority on the subject were the DOL regs at 2530.203-3(d) which limits the "suspendable amount" to "the portion of a monthly benefit payment derived from employer contributions." Does this mean we're only suspending benefits paid directly from the trust, and not from purchased annuities? Or does it simply mean that we're not allowed to suspend payments form employee contributions under a defined benefit plan?

Thanks in advance for any help/background you can provide on the subject.

I have been talking with clients regarding the new notice which is due the end of April. The new funding notice asks for carryover balance / prefunding balance. These numbers depend on the whether the plan is a BOY or EOY valuation in my opinion.

Is the following interpretation correct:

An EOY valuation has to take the beginning of the year balance and increase by the effective rate to get the EOY balance used to offset the assets. Similarly, the credit balance is adjusted to valuation date for the current liability percentage.

Similarly, the current liability at the EOY is the old 1(d)(2)(a) + 1(d)(2)(b) (from the old Schedule B) for years prior to 2008. The funding target is used by itself for the 2008 liabilities. This appears to be inconsistent (or maybe just the liability is used from the old Schedule B)??

Thanks for any and all comments.

Client has had a plan for years. For the 2008 plan year, they have informed us that a portion of the population should be treated as a QSLOB and tested separately. The ADP tests utilize the prior year testing method. What prior year percentage should be used for QSLOB? NON QSLOB? I would think of two possible scenarios: The first is to use the prior year ADP as calculated for the combined group. The second would be to use the ADP as calculated for the combined group for the NONQSLOB and 3% for the QSLOB and treat as a new plan. I think the former is the correct way to go.

There was also the idea recalcing the prior year for both groups, but I cannot find justification for that so I chose to exclude that idea.

Any thoughts would be appreciated. Also, any cite or references would be greatly appreciated.

I know employers can decide whether or not to include rollovers when determining whether the distribution is $5000 or less and therefore eligible to be forced out.

However, I was thinking that when looking at whether the distribution is more than $1000 (and therefore has to be rolled rather than paid in cash) you must always include the rollover balance.

But now that I am looking into it, I can't substantiate that.

Does the ability to include/exclude rollovers extend to both the $1000 and $5000 determination?

My wife has a 403b. I have been telling her employer for years that the plan is an ERISA plan, yet they have not filed 5500s. CPAs claim one is not necessary.

Well her employer finally decided to look into the matter and spoke to an attorney who said that they have a 403(p) plan and that they are in compliance.

I have never heard of a 403(p). I looked at the regs and I believe 403 only goes to section (d). I did find one thing on 403(p), which was health benefits for former spouses of CIA employees. I do not believe this to mean the culinary institute.

So either

1. this attorney is making this up

2. 403p is really a plan for non-profits, schools, hospitals etc and I need to brush up on my 403 plans

Please let me know which it is. Thanks in advance

Is it possible to bring in ineligibles to pass 401(a)(4)?

Have a cross-tested 401(k) plan where they have provided nonelective contributions of 10% of salary to employees and whatever it takes to get the owner to the 415 max. They want to do the same this year but fail 401(a)(4).

Would it be possible to bring in ineligibles who worked more than 1,000 hours during the plan year and give them a 10% allocation with an 11g amendment? In this case they would have 5 ineligibles, but 2 of those ineligibles worked more than 1,000 hours in 2008. If it can be done, it is those two who would allow the plan to pass 401(a)(4).

I know a broker who pays for his client's group life insurance premium. As part of his marketing campaign, if you hire him, he'll pay for $10,000 of life insurance for all of your employees. The employees name the beneficiary. Is this legal? Its actually a fairly well know company.

Just got a takeover plan (cash-balance) and the benefit formula only gives a pay credit "if the Participant remained in the Employer's employ through the last day of the Plan Year".

Can a cash-balance plan have a last day requirement ? I didn't think they could but maybe I'm missing something.

Can a custodian designated as a beneficiary pursuant to the Uniform Transfers to Minors Act roll over an eligible distribution to an inherited IRA on the minor's behalf pursuant to IRC 402(2)(11)?

Any nonspouse designated beneficiary, as defined by I.R.C. section 401(a)(9)(E), who receives an eligible distribution from a qualified retirement plan can roll over the distribution to an IRA, which will then be treated as an inherited IRA. 26 U.S.C. 402©(11). Because only “designated beneficiaries” are eligible to roll over eligible distributions, the definition of “designated beneficiary” is the crux of this issue.

Section 401(a)(9)(E) defines “designated beneficiary” as “any individual designated as a beneficiary by the employee.” Treasury Regulation §1.401(a)(9)-4, Q&A-3 elaborates on the definition of “designated beneficiary” contained in section 401(a)(9)(E). It reads:

Q-3. May a person other than an individual be considered to be a designated beneficiary for purposes of section 401(a)(9)?

A-3. No, only individuals may be designated beneficiaries for purposes of section 401(a)(9). A person that is not an individual, such as the employee's estate, may not be a designated beneficiary. If a person other than an individual is designated as a beneficiary of an employee's benefit, the employee will be treated as having no designated beneficiary for purposes of section 401(a)(9), even if there are also individuals designated as beneficiaries. However, see A-5 of this section for special rules that apply to trusts and A-2 and A-3 of Sec. 1.401(a)(9)-8 for rules that apply to separate accounts.

Only individuals and trusts (which satisfy the requirements of Treas. Reg. §1.401(a)(9)-4, Q&A-5) are “designated beneficiaries” for purposes of I.R.C. section 401(a)(9). Therefore, only individuals and trusts may roll over distributions into an inherited IRA.

Any thoughts on whether an UTMA custodianship is an individual or a trust or neither?

We have an HSA design whereby if somene elects family coverage ( we have 2 choices single or family, where employee +1 is a family)

Even if only 1 individual incurs medical expenses for the year the deductible that applies is the family deductible 2500 sungle 5K family

Can we desing our plan where there is a separate deductible to be more like our regular PPO medical plan and allow the single deductibel to be reached rather than the family in this scenario?

Can a custodian designating as a beneficiary pursuant to the Uniform Transfers to Minors Act roll over an eligible distribution to an inherited IRA on the minor's behalf pursuant to IRC 402(2)(11)?

Any nonspouse designated beneficiary, as defined by I.R.C. section 401(a)(9)(E), who receives an eligible distribution from a qualified retirement plan can roll over the distribution to an IRA, which will then be treated as an inherited IRA. 26 U.S.C. 402©(11). Because only “designated beneficiaries” are eligible to roll over eligible distributions, the definition of “designated beneficiary” is the crux of this issue.

Section 401(a)(9)(E) defines “designated beneficiary” as “any individual designated as a beneficiary by the employee.” Treasury Regulation §1.401(a)(9)-4, Q&A-3 elaborates on the definition of “designated beneficiary” contained in section 401(a)(9)(E). It reads:

Q-3. May a person other than an individual be considered to be a designated beneficiary for purposes of section 401(a)(9)?

A-3. No, only individuals may be designated beneficiaries for purposes of section 401(a)(9). A person that is not an individual, such as the employee's estate, may not be a designated beneficiary. If a person other than an individual is designated as a beneficiary of an employee's benefit, the employee will be treated as having no designated beneficiary for purposes of section 401(a)(9), even if there are also individuals designated as beneficiaries. However, see A-5 of this section for special rules that apply to trusts and A-2 and A-3 of Sec. 1.401(a)(9)-8 for rules that apply to separate accounts.

Only individuals and trusts (which satisfy the requirements of Treas. Reg. §1.401(a)(9)-4, Q&A-5) are “designated beneficiaries” for purposes of I.R.C. section 401(a)(9). Therefore, only individuals and trusts may roll over distributions into an inherited IRA.

Any thoughts on whether an UTMA custodianship is an individual or a trust or neither?

Can a custodian designating as a beneficiary pursuant to the Uniform Transfers to Minors Act roll over an eligible distribution to an inherited IRA on the minor's behalf pursuant to IRC 402(2)(11)?

Any nonspouse designated beneficiary, as defined by I.R.C. section 401(a)(9)(E), who receives an eligible distribution from a qualified retirement plan can roll over the distribution to an IRA, which will then be treated as an inherited IRA. 26 U.S.C. 402©(11). Because only “designated beneficiaries” are eligible to roll over eligible distributions, the definition of “designated beneficiary” is the crux of this issue.

Section 401(a)(9)(E) defines “designated beneficiary” as “any individual designated as a beneficiary by the employee.” Treasury Regulation §1.401(a)(9)-4, Q&A-3 elaborates on the definition of “designated beneficiary” contained in section 401(a)(9)(E). It reads:

Q-3. May a person other than an individual be considered to be a designated beneficiary for purposes of section 401(a)(9)?

A-3. No, only individuals may be designated beneficiaries for purposes of section 401(a)(9). A person that is not an individual, such as the employee's estate, may not be a designated beneficiary. If a person other than an individual is designated as a beneficiary of an employee's benefit, the employee will be treated as having no designated beneficiary for purposes of section 401(a)(9), even if there are also individuals designated as beneficiaries. However, see A-5 of this section for special rules that apply to trusts and A-2 and A-3 of Sec. 1.401(a)(9)-8 for rules that apply to separate accounts.

Only individuals and trusts (which satisfy the requirements of Treas. Reg. §1.401(a)(9)-4, Q&A-5) are “designated beneficiaries” for purposes of I.R.C. section 401(a)(9). Therefore, only individuals and trusts may roll over distributions into an inherited IRA.

Any thoughts on whether an UTMA custodianship is an individual or a trust or neither?

Sal Tripodi's ERISA Outline refers to the use of liquidating trusts or partnerships to facilitate the distribution of illiquid assets when terminating a plan. Basically the plan distributes the illiquid assets to the trust or partnership, which in turn issues participation certificates to the participants. When the liquidating trust or partnership sells the assets it makes disbursements to the participants. Anyone ever attempt this sort of thing? What benefit would this have over making distributions "in-kind"?

Does anyone have a good handle on this new COBRA premium subsidy signed today by President Obama? If you have no employees who involuntarily were terminated or laid off during that specific time period 9/1/08 through present, does that mean you don't have to go back and do anything? I believe we will still have to update future COBRA notices even if you do not involuntarily terminate employees or lay them off. Any guidance would be appreciated.

Current regulations do not allow employees to cancel dependent coverage paid for on a pre-tax basis if the child becomes enrolled in a state sponsored SCHIP program. However, the new SCHIP Reauthorization Act of 2009 allows employees and dependents 60 days to request to enroll in an employer's group health care plan due to becoming eligible for premium assistance under a Medicaid or a SCHIP program. Does anyone know if the new regs also allow employees to drop pre-tax coverage to enroll dependents in a SCHIP program?

A not-for-profit company has their 403(b) plan with a large insurance company. One of the HCEs decided not to invest there, so he set up a 403(b) (including a plan document) with another investment firm and his assets are invested there. First, assuming the 2 documents have identical provisions, is that acceptable?

If that's not acceptable, I recall that plan participants have the ability to invest anywhere that will accept 403(b) assets. However, would there have to be an information sharing agreement between the 2 investment providers?

I am reading a Plan Documument that defines compensation as "W-2" Compensation.

"Testing Compensation" means wages within the meaning of Code section 3401(a) and all other payments of compensation to an Employee by the Employer (in the course of the Employer's trade or business) for which the Employer is required to furnish the Employee a written statement under Code sections 6041(d), 6051(a)(3), and 6052. Testing Compensation must be determined without regard to any rules under Code section 3401(a) that limit the remuneration included in wages based on the nature or location of the employment or the services performed (such as the exception for agricultural labor in Code section 3401(a)(2)). For any Self-Employed Individual, Testing Compensation shall mean Earned Income.

Can someone explain to me what Box on a W-2 I should be looking at?

And if the participant made any Employee Deferrals, should they be included in the definition of Comp?

Any help would be greatly appreciated.

ALEX

I also posted in the DB forum, but I am posting here b/c it seems this forum has more activity.

As you know, plans were required to start operating in compliance with the Qualified Optional Survivor Annuity ("QOSA") rules for plan years beginning after 12/31/2007. What do you do if a plan failed to offer QOSA as an option in 2008? Is there a correction method for this type of failure? If not, is there a correction procedure for failiing to offer a QJSA that by analogy could be applied to a failure to offer a QOSA?

Under PPA the funding is based on a unit credit method.

So a plan freeze may not reduce a funding to $0 since the FT may be greater than assets.

Alternatively, it is my understanding that an owner can irrevocably waive benefits in order to reduce funding requirement.

So let's say an owner's AB is 40,000.

Can the owner waive 10,000 to result in an AB of 30,000? Or does h e have to waive the entier AB?

So, for example if the owner can waive 10k he can in effect still have his gross AB increase and then be offset by 10k which would presumably be an irrevocable wiaver.

Curious to get thoughts and cites (notice, rev rul, etc.) if popssible.

Thanks.