My company recently processed a 401k distribution incorrectly.

We processed it as a cash distribution when it clearly should have been a rollover.

The check went out wrong. A stop-pay was placed on the check and it was later reissued correctly. The whole process took about 10-15 days.

The ex-employee is now complaining that we should make up lost interest for the 10-15 days it took for them to get a corrected check. The distribution itself only totaled around $5,500, so we aren't talking about alot of money.

Are we obligated to pay them any additional interest? ...is there are rule I can cite to this person to get them off my back?

a small company(ABC) has a 4 participant safe harbor 401. The owner of ABC is also a member of an LLC that currently has no employees other than the 2 members. The owner of ABC wants to see what he can do as far as a plan for the LLC. He is currently a participant in the ABC plan. Ultimately the employees of ABC will be employees of the LLC. my thinking is to add the LLC to the ABC plan as a participating employer via plan amendment. Next year ABC will no longer be a company and all ABC employees will be retained by the LLC. Would proper procedure be to amend/restate the plan showing the LLC as the new plan sponsor for plan document and annual filing purposes?

If the EGRRA determination letter for a cycle B plan is dated November 20, 2008, what is the last day to adopt the plan? The determination letter references section 401(b), but that doesn't make it any clearer. If this is a calendar year plan is the deadline 12/31/08?

My understanding is that a shareholder who is not an emloyee and who owns less than 50 percent of an employer is not a disqualfied person re: an ESOP sponsored by the employer. If such person sells his shares to the ESOP can such person take a note from the ESOP and can such loan be treated similar to a loan from a disqualified person (i.e., unallocated account, share release as loan is paid off, etc.).

We have an employee who transferred from one of our other companies in our controlled group

The company has a different EIN from ours

The other company has their own 401k plan and is a QSLOB arrangement.

Are we required to do a 401k refund?

thanks

Here's an executive comp feature I haven't come across, and it seems to violate 409A, but I can't put my finger on what's wrong with it.

The executive has been granted a 5-year option to purchase up to 1 million shares at $1/share under the company's stock option plan (which has provisions consistent with the exclusion from 409A for stock options). The option vests at the end of 2009.

However, the executive's individual employment agreement adds a wrinkle to his option holdings. For the month of February 2011, if he has not yet exercised the option, and if he is still employed by the company, he may surrender the option to the company in exchange for $500,000.

Part of me thinks that this agreement establishes a value for the stock options, so that at the time the option vests it becomes taxable to him under IRC 83 based on the present value, at that time, of $500,000 in 2/2011.

Part of me thinks that this is conditional deferred compensation that is subject to a substantial risk of forfeiture that becomes fully vested in Feb. 2011 -- and is taxable at that time, even if he does nothing (if he doesn't exercise the option).

Has anyone seen this kind of animal? Any ideas about how to approach this?

I have a Profit Sharing Plan with a pooled account that has an annual valuation.

Termination Distributions are to be paid after end of plan year in which participant terminates.

I have received a distribution form from a participant that terminated in 2007, do we need to pay out the participant based on 12/31/07 balance or can we force participant to wait till 12/31/08 annual valuation is complete?

The trustee of the plan is concerned that other participants would take the loss of this one participant if we pay out on 12/31/07 balance.

Employer's bargained employees are covered under a multiemployer plan 401(k) ("Plan A") pursuant to an area collective bargaining agreement. Plan A is terminating and Employer has no say in process b/c it is not a bargaining party. Bargaining parties decide to sign on to new area multiemployer 401(k) plan ("Plan B"), forcing Employer to allow collective bargaining employees to participate. Is Plan B a successor plan to Plan A as to the Employer? Is there an argument Employer has not established or maintained the plan under the (k) regs?

I have a question that has been talked around, but not exactly about. In our situation, the company wants to get rid of their Simple Plan and setup a 401k (making room for the possibility of an ESOP). The company has not contributed anything for 2008, but there is a possibility that employees have. If the company sets up the 401(k) in 2008, the Simple will be invalidated any all contributions will be considered excess (but, since nothing has been contributed by the employer this is not an issue). What happens if there has been employee contributions? Also, does this get around any notice and timing requirements that normally apply for a Simple termination? Are their any other concerns that I ought to be considering?

Thanks for any help & any citations would be greatly appriciated.

The House passed a pension bill

House Bill

I had this question posed to me recently and haven’t come up with an answer. So, I thought someone here might provide some direction.

Assume a company granted a non-compliant stock option to an employee in 2006. The option is still outstanding on January 1, 2009 and has not been amended to bring it into compliance with 409A. Does 409A require income inclusion back to grant date (2006) or will the income inclusion occur in 2009, with interest and penalties going back to 2006 (or perhaps something entirely different)?

Thanks!

MY7056

X and Y are married. X files for divorce. Y is a participant is an ERISA retirement plan. X's lawyer obtains a state court TRO ordering the plan sponsor not to make any distributions to Y. The TRO is perpetual--i.e., it continues to apply until withdrawn by the court. The TRO may or may not be a DRO, but definitely isn't a QDRO. Doesn't ERISA preempt such state court TROs?

What is the timing of the forfeiture of related match contributions on an ADP test failure corrective contribution? Is it the same 12 months as the ADP refund? If so, what happens if the related match contributions are not forfeited with 12 months after the end of the plan year? Can anyone provide a cite?

Thanks in advance.

Plan terminated in 2008. All participants are paid out, but there is $3500 remaining in forf. suspense account. Doc says forfeitures can be used to pay plan expenses or reduce contributions. No contribution for 2008 and plan expenses have already been paid by employer. Client wants the forfeitures returned to company as reimbursement for fees paid. Would that be considered a reversion to employer? Client also wants to avoid 5500 for 2009. If we allocate forfeitures now, we most likely can't get the add'l payouts done by 12/31.

Thanks!

I do not administer our cafeteria plan, but have been asked this question.

Child turns 13 on August 31st. Can employee claim dependent care expenses through that date and have the deductions from pay for all 12 months. Or, is the child ineligible all year because he turns 13 during the year?

Thank you.

Kate Smith

-a group has an FSA

-group is changing the plan year via short plan year

-group has a 2 month grace period

-how long can the grace period be for the short plan year?

The regs do not have anything about this so my current interpretation is that the grace period can be up to 2.5 months.

Is there any litigation or further commentary on this?

A client funded a whopping amount for their 2007 calendar year plan year to get the 2008 AFTAP to 80%. Hooray, they can distristribute lump sums to NHCEs through March 31, 2009. Of course, like all good Americans, their portfolio has decreased about 30% since January 1, 2008. Common story.

Now, unbeknownst to a long-term employee, they are terminating the employee this December. (Merry Christmas!) This employee is nearly 60 and eligible for early retirement and entitled to elect a lump sum under the terms of the plan. It is possible the employee may choose to defer receipt. I recommended that they should at least provide an election package. Further, they should tell the employee that lump sum payment may be restricted after March 31, 2009 and perhaps later as well. Finally, I advised they should consult their legal counsel regarding my non-legal-but-practical advice.

This begs the larger question. While not required by PPA, it is making more and more sense to provide annual communication to participants of even healthy plans that restrictions might apply at some later date -- even years down the road. This goes beyond simply burrying the potentially unpleasant news in the SPD, which in many instances will end up unread.

Has anyone taken the "preventive medicine" approach? If so, it would be appreciated if you could share the experience along with identification of the various poisons you have considered ingesting.

If a plan is properly Safe Harbor in 2008 and goes out of business in 2009 before the SH is funded where does the liability go?

Stays with owners? Officers?

Any idea on where to find any regs on this eventuality?

Thank you

This is probably an easy question, but I haven't run into the issue till now:

A doctor makes $250,000 at his primary job and gets a $46,000 NEC.

He also makes money as an author.

Can he start a solo k and defer another $46,000?

Is the 415 limitation based on the employer? I see there are aggregation rules for multiple plans under a single employer, but what about multiple employers?

Could 3 separate employers - not affiliated with each other at all - each give the guy a $46,000 NEC?

This is probably an easy question for someone, or perhaps everyone but me. : )

Thanks in advance for your feedback!