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?

Employer has a total of 3 employees- 2 NHCE and 1 HCE. Currently, the 2 NHCE are eligible to receive benefits and do receive benefits. The HCE is not yet eligible, but will be soon. The HCE will not be taking benefits. Accordingly, the health plan would not meet the 70% rule under 105 (h) b/c 2 out of 3 is 66%.

I think this is a non-issue since the nondiscrimination rules are directed towards the tax treatment HCEs receive for health benefits. Here, the HCE is not taking the benefits and therefore there shouldn't be any unfavorable tax treatment for the HCE. The fact that the health plan wouldn't pass the 70% rule won't affect the NHCE's tax treatment.

If I'm missing anything, could someone please comment?

Is it true that for the 2008 ADP/ACP excess distributions made during the first 2 1/2 months are taxable in 2009?

If distributed after March 15th, does the 10% excise tax apply?

Does anyone know if a small DB plan that terminated December 31, 2008 needs to be amended for WRERA?

Executive agreement provides for separation pay upon "good reason" termination, and the agreement provides, among other things, that there is a "good reason" condition if the executive's office is relocated more than 25 miles from its current location. Read literally, this provision will apply even if the office is moved closer to the executive's residence -- for example, if the executive lives 35 miles from the office, and the office is then relocated to within 5 miles of the residence.

I believe this provision was intended to apply if the office relocation increased the executive's commute by 25 miles or more, and was the victim of lazy drafting. Assuming that the intended meaning of this provision would constitute a "good reason" condition (not under the safe harbor, but under the facts/circumstances test), could the executive and the company execute some type of clarifying amendment or a memorandum of understanding regarding the intended meaning of the provision to bring it within the involuntary separation pay plan rules?

I think that if the executive were to attempt to enforce the provision in a situation that does not appear to involve a true involuntary type of termination, the company would argue against the payment.

Any suggestions on how to deal with this provision?

Belatedly reviewing executive agreement separation pay provisions whereby the executive will receive a year's salary upon involuntary termination without cause. Currently the executive's salary is well under twice the 401(a)(17) amount, but it's rising fast.

I assume I can amend the agreement now to cap the payment -- that is, the amount would not be subject to 409A if involuntarily terminated today.

Am I correct? The 2x compensation provision indicates that only amounts in excess of the limit are subject to 409A (assuming other involuntary separation plan rules are satisfied).

The new 65% COBRA premium subsidy for up to 9 months under the American Recovery and Reinvestment Act applies to plans subject to COBRA provisions under ERISA, the Code, or the Public Health Act, and to "a State program that provides comparable continuation coverage." See section 3001(a)(10) of the Act.

But how does it apply to a nonelecting 414(e) church plan which is exempt from COBRA under ERISA, the Code, and the PHA? Church plans in Ohio are subject to the Ohio continuation coverage law but it only requires 6 months. (OH Rev Code 3923.38) Assume a church plan voluntarily provides 18 months of quasi-COBRA coverage although it is not required to. Can that church plan qualify for 9 months of reimbursement under ARRA when the Ohio law requires only 6 months of coverage?

The Chairman's mark of the ARRA notes that church plans and small plans are exempt from COBRA. It goes on to say: "The Chairman's mark provides assistance for coverage required under State law that requires continuation coverage comparable to the continuation coverage required under the Code's COBRA rules for group health plans not subject to those rules (e.g., a small employer plan) and includes continuation coverage requirements that apply to health plans maintained by the Federal government or a State government." But nothing about further requirements for church plans. See the Chairman's mark here:

http://readthestimulus.org/01-23-09_UI_Hea...ARRP_senate.txt

The intent probably was to subject all plans to the subsidy requirement but that's not exactly how it was drafted. Is it reasonably safe to take the position that state law requires at least 6 months of coverage but does not limit it, and therefore apply for 9 month reimbursements?

Is it necessary for a governmental entity to amend its plan (i.e., statutes or ordinances) in order for the plan to allow eligible public safety officers to take advantage of the $3,000 gross income exclusion for health insurance premiums allowed under the PPA.

The plan states that if a participant's account balance at separation from service is less than $1,000, "the Plan Administrator MAY direct the Trustee to make an immediate lump sum distribution..." [emphasis mine]

It take the "may" as this being optional. The plan administrator has yet to use this provision, but there are several old balances and a few newer ones (due to a missed deposit some years ago), and he would like to zero these accounts out.

My questions are: did the administrator do anything wrong by waiting? And, how quickly do these types of accounts have to be liquidated in the future? Can he just periodically sweep them out? Some of the accounts won't even get a check because of the distribution fee being higher than the account.

I originally posted this on the Plan Correction board but have not received any responses and so thought readers here might have some thoughts / experience on the question below:

What is the usual procedure for correcting a 401(k) plan's failure to timely adopt proposed amendments submitted in connection with application for determination letter on continued plan qualification? Here a Cycle A 401(k) plan restatement was timely submitted to the IRS and received a determination letter in early 2008 conditioned on the plan's timely adoption of some minor additional amendments within the period set forth under 401(b). The Plan has not yet adopted the amendments. Can such a failure be corrected under EPCRS's nonamender provisions or does the fact that the plan arguably does not have a valid determination letter impair its ability to rely on EPCRS? Is there some other procedure outside EPCRS for fixing what I would think could be a fairly common slip up but not one I have encountered before? Thanks.

Good Afternoon:

I have a general question that has been posed by a potential new client. The client is over age 50, has a New Comparability Plan, wants to make a deferral contribution of $5,500 and recharacterize it as a "catch-up" contribution for the 2009 calendar year without making any other derrerals, and then wants to receive the maximum employer contribution of $49,000. In essence, what he is looking at is for the adp test to show zero deferrals made on his behalf and a 415 test to show $49,000 as all employer contributions. I'd like to know what anyone's thoughts are on this.

Thank you.

Terry W.

Does anyone have a link to a good web-site that tells you when tax returns are due? (or in particular, the funding of employer contributions).

My understanding is that they pushed back the partnership return due date to 9/15 for calendar 2008 tax years. Can anyone verify/send out a link?

If an unqualified deferred compensation plan provides for vesting of an employer contribution upon the earlier of (i) death, (ii) disability, (iii) termination without cause or (iv) one year from the date of the contribution, and that payment will be made in lump sum within 30 days of vesting, does the plan meet the short term deferral exception to 409A?

There is a substantial risk of forfeiture and the payment would occur before the end of applicable 2 1/2 month period. My concern is that allowing earlier vesting and payment upon death, disability and termination without cause might somehow change the analysis, though I don't see how.

Any thoughts would be greatly appreciated.

Employment agreement provides that if employee is involuntarily terminated without cause, the employer will pay 1/2 employee's annual salary in a lump sum within 60 days. However, if the termination occurs within 1 year after a "change in control" (defined in a way that does NOT comply with the 409A definition), the lump sum payment will equal a full year's salary.

Will this satisfy the short-term deferral exception, or must the definition of CiC in the agreement satisfy the definition in the regulations?

I'm thinking it will work, because the employee's right to payment is subject to significant risk of forfeiture, and is paid within the short-term period after the right is no longer subject to the SRF. Section -3© of the regs gives me some concern that the CiC definition must comply, but this provision relates to when "deferred compensation" may be paid (and, if the payment meets the short-term exception, then -3 doesn't come into play).

I also believe that the agreement won't have 409A effect if the payment is spread out over a 1-year period, as long as the involuntary separation pay exception is satisfied.

Thoughts?

A cash balance plan is designed with a small benefit formula. If the company sponsor has a good year, the formula is retroactively increased for that year only. Each year the formula is either left at the original low level, or retroactively increased for that year only. The purpose of the design and methodology is to increase the flexibility of employer contributions to reflect the actual level of business activity.

Does this meet IRC regs?

If not, why not?

Help!!!

I know what this is but have never had any involvement in administration.

As Benefit Administration how much involvement is this person expected to contribute. Should this information come from Finance/Accounting? What information is the Benefits person expected to present?

Out of the blue a client has received notice of a DOL audit of their health plan.

They are fully insured, and under 100 participants, so no 5500 has been filed. They have requested all plan documents and forms. Has anyone seen this activity from DOL?

A company had open enrollment in November as normal for a 1/1 plan year. This month they decided they want to change the plan year to 5/1, because they are adding some new companies to the fold and need to bring them in to the plan. Can they change this mid-year, without announcing during open enrollment? I understand you can do a short plan year, but I thought it had to be announced.

Can participants make election changes? Add spouse etc.?

I was hoping someone could provide a brief 457 "101 - Basics" and then point me in the right direction for additional information.

This is regarding an employer that I'm not really involved with: A (very) small business maintains both a 457(b) and 457(f) plans. Attorney drafted both documents and everything seems to be OK with that.

What administrative services are needed for these plan on an ongoing basis? There are no 5500s needed. Any other filings that they should be making? These are non-qualified plans, so the usual 415 and 402(g) limits wouldn't apply correct? The plan covers only the owner, so there are no testing issues. Do they need a TPA at all for something like this?

Thanks for any help.

I just took in a 401k plan with a plan year of 2/1 to 1/31. What year determines the limits to the plan-2008 or 2009? It is my understanding that the calander year is what counts. Am I right? Thanks.