I've been given conflicting advice on how to administer the 55% average benefits test for a Section 129 dependent care assistance program. One argument is that collectively bargained employees are completely excludable, the other is that only those unions who have not negotiated coverage in the plan are excludable.

I read Code Section 129(d)(9) to say that eligible collectively bargained employees should be included. I'd appreciate any of your thoughts on the matter.

Also, is anyone doing this test? I can't find any real world discussion about it, and I'd expect there to be some.

Excess Roth 402(g) of $1,000, loss of $100, net distribution equaled $900 and distribution took place before plan year end.

Am I coding the 1099R correct?

Box 1 Gross Distribution $900

Box 2a Taxable Amount $0

Box 5 Employee Contributions $1,000

I think box 1 and 2a are correct. My biggest concern is box 5.

ERISA outline book states when there is a loss only one 1099R is required, amount reported in gross box and taxable amount box is the amount of the distribution (provided a pre-tax contribution), with a separate statement instructing participant on proper reporting of deferrals and loss on personal tax return.

Thanks in advance for your imput.

Through a payroll audit a large multiemployer defined benefit plan discovered that a participating employer was making improper contributions to the plan for several years. It appears that the employer was requiring employees covered by the CBA to "elect" to participate in the plan and then was taking money from those employees' checks on an after tax basis to make contributions to the plan. The plan does not allow for acceptance of any kind of after tax contributions.

Obviously, the plan can no longer accept these contributions. My concern, however, is what the plan is required to do with those contributions it has already received from the employer. Can the plan simply refund the contributions to the employer and notify the participants about what happened and inform them they have not accrued any benefits under the plan? Should the plan approach the IRS regarding the proper correction procedure?

Any thoughts would be greatly appreciated.

If a participant applies for early retirement prior to the plan being certified as critical but the benefit payments would not start until after certification (notice of critical status), can the benefit be cut? No cutback can be made when the participant/beneficiary is already receiving the benefits, but what if the benefit has no yet started payment?

Thanks

A client wants to offer a 401(k) Safe Harbor (3% Non Elective) with a 7% Profit Sharing Contribution.

Is any non discrimination testing required on the 7% Profit Sharing Contribution?

I would not think so because the company is giving it to everyone in the Plan (HCE's and NHCE's).

Any input will be appreciated.

ALEX

I believe we have no Cash-Balance safe-harbor fixed interest rates to my knowledge. I know I can use the 3rd segment rate as a safe-harbor per proposed regs which under transitional rates (this plan went in for 2007 so eligible for transitional rates) the 3rd segment rate is 6.23%.

We're thinking of amending the interest credit rate up; currently using a 10 year treasury bond rate of just above 4%.

How aggressive do you think it is to go with a fixed rate of 6% for 2008 (via amendment) ?

It's lower than 3rd segment rate, higher than various Treasury Bond index rates, but ultimately not a safe-harbor rate at this point.

FWIW, there are only HCEs in this plan. Main goal is higher interest credit for accrued benefits and softer funding whipsaw impact on minimum required contribution.

Individual expects to receive $12,000 of self-employment income for 2008 and is considering adopting a Solo-k Plan by year-end in order to shelter all - or as much as possibe - of same. Was wondering how FICA is handled or interacts in determining the "net" amount that can actually be deferred?

Thanks!

I am trying to get my head around VEBA nondiscrimination testing.

BigCompany has a retiree medical VEBA and excludes key/highlycompensated employees. BigCompany acquires littlecompany and its retiree mendical VEBA.

What happens to the participants who were highly compensated/key in littlecompany but no longer are?

When do we run the test?

What do we do with the separate accounts under 419A maintained for the old key ees in littlecompany?

Since this is retiree medical, what relevance has reg. sec. 1.416-1 which says a former employee is a key employee if he was a key employee when he retired or separated from service.

Remember, the nondiscrimination rules are under 505 which involves highly compensated employees as defined in 414(q), not keys under 416.

Help.

After hours of research I seem to still be having trouble finding a solid answer to this question:

If an educational institution sponsors BOTH a 401(a) plan and 403(b) plan, is the participant able to maximize his/her 402(g) contribution to the 403(b) plan, and still have the employer contribute the max permitted under 415 to the 401(a) plan? Stated another way, are there two 415 limits? Could the participant potentially have 46k plus 46k contributed to these two plans with one employer?

Thanks for feedback!!

I see in EPCRS that there is a de minimis of $75 for corrective DISTRIBUTIONS (EPCRS section 6.02(5)(b)).

But is there a de minimis for corrective CONTRIBUTIONS? More specifically, I have a plan that needs to do some true-up amounts for a profit sharing. Client believes the $75 de minimis applies for people who have terminated and took their money. (The true-up is for 2006).

Does EPCRS allow for de minimis exclusions of corrective contributions? If so, where.

Thanks in advance.

Plan goes top heavy in 2006 triggering a TH contribution for 2007. TPA does not provide information to client until 6 weeks ago. Client did not extend tax return so corporate tax return due date was March 15th. TPA provides an allocation for the TH 3% contribution and also provides an allocation for a match contribution of 25% up to 4% of pay with the additional contribution due to satisfy the TH requirement so the client can make a choice.

It is my understanding that the due date of the TH contribution is vague. Based on the ERISA books one should use the deduction deadline (March 15th in this case) or the 415 deadline (April 15th in this case).

It is my belief that the contribution is late and that the client should contribute lost earnings on the deposit. The contribution would be deducted on their 2008 return, not the 2007 return because it was not timely deposited for that deduction. It is also my belief that the client should just do the 3% contribution and not the match with the additional amount to satisfy the TH requirement. Correct me if I am wrong but I believe that because the match does have a definite due date and they did not deposit the match by that date they should just do the straight 3% contribution. It would have been a different story had they already deposited the match and just had to make up the difference for the TH requirement because match can be used to satisfy TH requirements.

I recently spoke with someone who is dealing with an ESOP plan document that has not been updated since 1995. Surely there must be some amendments that have been required since that time (and no, the plan is not terminated although I don't know if there are current allocations). I am familar with the IRS cummulative list but this goes back so far and sometimes there are exceptions for what ESOP's must do, does anyone know where I can find a good list for ESOP amendments only?

Hello:

I have two plans that are aggregated for coverage and ADP/ACP testing.

The question I cannot seem to answer is whether the Top Heavy test can/must be done in the aggregate, or must it be done for each plan separately?

Thanks in advance for any feedback that might clarify the top-heavy application whne plans are aggregated.

Andmik

I am reviewing a plan that provides that certain employees are entitled to a bonus payment if there is a change in control of the corporation. I have 3 questions regarding this plan.

1. When are the amounts taxable to the 2 individuals? When a change in control occurs? Or is there any reason that the individuals would have to pay taxes (based on a valuation of the company) prior to an actual change in control?

2. Change in control is defined as a "sale, exchange or other disposition of all of the stock of the Company, a merger or consolidation of Company, or a sale of all or substantially all of the assets of the Company such that the Company is not controlled, directly or indirectly, by those persons who were shareholders before the transaction" Does this definition comply with the treasury regs so that the plan conforms to 409A?

3. Assuming the plan does not meet the 409A requirements, and a change in control does eventually occur, how would the individuals be taxes? Would the tax owed be considered when the Plan was implemented (which is when they had a vested right to payment)? In my scenario, the plan was adopted in 2000, so would the 2 guys have to amend their 2000 return, pay interest from that date, plus the 20% excise tax?

Can anyone assist? Thanks.

The employer/plan year are 6/30. Is the limit (i see references to calendar year?) of 15,500 based on the participant's year or the employer's year?

Can a company owner with 6 employees invest with a different financial instiution than his employees do.

Right now they all invest (employees and employer) through a popular mutual fund company and he would like to invest in another popular insurance company. He wants to roll or transfer his current SAR SEP money here and make new contributions at this insurance company as well.

Can he go elsewhere with his SAR SEP and does he need to notify the employees if he does so?

I figured that this would be OK since SAR SEP's are basically glorified IRA's.

Thanks.

What are TPAs charging for EGTRRA restatements? --We have mostly Vol. Submitter 401k docs. Thanks!

The maximum election amount for Dependent Care is $5000.

I will spend $5000 on daycare in about 4 months.

Our FSA plan provider says that I still have to make the contributions spread out over our regular 26-week pay schedule.

This means that I will have to deduct approximately $192 per pay check for the entire year and have to wait the year to fully reimburse myself for the expenses.

While this is not such a big deal (I can get reimbursements throughout the year), I would rather take more out of my paycheck early on ($625 per paycheck for 8 pay periods) so I can get it out of the way. I am on hold now with the IRS to see what they have to say about it.

Is this something that is a regulation for everyone, or is it our plan provider's rule?

Any thoughts?

Thanks.

Any insight on whether an extension is on the way. My clients are being bombarded with form documents (many of which are outdated and incorrectly drafted - one actually refers to the "exclusion allowance" and the 402(g)(8) limitation - these documents are being distributed by national consulting companies, REALLY!!). The employers are not being advised of the obligation to make deferrals available to union employees, and those that are, cannot comply in a timely fashion. Small non-profits do not have the manpower or budgets to hire fancy law fims to interpret these documents. I think that the purpose of the regulations was a good idea, but the implementation requires more time and education. An extension was granted for 409A - which was much more complex. It goes without saying that an extension is necessary. Bob Architect, are you reading this?? Also, for those of you who missed the videos, Bob's videos on You Tube are great!!

If plan termination date is 8-1-08(cal yr plan)how does one file with IRS at this point.

Dont we have to do an 2008 val first;since there will be accrual for 2008?