Is there something online or perhaps a thread/post someone could link to here that provides a summary of rule changes for 2009?

Thanks

A participant terminates while plan AFTAP is deemed over 80%. By the time he returns the paperwork showing a lump sum election, the AFTAP has been certified to be between 60% and 80%. Is this lump sum distribution limited to 50%?

Anyone have any AFTAP letters which the participant is supposed to receive if the plan's AFTAP is <60%??

Would appreciate a copy.

steve@thepensionmaven.com

A business is formed in November of 2003, and institutes a 401k plan immediately. None of the corporation's owners are employees, so there aren't any HCEs by virtue of ownership. The plan operates on a calendar year basis. How do you determine HCEs based on compensation when there isn't a 12 month look back year? How do you make the determination for the short plan year 11/2003 through 12/2003, and how do you make the determination for calendar/plan year 2004?

If a TPA charges $100 to process a distribution and the employer - sponsor wants to pay that fee from the plan, how would the cost be allocated? Could it be netted with gains and losses? That would put more burden on those with larger balances. If it is charged pro rata per participant, someone with $50 in the plan would be more affected than those with larger balances. Since HCEs have the larger balances, I am worried about discrimination. The employer does not want to use forfeitures.

Any thoughts?

Jimmy

Suppose you have a calendar year 1 participant DB.

They were not able to provide investment information until after 4/1/08. The AFTAP was certified 9/15/08 at 87%, so actually 77%. Since then, they have made a contribution that will put them over 100%. Can they terminate the plan 12/31/2008 without benefit restrictions or must we wait until 2009 to terminate and have a new AFTAP done?

Thanks much.

Please let me know if any more information is required or I may not have laid out the facts in their entirety.

Corporation - A (not a professional corp.) is 100% owned by individual Mr. X.

Mr. & Mrs. X are the only employees of the corporation.

Corp. A performs services for an unrelated company B (Union).

Apart from the service fees that corp. A receives from B, B also provides W-2 to Mr. & Mrs. X.

Company B has such a relationship with many other companies none of whom are related with any other company.

Company B provides two plans, a Defined benefit plan and a profit sharing plan.

No employees of any corporation are excluded from any plan

None of the employees are required to make any contributions.

Now, ER of corp. A wishes to sponsor his own 401(k) PS plan.

What if any could be the hurdles in having such an arrangement?

We have a former vested employee from years ago who retired this fall and, after much himming and hawing, ended up taking the lump sum option (about $20,000). He couldn't make up his mind about a direct rollover and ended up sending us no paperwork for a rollover election. So we told him we'd have to take the default action of paying him 80% of the total and sending 20% on to Uncle Sam.

Trouble is, we didn't instruct the bank trustee properly and they sent him 100%. Weeks later, long after he had cashed the check, we discovered the situation. I contacted him and asked him to send 20% back so that we could cut a fresh check for withholding. He says he's decided to just let it stand and pay whatever tax is due next April 15. I didn't ask if he's rolling it over himself or just keeping the money.

So now what? I'm inclined to let it stand too because I can't see any other alternative if he won't send the money back.

I have a QDRO with Continental Can. It was sold to Kiewit, then became Viatech Continental Can Company, which was a wholly owned subsidiary of Suiza Foods Corporation. Suiza bought Dean Foods and changed the name of the company to Dean Foods.

I am writing Dean Foods to determine who is responsible for payment on the pension benefits granted by the QDRO.

Has anyone else dealt with this kind of issue? I hope I am going about it correctly.

Thanks for any insight or suggestions.

Mary

I thought I remembered reading a requirement that stated if you have a loan in default you cannot get a new loan.

I sure can't find it now that the situation has arisen.

Anyone have any clues on this or am I imagining it?

Thank you

The failure is to obtain spousal consent before payouts under a plan subject to QJSA rules. The owner/EE has about $1.4m in plan (after withdrawing a couple of hundred thousand dollars without the benefit of spousal consent). Spouse is cooperative.

However, under Rev Proc 2008-50, section 6.04(2)©, it is provided that if spousal consent to the prior distribution is not obtained, the plan may offer the spouse a choice between a QJSA survivor benefit computed on the benefits as though there had been no withdrawals or "a single-sum payment equal to the actuarial present value of that survivor annuity benefit (calculated using the applicable interest rate and mortality table under § 417(e)(3)). Any such single-sum payment is treated in the same manner as a distribution under § 402©(9) for purposes of rolling over the payment to an IRA or other eligible retirement plan."

Given that there is only $1m of creditor protection for IRAs, this 'correction' alternative could seemingly be used to rollover some of the $1.4m at issue into an IRA for the spouse and the remainder could be rolled over into an IRA for the employee. If for whatever reason a liability cropped up, more retirement benefits of this couple would be protected using this correction alternative than the spouse giving consent to the prior distributions. (This might also make easier estate tax avoidance in planning their estates.)

Agree? Disagree? See any flies in the ointment?

My state is the 2nd or 3rd to do this. Unmarried dependents up to age 26 are eligible to be covered whether or not they are students or reside with you.

For state income tax purposes, coverage of a overage dependent (or a civil union or same-sex marriage partner) has no tax effect. For Federal tax purposes, we need to impute income to the employee for the cost/value of the coverage for the inelgible dependent, withhold taxes and not use the Section 125 Plan for payroll deductions for the coverage. That much we've figured out.

What we can't get a definitive answer to is whether that overage dependent can/should be covered under an HDHP/HSA plan . The HSA component is the problem since we contribute most of the deductible ($1500 single, $3000 family) to each employee's HSA.

If we have an employee with single HDHP/HSA coverage who adds an "overage" dependent, can/should we contribute $1500 or $3000 to the HSA ? The employee shouldn't use the HSA funds for that overage dependent, but the ee owns and controls that account, not us. There is no TPA to adjudicate claims.

If the employee already has family coverage, we still need to impute income for the cost of coverage for the federally inelgible dependent, but the HSA funding question goes away. The employee assumes the risk if they use the HSA funds to pay for pre-deductible expenses of the dependent.

Is it actually a company policy issue ? Should our policy be that our contribution to the HSA is based on the number of federally eligible dependents ?

Can anyone think of a helpful preliminary description of the amounts involved in the closing agreement program? Also, the relationship between the maximum payment amount and the final sanction.

Lack of supporting documentation; what code references or other official literature addresses this situation?

Small ER ends professional practice, pays out benefits to all EEs but the owner/EE. Continues QRP (holds merged MPP assets) for purposes of creditor protection until professional malpractice statute of limitations period runs. During that period, owner/EE makes 4 withdrawals during the last PY and the current PY, dating back 15 months. There was no 402f notice, no QJSA/QPSA notices or waiver by spouse of owner/EE. Owner/EE is passed the later of age 62 or QRP's normal retirement age, so not a problem in failing to give notice of right to postpone payout.

Incident to steps being taken to terminate the QRP, these notice and consent problems were discovered. In looking at Rev Proc 2008-50, section 6.04 on VCP describes the method for VCP correction, referring to Appendix A.07 for similar correction principles, of spousal consent failures.

The QRP qualifies for SCP correction of significant operational failures by SCP as the QRP has its own D-Letter. SCP correction may be timely accomplished.

My question of whether VCP is required or SCP is available boils down to whether these spousal consent and notice problems amount to something other than an operational failure as defined in section 5.01(2)(b), i.e., solely a failure to follow plan provisions.

Thanks in advance for input.

First time I've encountered this - the FSA interest rate for a plan is higher than 175% of the federal mid-term rate needed to calculate the 412(m) charge. Does this mean that there is no charge for just making the whole contribution on the minimum funding deadline and not making any quarterly contribuitons? Doing the calculation literally would result in a credit, but I don't suppose it would be appropriate to reduce the contribution by not making quarterly contributions. Does anyone know whether it's acceptable to just show zero for 412(m) charges in this situation? All help is greatly appreciated.

Given the state of our defined benefit plans, a lack of work in the region and skyrocketing health care costs, several groups are having difficulty finding management representatives willing to sit on a jointly trusteed board. One solution that has been proposed is to offer trustees a small stipend (>$500 per month) for their service to the trust. This would not be payable to anyone already receiving full-time pay from the union, an employer or an employer association. A trust amendment would be adopted by the settlors.

For example, we have a contractor representative who recently retired and wanted to resign. Can the Board offer him a small monthly stipend to remain involved?

How about a union trustee who is unemployed or retired?

What about an attorney or accountant who would be willing to serve for the union or association in exchange for the small stipend and paid conference expenses?

The relatively small cost of retaining or attracting qualified trustees would be well worth the money, but I cannot seem to find any guidance on the issue. The regs seem to speak only to "lost wage" reimbursement.

We have acquired two separate DC plans that both have QJSA language, and for whom we have participants facing MRD requirements. For what its worth, one plan is a Money Purchase Pan and the other is a Profit Sharing plan that was created as an offset to a defined benefit plan. So my understanding is that if we have not gotten (cannot get) an affirmative election from the participant (and spousal consent if married), then we have to make the distribution as a life annuity or a QJSA.

So the question is where we get an annuity vendor to provide a monthly annuity benefit where the premium or lump sum at distribution date is less than $2,000. Our search has trund up terminal funding annuity providers, but generally with a $10,000 mimimum payment.

I guess in the interests of full disclosure I have to say that we deal with this issue on a daily basis, but we can get participant and /or spouse consent in that situation.

Ideas?

Defined benefit plan with a long history of 10/1 - 9/30 plan years was amended before 10/1/08 to transition to a calendar year through a short year 10/1/08 - 12/31/08.

The amendment included language prorating service, compensation, etc. as you might imagine.

Driven by funding considerations, plan sponsor now wants to amend again, before the end of the short year, to run the current plan year out to 9/30/09 -- rescinding the plan year change to avoid a 1/1/09 valuation date.

What unintended consequences might this bring about? Employees who have already met short-year service requirements (250 hours for a year of service) when the amendment is adopted may have an additional year of service. But what other and worse things are lurking out there?

Thanks for your help.

Dr A had a practice with a PSP and contributed $46,000 in 2008. Business closed 9/30/08 and started working in a hospital with a 403(b) plan. Wants to defer $15,500 to the 403(b) this year. My thought is that the 2 must be aggregated this year, even though business has closed, and he can not defer anything to the 403(b), unless if he is over 50, then he should be able to do the $5,000 catch-up.

Any views would be appreciated.