Does the 1+-year free pass for coverage testing resuting from a merger/acquisition (IRC Section 410(b)(6)© and Treas. Reg. Section 1.410(b)-2(f)) apply to the purchase of assets--i.e., Entity X buys the assets of unrelated Entity Y, including the plan, and all Entity Y employees move over to Entity X--where there is no resulting controlled group being formed? The regs seem to indicate "Yes" (last sentence of -2(f)), but I can't get that result from the Code provisions (which require that "a person becomes, or ceases to be, a member of [a controlled group] . . .").

An actuarial report prepared using the Datair system shows a TNC for a DB plan that has been frozen since the 1990s. Why would this be? Would they be measuring the actuarial increase to late retirees as a change in accrued benefits? This would make some sense, though the assumption page does not indicate there is a retirement delay for those actives over the normal retirement age on the valuation date. I.e., the assumption would be they retire immediately.

I received a potential take over plan. In looking at it: 1) There is an insurance policy in effect for one of the two eligible HCEs. No other participant has a policy in force. 2) In looking at the document there is nothing about insurance except that the trustees can purchase any contract from an insurer. They also define an insurer. That's all.

In contacting the prior administrator she said the plan was previously a Money Purchase Pension Plan and that when it was converted to a Profit Sharing Plan they ceased allowing new insurance policies. There are a couple of employees hired in 1981 and 1999. I'm unsure if they were even offered insurance under the old plan. Clearly on one else has been offered insurance coverage. She also said there were no other provisions relating to insurance other than the plan allows the trustees to invest monies any way they want.

She wasn't concerned with only one HCE having a particular benefit under the plan or that no one else had. THis is because of their "not allowing new policies".

My document spells out insurance in detail to include "authorizing" the purchase of insurance.

I think there is a benefits, right & features issue. I don't think their not allowing new policies when the plan was converted to a PS plan carries much weight.

Where is the requirement that the plan give detail on insurance purchase? Is there a listing of required document provisions out there? On an IRS site, or?

Your thoughts.

I have a combined DB/DC plan.

I am in the process of researching these items, but wanted to get the ball rolling on my questions anyway.

1. My understanding is that only one of the two plans can apply permitted disparity in the non discrimination testing?

2. Let's say we apply permitted disparity to the DC plan and that we are testing the combined plans on the accrual method, i.e. cross testing the DC allocation. Is permitted disparity first computed and then followed by conversion to accrual rates OR is conversion to accrual rate done and then permitted disparity applied? I perceive that it is the former.

Thank you.

Company M maintains a 401(k) plan that contains a number of features, including after-tax contributions and Roth 401(k) contributions. Company T participates in Company M's 401(k) plan. M has reached agreement with Company U to sell the stock of Company T. U will establish a new 401(k) plan but it will not have after-tax contributions or Roth 401(k) contributions. U will enable Company T employees to roll over their account balances in Company M's 401(k) plan other than after-tax contributions, Roth 401(k) contributions and that portion of outstanding plan loans containing after-tax contributions and/or Roth 401(k) contributions. Can M divide the loan into two: one portion including the portion of the loan attributable to contributions other than after-tax contributions and Roth 401(k) contributions and the other loan being the portion of the loan attributable to after-tax contributions and Roth 401(k) contributions? Why or why not?

Do we have the 2008 Schedule SB instructions yet?

Question 21b, for example, asks for the code for the Applicable month for the Segment rates lookback - October (3 months) in this case.

Anyone know the code?

I thought the whole idea of a transitional rule is to lessen the impact of new laws/regulations.

With that in mind, I thought the transitional segment rates would produce lower required contributions. But that is not to happening in general because looking at the 2008 rates, the 2nd & 3rd segments are about equal to or less than the regular rates!

Needless to say, transitional rates produce higher FT & TNC for a benefit stream starting after 5 years than the regular segment rates!

Was this intended or is there something wrong with the published transitional 2nd & 3rd segment rates or have copied them down wrong?

WRERA applies as if part of PPA. So, the following question arises. Actuary "A" performs the 2008 actuarial valuation and AFTAP certifications of a January 1, 2008 valuation for a calendar year plan as 90% and got all this done by March 31. Actuary "A" couldn't not take it any more and retired suddenly but is still around to bridge transition and clean up loose ends. Actuary "B" was retained going forward.

The issue is why should the client have to pay to redo 2008 valuation [though most of the heavy lifting (e.g., determination of Funding Target) has been done? The result of redooing the valuation is that the employer will have made excess contributions since the redoo will reduce the 2008 minimum. So, why not let the sleeping dogs lie, have the employer elect not to redo the valuation [the election feels good but there is no legal basis], let Actuary "A" just sign the 2008 SB, and then Actuary "B" recognizes the 92% funding target when he/she determines the 2008 amortization charge and remaining base in 2009?

How should Actuary "B" proceed? Please vote.

Participant A was 52 years old in 2008, worked for 2 companies, and contributed more than the 2008 limit of $15,500 plus the $5,000 catch up allowed. The contributions to the first employer's 401k plan have been rolled into a Rollover IRA account. The Rollover IRA owner (i.e. participant A) can take a distribution from the Rollover IRA, but how should the distribution be coded for tax purposes?

I see that IRS Publication 525 says to add the excess to the W-2 wages on the tax return, but not sure how to code the Rollover IRA distribution.

Participant A is 49 years old in 2008 and makes an excess deferral to Plan X. A reports the excess deferral to the sponsor of Plan X in early 2009, the year in which he will attain age 50. Can the employer simply recharacterize this amount as a catch-up contribution or must it refund the amount as an excess deferral?

Can anyone confirm the fact that Congress is thinking about changing how DBs value assets for EOY 08 valuations, 09 valuations and for AFTAPs?

Thanks

Here's a situation I'm currently working with.

An individual with an IRA through a bank made a withhdrawal in late 2008. The individual requested that $2200 be withheld. Instead, due to a bank typo, only $200 was withheld.

What options does the bank have to correct this?

Can the individual pay the bank back the 2000 to have that count as withholding and then have the bank issue a corrected 1099-R?

thanks!

I'm pretty sure I know the answer to this but was hoping to get a second opinion.

Match formula is 100% of 401(k) up to 6% of compensation.

Definition of compensation is standard W-2 comp.

Payroll takes 401(k) from all pay except for a special bonus at the end of the year which is included in W-2.

Therefore, the 6% cap on the match is based on pay which includes the bonus, even though no 401(k) was taken from it.

Sound right?

Pay used for 401(k) 100000

401(k) - 8% 8000

Bonus 20000

Total Pay 120000

Match 7200 (which appears to be 7.2% of pay used for 401(k)

Has anyone ever heard of an opt-out notice that requires a participant's signature, stating that such participant needed to "opt-out" if they didn't want to invest OUTSIDE of the plan?

Does WRERA prohibit a participant from taking his 2009 RMD? RMD's are the only exception to lump-sum distributions in a lot of the plan documents I handle and I can't imagine telling retired participants they have to take $25,000 or nothing instead of the $1,000 they want. And can a participant still elect not to have the 10% (not 20% mandatory) Federal Taxes withheld?

Is a 204(h) notice required to a group of employees who are going to be transferred from the parent company to one of its subsidiaries and will no longer be participants in the Company's DB plan. The subsidiary has its own benefit plans and a DB plan is not one of the plans. Thanks.

We have a transaction where several plans, some underfunded and a few overfunded, will be merged. Does anyone know whether merging the overfunded plans with the underfunded plans raises any fiduciary issues?

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The sole owner/employee of LLC #1, which sponsors a DB plan, also owns 50% of LLC#2. The DB plan has paid LLC #2 to assign his 50% ownership in LLC #2 to the plan. I'm guessing that both LLCs are a controlled group due to the effective control rule since the owner of #1 would still be considered owning the 50% interest in #2 since he's the only participant in the plan, not to mention that the "assignment" was probably a prohibited transaction. As a result, the employees of #2 could be eligible for benefits under the plan due to the CG situation. Is all this a correct interpretation?

Another issue (that may be very small compared to the PT and CG ones) is whether this assignment runs afoul of the rules regarding how much of an employer a plan can own. It's my understanding that a plan can hold qualifying employer securities if their value doesn't exceed 10% of the plan's assets at the time of the transaction (assignment was more than 10%). But since qualifying employer securities are defined as either stocks, marketable obligations or public partnership interests and both LLCs are small, privately-held firms, does this rule not apply here? Thanks in advance for all help.

30 person 401(k) at record keeper platform

IC called me to ask vesting on a Participant. Since plan has never had anything but deferral and SHNEC, I said 100%.

I found out that the Employer had sent distribution forms straight to investment company instead of to me. I then confirmed that he had retired 2 years ago and asked her to send me copy of the forms

When I went through my checklist, I saw the form asked for just $10,000 of a $60,000 account. The Plan Doc only allows for lump sum distributions. It is a Corbel volume submitter with an adoption agreement.

I am thinking that asking for the money back isn't going to work. And I think the EPCRS fix would be to amend the Plan to allow partial distributions, at least for this year. He was never an HCE, so there would be no discrimination issues.

What do you think? Besides, telling the employer please always send the form to me, what would you do? Would anyone feel comfortable ignoring this as a one time mistake?