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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ordering the plan sponsor not to make any distributions to Y. The TRO is perpetual--i.e., it continues to apply until withdrawn by the court.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!

I know there has been added a bicycle commuter benefit - $20/ month

Are these still...

Transit and Van pooling $115

Parking $215

...the same?

Say a participant has an accrued benefit under the plan terms of 50,000.

Say the 415 limit is 30,000.

Now say that the 415 limit has increased to 45,000 as of next plan year.

If the plan amends plan where participant's AB next year is 40,000, is this a violation of anti cutback?

That is, the qualified benefit increased from 30k to 40k, but the Ab of 50k from the prior plan year which would be limited to 45k in the current plan year is not preserved.

Long story short, is the 30k preserved or the 50k (subject to 415) preserved?

Thanks.

Money Purchase Plan term'd in 2003. It was thought that all assets were distributed and final Form 5500 was filed for 2003. It has just come to our attention that one insurance policy still exists in the plan name. A 1099 was issued for the rollover of this policy, but the insurance company never re-styled assets to an IRA for the participant.

Since the assets were not distributed, what do I need to do to bring plan into compliance?

prepare for interim amendments

file 5500's using Delinquent Filer VCP

Anything else?

Thanks!

We use documents from a major provider. As most of you know the differences between prototypes and the check the box volume submitter documetns have diminished signficiantly now that a) PT's can use cross-testing, and b) VS documents can have TPA initiated regulatory amendments.

So if a) prototype has less flexibility than the vs (i.e., limitations on # of allocation groups), b) the pricincing is essentially the same, then why would anyone opt to use the prototype (other than branding). Or is branding the primary reason? Is there anything a prototype can do that a VS cannot?

Hi All, first post in this forum. I work for a firm that does turnkey 401(k) plans where we handle both the TPA work and the investment side. We are currently trustee directed and manage our 401(k) accounts in separate pooled accounts (made up of individual stocks and bonds) for each of our separate plans. We are trying to set up a system in which we pool all of our pension plans together, invest in the same stocks and bonds across the board, and allow individual particpants to choose their allocation. That is, everyone would have the same underlying investments, but could choose whether they wanted to be 80% stocks/20% bonds, 60/40, 50/50, etc.

Would allowing the employees to make an allocation choice (but not have any choice as to the underlying stocks and bonds in the investment vehicle) convert our plans into de facto participant directed plans? I've read the DOL/ERISA regs, but am fairly new at this and can't seem to find a definitive answer. Thanks in advance for any help/direction you can provide.

Would appreciate thoughts on 409A legality of the following. Company has established deferred comp plan that is intended to operate as a true defined benefit type supplemental retirement plan. Benefits equate to payment of a percentage of final compensation for a period of 10 years following separation from service. There are no elective deferrals, etc. under the plan. Document has always provided that benefits will basically only be paid if employee remains continuously employed with employer through age 65. (There are benefits in the case of in-service death or disability prior to age 65.) Notwithstanding the age 65 retirement date requirement, however, the plan provides that if a participant "retires" between ages 60 and 65 the Company may, in its sole discretion, provide the participant a reduced benefit. The plan then goes on to spell out the reduced benefits that will be provided upon early retirement (i.e., basically reduced percentage of final year's compensation compared to the larger percentage paid for retirement at or after 65). The time and form of early retirement payments (if approved) by the company are the same as for regular retirement. Company owners generally anticipate honoring early retirement provisions if situations arise but very much which to retain ability to decide that on a case by case basis.

Question is whether it is possible to be 409A compliant and retain company's sole discretion to pay out upon early retirement. My initial thought was that such discretion could raise concerns over having established a fixed time and form of payment under the arrangement; however, it seems to me that arguably should not be the result. In this case, a participant separating prior to age 65 should have no legally binding right to any benefits unless and until the company has decided that the individual should receive some early retirement benefit. In essence, it is as if the company simply provides a brand new benefit upon the early retiree and so long as the terms of the benefit are fixed in a 409A compliant way at the time the company chooses to bestow such a benefit, the fact that the company exercised discretion should not be a problem.

Seems like this is a fairly typical arrangement for deferred comp purposes but I have not previously had to address. All thoughts appreciated.

Can anyone please confirm what the new PPA deduction limits are for PBGC covered plans for 2008?

If you have a DB/DC combination plans, is the new deduction limit:

(1) 25% of compensation to the DC plan + the 430 minimum to the DB Plan

or

(2) 25% of compensation to the DC plan + the 404 maximum to the DB Plan

I have a DB plan with $0 minimum 430 funding for 2008, but a significant maximum 404 contribution. If the client elects to make a 25% contribution to the DC plan, can they made a deductible DB contribution?

Any input is appreciated.

Does anyone know where that table of permitted disparity factors can be found in an official format (i.e., for imputing disparity on an allocation rate)? I'm tlaking about the one that gives a disparity factor depending on the combination of the Plan;s NRA and the participan's SS Retirement Age.

Sole proprietor and spouse participate in 401(k) (no other participants) and wants to use plan assets to finance daughter's primary residence, which will be used as collateral.

Permitted? PT issues, limit on loan amount, loss of interest deduction for daughter, and/or ERISA fiduciary issues? (or anything else?)

Thanks in advance.

If the plan has segregated accounts and a participant invests his/her money in an annuity what are the requirements regarding the death benefit? If that participant dies does the death benefit just simply go to the beneficiary? Does the beneficiary have to be the Trust?

I've never dealt with this and want to make sure I understand the nuances and any possible problems.