Client has 3% SHNE and a match of 50% of deferrals. It fails ACP Test. Do I forfeit or return the money from the ACP test? Can I test anything over 4% of compensation. NHCE has a match in excess of 4%.

Hi: Great board. I have a 401k plan that wired money into their Holding Account back in 2008. They generally use this money for funding their non elective contribution. For plan year 2008 they have decided not to fund this discresionary non elective contribution. Furthermore, they want us to send the money back to them. Is this possible? I didn't think we could remove money from the Trust. Please advise -thank you.

Is there a penalty for sending out a 1099-R after the Feb 2 deadline mentioned in the instructions? If so, what is it?

The instructions say:

Furnish Copies B, C, and 2 of this form to the recipient by February 2, 2009.

...but that's it.

Does anyone have any thoughts as to whether it would be permissible to enter into an agreement with a construction industry employer to waive his assessed withdrawal liability so long as he paid contributions that he would have paid on behalf of his employees during the period from which he initially withdrew from the plan and the time at which he signs a contract with the union again? In other words, for all practical purposes, the agreement would create the fiction that he never withdrew from the Fund in the first place.

Can a spousal beneficiary who is a participant in the same plan as the deceased participant, rollover the participant's loan balance into her own account and assume repayments?

I found this in the ERISA Outline Book:

I also found this in the ERISA Outline Book:

So, I take this to mean that if the plan allows participants to rollover loans (which I know isn't all that commone) then the spousal beneficiary would be able to rollover the loan and assume payments. Is that correct? Doesn't feel quite right.

Any thoughts would be appreciated!

If the non-HCE's are classified as "not otherwise excludable" or "all" and the "not otherwise excludable" group provides a better ratio (2.39% as opposed to 1.9% for all) would I start my targeted QNEC calculations using the lowest paid in the "not otherwise excludable" group?

I work as a Compliance Manager for a large custody bank. We are the trustee and custodian for approximately 17,000 small 401(k) plans recordkept by a reputable recordkeeping shop. (As you've probably assumed, we don't custody the assets on a "participant or a plan level - it is one omnibus account in the recordkeeper's name). The plans are on a standardized prototype sponsored by the recordkeeper. It was recently discovered that a formalized KYC program was never put into place for these plans. We do sign a standardized trust agreement with all plan sponsors since we are trustee for their plans - (the plan sponsor is required to sign and a bank officer also signs). Each new client is required to complete a "Plan Application" as mandated by the recordkeeper. The Plan Sponsor must provide the official company name, address and EIN on the Plan Application. The new clients also (obviously) provide account statements so the plan can be converted to the new recordkeeper. My question is: are we (the bank and the recordkeeper) already fulfilling our KYC requirement by collecting a signed trust agreement and the recordkeeper collecting company information through their Plan Application? If not, what additional information would be required? I know 401(k) plans are considered very low risk for KYC purposes because they are probably the most tightly regulated type of account. We're hoping that what is already collected is sufficient because the recordkeeper is not to keen on trying to solicit more information from their clients. Also, these are extremely small businesses/companies who may not have documents like "articles of incorporation" readily avialable. I was thinking there are other banks who are in the very same situation Any help that anyone can provide would be greatly appreciated!

Thanks ahead of time.

I have a client who is unsure of whether they actually filed their 2007 Form 5500. Basically, we prepared the 5500-EZ and mailed it to them instructing them to sign it, send a copy to the DOL and send us a copy of the signature page. We received a copy of the signaure page but now the client is asking us to verify with the DOL that he actually mailed it to them!

I'm afraid that if he didn't actually file it and I alert the IRS due to my inquiry we have issues. Is there any way to determine if the ifling was actually received w/o creating this type of issue? Has anyone ever done this before?

Calendar year 401(k) has been using the current year testing method for all years since prior year testing authorized by the tax law. For 2008, employer determines that, due to the volatility in the equity markets, many NHCEs stopped contributing to the plan altogether. If the 2008 ADP/ACP tests show a failure, but the plan would pass based on a prior year testing methodology, what is the deadline for the plan to be amended to adopt the change in methodology?

Calendar year plan. Plan document definition of actuarial equivalence specifies the mortality table for converting to optional annuity forms as the mortality table per 415(b)(B), ©, and (D). At at 12/31/08 that table was the 1994 GAR table, but after WRERA on 1/1/09 that table is the applicable mortality table for 417(e). For benefit calculations, does that need to be handled like an amendment to the AE definition, doing the calculation under the old and new definition and taking the greater result? I hope not, otherwise any plan that defined it's annuity conversion mortality table as the 417(e) table would now be in a perpetual state of annually "amending" the definition of AE.

(I am remembering that the IRS said a plan document that had automatic increases to 401(a)(17) and 415 is an annual amendment as far as they are concerned ........ wrt the Schedule R question regarding any amendments increasing benefits during the year, and creating amortization bases, although they backed off the plan amendment base issue and eventually allowed the change to be part of the G/L.)

Are quarterlies required for 2008? The section in the 430 is 'Reserved' since it refers to the prior plan year shortfall base (which of course in 2007 could not possibly exist). I know this was covered before but can not put my hands on the cite.

Thanks in advance for any and all comments.

I was looking around for a QDRO checklist, and I found one that was a combo QDRO/EDRO checklist. I ahvce never heard of an EDRO, and no one in my office seems to have heard of it eitehr. A search of Tripodi came up empty, too.

I Dogpiled "EDRO" and I found out it means "Eligible Domestic Relations Order." And it seems as though it only pops up in some publice employees' plans. So is it a PERS-specific kind of QDRO?

Can a company who had a 401(k) plan with employees change to a "one-person" plan?

The employer has let everyone go. The only people left are the two owners and their spouses. However, there is one terminated participant who still has assets in the plan. It is my understanding of a "one-person" plan that they have no other employees other than the owner(s) or owner(s) and spouse(s). Since that's all there is now, could they switch it to a "one-person" plan? My next question is, if they can, how will this work for filing Form 5500? Their assets are well below $250,000. However, they have filed Form 5500 in the past, since they did have other employees. Can you go from filing Form 5500 to not filing Form 5500?

Thanks!

There doesn't seem to be much discussion of governmental DB plans, but maybe some of you are aware of guidance on dealing with this.

I have a governmental plan determining annual expense on a GASB 27 basis. They make a single annual contribution equal to the recommended funding contribution each year. However, during 2008 they switched from an off-calendar year to a calendar year fiscal year creating a short fiscal year ending 12/31/2008. The result is that during the short fiscal year they have made a contribution sufficient for 12 months which presumably will result in a net pension asset. It seems one approach toavoid this would be to reduce their next contribution (i.e. plan and fiscal year 2009) so we can say that the difference is due to timing differences. We are trying to avoid this since funding levels have dropped due to asset performance.

Is there any way to rely on the fact that the excess contribution was made during the short fiscal year and avoid establishing the NPA?

I've been told that a qualified plan definition of compensation cannot include voluntarily deferred compensation under a nonqualified deferred compensation plan. I do not see any support for this position since I do not believe voluntarily nonqualified deferrals are considered "employer contributions".

For instance, would deferral into an excess benefit plan reduce compensation for purposes of the qualified money purchase plan?

Hi Everyone,

BTW this is my first post! I am fairly new to the business (3 years) and I love it. I am trying to learn as much as possible and it seems like there a lot of very knowledgable (and generous) people on here. Sorry if this has been discussed already, I promise I tried to search first. Anywayyysss...

We have a new client and this is the first year we are performing testing for them. They use the prior year testing method, so I requested a copy of the 07 test. I received it and noticed that the ACP test has percentages over the plan limit. The match formula is 50% of first 6% (so 3% max) and people received up to 3.5%. Does this make test results invalid? I know that when I perform testing, I check for this like this and make sure they get corrected and I use the adjusted number on the actual test. I look forward to your thoughs...

Thank You

George

An employer sponsors a DB plan and a 401k profit sharing plan.

The DB plan provides a formula of 10% per year for the owner and an accrual of 0.5% per year for the employees.

The 401k profit sharing plan provides an allocation of 7.5% for each NHCE to meet gateway.

On a combined plan basis the plans pass the non discrimination tests.

Based on the above facts, does the above appear to be a reasonable non discriminatory plan design?

The IRS is just reviewing the DB plan and claims the plan formula is discriminatory.

Any suggestions on how plan sponsor should submit fopr determination with this type of plan design? That is, somewhere report that the plans meet discrimination on a combined plan basis. I don't work on plan determination process, so without researching the plan determination forms, I am thinking it would have a section to indicate plans pass on a combined basis.

Interested in comments.

Finally, what if Db formula provided 0.5 to NHCEs and offset DC value? On the basis that the plan passes general test and is of course not a safe harbor offset plan? Just another perspective for consideration.

Thank you.

I have an HSA HDHP plan from a previous employer, which I am now enrolled in through COBRA coverage. A tentative new employer has offered me a position but does not offer health coverage, so I will continue with COBRA until it expires. The new employer, however, mentioned that in lieu of a group health plan, they offer their employees a $200/month non-taxable "reimbursement" to cover the premiums employees pay on their own individual plans. Would this non-taxable "reimbursement" in any way restrict the amount of money I would be able to contribute to my HSA for the year?

Thanks for your help.

Many of you are old enough to remember the IRS's "actuarial audit project" from the early 1990s. At that time the Service opened audits almost all small defined benefit plans which had NRAs prior to age 65 and attempted to disallow deductions for the "excess" deduction (over the amount allowable if the NRA had been age 65). The benefits community (including the then-ASPA) banded together to fight the IRS. IRS lost the first 2 court cases and immediately dropped hundreds of audits that had been opened.

A similar thing is happening now. IRS has opened hundreds of audits of clients in various welfare benefit arrangements. We have known of IRS's dislike for these arrangements for some time (at least since 1995 when Notice 95-34 was issued). Then IRS upped the ante by labeling some of the plans as "listed transactions" [419A(f)(5) and (6) arrangements].

One welfare benefit plan stood up to IRS, hired a former IRS litigator and pressed for a court date. The IRS blinked and dropped the whole case.

Another plan, whose promoter IRS officials dislike intensely, is scheduled to have 3 cases go to court this June. Recently the IRS made a very reasonable settlement offer to avoid going to court.

Apparently the IRS is afraid that they will have to drop the whole project if they start losing cases in court. So they are avoiding court in hopes of intimidating taxpayers into paying taxes they don't owe and keep the audits going as long as possible.

IRS auditors are desperately trying to make up excuses why amounts in the welfare benefit plans should be taxable today. For example, for a client who made contributions in the 1990s but nothing in the past 7 years, the IRS offered to treat the plan as a split dollar arrangement (although our WBP has nothing in common with a split dollar arrangement), making the accumulation value of the insurance taxable to the client in 2005.

Is anyone else having experience with these arrangements?

I have only a passing familiarity with Corbel's documents, but have a question involving a plan using such documents at this time.

On Monday, the Supreme Court issued its decision in Kennedy v Plan Administrator of the DuPont Sav. and Investment Plan, Docket #07-636, settling a Circuit dispute as to whether a waiver of benefits violates the anti-alienation rule. The Court said no, it does not, provided that the plan document permits it, the waiver is made per the plan procedures, and the waiver does not designate who the successor beneficiary will be.

In my brief review of the Corbel document identified, I have found no spot where there is provision for waivers of benefits.

Does anyone know definitively if there is or is not?