DB plan is restricted from paying any lump sums for 2008. Administrator at TPA firm goes on vacation in October '08 and in his absence a lump sum payment of $2800 is mistakely made to a plan participant. The plan has a $1000 threshold for involuntary cashouts. They are trying to get the funds back from the participant but it seems unlikely. What happens now?

Do many of you prepare Forms 1099R for your small plan clients?

I am faced with about 100 clients in such a situation.

Thanks.

My father passed away, somehow my brother (executor of estate), convinced insurance policies that I was not able to locate. It took me years to get beneficiary money from my father's main life insurance company. But it was there just sitting there. Since I was not able to have access to any documents (he did not have a will), I don't know what else might be "just sitting there". How can I find out if I was on my dad's retirement account?

I know that in the past a person who was a "2% S-Corp Owner" (direct or indirect with 318 attribution) was precluded from participating under a Section 125 Plan. I have a new client (401(k) Plan) that has a 125 Plan, and the spouse of the 100% Owner (S-Corp) is buying health insurance under the 125 Plan -- which actually covers the 100% Owner. While I know that there was an exemption for the spouse of a sole proprietor, I do not believe this is possible with an S-Corp. Is there some way that this is possible with an S-Corp? I note that I no longer work with 125 Plans so any recent changes would be unknown to me.

We know that we are no longer required to figure Gap earnings on ADP/ACP failures, however, what about 402(g) and 415 refunds? Has anyone seen anything about this?

Thanks!

If a plan currently has their involuntary distribution threshold set at $1,000 cash out (no automatic IRA for amounts from $1,000 - $5,000), can the plan be amended to have involuntary IRA rollovers if the amounts are between $1,000 - $5,000? Are there any protected benefit rules that are applicable?

Thanks

What is the correction if a Plan is failing 414s and the Plan is a Safe Harbor Match? They are not allocating a PS contribution but they do exclude bonuses as their compensation definition for the Safe Harbor Match. They do not have a bonus deferral election.

We have a construction company plan that normally has layoffs in the beginning of the year with most people being rehired mid year. We have two participants who became eligible for the plan 1/1/2008. Both were given paper work to enroll 1/1 but did not return that paperwork because they were layed off and nor recalled until March. Both signed enrollment paperwork for the 7/1 entry date. I beleive that compensation from 1/1 to 12/31 should be used for the ADP test not compensation from the date they enrolled.

For the same company, two employees also became eligible 1/1/2008, did not return paperwork, were layed off and eventually terminated as of March. Neither earned any compensatin in 2008 but were paid for their earned vacation and sick time. Should they be included in the testing for 2008.

Appreciate your thoughts on these two scenarios. I cannot find anything in the document that speaks about this.

I am a newbie to EB. Here is my elementary question ("I'm not worthy, I'm not worthy!")

Is it possible to structure a single-member ESOP for a manager in a management buyout/lbo? The company has other employees. I would ideally like to do a leveraged ESOP to give both seller (shareholders) and buyer (manager) the tax benefits of an ESOP. I'm assuming I cannot do this due to ERISA's general non-discrimination provisions and ESOP coverage limitations (as well as a host of other reasons: the MBO would be seller-funded, raising conflict of interest issues, and the distributions to the manager would probably exceed the maximums allowable under the ESOP qualification provisions). Another wrinkle to this problem is that the purchase envisioned by the letter of intent is a kind of vendor-funded purchase for the manager that will likely encumber the company's assets after closing.

I know there are many other laws that intersect here, but right now I'm concerned about whether an ESOP is even available in this single-member context (i.e., only the manager would be a beneficiary under the ESOP). I'm guessing the answer is a resounding "NO!" for the reasons discussed above.

My understanding is that one can claim medical, dental, or vision expenses if incurred outside the USA so long as such is not otherwise a violation of federal law in the USA even if legal in the other country. Correct?

Hi,

I am totally confused. We just had training in compensation testing, and the facilitator said that the compensation difference between HCEs and NHCE must be no more than 3% EVEN IF THE COMPENSATION FOR THE NHCE GROUP IS HIGHER. In her example, if the HCE group average was 95% and the NHCE group average was 96%, then the plan would fail compensation testing BECAUSE THE NHCE AVERAGE IS NOT GREATER THAN 3%, even though it is higher. This is exactly opposite of what I have been taught. I have been taught that if the NHCE average is equal to or greater than the HCE average, the compensation testing passes. The only time you have to take into account a de minimum amount (3% is what I've been taught) is if the HCE average is greater than the NHCE average.

Right now I'm so confused I just want to leave this business altogther -- probably not a bad idea. Could someone please clarify this issue for me? And a reference site would be sooo appreciated, whether I'm right or completely wrong.

Thanks!

This week it was discovered that a participant in a profit sharing plan was paid in 2008 a small distribution (approx. $300) from the sponsor's corp. account by mistake. Would filing a 1099R now showing the plan paying the benefit in 2008 be appropriate? Or would showing the corp. on the 1099R as the payer be better? Should the trust reimburse the corp. account now, and if so, how would it affect 1099R reporting?Given the small amount of the distribution, the sponsor is leaning towards the first option without making a reimbursement because he would just explain it was taken out of the corp. account in error should it ever become an issue. There will also be the issue of whether or not to report it as a distribution for 2008 on Schedule I and whether to show the participant as paid out on the 5500. Payment was made as a taxable distribution directly to the participant. What would be the best way to handle this? All help is greatly appreciated.

PPA Section 501 requires most single employer DB plans (covered by PBGC and greater than 100 participants) to distribute an annual funding notice to participants, beneficiaries and the PBGC no later than 120 days following the end of the plan year. For a 2008 calendar year plan, this would be 04/30/09. It is my understanding that this notice has been in place for multiemployer plans, but becomes effective for single employer plans for plan years beginning in 2008.

Can someone confirm that for a large DB plan that this 04/30/09 deadline still applies (i.e. there are no exceptions and no extensions)?

Can someone also confirm that model language has still not been issued by the DOL or IRS and the deadline of 04/30/09 is still in place?

Note: This is the notice that is supposed to replace the SAR for DB plans.

Thanks in advance.

We have an employee who works for two employers. It was recently determined that these employers are part of the same control group. Thus when the employee's income is aggregated, the employee is a HCE in the Plan. Adding this HCE into the Plan makes the plan fail the ADP tests for the last 3 + years (assumingly back to the date the employee started working for both employers). There are no other plan issues other than this. Does this require VCP? How far back do we have to distribute excesses, contribute QNEC etc. (or one-to-one fixes) and do we need to fix the excesses for ALL HCEs? OR can we call this an operational failure - fix the excesses for just the one individual HCE and call it a day? Any thoughts Also Pamela Purdue mentioned in an Benefits CLE that there was a "Woods" case that discussed the requirement that the plan must be "fixed" going back to the beginning of the error not just back to the 3 year statute of limitations- any info on that case?

Thanks

Our TPA uses Relius for the daily recordkeeping of our 401K plan. We would like to add some ETF funds to our plan, which can only be traded in whole shares. Our TPA is telling us that Relius has no capability to track more than one whole share fund per plan. Given that ETFs have become a popular investment option for retirement plans, I am not entirely sure the TPA is correct. Any thoughts or comments on this would be appreciated.

Plan Year is 7/1-6/30. The initial AFTAP for plan would have been 68% which triggered deemed waiver of $660,000 of $680,000 credit balance to reach 80%. Enter Technical Corrections, with the assumed rate of return, assets increased enough to cut deemed credit balance waiver in half. Is it feasible to revise AFTAP or is credit balance considered waived based on original calculation?? Thanks.

True or False:

Any qualified benefit offered through a cafeteria plan is automatically an ERISA plan because in order for contributions to the plan (in which the qualified benefits are offered) to be excluded from income under IRC Section 106, the plan must be "employer-provided." Thus, even if an employer tries to fall within the ERISA safe harbor (e.g., payroll deductions only and no endorsement, etc.), the very fact that the plan is offered through a cafeteria plan means the plan is "employer provided" and thus an ERISA plan.

If true, why? If false, why?

We came a cross a GUST prototype DB plan (small plan, 5 people) where the normal form is a Joint and 100% survivor annuity (life only if not married).

In order to do that, the document provider did not complete the Normal Form section of the adoption agreement, since Joint and Survivor was not an option there, but they wrote an extra appendix and added it to the end of the adoption agreement to define the normal form as Joint and 100%.

I think this puts the plan in the 5-year cycle. Their EIN ends in 2. They are considering plan termination.

Should they restate and submit to VCP since they are a late restater, or are they considered a 'prior adopter' and still eligible for the 6-year restatement cycle?

We thought about amending the normal form to Life only and add a fully subsidized J&100, but the other optional forms are affected too. What do you recommend?

A 412(i) plan filed a Form 8886 with the partnership's information return. Does one have to be filed with the individual's 1040 as well? The instructions say that an 8886 should be attached to "your income tax return or information return", but an IRS agent I spoke with suggested that it should be filed with both in order to avoid that nasty penalty. Doesn't make sense to me at all.

Investment company is issuing 1099R for distribution processed from 401k plan w/ solely pre tax salary deferrals in the 401k account. Account is for terminated participant, who requested rollover to his Roth IRA of the entire amount.

My question is on the 1099 code. Unless I've missed something IRS instructions appear to be somewhat unclear. I found a reference to using code G in box 7 and reporting the taxable amount in box 2a (along of course w/ the distr amount in box 1). This seems to make sense to me however the investment company that is issuing the 1099 states that they will use a code GB.

The B is for distributions out of a Roth source 401k account (isn't it?). In the fact pattern above the money in the 401k plan is all pre tax.

If the B code is used that seems to me would indicate to IRS that there isn't a taxable event (eg the B seems to indicate that the money came out of a Roth, and since it is going into Roth IRA there s/n/b any tax since the original deposited source was post-tax). This would be an incorrect taxation result w/ my fact pattern.

Am I missing something? Anyone have experience w/ this fact pattern and if so what code(s) have you used? Thank you for any help.