A plan wants to terminate mid year and is a safe harbor matching 401(k) plan. The plan has always made deferrals and safe harbor match only. The plan is top-heavy and relies on the exemption from T-H status due to SH match.

Am I correct in the following

1. 30 day notice to employees is required to cancel the match.

2. The plan will be subject to ADP/ACP testing for the year of termination.

3. The sponsor will need to make top heavy minimum contributions for the year of termination (because the exemption no longer applies).

Is there an exception for terminating plans that I am missing where one or more of the above would not apply?

Thanks in advance for any thoughts.

I'm back at work, but it appears that my brain may still be snorkeling in Hawaii.... (Couldn't find Blinky, though.)

Plan sponsor signed documents mid-September for a new calendar year safe harbor plan effective in 2008. Deferral election forms were submitted by several employees before 9-30. Client has now decided that there is no way he can begin deferrals before 11-30 for anyone. Upon hearing that was not a viable option, he would like to "amend" the plan to become effective 1-1-09.

I'm thinking that they currently owe QNECs for the deferrals that didn't get made, and I've already nixed the proposed "amendment". What am I missing?

How long do we need to keep records for an old 401(k) account for a company that no longer exists (due to acquisistions) if the plan has been terminated and all funds distributed? What items, if any should be kept and what could be disposed of?

thanks!

Plan includes an EACA - default contribution percentage of 3%.

Effective 1-1-09 the Plan wants to amend to a QACA with the default contribution percentage set at 6%.

For those participants who were automatically enrolled under the EACA at 3% and have made no election to the contrary, must they be increased to 6% once the QACA becomes effective in 2009?

We have an employee who was hired in September at a level that is eligible for our deferred compensation plan. Due to an administrative reporting error, the HR department did not receive notice of this person until November. Under 409A, an initial deferral election must be made within 30 days of first becoming eligible to participate in the plan. I don't see anything in the 409A regs that allow for a correction of an administrative error such as this, and I don't think this error is covered by Notice 2007-100. Does anyone have any thoughts on this?

Ladies and Gentlemen, Florida has enacted a law effective October 1, 2008 about which there is little agreement among practitioners. What they do agree on is that sponsors of fully insured group health plans with a Florida situs must allow their covered employees to continue covering unmarried dependents without dependents of their own until age 30 as long as those unmarried dependents either reside in Florida or are students at accredited institutions of higher learning.

The age 30 mandate is further limited in that the unmarried dependents may not have any other healthcare coverage which includes Medicaid and Medicare. I would argue that the COBRA administrator should quote the same COBRA rate billed to a divorced spouse mandatorily or a domestic partner permissively as opposed to the single rate whichh has been the practice historically.

Please comment from the perspective of actuarial logic as there are no regulations on point to my knowledge.

I have a client that has an employee that is paid a salary once a month before service is credited:

For an example: The participant gets paid on October 30th for service credited in November.

Is this a qualified CODA? Oh...and the participant happens to be the owner's wife.

All other employees are paid twice a month AFTER their service is credited.

As 403(b) plan sponsors review the new regs and begin to consolidate vendors, install fidcuairy process and other ERISA related behaviors the question is arising as to whether these plans should elect 404©.

Is this safe harbor available to 403(b)s? If so, are there any different filing requirments on the Form 5500 other than indicating 2f?

Thanks

I have a plan sponsor who is having problems passing the coverage/discrimination tests for an early retirement window ("ERW") program to be implemented early next year. The sponsor acquired a division of a company this year (April), which will be the look back year for the HCE determination next year. Although many employees of the acquired division would be HCEs if their compensation were annualized, none of them will be HCE due to their partial year with the sponsor. (1) Is there any applicable relief for a year of acquisition? (2) Is the sponsor allowed to annualize compensation for the year of acquisition to determine HCE status?

Hi. Superintendent of a School Board has an employment contract. As part of his contract, there is a paragraph that states that the "School Board will make a contribution for the Superintendent's benefit to an arrangement invested in an annuity selected by the Superintendent and satisfying the requirements of Section 401(a) of the Internal Revenue Code, in the amount of $10,000 with Superintendent being vested immediately." The paragraph goes on to state that the School Board will make this contribution annually.

It appears to me that this paragraph is creating a governmental plan with one participant. I think this is permissible due to the governmental plan's exemption from the nondiscrimination and minimum participation rules of ERISA. But what about the plan document requirement?

Any thoughts?

An ER has 25 EEs, has a group health policy for the EEs, and is in the midst of annual renewal of the policy. Unbeknownst to the ER, the agent just found out that an EE laid off last week has been rated as a bad health risk and would spike the group premium considerably. So much so, it would be much less expensive for the ER to pay for an individual policy for the former EE for a year than it would be the extra group premium if that former EE elected COBRA and paid the group rate himself.

Is there a prohibition to offering an EE an inducement to forego COBRA, similar to the prohibition against inducing someone to forego ER provided health coverage and go on Medicare primarily?

Suppose a plan amendment is done that provides a year of past service (prior to the effective date of the amendment).

Also, suppose the amendment is written to only affect the benefit accrual (upward) for a one HCE - it does not change the benefits for any other participants. Overall, even with this higher benefit accrual, the general test under 401(a)(4) passes.

Is the amendment deemed to be nondiscriminatory? The past service provided did not exceed 5 years and the accruals do not appear to fail under 401(a)(4) testing.

Can someone please explain the differences between a MERP and an HRA?

Pretty straightforward question - but I'm struggling with how testing would be handled.

Company A owns Company B, C and D. They are all part of a controlled group (obviously) and each maintain their own 401(k) plan. They all operate on 1/1 plan years.

In 2007, B and D are tested on their own. They were each able to pass coverage separatley - and therefore performed ADP/ACP separatley.

A and C were a different story in 2007. In order to pass coverage, they were permissivley aggregated. As such, they were combined for ADP/ACP testing as well.

On June 1 of 2008, Company A sells B, C and D. They were sold to an investment group and all 3 companies will continue to operate separate plans. In other words, neither B, C or D will merge into any other plans - nor will they merge their own.

So, how would you handle testing these 4 plans for 2008. Keep in mind that A and C had to be aggregated to pass coverage in 2007.

For coverage, I think these plans would be able to rely on the transition rule. Assuming B and D could pass coverage on their own as of 6/1/08, they would be deemed to meet coverage per the transition rule until the end of 2009.

A and C would be aggregated and tested for coverage on 6/1/08. Again, assuming they pass coverage - both plans would be able to use the transition rule until the end of 2009.

As for ADP/ACP, B and D would just be tested on their own for 1/1/08 to 12/31/08. But what about B and D? Would you test ADP/ACP combined from 1/1/08 to 6/1/08 due to the fact the plans are aggregated for coverage for that time period? And then test them separatley from 6/1/08 to 12/31/08?

Any testing experts out there willing to chime in? I think we should have our own testing forum!

I was under the impression that a QDRO cannot be amended - even upon the mutual agreement of the participant and alternate payee - without judicial approval. Is this correct?

Thank you in advance.

Assume an entity is wholly owned by a taxpayer's IRA. Would the sale of that entity to another IRA of the taxpayer be treated as a prohibited transaction? If the sale is between the two IRAs it doesn't seem like there is a disqualified person involved. Any thoughts (other than why on earth would we do this)?

A terminated plan distributed all assets in Sept 2008. I'd like to use the 2007 Form 5500 and enter the appropriate dates (01/01/2008 to 09/30/2008), but with the changes to the Form 5500 beginning with 2008, I'm not sure I can do this.

We've done this in the past, for example, using the 2006 Form 5500 and entering 2007 dates, without any problems (so far).

Do I have to wait until the 2008 Form 5500 is released?

Thanks....

I work with nonprofit that has a non-ERISA 403b plan for only deferrals in excess of 5% of pay.

They also have an ERISA 403(b) plan for deferrals that are matched (i.e. below 5% of pay).

Some think this is impermissible re the anti-conditioning rule in the regs as a failure to meet the effective availability requirement. I guess this is because in order to defer into the non-ERISA plan you have to defer over 5% of pay - otherwise all your deferrals go into the ERISA 403b plan. I know this 2-plan strategy is common to TIAA CREF plans and many others.

What do you think?

Suppose your defined benefit plan defined "average annual compensation" as the average of compensation paid in the 60 highest-paid consecutive months of employment.

When determining the 60-consecutive-month period, do you use whole calendar months?

Or do you use some other measuring period, for example, the period ending on the participant's date of termination and beginning 5 years earlier (e.g. the participant terminates on November 4, 2008. His 60-month period begins on November 5, 2003 and ends November 4, 2008.)? If you use a measuring period like this, what do you do when the date of termination isn't among the highest-paid months?

I have been doing some reading and some thinking about cross testing and the gateway requirement. (I know, very dangerous.) My understanding is that in order to pass 401(a)(4) when cross testing, the plan must satisfy the gateway requirement. When a plan allocates a profit sharing allocation to group of NHCEs that does not satisfy the gateway requirement, then their allocation must be increased to satisfy the gateway. (i.e. NHCE participants get a 3% TH min cont and the gateway is 5%. The cont is increased to those who only got the 3%.) I know that the allocation needs to be increased, but here is where I need additional confirmation. It appears that in order to do this increase, the plan may require an amendment to allocate the additional amount. Is this correct? Can a document be written such that it states that the increased allocation is required to select participants? Even if this violates the terms of the plan which may allocate the contribution comp-to-comp inside the allocation group? Does anyone inform their client of this and require them to execute an amendment?