Hello:

I received a certified letter from my employer ( a non-profit hospital) stating that as of June 30, 2009 I must liquidate my 457B that is invested through a private brokerage (Schwab). The letter states that I will then have to move the assets to funds that the hospital has set up through another brokerage account.

The hospital allowed me to elect to move my investments to the Schwab account, now they are saying that they may be in violation with the IRS and I must liquidate.

As it stands right now, that would equate to about a $5,000 loss. Who knows what the market will be like in June?

My questions are:

1) Is it legal for the hospital to force me to liquidate my 457 and move it into there funds as they stated?

2) If I do not comply, can they remove the funds from my Schwab brokerage account without my consent?

3) Is there any way to recoup the paper loss when the forced liquidation occurs?

Any help in this matter would be greatly appreciated. The next call is to the tax attorney :angry: .

We went through Annual Enrollment in November, with a January 1, 2009 effective date. Now we have exec mgmt wanting us to increase the deductible amounts across the board for all plans. They want this effective for March 1.

My question is this -- are we required to have a special enrollment, allowing everybody the ability to enroll, change, waive? Or do we just allow those that are currently enrolled to make changes? Or do we only allow those that are currently enrolled to cancel?

Management only wants to allow those that are currently enrolled in a medical plan the option to cancel. I think we have to allow everybody the ability to change. Thoughts?

I know this topic has been out here before but I wanted to get everyone's current thoughts...

A compnay that sponsored a small 401(k) plan (30 participants) was puchased in an asset acquisition. All employees were terminated on the date of acquisition. When the (prior) owner authorized that the assets be distributed to the terminated employees, the bank trustee refused and said it was their internal policy to require a determination letter on the termination. The owner states that the plan does not have any compliance issue: 401(k) and 5% employer contribution for all, deposits made timely, plan document updated correctly (including amendments to terminate plan and distribute assets), 5500's filed properly, all annual testing done as required.

Since the company no longer exists there is little desire to go through the added expense of a determination letter and the participants all want their money since they are now unemployed. The owner is considering setting-up a new trust account, transferring the money and making the payments himself (including doing the tax withholding and 1099). The current trustee is fine with this. The question is what are the draw backs in not getting a determination letter? Are you at higher risk of IRS audit? How would the IRS even know that you terminated the plan without getting a determination letter since I don't see that question on the 5500 anymore? Finally, what is the trun around time for getting a determination letter?

Thanks in advance for your thoughts on this.

PAL

Plan improperly distributes $150 of employer contribution as part of an in-service withdrawal. Discovered three years later. Participant is currently employed and remains a Participant in the Plan. Unfortunately, the amount at issue is over the de minimis threshold.

Of course, Rev. Proc. 08-50 would say take reasonable steps to have the overpmt (adjusted for interest) returned to the Plan, notify the P that it was not eligible for favorable tax treatment, and, to the extent that there is a shortfall b/w what is returned and the amount necessary to make whole the Plan, the ER contributes the difference.

My question: If the Plan notifies the P that the amount wasn't eligible for favorable tax treatment, can the ER just go ahead and make the contribution? ER doesn't want to request the overpayment if necessary.

When terminating a DB plan we have been terminating the plan and freezing benefits. The idea being that if the plan termination somehow did not happen, benefits would not continue to accrue. Although we have not found anything on this, we heard that excess assets cannot be allocated to participants once benefits have been frozen. Is this the case?

I probably could find this, but figured I'd spin my wheels and thought it would be easier to ask here. Can a MPPP allow an in-service distribution at attainment of early retirement age, or only at normal retirement age?

I asked this question earlier in a convoluted sort of way, so I'll try again. I keep going around and around on whether this arrangement is 409A-safe. Some of the facts have been changed for simplicity.

An executive has been awarded a stock option to purchase several thousand shares under the company stock option plan, and the award is structured in such a way that it clearly satisfies the stock-based compensation exemption from 409A. The option will vest in two years if he is still employed at the time. The executive's employment agreement provides, in addition, that if he does not exercise the option for 1 year after the vesting date, and if he is still employed at the time, he may, during a 1-month window period, surrender the option in exchange for a cash payment of $X.

My ultimate conclusion is that this arrangement is compliant with 409A, because the regulations (or at least the preamble) provides that 409A does not apply if the employee may choose between two or more types of compensation, none of which are subject to 409A. In this case the executive may choose to be compensated by the stock option (which is not subject to 409A), or he may choose to receive the cash payment, the right to which does not vest unless he is still employed at the time of the 1-month window (and is not subject to 409A under the short term deferral rule).

I have some reservations about this conclusion. I would appreciate any thoughts on this arrangement.

I don't know why an employee wouldn't want to use up the prior year's first but the question is asked if an ee incurrs a claim in this plan year but the incurred date is still within the extension, can they opt to choose which plan year to make the claim in or are they forced to claim for the previous year while they still have money left there?

We sponsor a prototype document and many clients have adopted our plan over the years. Now that we are gearing up for restatements, we have written letters to all the clients on our plan list, and we've requested a reply. Of course, there are a handful of clients who have ignored our first and second letters. Our third letter will tell them that we will no longer sponsor their plan in accordance with Rev. Proc. 2005-16, Section 10. The last sentence of that section says that we must also notify EP Rulings and Agreements. My boss thinks that requirement is no longer applicable. I wondered what other sponsors are doing in a similar situation.

Has anyone figured out how to deal with quarterly contributions for an EOY valuation?

Advance contributions are increased at the effective interest rate to the EOY. However, if they are not made timely, it would appear the increase is lessened to cause a larger contribution (similar to a BOY valuation).

I'm still getting more details on this, but a SEP plan was overfunded for 2008. Is the correction of this problem the same as with a qualified plan? Take out the excess, pay a 10% tax, file a 5330?

Thanks

I have a restaurant client and need to clarify the 100 employee rule.

From the publications and FAQs I have read on the IRS website, it was my understanding that the 100 employee count was determined by looking at any employee that had $5,000 the preceding plan year. From posts I am reading, however, I have seen some that have implied the $5,000 does not affect the 100 employee detemination. Can anyone confirm which way it is?

Also, on the exclusive plan rule. The client was part of a multiple employer plan 401(k) but will be sold effective 2/1/09. With the sale, they will set up a new entity and new EIN. Can they then set up a SIMPLE IRA under this new entity even though they had deferrals and match under the prior plan and entity?

Thanks for any clarification.

Private company ESOP was funded with a section 133 loan. Section 133 required pass thru voting on all matters. Loan has been repaid in full (i.e., no 133 exclusion is now being claimed). Can plan now eliminate pass thru voting on all matters and limit it to only those matters described in 409(e)(3) (merger, etc.)?

hi everyone -

a client with fairly shoddy record-keeping provided us with documents to file a determination letter request on their behalf. While they have had 5 amendments since their last letter, no signed copies of these documents exist. What is the best way to submit these documents? Suggestions on explaining to the IRS what happened or giving them some proof that the amendments were actually adopted many years ago?

Thanks for your help! Any ideas would be greatly appreciated!

On December 23, 2008, President Bush signed into law the "Workers, Retiree, and Employer Recovery Act of 2008." One major provision of the law allows for the suspension of required minimum distributions (RMDs) from tax-deferred retirement accounts for 2009. Plan participants who are financially able to forgo their distributions may chose to suspend the 2009 RMDs so that they don't have to sell investments that may have fallen substantially in value.

Does the Workers, Retiree, and Employer Recovery Act of 2008 apply to non governmental 457 (b) Plans? Meaning that plan participants' can suspend their required minimum distributions (RMDs) for 2009?

I have a question regarding the discrimination testing, High Comp Employees and a flex plan. We have a company that all the employees would quailify as highly comp. Can you still have a flex plan if all the employees are HCE's? I would think so since it is not discriminating against any one since they are all HCE but I could not find anything on it.

Thanks

When performing an ADP test for a plan with 9.30.08 year end, can participants exceed $15,500 in deferrals? Ex. a participant who is not over 50 made deferrals of $16,000 for the plan year but does not exceed the 402(g) limit for the 2007 or 2008 calendar years.

Is there gasb 45 software out there for groups who don't qualify for the alternative method?

I see the 2008 Form 5500 instructions include something called Voluntary Alternative Reporting Option for Certain Plans with Fewer Than 25 Participants.

Am I missing something, or is this much ado about nothing? I haven't analyzed the differences in detail, but it sure looks like it doesn't reduce the reporting by much.

May QNEC's be included in determining if 60% of account balances are for the benefit of key employees?

Facts: Determination Date is 12/31 (last day of plan year). As of the 12/31/07 determination date, the plan is determined to be top heavy. However, on 6/15/08, QNEC's are made to correct ADP failure for 2007. The addition of the QNEC's results in 57% of account balances for the benefit of key employees.

Question-1: Is the Plan top heavy for 2008 (based on the determination date of 12/31/07)?

Question-2: If the answer to Q-1 is no, does it make a difference if the QNEC's were made within 2-1/2 months of the 2007 year end?

Thanks for any thoughts on this.