We're a startup nfp/public charity and I heard recently that we could choose between a 403b or a 401k for employees. Is this accurate and what are the benefits of one over the other?

We currently have 4 employees, all with existing 401k that could be rolled over. I don't think we can afford to provide any match funds in 2009, but we hope to do as soon as we are able. Two of the current employees are fairly savvy investors while two are passive contributors. That ratio will skew toward passive investors as we grow.

We expect to grow exponentially in the coming years, and need a plan that will easily grow/adapt as we add employees...

Suppose an employer provides generous profit-sharing contributions every year, such that to maximize the employer contribution, a participant must contribute well under the elective deferral limit in order to maximize employer contributions. In any given year, a 415 violation would occur and could be corrected by providing a refund of the excess amount to the employee. However, if the profit sharing contribution is predictably high year after year, can the employer continue to allow the employee to contribute the maximum in elective deferrals (even knowing that 415 violations are likely to occur) and simply correct any violations through EPCRS by returning the excess employee contributions? If you answer no, how would you advise the employer to proceed to allow the employees to maximize deferrals within the plan?

Issue 1. Obviously not all of the provisions created by ERISA or the applicable sections of the IRC have to be in a plan document. Despite that, plan documents are still BIG documents that (1) regurgitate some of those provisions, (2) incorporate others by reference and (3) leave the remaining provisions out of the document completely. How do I (or anyone) know which of those provisions MUST be regurgitated in a plan document, which may be incorporated by reference and which MAY be included in a plan document, but are not required to be included?

I know there are different types of plan documents for purposes of the IRS D-letter program. If the type of plan (e.g., prototype, VS or individually designed) is relevant to the answer, how?

Issue 2. A qualified plan, once installed, may be amended from time to time at the election of the plan sponsor (a so-called discretionary amendment). There is no reason that I can see why a plan sponsor cannot amend its plan retroactively unless doing so is specifically prohibited by law (e.g., the law prohibits an amendment from taking away vested or accrued benefits). However, the IRS has said in recent guidance that discretionary amendments must be adopted no later than the last day of the plan year in which they become effective. Huh?

Thanks so much for your help!

A participant actually read the SAR provided to them

They want a copy of the full annual report...what exactly are they privey too? Is it a copy of the 5500 and that's all?

Thanks

Need help calculating contribution for second year of plan.

Can I amend a church's money purchase plan to accomodate a match formula rather than a fixed percentage to all eligible employees? Can the term "eligible employee" be defined as one who makes salary deferrals into the church's 403(b) plan in addition to the usual age and service requirements?

I have a small medical practice client that has a calendar year SH 401k plan with age 21/One YOS, semiannual entry dates. I have not restated them for EGTRRA yet. They added a new doctor 9/2/08 and they want him to be able to participate in the plan 1/1/09. Then they want to change the eligibility back to One YOS.

I was thinking that I could amend the plan effective 1/1/09 to allow entry after 3 months of service, and enter the 1st day of the following month. This would let one additional part-time person into the plan, plus possibly any new hires during 2009.

Then I would restate the plan for EGTRRA and change the eligibility back to 21/One YOS effective 1/1/10.

Does this sound reasonable?

In our GUST Volume Submitter plan documents we were allowed several choices of when a forfeiture would occur. We have always used "after a one (1) year break". Now for the EGTRRA Volume Submitter restatements, our document provider is telling me we can no longer have that option. Are any document providers allowing for a forfeiture to occur after a one (1) year break?

I had a client call us this am concerned about his plan assets. He's in the newspaper buisness, so I think he hears A LOT more than I do.

Here's some basics:

Client called this am concerned about the protection of the plan assets.

This client has a 401(k) PSP and the assets are held at Nationwide. Each participant has their own account and controls their own fund selection.

If a participant declares bankrupacy, all assets are protected against creditors, correct?

Are the assets of the plan as a whole protected from creditors, including the federal government? This client is very concerned about rumors and discussions that are circulating in the media during this economic downturn.

What are your thoughts? I hesitated to ask the client if he felt that the government would go after the assets of the plan if his business was failing, so I am not exactly sure where he's going here. I had another client call the day after the election last week to discuss changing from a 401(k) PSP to a Db or cash balance plan because Obama got elected.....

Have any of you gotten calls from clients who are concerned? Thanks for your thoughts!

And so it begins...

MultiIndustry_Funding_Letter11_12_.pdf

Employer wants to convert existing Safe Harbor plan to a QACA but they want to keep their existing Safe Harbor "Basic" match formula. The existing Basic will provide a 4% contribution for those contributing 5%. The QACA minimum will provide 3 1/2% for those contributing 6% and according to the QACA rules there must be an automatic contribution escalation from 3 to 4 to 5 to 6%. Couple of questions -

Since the "basic" safe harbor contribution will meet the QACA minimum (3 1/2%) once the participant contributes 4% (automatic increase from 3% to 4%), must the plan automatically increase the participant contributions from 4% to 5%? And then from 5% to 6%?

The new QACA will only have to be provided to those existing employees who have made no election to participate (or not), and to newly eligible employees as of the QACA effective date who make no election. Is that correct?

Vesting - since existing participants are 100% vested in the Safe Harbor Basic contribution, must those participants continue to remain 100% vested in the new QACA contributions? EOB Sec. XIV, Part C, 1.d.3 says yes but just wondering if anything changed since that printing. I seem to recall there was some discussion that the QACA could be viewed as a "separate contribution source" from the regular safe harbor and therefore the 2 year vesting could apply.

Thanks

I am the trustee of a medium-sized (325 participant) 401(k) plan. Participant accounts are directed by participants among a menu of funds I select in conjunction with the input of our TPA (which is a regional TPA firm which offers a daily valuation/website interface). Accounts are valued daily.

We know from talking with other businesses in our area that some investment mistakes have been made in the past on the TPA's daily val platform. Mistakes such as participant investment changes (either for old or new money) not being processed timely (or, in a few cases, at all). Mistakes with 401(k) contributions not being invested right away--things like that. In the past, the TPA has written checks to correct the mistakes resulting from use of its daily val platform. However, in connection with an "upgrade" of the TPA's website/daily val platform, all users now have to agree to a number of conditions--some of which seem like overreaching to me. I need your help to determine whether a few of the conditions are inappropriate and may even subject me, as the plan's trustee, to fiduciary liability for retaining the TPA.

The condition I am most concerned about reads as follows (my editorial comments are contained in brackets):

You [the participant] are responsible for monitoring your account [i thought that's what we paid the TPA to do]. You agree to notify ***** immediately if you properly submit, via the website, any instruction regarding investment of your plan account (including instructions relating to the investment of future contributions) that are not reflected on the website within three (3) business days. ***** will have no liability for any claim, loss, cost or expense resulting from your failure to report promptly any of the items listed above.

I take this language to mean, for example, that if a participant makes an election change and the TPA doesn't process the change and the participant doesn't notify the TPA of its (the TPA's) mistake, the TPA doesn't want to be responsible for the mistake.

What do others think about this? It troubles me--especially in light of the fact that the TPA has made these sorts of mistakes in the past.

Maybe notice was sent out in November 2007 for the 08 plan year. Anyone have a notice I can use today to announce the decision to go safe harbor?

First, I am not a 403(b) person, but a friend of mine asked me why his mission (church plan?) recently told him that all new contributions would go to a new 403(b) vendor and that he could no longer use the vendor he was currently using. Apparently old money was allowed to stay, but new money needed to go to the new vendor. The remaining single vendor was available under the multi-vendor arrangement.

When he questioned them, they responded that a new Federal law is forcing them to use a single vendor.

I poked around and didn't see any requirements to use a single vendor. Is there some reason why they would have forced this?

Also, the new vendor doesn't offer any target retirement age funds, but it did offer "active management". Don't 403(b)s have issues with default options? As we see 401(k)'s nudged into offering target funds, aren't 403(b)s being nudged as well? The plan does have a match, so it would seem that a default fund would be necessary.

Any comment would be helpful.

This should be an easy one to answer. For a 2007 calendar Plan year, how do you determine the number of employees in the top paid group for determining the number of HCEs? Say there are 200 employees on 12/31/2006. There are 230 employees on 12/31/2007. Assume there are no exclusions, no owners, and everyone makes over $150,000. Do you take the 200 times 20% or 230 times 20%?

We're a startup nfp/public charity and I heard recently that we could choose between a 403b or a 401k for employees. Is this accurate and what are the benefits of one over the other?

We currently have 4 employees, all with existing 401k that could be rolled over. I don't think we can afford to provide any match funds in 2009, but we hope to do as soon as we are able. Two of the current employees are fairly savvy investors while two are passive contributors. That ratio will skew toward passive investors as we grow.

We expect to grow exponentially in the coming years, and need a plan that will easily grow/adapt as we add employees...

I have a small LLC that wants to adopt a 401(k) Plan. The only 3 people who work at the company are the 3 owners and all 3 will contribute to the 401(k).

Since LLC owners do not have a salary, but rather take "draws" during the year, they should still be able to make 401(k) contributions from these draws correct? For example, an owner takes monthly draws of $5,000 and therefore has $60,000 in compensation for the year. He also plans on having $500 deposited as a 401(k) contribution each month. Can he do this on a monthly basis or does he have to wait until after the end of the year, have his income determined, and then make a 401(k) contribution all at once at that time?

Thanks

Can a plan have an in service distribution provision that allows a participant to receive an in service distribution upon NRA provided the employee reduces his/her hours below the threshold in which he/she will continue to accrue benefits (in this case less than 1,000)? In other words, can the employer design the plan so that those receiving in service distributions do not receive any further accruals? Thanks for any help you can provide.

As part of the termination application, I submitted an Intent to Adopt Pre-Approved Volume Submitter document dated prior to 2/28/02 and a EGTRRA good faith and GUST plan amendment dated prior to 9/30/03. IRS agent said unless I have a corporate extension for 2003, amendment is late. Anyone have a similiar experience, and does anyone know the authority for supporting the 9/30/03 date?

My understanding is that there have been 4 sets of proposed regulations under IRC 430.

The 2nd in the series was on Benefit Restrictions for Underfunded pension plans

The 3rd in the series was on Measurement of Assets and Liabilities

The 4th in the series was on Determination of Minimum Required COntributions

I am not sure, but I believe that the 1st in the series was Mortality Tables for Determining Present Value.

Is that correct?

And have there been any other proposed regulations under 430?

Thanks.