We have a plan design where DCAP experience gains are forfeited. This surplus is used to increase the annual benefit amount to each employee who is participating in the DCAP the following year. The experience gain is $6.99 - or about $0.58 per participant. Is there a di minimus threshold when working with forfeitures?

My understanding of whether document preparation (prototype) fees are a settlor function or not regards whether the plan is already drafted or not. An initial drafting is a settlor function, subsequent amendments are restatements are not. Can someone please confirm or correct me if I'm wrong? I have a client who will restate into an EGTRRA prototype soon, and they pay the TPA's fees from the plan assets. The TPA will do the prototype. I just want to make sure the TPA doesn't need to bill the plan sponsor vs the plan itself for the cost to update the prototype for the EGTRRA restatement. Thank you for any help.

Do you look to the year a participant attains age 70-1/2 to determine if there is 5% ownership, or is the rule "once a 5% owner, always a 5% owner"? I get the latter statement from Rev. Notice 97-75 (in "Background" Section). In this case, the individual has not had any ownership %-age since about age 65, and does not want to take MRD while he still works. Language in 97-75 seems to say that distribution must continue even if no longer a 5% owner, but I don't think it requires the distribution to begin if there is no 5% owenrship at age 70-1/2. Treas. Reg. Section 1.401(a)(9)-2, Q&A-2© is not very helpful. Any thoughts?

A participant has requested a hardship distribution for costs related to the purchase of a principal residence. The participant has a letter from a mortgage broker stating that the participant needs the distribution to cover the down payment, closing costs, and to "qualify for the mortgage" (i.e. pay down other debt so that the participant will be approved for the mortgage).

Has there been any guidance released anywhere indicating that a hardship distribution to pay down other debt so that a participant can qualify for a mortgage is permissible as a cost directly related to the purchase of a principal residence?

Thanks for your help with this.

A plan is implemented in 2008 with a calendar year plan year.

We'll assume a 1 participant plan.

We'll also assume the following:

1st funding segment rate = 5%

2nd funding segment rate = 6%

3rd funding segment rate = 7%

1st 417e minimum present value segment rate = 4%

2nd 417e segment rate = 4.5%

3rd 417e segment rate = 5%

Plan rates are 5%, GAR94 (post ret only)

Hire Age and Participation Age = 45

NRA = 62

AB 1/1/08 = 10,000

Assumed form of payment at 62 is lump sum

Summary of PVAB 1/1/08 for verification:

using plan rates PVAB is presumed to be

v^17 using the 2nd funding seg rate of 6% for deferral period up to time of lump sum payment

at 62 compute pv benefit as a62 using 5%, GAR94

based on 417e min pv

v^17 using 2nd funding seg rate of 6% for deferral period up to time of lump sum (payment all at once, thus the 2nd funding segment rate)

at 62 compute pv ab as a62 based on 2nd funding seg rate for 3 more years and 3rd funding segment rate, thereafter. 2008 applicable unisex mortality table.

Note that I use v^17 using 2nd funding segment rate for entire time of annuity (even after the 20th year, where I would switch to 3rd funuding segment rate if form of payment were an annuity) since the payment is all made at the end of year 17 in a lump sum.

SInce th is so much in one thread, Part II will be the 415 lump sum basis, where it is subject to:

5.5%, Gar94

105% APR using 417e methodology

plan rates

Thank you

Just received a call from a plan sponsor. It seems that the 100% owner of this LLC has deposited funds as salary deferrals for himself in 2006, 2007 and 2008. He now wants all of those deposits refunded before October 15 because they were supposed to be deposited to his SEP, not the 401(k) plan. It sounds fishy to me.

Anyone care to share thoughts about what sort of documentation we should request of the employer before processing a refund?

Is there a requirement that an employer must actually have a custodial agreement in place with the custodian in order to have a custodial account under 403(b)(7)? Common sense would suggest that it is required - i.e., how can you have a custodian without a custodial agreement? However, we are hearing from a client that at least one provider purports to offer a custodial account without such an agreement. The definition of "custodial account" in the final regs (1.403(b)-8(d)(2)) does not appear to address the issue. Any thoughts?

Individual owns 100% of S corporation. He also owns a sole proprietorship with no employees. The corporation has a 401(k) plan to which the 100% owner is not contributing. The owner would like to set up a solo - 401(k) for his sole proprietorship with the same benefits, rights and features and contribution rates, investments, etc. as the corporation's 401(k) plan. Is that possible? He doesn't take much of a salary from the corp. and has a big Schedule C net income, which is why I think he posed the question.

Employer X is an S corporation that had a nonqualified deferred compensation plan. In anticipation of the sale of all the stock of X (in which a Section 338(h)(10) election will be made) and the treatment of the deferred compensation plan as an excluded liability by purchaser Y, a C corporation, X terminated and paid out the plan in January 2008. The stock sale occurred March 31, 2008.

With the deferred comp being paid out in the short S year of X (January 1 to March 30, 2008), is there any way under Section 404(a)(5) and Reg. 1.404(a)-12(b)(1) (or other guidance) that X should be able to take the deduction for the contributions attributable to the payout in its short S year?

Any thoughts are appreciated.

We have a client with a prevailing money purchase plan with us. In 2007 they started a prevailing wage plan with a new provider and did not notify us until January 2008. They sent their 2007 prevailing wage contributions to the new provider. The prevailing wage contributions are the only contributions to the plan. Both providers filed the Form 5500 for their respective plan. As of this date, they have not terminated our plan nor rolled the assets from our plan into the plan wtih the new provider.

Does anyone know what kind of problems this could present. Should our plan have been amended to a zero contribution prior to them starting the new plan?

Thanks for your assistance.

We have a client that wants to change their employer contribution amount from 100% EE only to 50% EE only as of 11/1/08. Can we do this outside of a S125 open enrollment or do we need to wait until our open enrollment for S125 which is 1/1?

Thanks

Employer is delinquent in contributions and has filed for bankruptcy. Do the trustees violate their fiduciary duties if they do not file a proof of claim where legal fees will exceed the amount owed?

Employer is having severe financial difficulties and, 2 months into the plan year, wants to eliminate non-elective safe harbor contribution without terminating the plan. For some reason, the regs do not permit elimination of the SH NEC unless the plan terminates--although the regs do permit elimination of the match SH: in both circumstances, SH contributions must be made until the plan amendment eliminating those contributions and the plan must pass ADP/ACP for the entire year. Any idea why the regs don't permit elimination of the NEC with the same limitations? If you can eliminate a money purchase contribution on a prospective basis, why not a SH NEC?

We have a Sarsep plan in our company. We have a employee who is 52 years old and making 60k year. Per the contribution limits he can contribute to 25% of his income(15k) or 15,500 whichever is lower. Therefore he can contribute 15k. Now my question is since he is over 50 can he contribute 20,000(15k+5k) or is he limited to 15k(25% limit). Thanks

Does anyone know of a TPA that would handle health claims for international employees?

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I have a small db plan (4 employees, owner-family) that is terminating. We are amending the plan to provide for lump sums. While we know we need to provide PPA basis lump sums at a minimum, and 415 lump sums as a maximum, we'd like to define the basis as the interest rate that will exhaust all plan assets on the termination date. The 4 participants have all elected a lump sum. Has anyone done this, can it be done legitimately in a plan document, and if so, how would we word the amendment to define the interest rate?

once again I believe this has been covered on these boards, but I can't find the thread...

If plan has no distributions during the plan year and is a crosstested plan with a profit share allocation for the plan year, should a Schedule R still be filed to report the coverage information?

I am a bit of newbie in the health insurance world and would appreciate any thoughts anyone may have.

Hospital is switching from a fully insured health plan to a self-funded plan. In the past, non-hospital owned entities (various physician groups, emergency room group, free clinic, etc.) participated in the fully insured plan by paying the COBRA premium (I am not sure if this was really permissible). With the change to a self-funded plan, can those non-hospital owned groups continue to participate? If so, do you just continue to pay the COBRA premium? Or bill them for actual claims paid for those groups? What if one of the non-hospital groups has a large amount of claims and it exceeds the COBRA premiums - does the hospital have to eat the excess?

I am primarily concerned with the funding issues right now. We have counsel looking into the Stark/inurement issues.

We are a true daily tpa. A few clients have SDBs available in their plans and we are wondering if anyone has any guidelines or suggestions on what charges are appropriate for the administration of the SDBs? Obviously from an administrative standpoint, it causes more work for us to record keep the SDB versus the "main" plan accounts with our custodian since we don't have all investments in creation set up in our software, etc.

Can we charge the participant directly for the admin of the SDB even if the employer pays for the plan expenses other than these? Any idea of amount that would be appropriate?

thanks!