Plan sponsor is trying to terminate a 403(b) plan. Plan sponsor is having difficulty getting forms back from a few participants. Under the regs. It is my understanding that the regs provide that the employer can notify the participant that the plan is terminating & that as of a specified date the contract will be treated as distributed. Two questions:

1. Is that a correct understanding of the regs?

2. If I am reading the regs correctly, but the vendor won't do it, is the plan sponsor SOL or are there other options? They want to get this done before year end to avoid the plan document.

Thanks in advance for any guidance.

we have an employer who sent the biweekly employee deductions twice.

And they were traded/allocated to participant accounts twice...

SO, somebody who deferred $50 for the week ending october 3rd, actually received $100 contribution for that payroll

How do we fix this? If we reverse the trades, b/c of the fall in stock market, the employer will have to make up the difference. For example, if the total payroll for that week ending was $20,000, if we reverse the trades, we may only get $10,000 back.

Can we use this over conribution as a credit towards the next paryoll deduction? So if that same person who had $50 deducted for the week ending 10/3, but received $100 in his account, has $75 deducted from his pay for the week ending 10/10, the employer sends in only $25. The end result will be the same...the employee will have $125 contributed to his account for those 2 weeks.

Is it okay to handle it this way?

Under T.R. 1.409A-2(b)(2), payment means each separately identified amount to which a service provider is entitled to payment under a plan on a determinable date, and includes amounts applied for the benefit of the service provider. An amount is separately identified only if the amount may be objectively determined under a nondiscretionary formula.

It's the latter part, objectively determined under a nondiscretionary formula, that I am struggling with. We have two linked plans: 1) DB plan; and 2) SERP. If an employee is eligible for unreduced benefits and begins taking payments under the DB plan before the SERP commencement Date, then the employee receives a one time lump-sum make-up payment to be paid on the SERP commencement date. If an employee is eligible for the make-up payment, the employee receives the make-up payment and the SERP benefit, but if an employee is not eligible for such payment, the employee receives only the SERP annuity benefit.

The make-up payment does not pull any money away from the annuity; rather, it is a separate lump sum payment. I am trying to determine whether the make-up payment is a separate payment. The issue is whether it is objectively determined under a nondiscretionary formula.

I saw a reverend on television many years ago telling a story intended to make a point about different personalities. For some reason, it created an impression in my mind that I still remember when determining my approach to everyday issues. I though I would share as it does provide some perspective on different approaches we take when addressing questions posed on the board.

Here goes:

There was a rich man living on a Mountain. He was seeking a chauffer to replace is long-time friend who had just retired. Upon narrowing his search down to three finalists, he posed a simple question to each; "How close to the cliff can you drive without falling over?"

Driver 1 states, "I can drive within 2 feet of the cliff without driving over".

Driver 2 states, "I can drive within 12 inches of the cliff without driving over."

The third driver, taking a look out over the cliff and seeing the valleys below states, "I am not sure, I try to stay as far from it as possible".

Sometimes, as consultants, we attempt to impress clients with getting them as close to certain cliffs as possible. When we get it wrong, the client pays in IRS penalties. Other consultants, while attempting to stay as far from the cliff as possible, deprive their clients out of safe leveraging opportunities for no other reason that to stay as far from the cliff as possible.

This is not to say either approach is right or wrong, but certainly worth considering when formulating a position on any given issue. At any rate, it always help to develop a realistic idea of where the cliff actually is. Just keeping things in perspective.

Just wondering how others are handling all the various annual participant notices. I know that the QDIA and traditional safe harbor notices can be combined. Without final regs on the Participant statement requirements (the annual notice explaining that the information is supplied through more than one source), I am wondering if it is acceptable to combine this with the other notices?

I would appreciate other thoughts on this - thanks!

I have a client whose mother died and had named her as the IRA's beneficiary. My client wanted to defer taxation and keep the IRA intact as an inherited IRA and take the RMDs based on her life expectancy. However, the attorney involved in the case had the IRA distributed to the mother's estate. Is there anyway to get the IRA distribution back into an inherited IRA with the daughter named as the bene? Is it possible if it's within 60 days due to a mistake in the original distribution?

Our plan is going through the PBGC Premium Compliance program. After a long delay, they announced that they want to make arrangements for an onsite visit.

Has anyone been through this process, and if so what was the focus?

Here is my situation:

I have opened a 401K account with my current company.

When opened, I signed a form saying I want to have 100% of it in moneymarket. It has been like that for a year.

A month ago, the company deceided to move to a different provider. After the swap, my money found its way to 85% stock fund.

Although there were emails and meetings I did not attend them and I was unaware they moved the account to a riskier fund without my approval.

In the past month (without me knowing) the account has suffered heavy losses of 25%.

I know that when changing providers, the original funds are usually swapped into similar funds with the new provider , but I don't know if it is a rule that must be followed.

In a Need for advice

Have a client that has an individually designed DB plan document ("IDP"). Intends to move to a prototype when the amendment and restatement is done at a future date and has timely executed a Form 8905 noting that intent.

The deadline to adopt the IRC 415 interim amendment was 9/15/08 for the IDP. The prototype timely adopted the 415 amendment at the sponsor level.

Question: Does the client get the "benefit" of the timely prototype 415 amendment OR is this not the case and is the client a late adopter?

(I think is answer is the later.)

A one man plan is overfunded (plan assets > PVAB of accrued benefit by formula), and the client intends to terminate the plan. The plan documents talks about allocating excess assets up to the 415 limit, but it has a line that I haven't seen before:

"...Such additional benefit will be subject to the limitations of Article 6 [referring to the 415 limitation] of the Basic Plan but without regard to the 10 year participation requirement in Code 415(b)(5)(l)..."

Let's say that the client only has 5 years of participation in the plan, but has 10 years of service and average compensation in excess of the 415 $$ limit. I can really pay him out the PVAB of the full $$ limit without pro-rating it?

Something just seems weird about that to me, but then again, what do I know (that phrase is not trademarked on this board, is it?).

By the way, I'm looking at an Accudraft Prototype DB Standardized Non-Integrated plan for those of you that are familiar with this type of document.

Thanks!

Client is terminating a Simple IRA plan and instituting a standardized prototype 401(k) plan. In putting together plan documents, I learned that one of the related employers that has been a co-sponsor of the Simple IRA participates in the railroad retirement plan.

In its exclusive plan rule, Section 408(p) uses the term "qualified plan."

What little I've learned in a quick bit of research about railroad retirement benefits is that there are two tiers of benefits: tier 1 which is a social security-like benefit and tier 2. Tier 2 is what concerns me. IRS Publication 575 states, "Treat this category of benefits . . . as an amount received from a qualified employee plan."

Anyone addressed this question before or have experience with it?

We've been blissfully ignorant of non-resident alien issues for the most part, but have to deal with it now.

The plan is pretty clear that non-resident aliens are excluded from participation if their only income is from non-US sources, or some such language; I don't have it handy.

I have a US company that has an employee working here on a Visa, and they noted that he is excluded because he's a non-resident alien. I don't think he is excluded, based on the fact that the compensation is from a regular US company. But I just thought I'd check to make sure I'm not missing anything that the rest of the world thinks is obvious.

(Of course, it's a takeover, and of course, his employment date is several years ago...)

We're trying to figure out if a profit sharing plan qualifies for EZ. The owner of the biz owns 100%, he is the only person with an account. The plan hasn't made a contribution since 1990. However, the company does have 7 employees that would appear to be "eligible" to participate (based on language of plan) although they have never received any contributions. The PPA 1103 states that the plan must "cover" only one individual at the beginning of the plan year. Could these other 7 individuals possibly be construed as being "covered" under the plan even though they have never received a benefit and the plan has been effectively frozen for 10 years? Any thoughts are much appreciated. Thank you.

HC FSA is subject to COBRA for all qualified beneficiaries, which would include spouse and children.

Assuming FSA has positive balance at time of divorce, how do you price FSA COBRA to a spouse in event of divorce? If the employee's annual election amt and payroll deduction stays the same, how can the spouse contribute and make claims? Is a new account set up with no balance??

Ditto if child graduates and is no longer eligible.

Do most employers just not offer to spouse/deps? I can't wrap my head around this one!

If fixing Social Security is "easy" as Senator McCain commented at last night's debate, then why is it broken?

How does Fidelity and other similar companies offer its mutual fund products in the mix under its target date funds without creating a prohibited transaction?

As my avitar shows, I crunch numbers, mostly N's and D's and the like. That's why I do a double take when the pension plan auditor says they are holding up the calendar year 2007 plan audit report until the Sept 2008 asset statement is issued. Apparently, their report needs to comment on the effect of the current market conditions. Presumably, if they had completed their audit in April, there would have issued the report without delay. I know the SAR will not comment on current market conditions.

The 5500 must be signed by October 15 and the auditor still hasn't issued its report. Does this seem appropriate? Are any of your clients facing such delays?

Are VEBA's required to have fidelity bond coverage?

I'm thinking not since not a qualified plan

Partner in an LLC who is over age 50 made 401(k) contributions of $10,250 during 2007 from his guaranteed payments. LLC ended up with a loss for 2007 so he has no earned income and a 415 excess contribution. Question: Is this employee eligible for a catch up contribution? Should we refund $10,250 or $7,250?

Thanks in advance for any insight.

A DB plan provides for deminimis lump sums using the 417(e) basis. At 65, a participant may elect and it is assume 100% do elect lump sum payment (>$5,000 for sake of illustration) using the PBGC interest rate [Remember These?] and 1971GAM. Like everything else in our world, we don't know what these rates will be. However, given the spread currently [PBGC 1/1/2008=3%/4%/4%/4%], we would believe that the PBGC basis will provide the greater lump sum. So, question is what is an appropriate way to recognize this? Assume for this discussion there are no pre-retirement decrements.

(1) We could value the lump sum at 65 using 3% and then discount using the appropriate single segment rate.

(2) We could assume the PBGC immediate rate at 65 is a percentage of the effective interest rate.

(3) We could forcast a long-term PBGC immediate interest rate as the segment rates less a specified number of basis points.

(4) We could ignore the PBGC basis.

Any thoughts? Also, does anyone have any kind of feel of how (if at all) the PBGC interest rates would relate to the yield curve