the plan is a 403(b) with employee deferrals only. however, it is invested in mutual funds in a custodial account. Everything is handled by the employer through a TPA. ie. distributions, deferrals etc. would this be subject to Title I of ERISA and have to file a form 5500 under the new rules? are there other factors i am not considering?

The calculation of the PBGC variable premium is based on the methodology used during your normal valuation. An assumption of 100% lump sums is made for 1/1/2008 for the valuation. Lump sums in the plan are defined to be the greater of AE or the 417(e) rates - using the proposed regulation method of funding interest segments. The PBGC though has different interest rates (4.93, 6.13 and 6.69) for purposes of calculating their liability. How is the lump sum calculated for PBGC purposes?

a Lump sum is computed using the greater of PBGC rates or AE

b Lump sum is computed using the greater of 417(e) per the valuation OR the lump sum at retirement discounted to attained age using PBGC rates

c Something else

Thanks in advance for any and all comments.

We had a COBRA question arise today that we are hoping to find an answer for.

The group is in their open enrollment period and they are offering an employer paid HRA plan to their active benefit eligible employees.

Do they have to offer the HRA to their current COBRA participants?

My best guess would be no. Any thoughts?

We have a participant that is getting divorced. As part of their divorce decree, her spouse is entitled to a part of her 401k. She wants to withdrawal this money to pay him, without getting a QDRO drawn up. The only in-service options this plan allows is a hardship and at age 59 1/2 (which she is not).

Can the plan accept her divorce decree paperwork showing that she owes her spouse this amount without having a QDRO drawn up?

Thanks!

We took over a Plan in 2007, but the 2006 5500 is showing Oxford Health Insurance on the 2006 Schedule A.

Oxford Health Insurance is not an investment option in the Plan, and has nothing to do with the 401(k) Plan.

I don’t believe it should be reported on the 401(k) 5500? Do you agree?

Should it be reported by the company on a separate 5500?

Plan was late in applying for Retiree Drug Subsidy and so the request was denied by CMS...reason for missing deadline is essentially that the Account manager drpped the ball. We are attempting an appeal to CMS of the denial...any ideas on strategy/liklihood of success/past sucess stories/ etc etc???

Does anyone have a phone number for the IRS in Covington Kentucky?

I would like either a phone number or an answer to this question.

I am submitting for a determination letter on a volume submitter that looks and feels like a prototype. Of course, I am sending in a copy of the adoption agreement and the IRS approval letter. My question is: Do I need to send a copy of the complete document?

This is bad: For the past several years, participants who took loans from the company 401(k) Plan never had any loan repayments made. Not their fault, for some reason the person in charge of having these withheld from their pay and deposited back into the plan, just dropped the ball badly and never triggered these repayments. The participants, out of either ignorance or perhaps sensing an error in their favor, never noticed or said anything about it.

Looking for possible consequences:

(i) For the more recent loans which still have a few years left on their repayment terms, can we go back and re-amortize the outstanding balance, coming up with a new (higher) repayment schedule for the rest of the remaining terms of the loan?

(ii) For the others whose loans are either close to the end of their repayment schedule (or in some cases, that date has already passed), are they stuck with having this a deemed distribution and being taxed on this this year? Am I correct that they still have to pay the loan back, but still get taxed on it this year as well? Does it matter that this is not their fault since it was the employer who did not make the deposits?

I know there is a lot wrong here and I am checking into all of the consequences, but if anyone can point out a few of the major problems, that would be a great help.

Thanks

I am working on a plan provision that permits a 'make-up payment' to be paid on the SERP commencement date. The Plan currently pays in the form of a life annuity, but a make-up payment (lump sum payment equal to the SERP benefit multiplied by the number of months difference between the start of the db benefit and the SERP commencment date) is triggered if a participant's db payments commence before the SERP commencement date. In sum, the difference in time is made up by one lump-sum payment on day one of the SERP benefit.

My question is whether the make-up payment changes the time/form of payment which will then require 12 mo./5yr delay. Does this cause the payment to not be a life annuity?

Say a new one participant plan is implemented for 2008.

Say the assumed distribution form is a lump sum.

The participant is age 55 at plan inception and NRA is 65.

So the lump sum would be taken in 10 years based on the plan terms and assumptions.

When computing the funding target (subject to a subsequent thorough review of existing regulations):

My impression is that I would compute the PV of lump sum at age 65, where the basis is the 417e segment interest rates and the 417e unisex mortality table (assuming these are all finalized or at least proposed).

In order to do this the lump sum would be based on an annuity at 65 where the first ten years of payments (65 to 75) are computed using segment 2 rates and segment three rates are used beyond age 75.

So let's say the pv at 65 is 200,000.

Then the funding target would be the pv of a payment of 200,000 made in ten years and thus it would be v ^ 10 * 200k, using the segment 2 rate.

Does the above make sense? As opposed to if an annuiity were the form of payment and the pv would be computed using the funding segment rates and funding mortality tables (not unisex).

In conclusion my impression is that the mortality table and the segment rates for 417e purposes is different from 430 purposes.

Shortfall Amortization

Say a new one participant plan is implemented for 2008, where the participant is age 60 (with 5 years of past service counted) at inception and NRA is 65 & 5. As a result the employee would receive his pension in 5 years.

If the participant received a lump sum in 5 years, where the plan were terminated at that time, the question is:

Should (or must) the initial funding target be amortized over 7 years even though plan is only expected to be in existance for five years? If it is 7 years, then of course there may be a relatively higher final plan contribution to fully fund the pension.

Thanks.

A state law that applies to group life policy requires that individual's be given an individual conversion right when they become no longer eligible to be covered under the group life policy.

The state law also requires that the individual be provided a notice at that time that explains the conversion rights and how to take advantage of those rights.

The state law also includes extra provisions that by their terms apply only to group life policies of governmental employers (which would be exempt from ERISA)

The plan that I'm dealing with is clearly an ERISA one; the employer is private, not governmental.

Does anyone know off the top if the two provisions of state law that by their terms apply to all group life policies would be preempted by ERISA (ERISA § 514(a)) or exempt from preemption under ERISA § 514(b)(2)(A)?

I've noticed a large number of public company incentive plans contain the concept of a "Change in Control Price". Typically, if there is a change in control, all options and SARs vest, and holders receive a payment equal to the "Change in Control Price" less the exercise price. “Change in Control Price” is usually defined as the highest price per share during the 30 or 60-day period immediately preceding the occurrence of the Change in Control...

My concern is that this would cause otherwise exempt SARs to fall within 409A, because 1.409A-1(b)(5)(i)(B) provides that compensation payable under the SAR cannot be greater than the excess of the FMV of the stock on the date the SAR is exercised over the FMV on the date of grant, and if it is, 1.409A-1(b)(5)(i)© provides that the grant will generally be a deferral of compensation subject to 409A.

I don't see that the definition of FMV for public companies under 1.409A-1(b)(5)(iv)(A) is broad enough to permit using the highest price during the previous 30 (or 60) days. For instance, suppose an SAR had a grant price of $1/share (its FMV), and the FMV as of the change in control is $5, but sometime during the 60 day period preceeding the change in control the stock price hit $10/share before dropping back down. If the "Change in Control Price" is $10 when the current FMV is only $5, it seems like the recipient is receiving more than the excess of the FMV of the stock on the date the SAR is exercised over the FMV on the date of grant, and thus would not fit within the SAR exemption.

Any thoughts on this? A number of recently drafted plans by reputable firms contain this type of provision, but I just can't seem to get comfortable that it works with respect to SARs.

Reality check please? I am puzzling over exactly what is meant by "form of payment" for 409A deferral elections. Specifically, what does the statement in 1.409A-2(a)(1) indicating that "an election to defer includes an election as to the time of the payment, an election as to the form of payment or an electionas to both the time and the form of the payment, but does not include an election as to the medium of payment (for example, an election between a payment of cash or a payment of property)[/i]"?

I ask because I am trying to determine whether it is possible to draft a new deferred comp plan providing for the deferral of directors' fees until termination of a director's service that provides the company the discretion to pay out accrued benefits under the deferred comp plan in either cash or stock in the company's sole discretion at the time of distribution.

Does such discretion address the "medium" rather than the "form" of payment or would that be looped into the notion of "form" as well. If it does go to the "medium" of payment involved, does the provision in 1.409A-2(a)(1) mean that such a provision is acceptable?

(Other than this discretion as to paying out in cash or stock, the plan is likely to be very straightforward--elect to defer fees prior to beginning of year, fees are 100% vested, all accrued benefits to be paid out in a lump sum (either in cash or stock) within 90 days of a director's separation from board service for any reason.)

Thanks for any insights.

Is it possible for a participant in a 403(b) to move their money to a CD? This doesn't seem possible with a plan that has annuity contracts or custodial accounts. Perhaps with a retirement income account, but this isn't a church sponsor. Please help.

We are in the process of completing a 5330 for a client who did not make corrective distributions due to a failed ADP/ACP test by the 2 1/2 deadline. Total ROEs were $5000. One of the HCEs who had termed, took a rollover distribution and moved the money to an IRA account before the 2 1/2 month deadline. He was due $1000 of the $5000 in total ROEs. We have notified him that the $1000 was not eligible for rollover and the money needs to be removed from IRA account.

My question is: what amount needs to be reported on the 5330? Is it the full $5000? Or would it be $4000 since $1000 was removed from the plan before teh 2 1/2 month deadline?

Any thoughts would be appreciated!

A plan merges into another existing plan. Transferor terminates by transferring 100% of its assets, obligations, and participants to Transferee. Transferee is the surviving plan.

Who signs Transferors's final Form 5500?

I can't find any guidance, so I'm relying on (what I hope is) common sense. It seems to me that Transferor's trustees are responsible for filing the plan's final return and, therefore, that Transferor's trustees must sign the Form 5500. I'm disagreeing with a TPA who's telling the Transferee trustees to sign.

Does anyone have an opinion? How have you handled this matter with your own clients?

Hoping someone can provide some assistance with this. My husband & I divorced in Sep 07, I am entitled to half of his 401(k) as of the date of the filing of the complaint which was in August 2006. The value of my ex's 401(k) in August 2006 was approx $262K. Being that I knew I was only going to get half (131K) as of the valuation date (August 2006) , I told my ex, to place my portion in a money market acct, so that it would be stable. I of course do not have access to ex's 401(k) & am unable to reallocate his positions, or get updated statements. My ex did nothing, and 70% of his 401(k) is invested in his company's stock, with the rest invested in mutual funds. The QDRO states that I am entitled to 50% of the assets adjusted for market gains/losses as of the date of distribution, which will be in a few weeks. How do I fight this, being that the ex, did not re-allocate, as he should have done. The $262K, that the 401(k) was worth 2 years ago has dropped considerably. The reason, I have concerns, is because, as part of our divorce decree, I am to pay my ex-husband, a large part, alomost all of my half of the 401(k), as part of the buyout of my home that I get to keep. Being that he didn't reallocate, I don't know if I will have enough to pay him. Please advise what I should do

Is a withdrawal from an IRA originally funded by a direct rollover distribution from a qualified plan also eligible for the "first-time home buyer" exemption from the premature distribution penalty?

In other words, would a terminated plan participant requesting a cash distribution from his/her qualified plan account be better off doing a direct rollover to an IRA and then withdrawing his/her home-buying $s from the newly established rollover IRA - i.e., to avoid the penalty on the first $10,000 of the distribution?

Thanks!

Employer's 401(k) plan complies with a matching safe harbor formula of 100% match on the first 3% of pay deferred + 50% match on the next 2% of pay deferred. Employer decides to increase the match during the plan year to 100% match on the first 5% of deferrals. Employer is willing to comply with any applicable notice requirements.

My initial impression was that a mid-year increase of matching contributions would cause the plan to no longer comply with the safe harbor requirements for that plan, instead necessitating that the plan be subject to ADP / ACP testing. However, upon closer inspection (and following discussion with legal counsel), the ramifications might be even worse. Treas. Reg. 1.401(k)-3(e)(1)(2nd sentence) states:

In other words, if one amends the plan to change the provisions of the plan that satisfy the safe harbor rules effective for that plan year and if the change is an increase, not a suspension or reduction of the match permitted by 1.401(k)-3(g), then the ADP test is not satisfied.

I had read the preambles to both the proposed and final versions of the 401(k) / 401(m) regulations and do not see anything that addresses mid-plan year increases in matching contributions. I also found nothing relevant in recent IRS gray books. We can't avoid dealing with the regulations as they are written.

Help me decide between two possible interpretations:

(1) Employer cannot increase the matching contribution in the middle of the plan year. There are some other possible solutions described below.

(2) Amend the plan to add in the additional layer of match (50% on deferrals in excess of 3% of pay but not exceeding 5% of pay) but don't amend any of the plan provisions describing the safe harbor match already in the plan. Now, the sentence in the regulation I quoted doesn't apply, right? [Query: might this interpretation go too far? Does the plan still meet the safe harbor rules so that ADP / ACP testing isn't required? Although it would be prudent to notify employees, is that technically required?]

Other work-around solutions:

- Wait until the beginning of the next plan year obviously.

- Change the plan year in compliance with the rules in the safe harbor portions of the 401(k) / 401(m) regulations.

- If one anticipates this happening in advance, use the discretionary match rules in the safe harbor portions of the 401(k) / 401(m) regulations, although to avoid having a higher rate of match available to an HCE than is available to any NHCE, the discretionary match probably has to be made for the whole plan year or exclude HCEs from the discretionary match.

FYI, I searched and found some prior threads on related topics, but none that addressed my question exactly:

http://benefitslink.com/boards/index.php?showtopic=29756

http://benefitslink.com/boards/index.php?showtopic=9518

Thanks in advance for any replies.

A paricipant in a 401(k) plan went over the 402g limit for 2007. We/he didn't discover the "excess" until now. Since it is past the 4/15 deadline to return/refund what is the fix? Can we still refund or does the money have to stay in the plan?