Terminating 401(K) Plan

Participant dies before benefits are paid. There is no spouse.

A beneficiary was named, but no address or social security number was obtained at the time the participant enrolled into the plan which was many years ago.

The balance left is $210.22.

We'd like to roll the money over into an approved IRA (which is what the doc says to do when there is a lost participant), but I don't think we can do that unless we tell the beneficiary...how can we though, when we don't know who it is, their social, or their address?

Any suggestions?

I have an account with 2 separate S corps where 2 of the 3 Owners have a controlling interest in both S corps. Can they file one 5500 form for the Section 125 plan that covers both S Corps?

I am setting up a new plan that we originally were going to use 10/01/08 as the effective date. Since the employer currently maintains a SIMPLE IRA for 2008 we need to change the effective date to 01/01/2009. The plan docs have already been processed with the 10/01/08 date. No contributions have been accepted or anything I just need to change the effective date. I have looked for an amendment form to make the change but have not had any luck.

I would appreciate any guidance. I'm new at this. Thanks!

I'm doing something of a compliance review for a client on a 401(k) plan of theirs, and before I talk to them and put the screws to them, I wanetd to get a sanity check to make sure I wasn't being too harsh.

The basic issue is that they don't appear to have adopted some required amendments. Specifically, they're missing 401(a)(9) RMD changes and they still have a $5,000 involuntary cashout rule without the required rollover for amounts over $1,000. We actually alerted them of this problems last year, but oh well.

There are a couple of mitigating factors, but the Code Nazi in me doesn't care; I just wanted to bounce these off of the crowd here and get a consensus. For the sake of argument, let's assume that they've been in full compliance in operation, and that our only problem is documentation.

Prototype Adoption

From the plan's original effective date, it was individually designed. However, effective 1/1/07, they have adopted a prototype plan. The prototype sponsor has kept it up to date, and I don't have any concerns going forward. However, my understanding is that with respect to this specific plan, none of the prototype amendments would have been effective prior to 1/1/07, and there is still a gaping complaince hole for the period between the required amendment date and the prototype adoption. I'm afraid that client is going to resist correcting the missed amendments by relying on this new prototype.

Also, what effect does this have on the IRS determination process? Surely if they had applied for a det letter using a new individually designed restatement, the IRS would have requested the interim amendments and discovered the oversight. However, given that they're likely relying on the prototype's opinion letter, now, is there any way the IRS would be able to identify this error short of a random plan audit?

Lost Documentation?

The client has been able to provide us with the cash-out amendment for a sister plan that was timely adopted. Given their administration, I find it likely that they would have adopted a similar provision for the plan in question at the same time. However, they have yet to produce it. My question then is whether, from a compliance standpoint, there is any difference between having never adopted an amendment at all and adopting it, only to lose it to the nether of space 30 seconds later?

Thanks for the feedback. I sometimes get a little too excited about shuttling clients off to EPCRS and sometimes like to check my gut against a 3rd party.

We are a small company with just two employees - one FT, one PT. A TPA completed our 5500 and in the process they reviewed our plan document and determined the PT employee, who was less than PT for 3 years, was actaully eligible for contributions. What happened is I asked Vanguard to make the plan matching (put in 3% to get 6%) and available to FT employees. The plan was established before the employee was even hired or prior to us even thinking we'd be hiring naother employee. Vanguard said no problem they'll send a document all I need to do is sign it and return it. I did that and made the mistake of not reviewing it. I have no background in HR so it is all greek to me. Turns out they did not put any of the details I asked for and it immediately vested all employees regardless of hours worked. Now we are faced with how to handle this. The employee said they are willing to sign something waiving participation because he did not expect, nor would ever expect to participate as a PT employee and further he has his own Roth account he contributes to. The business' benfits package clearly states the matching contribution policy and the employees contract clearly states he is not a benefitted employee. He has been an employee since 2004 and worked less than PT for all years except 2007, 08.

What are our options?

Can partners make deferrals during the year from the guaranteed payments made each month? Maybe I'm not understanding the concept, but the guaranteed payments themselves are not the earnings from self-employment.

MDVIP is a Boca Raton, FL based firm which signs up physicians tired of having too many patients. Each physician takes on 600 patients who pay $1,500 to $4,000 depending on the locale. The "fee" guarantees patients timely access as well as a complete physical annually.

Is the MDVIP "fee" reimbursable federal income tax-free from an HSA?

Citation(s) please.

Thanks

Is there any issue with plan providing for employer to make discretionary contributions to participant's account in NQDCP in such amount as employer determines if contributions are subject to 3 year vesting and are to be paid out with participant's elective deferrals upon occurrence of statutory distribution events (death, disability, change in control, etc. )?

OK - I've read through the many Top Heavy/Control Group posts and my head is spinning

I'm hoping if I lay out a scenario I'm facing, someone can provide an answer.

Company A has 4 owners (each 25%) that sponsors a calendar year 401k plan.

In 2007 Company B was formed in which Company A has 85% ownership. Company B consists of 2 former EE's of Company A. One is a 15% owner, the other is a worker bee. 15% Owner of Company B does not have ownership in Company A.

Company B became an adopting employer of the Company A 401k plan in 2007.

Both Company B employee's are eligible and participate in the 401k Plan.

Only 401k deferrals were made to the Plan in 2007.

My question regards Top Heavy determination for 2008.

Do I test each company separately for Top Heavy (whereby Company A is not Top Heavy), or do I need to aggregate the testing where the 15% Company B owner is considered a Key EE which causes the Plan to be Top Heavy?

A defined benefit plan purchased an annuity contract several years ago for some of its deferred vested liabilities. The annuity contract offers a 50% and 100% annuity. Per PPA, the plan has been amended to provide for the 75% qualified optional survivor annuity. What happens with the annuity contract? Is the insurance company required to offer a 75% annuity also? Any thoughts would be appreciated!

Corbel recently provided an amendment for terminating DC plans that will conform with PPA provisions for 2006, 2007 and 2008, plus the HEART Act.

I don't see that an SMM was provided. Anyone else get one?

Has anyone encountered an extant "Maximum Deferred Compensation" or "MDC" program sponsored and sold by MetLife circa 1995 - ??

It appears to have capitalized on PLR 981005 which arose out of a deferred compensation arrangement structured between nonprofit Kaiser HMO, and a for-profit MD corporation (Permanente).

Specifically, Kaiser deferred fees for medical services it would otherwise have paid to the MD corp. into a grantor trust, assets of which were ultimately used to satisfy the MD corp's obligations under its own nonqualified deferred compensation plan. The Service ruled that Kaiser was the owner of trust assets for which there was a substantial risk of forfeiture, and the MD corp. would not be taxed on assets until the substantial risk of forfeiture lapsed (i.e,. when individual MDs reached age/service requirements for payout) and benefits were distributed. The Service also ruled that the arrangement would not give rise to any income to the participants and beneficiaries of the MD corp.'s deferred comp arrangement prior to actual receipt of funds.

What would happen if, heaven forbid, either the administrator or custodian bank of an IRA went bankrupt? Would the individual IRA-holder be at risk of loss due to the bankruptcy?

Would if matter if the IRA held private investments (as a self-directed IRA), such as a hedge fund or partnership investment, rather than marketable securities?

Thanks in advance for any replies.

I have a client that did not understand how an HSA works and has some problems that I am trying to fix and am looking for suggestions on the correct treatment on how to fix it. An individual that setup an HSA (family coverage) contributed approximately 9,000 to his HSA. Apparently what he was doing after making an initial contribution of 5,000, was paying some medical expense that was reimbursed by insurance and then depositing the insurance check back into his HSA. The balance of his account after doing all this is approximately 1,000.

It looks to me like I have an excess contribution problem and there is not enough money in the account to pull out the full amount of the excess contribution and any remaining balance would be subject to the 6% excise penalty. Then it looks like I have a distribution that does not qualify as they are reimbursable by insurance. I am thinking this would be taxable and subject to a 10% penalty. It also seems to me that to finally pull out the remaining excess contribution, part of the following years regular contribution would have to be pulled not for medical expense but as an excess contribution.

Any suggestions or thoughts would be appreciated.

There's a theoretical new plan, effective 1/1/08 (for profit sharing allocations), adopted 9/30/08 with Safe Harbor match effective 10/1/08. The match is to be calculated annually (not per-payroll).

Can you calculate the SH match based on compensation from 1/1/08, or is it restricted to 10/1/08? It seems clear to me that compensation for purposes of calculating the SH match would be restricted to 10/1/08-12/31/08, but others disagree with me.

It doesn't seem to be explicitly addressed in the regs, other than the requirement that the SH is effective only after the plan is adopted, and I believe that includes the entire SH contribution formula.

Without it being explicitly addressed, I think it may be aggressive to use 12-month compensation, as it would be discriminatory for for NHCEs to have to defer 16% of their last 3 months' compensation to get the full match, while it's easier for the HCEs to afford to so. Conversely, however, if this were a Safe Harbor nonelective contribution, the NHCEs would only benefit more from SH being determined on 12 months' compensation, so I don't think the IRS would take issue with that.

The plan document doesn't specifically address this either, but we are able to custom-define compensation periods to meet our objectives.

Finally, what about a self-employed HCE in this situation, or any other with partial-year eligibility? My understanding is that the total compensation is deemed to be earned on 12/31/08, but that also seems discriminatory. Do any of you pro-rate self-employment compensation in this case?

Thanks.

I have a client who recently got a loan for their company business from a local bank. when the bank learned that the company was putting their 401k plan out to bid, they have stongly suggested the company move their 401k plan over to the bank. While the company has done some due diligence to look at the banks 401k product, it seems the overall plan expenses would be a little higher, and they would have to sacrafice some services they are getting today if they moved to the bank. the company is willing to do this because of the loan. what are your thoughts on this?

Our office has been asked to assist in the representation of a plan that is under audit by the IRS for a plan year. During the audit, the agent discovered that the plan has not been updated since 1985. Yep..1985. I am looking at the fee chart for sanctions and under Section 14 of Rev. Proc. 2008-50 and trying to determine the possible sanctions. The chart provides a separate sanction amount for each type of nonamender failure (e.g., EGTRRA, GUST, OBRA, TRA 86) and it goes up due to the "age" of the failure. Is our client on the hook for each sanction or just the sanction for TRA'86 since that was when the first failure occurred ? I am of course assuming the latter but just wanted to see if anyone else has been in this situation. Thanks.

In February of this year we issued an ADP refund to a participant. Gross was $4,600 and earnings made it $5,100. She cashed the check.

But we just found out the ADP test was incorrect, so it was reprocessed. The correct ADP refund amount is $4,400 and earnings make it $5,350.

I've done some research, and it looks like this is referred to as an operational failure. I read that I should use the EPCRS to correct this. The EPCRS (Rev Proc 2008-50) has a "Return of Overpayment" section that says the participant should return the difference to the plan. It goes on to say that this money should be put in an unallocated account and used to offset future employer contributions.

How would you handle this situation? Just have the particpant send back the gross difference plus earnings? ($4,600 - $4,400)? Send back the difference between the totals after earnings ($5,350 - $5,100)?

And does it really need to go into an unallocated account to offset future employer contributions like the EPCRS says?

I used to not think much about these kind of bulletins, etc.

Now, I begin to wonder if someday something like this will happen.

Please see the attached document.

House_Democrats_Contemplate...pdf

It is my understanding that you can't add an EACA mid-year. I have a profit sharing only plan that is adding a CODA mid-year. Since the EACA is tied to deferrals, I assume that the EACA can be added at the same time as the CODA.

Any thoughts?