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

Can a participant take an in-service distribution and roll that distribution back into the same plan within 60 days? This doesn't appear to be prohibited by the Code or Regs, but I'm sure it would appear to be a little fishy to the IRS. Any comments?

We administer a Title I 401(k) Plan where the plan loaned the plan sponsor (sole proprietorship) $78,000 back in 2005. We have filed Form 5330's for 2005, 2006 & 2007 and have accrued interest for those years. We have also reported the PT on the Schedule I (Form 5500) for 2005 & 2006. We haven't filed the 2007 Form 5500 yet but will do so by the 15th.

The plan sponsor has repaid about $2,000 of the loan, plus some of the accrued interest.

It could take several years for the entire loan and interest to be repaid. So do we continue to do what we've been doing (accrue interest, file 5330's, report on the 5500, etc.) or is there a point in time where we can distribute the loan? Or what are our other options (if any)?

Any input on this would be greatly appreciated!

Thanks!

Anyone use a formula valuation in determining the FMV of stock underlying SARs? Under what circumstances could a company change the assumptions used in the formula as applied to future grants?

We have an employee who is not an HCE or owner, but is a party in interest, who received a loan in excess of the 72(p) limits during the plan year. It appears that we have to disclose on Form 5500, Schedule G, Part I, and also in Schedule H, under question 4(d). My question is first whether the preceding sentence is correct, and second whether we have any additional reporting obligations on Form 5500 or any other form (i.e. Form 5330)?

QDRO states "The Plan Administrator of the Plan shall transfer to the Alternate Payee the sume of $23,500 of the Participant's vested account balance as of XX/XX/2008." It also states that "the distribution shall not be adjusted by earnings or losses allocable to the account as of XX/XX/2008." (same date as above - but using the wording "as of").

Once the time period for determining if the QDRO was valid and the 30 time period for written claims is over and the distribution is requested, the account value is under $23,500.

The PA determined the DRO was a QDRO and the participant has been making contributions to the plan since the XX/XX/2008 date.

Can the losses be allocable to the $23,500 from the date to current? I think that's the only correct way to run the calculation but since the PA determined the DRO was a QDRO with that wording, I don't know if they can actually do that.

What are yourt thoughts on the following:

Lets say an employee has a designated beneficiary for his pension plan death benefit as person A. Person A is his beneficiary for mulitple plans and benefits. At some point employee goes into HR and requests to change the beneficiary on all of his plans. HR rep gives him the change form for all plans but the pension plan. Employee changes beneficiary to Person B for all of his plans but since he never got the designation form for the pension plan that remains unchanged. Employee never realizes this nor asks for a pension form. Employee dies. Pension death benefits are paid out to Person A. Person B now says wait, I was supposed to be the beneficiary and Employee had asked for change forms for every plan.

Is there a duty of care in responding to such requests? the plan was paid out based on the designation form on file, but is there some negligence at play on the part of HR?

Thoughts?

A QDRO for a DC plan states that the alternate payee shall receive 50% of the marital share to which the participant is entitled to under the plan. The marital share shall be calculated by multiplying the monthly gross annuity, lump sum, death benefits or other payments by a fraction, the numerator of which is 9.630 and the denominator is the "total number of years" of the participant's participation in the Plan.

The plan's normal form of payment is a 50% QJSA. The participant has remarried. Assume the participant becomes eligible to take a distribution on January 31, 2009 with 19 years and 31 days of participation in the plan, and begins receiving a monthly annuity of $1200. What is the most reasonable interpretation of the award to be made to the alternate payee?

$1200 x 9.630/19 years of participation (is the most reasonable interpretation to disregardthe 31 days of participation since the QDRO states that only "total number of years" are considered?) = $608.21

$608.21 x 50% = $304.11 monthly payment to the alternate payee for the life of the participant (QDRO does not provide for survivor benefits for the alternate payee, other than stating that the "death benefits" will be multiplied by the coverture fraction above)

Is my thinking above correct?

Thanks for any help you can give here.

We have an employee who is not an HCE or owner, but is a party in interest, who received a loan in excess of the 72(p) limits during the plan year. It appears that we have to disclose on Form 5500, Schedule G, Part I, and also in Schedule H, under question 4(d). My question is first whether the preceding sentence is correct, and second whether we have any additional reporting obligations on Form 5500 or any other form (i.e. Form 5330)?

We've acquired a plan that only provides for lump sums prior to NRD - all other benefits are payable only at NRD as monthly annuities. As a consequence, there is no way to show an immediate QJSA. However, the 417 (a)(3) regs seem to be fairly clear about requiring this. The only thing that seems to make sense (which could really get me into trouble) is to show a deferred monthly annuity payable at NRD along with its PVAB calculated using 417(e) rates for comparison with the lump sum. Any thoughts?

A 7 participant profit sharing plan with a 1965 effective date appears to have not been restated for GUST nor any of its following amendments. The plan has a large financial institution acting as corporate trustee and the client has been paying them appx $6000 annually for this role. Most recent document is an unexecuted doc from aforesaid financial institution dating june 1994. Recently, (9/25/08) Plan sponsor received correspondence from the plan trustee stating that they (the trustee) need copies of restatements/amendments since 1994 in order to be tax qualified. They also bring up EPCRS and VCP and then state they want to resign as trustee and await appointment of successor trustee.

Is this trustee on the hook?

We have a nonprofit parent that sponsors a 403(b) plan and a for-profit subsidiary with a 401(k) plan. I am being told that our 401(k) fails the 410(b) coverage test because the employees in the 403(b) plan cannot participate in the 401(k). I am nearly certain that there is an exception and the employees in the 403(b) don't have to be counted in the 401(k) coverage test. Am I correct? Can someone point me to the law/regs on this?

Thanks.

If union employees cease to be union employees during a plan year is there any kind of transition rule that allows the employer to keep the union plan (and the employees) separate from its other plan for the remainder of the year purposes of coverage/discrim testing?