We get quite a few takeover plans whose existing documents call for immediate distribution vs. having to wait until after the close of the plan year after they terminate to take a distribution. When we go to put the takeover plan on our VS document, can we modify this provision to where the participant cannot take an immediate distribution, but rather, they have to wait until after the close of the plan year after they terminate in order to take a distribution? Or is this a protected benefit?

Any thoughts would be greatly appreciated. Thanks!

We are filing several years of 5500's for a client who failed to file. We are filing under dfvcp. The question is, what about the SAR's that were never provided. Should they be provided now? Or just provide the current year to existing participants?

This is a completely new animal to me so I'm not sure where to post my inquiries. (Puns were mainly intentional!) There is an association of jockeys that works (mainly) for a specific casino/race track. The race track pays a set amount to the association for the purpose of providing benefits for the jockeys of that track. The amount is set "per the agreement that governs all race track / casinos". The association (which is non-profit) would set up a plan that credited each eligible jockey (see below) with $ 15,000 annually that they could spend on any or all of the following: medical insurance, disability insurance, life insurance, dental insurance or pension.

Eligible jockeys would ride in at least 200 races (annually) and more then 50% of their total races would have to be at this specific facility / track for the year.

This is all I know and the first proposal of it's kind that I have run across. Can anyone give me any pointers on whether this works, is legal and what sort of testing it may be subject to? Is the pension plan a regular qualified plan and, if so, what do I use as compensation? I'm thinking it must be non-qualified as each jockey is self-employed.

Any information would be appreciated.

Sheila

Hello -

My coworkers and I are currently going through benefit renewal discussions and the topic of smoker rates vs. nonsmoker rates has come up. We are wondering if anyone out there has experience with implementing this type of rate and how effective it has been. We have previously offered smoking cessation classes with little response.

Any help would be appreciated!

If, after the applicable time period, the plan sponsor implements the default schedule under the rehabilitation plan, does that mean the employer is bound by the default plan? Stated differently: if we are unable to reach an agreement regarding the rehabilitation plan, can we continue paying the 10% surcharge until the end of the rehabilitation period?

We have received a notice of critical status from a plan, but we have not yet received the rehabilitation plan. I'm trying to sort out the rules. I understand the rehabilitation plan will contain some design options. Do all bargaining parties have to agree on the same set of options, or can we bargain for and agree to some options while other employers agree to different options?

Would appreciate thoughts on the following. Suppose employer has old deferred comp plan that has not yet been amended for 409A. (Company has not gotten around to it yet but plans to amend before year-end.)

One of the provisions that presents compliance issues is provision which provides for certain pro-rata portion of participants' deferred comp account in the event they die while employed by company and have not attained age 65. Plan provides for death benefit to be paid to designated beneficiary but does not provide for specific time for payment. If participant died (say now) and was entitled to get benefit, could the amount just be paid out (say within 90 days) and be considered compliant with 409A? Alternatively, could the agreement possibly be expressly amended by the participant's estate or possibly the participant's designated beneficiary to provide for payment within specified period that complies with 409A (say within 30 days of death) without violating 409A?

There is no problem here with the company paying out amounts within reasonable timeframe or with estate / beneficiary agreeing to whatever provisions might be required to avoid excise taxes; however, due to the death, there is obviously no way that the company and the original participant can actually amend the original agreement to comply with 409A.

(I'm sure this has been discussed previously. I did a quick scan of this forum, but couldn't find anything "on point". If someone could provide a link to a previous discussion of this (or similar) subject, I'd be most appreciative.)

PS Plan is being amended to allow participant direction of investments.

One participant would like to have her son (a broker) handle her account. I have a faint recollection that such a relationship might be a PT. I am assuming this would be where the participant's account is maintained with the son's brokerage firm and where son receives commissions on trades.

What if the participant maintained an account with a discount broker and son merely provided Mom with investment advice, on a non-compensated basis?

Thanks for any and all comments.

A multiemployer plan that is significantly overfunded is considering paying a "13th check" to current retirees at the end of this year. The labor trustees suggested that to save some money the 13th check should be paid only to retirees who are active members in the union. Apparently, some multiemployer funds have done this, but I see significant issues with making the 13th check contingent upon union membership. This could violate ERISA's exclusive benefit rule and the NLRA as well. Does anyone have any authority on why this should not be done? Any help would be appreciated.

A plan sponsor wants to continue benefit accruals for participants within 10 years of normal ( i.e. 65) and freeze benefits for all other participants - (1) is this doable ? and (2) if so, what specific non-discrimination tests, if any, would be required ?

Hello,

Client wants to place employer contribution in participant accounts on a mothly basis. The employer contribution is subject to a 6 year graded vesting schedule within the plan.

Client wants to impose an annual 1000 hour requirement. If the participant at year end does not meet the accrual requirement, client wants to remove the money from the participant's account.

This seems counter-intuitive since it always seems that the vesting schedule is the only thing that governs the removal of money (other than operational errors and such).

So the client will have someone who is already 100% vested for example, when they look at their account balance while employed, will see that they are 100% vested but when they take a distribution, they will "forfeit" money that was placed in their account that year, due to them not working 1000 hours.

I cannot find anything specific that prohibits this, but wondered if other run into this situation and how they may address this.

Thank you.

IRC Sec. 432 says that the actuary's projections shall be based on reasonable assumptions and methods and be his best estimate. However, Sec. 432 goes on to say that the projected value of liabilities shall be determined based on the most recent actuarial valuation. What if the actuary's best estimate has changed between the time the actuarial valuation was completed (let's use a 2008 calendar year to make it specific) and the deadline for the 2009 certification (March 31, 2009)? Can an assumption used for the 2008 valuation be changed for the 2009 certification?

We have a situation for which we need your suggestions.

Our client, Elizabeth a 100% owner of an S corporation, husband is the only employee, sponsors two plans.

One Defined Benefit Plan effective 01/01/2006 and a 401(k) Safe Harbor effective 01/01/2007.

Elizabeth has entered into a partnership around July 2007. The partnership currently has three employees along-with the current partner. The current partnership sponsors a 412(i) plan.

Elizabeth does not wish to be part of the 412(i) plan.

Please let us know what options we can put forward to Elizabeth.

Would she have to discontinue any of her current plans?

I have a client that insists they read this somewhere, but I haven't found anything:

She said all small 401ks and 403b will be subject to annual audit effective 2011 - Not just plans with 100 participants.

The company may adopt a SIMPLE because they are tired of all the rule changes, etc. Their HR person tries to stay on top of everything. So when the DOL issues an opinion or statement, I get an E-mail. Every time she hears a rumor..... well you know.

I don't mind. It's part of the process, and she's a very pleasant person.

Anyone heard anything about this?

Thanks,

Fender

www.401ktest.com

www.projectedfinancialstatements.com

This is a pretty basic question but we run across so few of these anymore, I always get confused! Please bear with me.

Calendar year 401(k) PSP, client's tax year ends 10/31. Form 5500 is on extension until 10/15/08 for PYE 12/31/2007. Must the client make the ER contribution deposit for PYE 12/31/2007 by 10/15/08 (due date of 5500) or do they have until 1/15/09 to make the deposit?

Any input you have on this would be great.

Thanks!

Say we have a privately held company that has 5 employees, including the owner.

They want to design the plan with basic eligibility provisions of 21&1.

They want to include an additional employee who works less than 1000 hours and is age 17 (i.e. their son).

Is there a problem with adding an additional provision to include the son?

Of course we can just have the plan provisions be immediate entry for all employees, but just wondered if there is an explicit problem with the specific provision. There are no other employees that are not 21 & 1. But what if there were? Could it still be an acceptable provision or does the group not 21 & 1 need to be tested separately for the coverage tests?

Thanks.

We have a client with a balance forward (calendar year) profit sharing plan. Due to the adverse market conditions, and the fact that a participant whom they dislike needs to be paid, they want to revalue the plan at this time. Of course, they have never done this when the market was up. While we have advised them against this, does anyone have anything specific that would help me convince them that this is not a good idea?

In re-reviewing the 2007 regulations set to take effect 1/1/2009, I note that the requirement for a plan document is one imposed as a condition for tax-deferred contributions to a 403b contract. That is at least how the regulatory language reads.

I did not find where in the 2007 regs there is an affirmative duty placed on the employer to establish a plan document, even as to an employer that has to date operated a non-ERISA 403b program without a document. Nor did I find anywhere in the 2007 regs where it requires of an employer that might choose to adopt a 403b plan document which 403b contracts the employer must include in and maintain under its 403b plan.

Re-reviewing Rev Proc 2007-71, section 8.01 speaks in terms of the circumstances under which a 403b contract not maintained under an employer's 403b plan yet satisfies the requirement that the 403b contract be maintained under a 403b plan document. That provision is odd in that it assumes generally that a 403b contract not receiving contributions needs to be maintained under a 403b plan document, but the 2007 regs only require such to keep contributions going into the 403b contract tax-deferred.

There is one provision of Rev Proc 2007-71 that suggests that an employer must have a 403b plan document and what 403b contracts be included. Section 8.02 provides "a §403(b) plan will not be treated as failing to satisfy the requirements of §1.403(b)-3(b)(3) if the plan does not include terms relating to those contracts" of employees if by 1/1/2009, the employer is a 'former' employee and no more money goes into the 403b contract. However, no part of Treas Reg § 1.403(b)-3(b)(3) specifies the an employer must have a 403b plan for the 403b contracts of its employees that must be included in an employer's 403b plan.

Again, the only requirement of the 2007 regs seems to be that a 403b contract needs to be maintained pursuant to an employer's 403b plan in order to shield contributions from current taxation.

The 2007 regs permit an employer to stop future contributions, i.e. to freeze its 403b plan. The 403b contracts would not be receiving contributions in 2009 and beyond, and thus not need to be maintained pursuant to an employer's 403b plan. The 403b contract of an employee would simply be a matter administered between the vendor and the employee, per the terms of the 403b contract between them. (It would behoove the vendor and the employee, the parties to that 403b contract, to take whatever steps may be necessary--other than that to be maintained pursuant to an employer's 403b plan--that the 2007 regs otherwise require.)

I'm hoping someone can point me to authority, if there is any, that prohibits an employer that has operated to date (and perhaps through 12/31/2008) a non-ERISA 403b program without a document from simply stopping contributions on 12/31/2008.

I am looking for authority to explain the treatment of severance pay when determining final average pay. Plan language definition of annual comp is w-2 wages plus elective deferrals. This would include severance pay. That result seems wrong. What am I missing? Thanks.

I apologize in advance if this is not the right forum...

I'm so confused by this issue, I'm not sure where to turn. The employer is a sole proprietor, no other employees. He had a DB plan which was terminated at the end of 2005. For a few years, 2003-2005, the contributions required to meet the DB minimum funding standards exceeded the amount that was deductible, so he was making required contributions that weren’t deductible (for a sole proprietor, the maximum deduction is limited to earned income minus ½ se tax). He was able to deduct some of those contributions in subsequent years, subject to the deduction limitation in those subsequent years. After the 2006 tax deduction, he still has about $60,000 of contributions that were made that have not yet been deducted. He now has a 401k profit sharing plan. For 2007 he has earned income minus ½ se tax of about $200,000. He’d like to get the maximum deduction possible, using both as much of the $60,000 plus as much current 401k and profit sharing contribution as possible.

The question is, can he deduct some/all of the $60,000 PLUS make deductible 401k and profit sharing contributions for 2007? If so, how much? Or, if he makes the maximum $50,000 401k/profit sharing contributions (he’s over age 50), is that $50,000 the maximum deduction allowable for 2007, and he’ll have to continue to carry forward the $60,000 for deduction is some future year? Or is the deduction subject to the DB/DC combined plan deduction rules, even though the DB is not currently in existence and there is no current contribution to the DB.

Thanks in advance for any insight!!