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?

It's now October 1 but my trusted Timex shows a day of 31. Unfortunately, while it took a lickin' and kept tickin', the stem broke off, so I'll just have to wait until the day the watch shows is back in sync with the actual calendar day. How long will I wait?

Can you provide a simpler route to the answer than just grinding it out on Excel?

I saw in ERISA Outline where a person can make an irrevocable waiver of the right to make deferrals before she is eligible, and she wouldn't be in the ADP test.

I couldn't find anywhere if she would also not partake in the ER portion. ALso, would the revocation of rights apply tot he entire plan year, or just the plan year going forward?

Hello, all. The new EPCRS revenue procedure says that submissions relating to § 457(b) eligible governmental plans will be accepted by the Service on a provisional basis outside of EPCRS through standards that are similar to EPCRS. Yet on the sample VCP forms (Appendix D and F to Rev. Proc. 2008-50), there is a box to check indicating that the plan being submitted is a 457 plan.

Can we correct a 457(b) plan using VCP? Specifically, this would be a non-amender submission using Appendix F.

Any guidance will be much appreciated.

Surprise -- this is not a question about what situations qualify as a mistake of fact.

The instructions for correcting a mistake of fact deposit indicate that a refund must be processed within 12 months of the original deposit. I haven't been able to find any indication of what the correction is after 12 months. Would a correction after that time require a VCP filing?

I am trying to figure out whether it is acceptable to contribution wellness incentives into an FSA for an employee... The situation would be that once an employee completes an HRA, the money would be contributed to a health FSA for the employee's use. Is this acceptable?

I am also curious as to the logistics - the employee elects $1000 for the year for FSA contributions, on March 2, earns $100, so the employee simply now has $1100 available? The intent is to make it the employee's option - take the money in cash or let them elect to put the money in an FSA.

Thank you

I am trying to figure out whether it is acceptable to contribution wellness incentives into an FSA for an employee... The situation would be that once an employee completes an HRA, the money would be contributed to a health FSA for the employee's use. Is this acceptable?

I am also curious as to the logistics - the employee elects $1000 for the year for FSA contributions, on March 2, earns $100, so the employee simply now has $1100 available? The intent is that the employee will have a choice - elect the cash or elect to have the money contributed to an FSA.

Thank you

We are switching medical vendors for a company we purchased as part of a stock deal today.

Prior medical vendor wants to charge us the regular ASO fee ($38/month/ee) for 3 months totalling around $45K

I think this is high. All they will provide is run-out claims adminstration. We are self-insured.

Has anyone else experienced this? What is a reasonable fee arrangement for this sort of service?

Thanks

ER pays for group life insurance coverage for EEs. ERISA applies.

EE goes on LTD. No waiver of premium. LTD plan does not call for ER to continue the group life insurance coverage for former EE even if on LTD. Group policy does give terminating EEs a right to convert to and pay for individual life coverage.

Strong evidence that ER's health insurance rep erroneously told EE (and EE's spouse) that there was a waiver of premium on the life insurance for those on LTD. Neither insurance company nor ER can produce any notice or letter to EE or spouse about individual conversion option.

EE dies. ER and insurance company deny coverage.

Spouse is claiming equitable estoppel argument that the EE and spouse detrimentally relied upon the misinformation given by the ER's health insurance rep.

How strong of a factor in the ER's defense of the case do you think it is that the EE and spouse relied on a HEALTH insurance rep of the ER on an issue about LIFE insurance? Was it reasonable for the EE and spouse to have relied on a HEALTH insurance rep about LIFE insurance issues?

Can someone provide a regulation that would allow a participant to reduce or stop salary deferrals immediately, or 30 days, upon a participant's request?

Thank you.

We have a situation where Company A acquires Company B and keeps many of Company B's employees. Company B decides to terminate its 401(k) plan. Employees of Company B moving to Company A are instructed to complete enrollment documentation if they want to participate in or rollover funds into Company A's plan. The employee in this scenario completes a rollover form and instructs Company B's TPA to do a direct rollover to Company A. Company A receives the rollover form and check and returns the check to Company B's TPA because the individual did not complete the enrollment form for Company A's 401(k) plan.

Nearly two years later, the employee receives a large tax bill from the IRS. He contacts Company A who refers him to Company B's TPA. Company B's TPA still had the check and decided to reissue a new check payable to the employee and Company A's trustee.

My question is whether Company A should touch this check? Put aside for now the question of how Company B terminated its plan with a large check still outstanding.

ACOPA?

'Mea culpa' is a Latin phrase that translates into English as "my fault"

This may seem a contrite but I have a client with a self directed 401 k plan (brokerage accouts for some, bank cd accounts for others) its a 401 k with each person choosing own route and broker etc under employers 401 k plan. So with all the market stuff they asked what limit of insurance applies for each type, broker versus bank. I think the bank side is 250,000.00 but all that we have found is that mentioned for ira's keogh's not specific to a FBO 401 k, the broker side seems to be 500,000.00 any help is appreciated.