Can you do a hardship under safe harbor regulations for costs associated with the draws on a home that is under construction and consider it to be part of purchase of principal residence? How would we go about determining whether those costs had already been pulled under the construction loan or would we?

Any opinions would be greatly appreciated!

I know this contradicts a recent ASPPA issuance, but 10/1 is too late as I understand it. Isn't this correct?

I have a plan that has a group of employees that are specifically excluded from the Plan. The plan is passing the 410(b) coverage tests with that specific group "Not Benefitting". Because the coverage tests are passed, can this specific group be carved out of the 401(a)(4) test?

I need help setting up my PPA valuation for a plan that pays lump sums based on the accrued benefit payable at NRD.

Assuming x% of the TV’s will defer payment until NRD and elect a lump sum at that time, my reading of the rules would have me value a deferred annuity commencing at NRD using the valuation segment rates, with PPA mortality before NRD and the 417(e) mortality after NRD. But since my plan provides for a death benefit equal to the present value of the vested benefit, it seems appropriate to assume no mortality during the deferral period.

If y% of the TV’s are assumed to elect an immediate lump sum benefit, my reading of the rules would have me value a deferred annuity commencing at NRD using the valuation segment rates and the 417(e) mortality both before and after NRD. In this case, it makes sense to apply a mortality decrement prior to deferral age since that is consistent with the actual 417 lump sum basis.

For a given employee terminating at age z, this would make the liability for the immediate lump sum lower than that for a deferred lump sum. This doesn’t seem right, so maybe I'm missing something. Or maybe it just illustrates the fact that the immediate 417 lump sum is a bad deal under this plan because of the death benefit?

Hi,

A plan is being amended to an integrated allocation from a comp percentage allocation. Plan is top heavy.

The plan currently maintains an American Century doc. It states that under Top Heavy, first there will be an allocation of 3% to all eligible participants. Second step is an Excess Comp allocation multiplied by the Permitted Disparity Percentage. In this case we are using the TWB for 2007 of $97,500 and therefore a PDR of 5.7% (225000-97500)*.057 = 7267.50 is the second step allocation. The third and final step is the remainder of the contribution allocated on a comp percentage basis.

This differs from a Top Heavy Profit Sharing allocation in a Mass Mutual Corbel prototype and in fact is less beneficial to the sole Key Employee.

Am I missing something?

OK, I can see we'll have a few clients that we won't be able to certify caledar year AFTAPs by 10/1/08.

If we certify them AFTER 10/1/08 (say certified on 10/27/08) we are "deemed" below 60% for the rest of 2008 and restricted in 2008, but we use the late 2008 AFTAP for the presumptive % for 2009 (less 10% on 4/1/09) is that correct ?

A is a sole proprietor Sch C filer with no employees and has a 401(k) Individual plan putting away the maximum $45k say in the 401(k) account in 2007. He provides professional services.

A becomes a 50% partner in an LLC in 2008, the other 50% owned by B in an operating business. The professional services provided by A and the business - are otherwise unrelated and different.

Does this jeopardize A's intended maximum contribution to his 401(k) plan for 2008? Is this 401(k) plan required to be offered to all employees of the LLC business?

Is there a flowchart or a decision matrix out there somewhere that provides guidance regarding when an EBAR calculation can be used and when it cannot?

Thanks in advance for your feedback.

Does anybody know of any good recent articles that would give statistics on what average deferral rates are for given compensation levels?

1/1 plan anniversary. ADP test for 1/1/06 to 12/31/06 failed. A correction needed to be made by 12/31/07.

There were 3 HCE's who were due a refund of $1500 each. They all terminated employment on 11/8/07 and rolled their money out of the plan into another financial institution. The rollover occcurred in November of 2007.

Now, I know that the $4,500 was not eligible to be rolled over. However, the plan sponsor did not notify the former employee's to tell him this.

So here are my questions....

What should the plan sponsor do at this point? Is this considered an operational failure? Do they need to self-correct using the EPCRS? Or, because the money left the plan prior to 12/31/07, is that considered a correction within the 12 month correction period? Or does their lack of informing the former employee's come into play?

The plan sponsor really doesn't want to use the One-to-One method and have to fund a $4,500 QNEC.

Thoughts?

I just started teaching very part-time at a local community college. I don't need the pay immediately - I have other income - so I signed up to send 95% (I've gotta leave something for beer and cigarettes) of my quite small paycheck to their 403b plan.

I just got my first pay stub and see that none of that money is currently taxable. This seems to be as good as a deductible 401k. Have I got this right? I should be in at 100%, no?

(You wouldn't mind if I had to hit you up for a cigarette now and then, would you?)

Newbie

I am aware that the deadline to implement a new safe harbor plan for single employer plans this year is Oct 1, but I'm wondering if there is any loophole or way around that? Would using the services of a Professional Employer Organization like Administaff for payroll, benefits, and 401(k) make any difference to when we could set up the plan? Thanks in advance.

Situation with prospective client. Owner's son works for the company, earns more than $105,000, and owns more than 5% of the stock. This is a company in the construction industry and excludes union employees.

The son currently is a member of a union and accrues benefits under the union pension plan. Can he be covered under the 401(k) plan without covering all union employees? It would seem that you cannot have a collective bargaining agreement with benefits the subject of "good faith" bargaining when one of the individuals is also an owner of the company?

Any opinions/suggestions?

Hello everyone! I'm hoping your various expertise can help me understand some basic things about my 401K.

I am 35 and just started contributing to my company 401K last November. I contribute $759 per pay period (every two weeks), with my YTD contributions being $14,283. My employer contributes $91 per pay period, YTD $1,714. I also contributed these same amounts thru out November & December of last year. My current account value is at $16K. The 401K fund is managed by Prudential.

Here is my question/confusion. I've been in this just about a year now and I know NOTHING about investing, nothing about stocks ...etc. I didn't/don't pick the stocks or securities or what ever it is they buy with my money, I just picked investor goals and time until retirement. They have me listed as a moderate risk investor and 10-15 years until retirement (which I just switched to 5-10 years in hopes that would make them purchase safer investments for my fund).... ANYWAYS.... almost a year now and EVERY single quarter I have lost money, every quarter! Why wouldn't they just throw the money into something completely safe at a 2-3% interest rate rather than losing the 3-6% each quarter they are losing? They show a pie chart of where my money is "invested" and it appears to be pretty diversified to me... but these guys that manage these funds, isn't it their job to switch around investments within the funds in order to not get a loss? I looked and looked and couldn't even find a way to switch my money from this type of investment to something completely safe (like government bonds at 2% interest)... I mean 2% interst is better than 3-6% loss evrey single quarter... and I worry about what this market crisis is going to do to my money now. I feel like I'm just throwing my money away, the whole idea here is to save for retirement, not gamble. It just doesn't seem right that in order to participate in a 401K that I have to gamble my money away.

What would you do if you were me and remember, I have no understanding of how all the funds/stocks/etc... work... I don't care about making tons of money, and I can understand a loss here and there, but one year strait of losses, and now probably a huge loss with the market crisis... I'd be better off buying bonds, but that can't come out of my checks pre-tax and my employer wouldn't match that...

any ideas/suggestions?

Thanks in advance!

Kathy

What is the most that can be contributed to a DB pension plan in 2008 and still be tax deductible? It used to be normal cost plus 10-year paydown (?) of nonfunded amounts.

Now there is "Target Normal Cost." Can more than this be contributed and deducted? We may want to fund-up our probably soon to be frozen plan.

If we freeze the plan at 12/31/08 (last day of plan year) will there be a target normal cost for 2008? Certainly none for 2009, right?

Can anyone point me in the right direction for locationg a medicare & Medicare gap grid comparison for A& B (even D would be benficial)? I searched google but found only medicap plan specific coverage (such as aetna only not compared to A & B). Thanks!

Can you please help me. My husband is age 65. I am age 51. I was granted 100% of his accrued benefit, that was a lump sum of $200,000 if he took it and a monthly benefit of $1390.00. I just received papers today from CBS that tells me that it is now only worth a lump sum of $92,000 or $501.00/month. I knew there would be calculations involved, but not this adverse. Please advise. Every Excel calculation I do and every annuity assumption I do does not equate to these numbers.

If a plan fails its ADP test but recharacterizes some of the deferrrals for an HCE, can those recharacterized amounts be disregarded for top heavy purposes? It appears based on my initial research that you can disregard "catch-ups" for top heavy purposes, but only for the plan year in which they are made. I need to verify that "catch-ups" in this case can be disregarded even though the amounts weren't over the 402(g) limit - they were just recharacterized due to a failing ADP test.

Does a plan termination trigger Required Minimum Distributions for non-owners?

Example:

Participant (72 years old, non-owner) is still employed. Plan terminates as of 12/31/2008, assets to be paid out late in 2009. Does this require the participant to take an RMD as of 4/1/2009? Or does the participant's actual distribution trigger the RMD?

Forgive me if this is not the correct or best board for this post. (I've seen a similar question on another board that didn't get any responses so thought I might pose the question here given the higher traffic on this board.)

I have a real blind spot with respect to behind-the scenes administration and processing of 401(k) investments. Could someone provide a snapshot of the process for handling dividends paid on employer stock offered as an investment option in a 401(k) plan. (Plan simply permits participants to direct investment to be made in employer stock as one of several options--employer does not make any contributions in employer stock.)

I guess my assumption is that cash dividends owed to each participant would be calculated and paid to the plan / trustee just like with regular shareholders and that the plan would then allocate and invest those cash amounts in accordance with the participants' investment elections on the date received (i.e., that the cash dividends could be used to buy additional shares of company stock plus other mutual funds the participant had elected and would not simply be plowed back into employer stock alone). If so, are the dividends usually allocated immediately or are they commonly held and combined with other contributions (e.g., the elective salary deferrals under the next paycheck)? I am also curious to know what plans typically do about fractional shares of employer stock.

Thanks for any light that can be shed on the general process invovled.