We do the audit of a 401k plan and notified them in 2006 that several participants made deferrals over the 15% plan limit in 2003 and 2004. Three of the participants terminated and rolled their distributions to IRAs. Unfortunately, our advice was never taken and these excess deferrals are still in the 401k for the active participants and presumably in IRAs for those that terminated. They are not de minimis amounts. I explained to the client that we should really take the plan and correct under VCP since it happened for 2 years and has not been corrected but they really don't want to. I told them that I would calculate the amounts that should have been distributed plus earnings for the affected participants. We can refund the deferrals plus earnings from the 4o1k for the active participants, but do we have to tell them they need to amend their 2003 and 2004 returns, or can we have them show the total excess for 2008 on a 1099-R from the plan? Any thoughts? Secondly, for those terminated participants amounts, does the plan issue a 1099-R for 2003 and 2004 or for 2008 to show the excess and then we also notify them that those amounts were not eligible for rollover so they would be subject to the 6% excise tax on the ineligible rollover amount? Really wish we hadn't been so thorough when we did the audit in 2006 for the first time!

I need some help understanding the proposed IRS regulations from August 6, 2007 regarding individual insurance premiums. In our cafeteria plan, we have a premium payment account for group insurance, medical reimbursement account, health savings account, and dependent care account. An employee obtained an individual health insurance policy in her name outside the company's group plan. Is it possible for the employee to pay for the individual premiums with pre-tax dollars through the cafeteria plan? Would we need to set up a separate premium payment type account for individual insurance premiums to do this, or is this even possible? I'm so confused...!

Regulation 403(b)-(3)(b)(3)ii provides for allocating of certain plan responsibilites. This seems to be to remove ERISA responsiblities from the employer. Other articles nominate the TPA for these tasks. What responsibilites, legal, ERISA or otherwise are assumed by assuming on these tasks?

What are the options if a small group (4 employees on the health plan) canceled our policy to move to individual insurance, but one of the members was denied coverage? The group policy is set to expire on 9/1

Everyone else is covered. I thought insurers were required to insure since they've been on a group plan and that plan wasn't terminated for fraud or default payment. Any ideas how to proceed and get coverage before 9/1?

I've been reviewing Rev Proc 2008-50 to see if the correction for employees permitted to defer before meeting the plan's eligibility requirements and entry has been changed. I don't see that situation mentioned at all. If I've missed it, I'd love a reference to where it's hiding.

If it truly isn't there, does that mean that we continue to use the direction from 2006-27? Section 2.01 says that 2008-50 supersedes 2006-27, which leads me to believe that if it is gone, it no longer applies. That begs the question: How do you fix this now?

We have a Salary and Hourly plan. The hourly plan has non union employees. As one would think, there are coverage issues since the hourly plan does not have any HCEs in it. The plans do pass coverage using Average Benefits Testing in 2005 and are tested separately for ADP/ACP purposes. They are relying on those results for 2006 and 2007. My question is the Salary plan allows for aftertax contributions and the hourly plan does not. Both plans allow for match. Do I need to worry about the fact that the hourly people can not make after tax deductions?

This may be a ridiculous question.

Is there any reason you would file more than one Schedule R for a Form 5500?

This plan is a multiple-employer profit sharing plan. I see that the instructions say: "Multiple-employer plan filers should complete one Schedule R to report satisfaction with the coverage rules by all of the employers that participate in the plan." So far so good.

However, the person who completed the 5500 for this plan in the previous year filed a separate Schedule R for each of the employers. Is this necessary?

A client of mine has received a notice from the DOL of the need for an "Accountant's Opinion". The plan is tiny with only about 20 participants, but there are over 100 eligible employees.

Unfortunately, I was not aware of the need for an Accountant's Opinion, and the TPA never mentioned the subject when the plan was set up.

So what I'm wondering is: can the company's accountant act as the IQPA, or does it need to come from someone with no other association with the business? Also, what is the typical cost? This plan only has $30K or thereabouts in it. There are less than 10 active participants. The plan is basically an afterthought that the company owner has in place just in case employees want to use it (it's a staffing company, so employee turnover is very high).

I'd appreciate any guidance anyone has on the subject.

Sole proprietor designates a non spouse beneficiary of a db plan and spouse consents. That refers to the death benefit.

Can spouse also waive rights to the retirement plan benefits in advance? Or does that waiver have to be done within 60 days (or some similar timeframe) of either retirement or plan termination?

If I take a distribution before 59 1/2 and repay it within 60 days, there is no penalty. How is the transaction handled when I pay it back so it isn't considered a contribution for the year? Does the broker simply show it repaid and not reported to IRS?

Company X and Company Y decide to combine under a new Holding Company. Holding Company acquires both Company X and Company Y via a share exchange. After the acquisition, Company X shareholders hold 70% of Holding Company and Company Y shareholders hold 30% of Holding Company.

Company X executives vest in certain benefits upon a CIC as defined under 409A. Has Company X experienced a CIC under 409A?

Given the stock attribution rules of 318(a), I am inclined to say no, but was looking for some feedback.

A terminated non-owner participant wants to purchase real estate in his self-directed 401(k)/PSP. The trustee is fine with this, as he himself has real estate as one of his investments, but wants to know if all the same rules regarding real estate investments apply to a non-fiduciary.

Also, does the participant's real estate investment need to be offered to all plan participants - or is the option of finding their own enough?

Are there any other special things to consider?

TIA!!

Could someone please point to the reg that allows (or prohibits) a terminated employee from taking out a loan on his 401(k)?

I understand that if a retirement plan has only one employee because the company it serves has only one employee, then no requirement exists for it to have a bond. (This often happens with doctors, who have a qualified retirement plan so that they can have a trust that cannot get touched if a malpractice suit ever occurs. So, they file an 1120S or 1120 even though they have no employees.) However, if the company has other employees, but only one participant for the retirement plan, does it still have to have a bond?

Now that the proposed regulations are out implementing the PTE, I have approached several potential Investment Advisers to to prepare proposals to provide fiduciary advice to participants. All of them have said they are interested and would be willing, if they could identify and engage an independent auditor that would satisfy the audit requirements of section 408(g)(6) of ERISA and the compliance of investment adviser arrangements.

Do you know of any auditors that are geared up to to perform this work?

Thank you in advance for your replies.

I'd really appreciate informed opinions as whether the following Exam question is correct or is in error:

Data for Question 4 (1 point)

An employer sponsors defined benefit Plan A, which covers salaried employees only. The employer suspends benefit accruals in Plan A effective December 31, 2006. A partial plan termination is deemed to occur on that date. The employer then establishes a new defined benefit Plan B that covers all employees effective January 1, 2008.

Consider the following statement

Vesting service in Plan B must include all years of employment since the effective date of Plan A.

Is the above statement true or false?

(A) True

(B) False

The official answer is A (True). I think it is false because only a termination, not a partial termination or a freeze causes a plan to be considered a predecessor plan within the meaning of 411(a)(4) say the DB answer book, the ERISA Outline Book, and anything else I can find.

Is there some DB-specific rule in some weird place that I am overlooking? Help would be really appreciated.

It has been too long since I've administered a plan with 415 excesses. I've learned that gap period income does not apply. But, my question is, what if the participant experienced a loss? I think I remember that annual addition excesses are not reduced for loss. Is my memory correct?

Thanks in advance!

Have an employee with voluntary after tax balance who has terminated employment and wants rollover. New brokerage account does not want after tax contributions.

If all but after-tax is rolled over, is the after tax still considered tax fee in year of distribution, since its a complete distribution?

Employee is only 52 if that has a bearing...

Thanks

We have a separate plan for our active employees and retirees. If we terminate coverage for certain groups under the retiree plan, would we be required to offer COBRA for those recent retirees (e.g. those who became retirees less than 18 months ago)? I realize the retiree plan ceasing to provide coverage is not a qualifying event, but am a little concerned whether the failure to return the COBRA election forms is an effective waiver? The COBRA election forms do state that if you fail to return the form, you lose your right to elect COBRA. Any thoughts?

With 4 companies listed under a 401(k) MEP doc, if the sponsoring company (company A) wants to terminate the plan and the 3 other participating companies (companies BCD) want to install new 401(k)s to continue benefit,

1) What is the proper procedure for terminating from the MEP so that BCD can adopt a new plan? Remove by resolution/amendment from the MEP first, then adopt new plan? Or can the sponsor (A) terminate the MEP which defaults to BCD's removal from MEP and they start their own respective plans with no wait period?

2) If it is necessary to remove BCD from MEP first prior to MEP termination as the best course of action, is it necessary to restate the MEP at this time to adopt new language for BCD removal?

3) Similarly, when terminating the MEP, is it necessary to restate the MEP at this time to adopt new language?