attached is the new and improved version of EPCRS (Self Correction) - Rev Proc 2008-50

They never put the page numbers on the index, so I went through and added those. (just to make clear, the page numbers are only the first 6 pages of the entire rev proc)

page 35 is the correction for 415 limit violations. these were formally in the 415 regs and were 'eliminated' from the regs, so to speak.

hey, its only 179 pages.

I know that Code Section 125 specifically excludes benefits provided under Code Section 132 (e.g., qualified transportation plans). Does anyone have any insight or thoughts on WHY Congress decided to not permit transportation benefits to be offered as part of a cafeteria plan?

Plan changes providers. Old provider hits outgoing plan with a market value adjustment under its contract with the employer. Different employees are hit differently, depending on their account balance in the investment with respect to which the adjustment is made. The Employer, feeling guilty, decides it wants to replace the $40K market value adjustment, allocating the appropriate amount to each participant suffering a loss. How do you do this?

I think the employer $$ will be a non-elective contribution, requiring a Plan amendment in order to permit the allocation in a manner that would replace the individual account losses (rather than being allocated according to the comp-to-comp PS allocation formula)--watching out, of course, for discrimination issues in the allocation. Or, is this just an investment return (rather than an e'er contribution), allocated directly to those suffering a loss and thus not needing a plan amendment? (Bonusing is a possibility, but the employer would rather keep the $$ in the plan.) Any thoughts?

First assumption is that EOY valuations will be OK (in some geological time period).

The effective interest rate is the singular rate which produces the same funding target as the segmented rates. Therefore, it can not be determined without performing the valuation. This interest rate is used to adjust the contributions to the valuation date. This means that EOY valuations must determine the effective interest rate prior to completing the valuation because the adjusted prepaid contributions have to be subtracted from the assets.

Is that correct??

Calendar year plan has following characteristics for 2008.

2007 contribution without regard to FSA CB was $0 so no quarterly contribution due.

FT = 2,000,000

TNC=100,000

Assets=2,400,000

FS COB=900,000

Client wishes to avoid making any contribution for 2008 and in the great hereafter.

If client elects to burn 600,000, then for 2008, we have FT - (Assets - FSCOB) + TNC = 0. Further, there will be no quarterly contribution requirement in 2009 and most likely, no contribution after burning or using credit balances in 2009.

Alternatively, client could choose not to burn credit balance. This will effectively set up 7 year amortization of CB which client can then offset using the FSCOB. There would, however, be a quarterly contribution requirement for 2009 and it might be $0 or FSCOB could be used to offset.

Appart from the apparent administrative advantages of the first approach, is any advantage to the client perceived selecting one approach over the other?

I have a client that would like to establish a multiple employer plan as follows. My client leases staff to professional corporations and pays the leased staff via a W-2; they enter into a leasing agreement with the recipient corporation. As a marketing tool (in addition to providing staff and payroll), my client would like to offer a retirement plan service in which there is a "base" safe harbor plan document that may be adopted by the employer; however, the employer also has the flexibility to change the contribution from a safe harbor to something else suited to them. my job is to determine whether this is allowed under the IRC and ERISA. I have been unable to find anything directly on point. Any suggestions or insight would be greatly appreciated!!!!

is anyone aware of a good resource to determine the issues associated with the establishment of a 401k plan for ex-pats. A client would like to provide a retirement arrangement for us citizens working abroad?

Thanks

Can an EACA have a traditional Safe Harbor match rather than a QACA?

This was in the May 2008 IRS Q&A from the ABA:

12. § 401©(2) – Self Employed Individuals Earned Income Treas. Reg. § 1.415©-2(b) defines compensation for self-employed persons as earned income under § 401©(2) of the Code, plus amounts deferred at the election of the employee under § 401(k) of the Code. Earned income under § 401©(2) of the Code includes a reduction for 50% of SECA liability. When is SECA liability determined?

Proposed Response: The SECA liability should be determined after the 401(k) contributions have been deducted from the person’s income. The 401(k) contributions are then added back to arrive at 415 compensation.

IRS Response: The Service representative agrees with the proposed response.

Is anyone calculating the 50% deduction for SE Taxes on comp NET of 401(k)?

Anyone have a report that breaks down balances in an investment model by participant?

Could someone provide a checklist to change the FSA plan year. We'd like to change it from January to July.

Can a religious employer elect ERISA coverage for one plan without subjecting other plans to ERISA? For example, an employer wants to make a 410(d) election (in light of the Catholic Charities case) for its welfare plans, but wants its pension plans to remain church plans. Would the 410(d) election for the welfare plans cause a problem for the pension plans? I think not, but want to make sure.

I have a 401(k) plan and 3 of the participants have life insurance polices in the plan. Do I report the premiums in Part II, 5 a & b or in Part III, 9a? I always reported them in Part II, but we recently took over some new plans and the prior RK reported them in Part III and in part II, 5 a. Would just like to verify how to report them. Thanks

We want to terminate a 403(b) plan that has an existing plan document. The final regs allow for a termination and distribution prior to 1/1/09 as long as all contracts have been updated in conformance with the final regulations. The contract provider has updated the contracts. My question is whether the plan document must be brought into compliance with the final regulations or may we simply adopt a termination amendment.

In a Section 125 plan the full amount of a participants insurance premium, both employee and employer paid, must be included as part of the total benefit when performing discrimination testing. If an employee decides to opt-out of the plan, as is their right (though not very smart), their deduction for insurance premium must then be done on an after-tax basis and would not be included in the discrimination testing. What about the employer paid portion? Can it continue to be paid by the employer and non-taxable to the employee? Would it still need to be included in any testing of the 125 plan?

The reason I'm asking is I have an employer with several Highly-Compensated and Key employees. The insurance premiums assoiated withe these employees is causing the 25% Concentration and the Contribution and Benefits tests to fail. If they could opt-out of the premium part of the plan and pay the taxes on their portion of the premium (which is relatively small) the tests would pass with flying color.

Creating a seperate plan for just the pop would still fail the safe-harbor test so I'm not sure that would help.

Would a company that has mostly seasonal workers ever be required to have their 401k plan audited if their peak employment is in the summer. I know in order to have a audit you must have over 100 eligible participants at the beginning of the plan year. This plan has a calander plan year so the number of participants they have in January is usually well below 100 but during the summer they employ over 300 people and eligibility for the plan is 18 years of age and 1 hour of service so almost everyone is eligible.

I was hoping someone could walk me through the following situation.

Plan sponsor wants to add an integrated profit sharing component to his 401(k) safe harbor plan (we looked at many other options such as New Comp., but didn't work with ages, etc.) The integration level will be the TWB which would make it 5.7%.

So, if you have 4 owners, 2 in their 20's, how would the scenario work to get them to 46000

Owner 1 (age 51) 230,000 Comp. - Elective Deferrals - 15,500 Catch-up - 5,000 3% SH - 6,900 Excess (5.7%?) Base (Remaining to get to 46,000?)

Owner 2 (age 56) 230 Comp. Elective Deferrals - 15,500 Catch-up 5,000 Excess (is it 5.7% of Comp?), Base?

Owner 3 (age 24) 230K Comp. Elective Deferrals - 15,500, Safe Harbor 6,900 Excess (?), Base (??

Owner 4 (age 28) 230K Comp. Elective Deferrals - 15,500 Safe Harbor 6,900, Excess (?), Base (?)

Sample NHCE (60) 48,000 Comp. Elective Deferrals - 15,500 Safe Harbor - 1,400 Excess (?) Base (?)

There are many other NHCE's, but want to see how that is factored in as well.

Thank you!!!

In this plan employees have the option of having a separate investment account within the plan or being part of a pooled account. The owner wants to pay the management fees on his account rather than having them deducted from the investment. This allows him to effectively leave more money in the plan. Is this allowed. Would it be discriminatory as long as all participants had the option? Where could I look this up?

I appreciate any help.

Thanks

Jimmy

Line 14 asks if the business has any employees other than the owner, spouse, partner, partner's spouse. This sole proprietor does employ one individual that is not a spouse or partner or partner's spouse, so the answer to 14a is yes.

Where it asks for the total number of employees, including the business owner, do you include him in the count since he is a sole-prop and not an "employee"?

Thanks.

I am drafting a QDRO based on a separation agreement that describes the amount to be distributed to the alternate payee (Wife) as follows: Wife's IRA balance as of Date X is added to Husband's plan balance as of date X. The sum is divided by 2. Half of the combined balance is further decreased by various debts of Wife and finally by one-half of Wife's IRA balance as of date X. The description of how the amount is to be determined is actually pretty clear.

My question is: are plan administrators comfortable having to determine the QDRO amount by reference to a plan other than the plan they administer? Is this unusual? How have other handled this? I would rather get it taken care of before submitting the draft QDRO to the plan administrator.

Thanks.