Is the due date of wage rate contributions to a Prevailing Wage Plan on or before the extended due date of the company's tax return (e.g., September 15th for a calendar year corp) or is there a rule that says the deposits must be made on an ongoing basis within a few days of each payroll (like with 401(k) deferrals)?

Thanks!

One doctor has a corp and a 5 year old 401(k) Plan with the usual 21 and 1 year and dual entry dates.

New doctor will start a corp and the 2 corps will form a partnership. They would like the new EGTRRA document to waive eligibility requirements for the doctor and his wife by waiving requirements for anyone employed on or before October 1, 2008.

How exactly would this work? What would we do with the nurse hired 2-01-08. Would we just let her in on October 1st or is there something else we would have to do for her? How about the receptionist hired November of 2007?

I have read that this is a Benefit, right or feature that must be tested for coverage.

On 12-31-08 testing:

Who is benefiting?

Who is not benefiting?

Who is excludable?

(Behind the scenes I am trying to figure out why the prior HR person didn't auto-distribute to a terminated person even though she wrote him a letter stating that she would do so if she didn't get the forms returned by October 2001. His balance at 3/31/01 was approximately $2700 and there were no future contributions. She took this language directly from a letter from the plan recordkeeper as they were terminating the plan. His money was left in the plan until he requested a distribution in 2006 -- by 06, his balance was almost $4,000).

I remember that the amount that could be auto-distributed out to a terminated employee changed, but I can't remember when or by how much. It added on a chance to rollover to an IRA between two amounts also. Is there anyone out here that remembers where that amount stood in 2001? And when the change occurred?

I know sometimes it can be dependent on the plan, but I am mostly looking for what the IRS/DOL would have allowed in 2001 to see if that is the possible answer to why the scenario above occurred.

Unfortunately I was out of the 401k side of the business from 1999 to 2005.

This is a TPA question for the 50-100 employee groups. Does anyone know of any good TPA's that go down to 50 lives & operates in the Philadelphia area?

Thanks

edited for clarity

If a 401k safe harbor plan calls for 3%-of-pay, non-elective employer contribution and employer also makes non-matching, profit sharing contributions, would those that receive the 401k safe harbor non-elective 3% but no part of the profit sharing contributions be considered as 'benefiting' for purposes of minimum coverage of non-matching employer contributions?

Discussions in other posts have indicated broad interest exists for funding new SEP plans immediately for all existing employees, while using the maximum service requirement for future employees. Some prototypes allow this (ie, Schwab), but 5305-SEP does not specifically do so.

We have seen discussions of "rolling eligibility", "dual eligibility", potential amendment techniques, possible determination of discrimination, etc. Some of the posts appear to exhibit at least minor disagreement, illustrating the confusion that exists. A comprehensive example might help resolve some of the uncertainty while also providing a means to illustrate where problems can or actually do occur.

Does the following scenario create any issues, whatever? It includes some wrinkles to throw in additional possibilities for adverse consequences.

Company desires to launch an SEP. The owners want to fund it in the first year for current owners and employees, but use a 3 year wait for future employees. All current employees and owners have at least one year of service in prior years. Form 5305-SEP is used. No PLR is sought.

1. Year 1:

a. Company adopts plan early in year with a 3 year service election.

b. Company realizes later, before any contributions occur, the plan cannot be funded for anyone for three years.

c. Plan is amended to provide a 1 yr service requirement.

d. Plan is funded. There were no new hires this year. Every employee is eligible and receives a contrib.

2. Year 2:

a. Plan is amended to require a 3 year service period.

b. The plan is not funded this year, to avoid potential discrimination if a new employee were to be hired.

c. A new employee -IS- hired this year, sometime after the amendment requiring 3 years of service is made.

3. Year 3:

a. Plan is funded using same percentage for all eligible employees (those having 3 prior years of service).

All employees who received a contrib in year 1 get a contrib. The employee hired in yr 2 does not.

This scenario seems to embody all of the cautions expressed in other posts. No discrimination appears to have occurred because all HCEs met the originally established 3 year service requirement during every year when contribs actually occurred, except during year 1 which itself seems perfectly valid. In year 3, all participants including owners had at least three years of prior service (year 1, year 2, and the year before the plan was established).

Does this scenario avoid all possible adverse consequences? If not, where does a problem occur and is it potential or real?

Note that this example does, however, omit all contributions in one year. Thus, if completely valid, it does not fully satisfy every case that can occur.

We have a client who gives its employees and key executive retirees an employee discount. I can't seem to find a reason why the employee discounts to the specified employees would not be considered nonqualified deferred compensation, and therefore subject to 409A. Does anyone have any guidance on 409A's application to employee discounts? Thanks in advance!

Have a DB plan where spouse is 51% beneficiary and children from a prior marriage together are 49% beneficiaries.

The participant dies.

As part of a settlement agreement, the kids are assigning their 49% to the spouse.

ERISA's Anti-alienation clause usually deals with creditors. What about the assignment from one beneficiary to another?

It's fairly common for a self directed plan to have an "open brokerage" feature that allows participants to direct investments into literally hundreds of different investments. The truth is that it's impossible for plan fiduciaries to review all of these investments to make sure that they are appropriate, but I never hear talk about maintaining 404© compliance with an open brokerage feature. Does 404© protection extend to an open brokerage feature?

I have in my head that the a qualified plan's definition(s) of compensation must explicitly state the 2 1/2 month rule in 1.415©-2(e)(3) in order to be considered compensation within the meaning of 415©(3). But looking at the regs, this doesn't appear to be the case. The regs do not use the language "a plan must provide...." There are a number of things listed in 1.415©-2(e) that a plan "may provide," but nothing that a plan "must" or "shall" provide. It seems as though a plan document can pass muster without specifically mentioning any of the timing rules in the regs; and if a plan takes that approach, the regs set out a number of default rules and the mandatory 2 1/2 month rule that will apply without any explication in the plan document.

Has the IRS said somewhere that qualified plans must contain language reflecting the 1.415©-2(e)(3) rule about compensation paid after termination of employment, or did some sort of excessively-verbose-plan-document-loving elf plant the idea in my head? Has anyone received comment from the IRS on their cycle B filings requiring this language?

This question must have come up a zillion times before but I believe a recent reg has changed it

Can someone defer a % of their total compensation, even if over the Comp limit?

Happy Friday. I received a governmental excess plan question. Client was wondering if participants could delay distribution once they are retired. These plans are not subject to 409A but 415(m)(2)(B) says the participant shall include in income as if such qualified governmental excess benefit arrangement were treated as a plan for the deferral of compensation which is maintained by a corporation not exempt from tax under ...section 401.

Do you think the plan should follow 409A rules or do you think they could follow what most nonqualified plans did standardly before 409A which was to allow the delay of a distribution if elected prior to the retirement date?

Thanks

A plan's participant count will soon exceed 120. Sponsor wants to avoid Audit requirement.

The plan has immediate participation for purposes of deferrals only. (The plan is not Top Heavy.) Very few participants with less than 1 year of service have signed up to defer. So, the plan has around 80 participants with no account balance.

I know the plan can be amended to add a service requirement of up to 1 year, but Can the Employer amend the plan to remove previously hired "participants" who have not signed up to defer? I recall an IRS ruling in which they permitted an amendment removing participants as long as the amendment doesn't reduce accrued benfits. I can't find that ruling any more. Can anyone provide a citation one way or the other?

Thanks for any feedback.

If I'm reading the new 2008 PBGC premium rules and deadlines correctly you must value the unfunded vested benefits (for variable rate purposes) as of the Valuation Date that falls within the premium filing year (not prior plan year EOY Val).

While the deadline appears generous being 16 months after the start of the 2008 premium year (e.g., 4/30/09 for 2008 filings) how many 2008 EOY valuations for Sole Props/LLCs will have their self-employment earnings to you before 4/30/09 (some, but many go on extension).

So how does one file the 2008 PBGC premium based upon the 12/31/08 Valuation which uses the 2008 self-employment earnings that might not get done until say August 2009 (via tax return extension). Do we need to put these people on notice that they can't extend their tax returns since we need the Net Schedule C (or net k-1 income) before 4/30 to do PBGC filings ? Is there any relief that I am missing ?

Under 2007 rules we could use the "snapshot" Val date as of 1 day before premium year (or 1st day of premium year) giving you 8.5 months to get data and get it done.

Thoughts anyone ? Another provision forcing us into BOY vals ?

I have several questions regarding a SEP (not SARSEP). I want to insure we do everything correctly in the future and identify anything we may have done incorrectly in the past. I believe we are okay as to plan operation and intent. These questions concern the details of "proper documentation". A SEP is supposed to be a "simplified" plan; hopefully, someone can provide specific confirmation that small companies don't have to "go overboard" in these areas.

1. Must employees who terminated their employment in a prior plan year (no longer eligible for contributions) receive copies of various required notices in future years, such as amendments and contribution statements? I would assume the answer is NO, but I want to make certain. I would like to think that, beginning in the plan year after termination, we can treat them as if they never existed for EVERY future action, unless they become re-employed.

2. Must employees receive a statement of contributions in years when the contribution is zero? I have seen various language that seems to go both ways for this requirement, so we have been providing them. Seems needless to me.

3. After a plan is established, must a corporate resolution be adopted to make each contribution, or is that purely a management prerogative like most other expenditures?

4. Must corporate resolutions to adopt or amend a plan be in any special form, or use any particular wording (except for the resolution boilerplate itself)? Obviously, they must be specific enough to identify the exact documents being adopted or amended, but is any other "legalese" required to satisfy the IRS? For instance, I have seen references to "amend and restate the plan". Are these or any other specific words required or is any wording that adequately conveys the intent ok?

5. I am very confused in one area. We are considering changing plan sponsors (example: moving the SEP accounts from trustee A to trustee B). Should we (a) terminate Plan A with a resolution, then make a resolution to begin Plan B as a new plan; (b) just adopt Plan B, making no reference to Plan A and letting it "hang"? In a sense, this might be no different than adopting an amendment; the plan IS changing either way. Any very specific guidance would be enormously helpful. (See related wording question in #4 above.)

If we change to trustee B, he will let us use 5305-SEP. I prefer to do it that way instead of using his prototype as we did with trustee A. What confuses me about all this is that I don't really understand when to use "adoption", "amendment", "restatement", and what events create the need to terminate a prior "plan" and start a new one. To me, it is one plan all along, just different "suppliers". But, all the documentary possibilities are so complex, I need guidance that I have not been able to find anywhere to do this correctly.

6. We are a very small S corp, but thinking about converting to C corp. Would any of the items above be done differently for either of these corporate forms?

7. Are questions like this answered "very explicitly" in the SIMPLE, SEP, SARSEP Answer Book? If so, I will purchase it today.

Thanks for a great site! The Q's and A's here have already been enormously helpful to me.

I am proposing adding a loan feature to our plan, and have received a couple of questions about setup that I'm not 100% sure (very creative boss):

1. Can a portion of the loan processing fee charged by the recordkeeper be given back to the plan sponsor for plan use, such as education programs? My first instinct is NO - and not a good employee relations issue either when they find out a portion of the fee went back to their employer

2. Can we set a maximum allowable loan request, less than the $50k cap? I know there's a minimum allowable threshhold of $1,000 but not sure about a maximum.

Thank you and Happy Friday!

I have a question - I have an employer whose plan fails 401(k) testing and is questioning everything about the test - including the definition of an HCE. We provided a definition of HCE for which he came back with the following information:

[color="#8B0000"]The Pension Protection Act of 2006 has changed the definition of a highly compensated employee. There are now four considerations:

1) owning more than 5% of the stock (old)

2) has compensation in excess of IRC %414(g) limitation (old)

3) is among the highest paid 35% of all employees following the rules of IRC %105(h) (new)

4) is among the top-5 highest paid officers of the company (new)[/color]

I can't find where he is getting items #3 & #4 above - Is this correct? I could not find any information on this in the ERISA outline book - does anyone know what he is referring to?

We are adding a roth 401(k) to our plan. When a partcipant hits 415 limits they automatically go on Non-qualified plan. I am trying to figure out how to design the plan if a participant hits 415 before 402g and the participant wishes to contribute the remaning 402g contributions to the roth 401(k). If it were the case that he wanted to just make 401(k) contributions, those contributions and the corresponding match would go to the NQ plan, but in the case of the roth, would these after tax nq contributions ?

Thanks for your help ?

A PS sharing plan that was merged with a past MP plan several years ago.

Participant loans are allowed.

Is it not true that we can use the MP account balance to calculate maximum loan amount, but when it's time to make the loan distribution, we must only take it from the PS source.

Is this true?

We have a new client that would like to discontinue their SIMPLE IRA and begin a 401(k). We intend to make this transition on 1/1/09 to avoid maintaining 2 plans in one year. However, how do you actually go about terminating the SIMPLE IRA? Is it simply a board resolution or amendment? What are the notice requirements? Once the sponsor terminates his sponsorship of the SIMPLE, participants can then rollover their accounts to a 401(k) - so long as their first deposit was at least 2 years prior, correct? Thanks!