A company has a 401k profit sharing plan for several years.

The company is now considering a DB offset plan.

Can the offset be based on the total value of the account balance (including assets accumulated prior to DB plan implementation) or must it be based on the account balance that accumulates after the inception of DB plan?

Obviously it is not intended to be a safe harbor offset plan.

Thanks

I'm mostly a DB guy, so when it comes to 401k's, I always like to make sure I've got it right....

Background:

The plan has 1 HCE and uses prior year testing. His comp exceeds $230,000. I know that the maximum deferral for 2008 will be 6.56%, or $15,088. He is 64, so he is eligible for a catch up contribution. He should be able to defer another $5,000 which would bring his total to $20,588.

If I understand it correctly, anything over the $15,500 surpasses the 402(g) limit, and is considered a catch-up contribution. Then, I fail my ADP test because he deferred $15,500 instead of $15,088. At that point, I can recharactarize the difference of $412 as a catch-up contribution, and everything is ok.

Since I'm doing prior year testing, do I already know the limit, and therefore don't have to worry about failing and recharactarizing?

I know it works out the same way in the end, I'm just trying to understand the concept.

Thanks for your comments.

Got a participant with a loan who cannot afford the payments anymore (got very sick, but is still working). She has a lot of medical expenses not covered by insurance AND she has a son who needs tuition money for school in the fall, so she really wants to get rid of her loan payments.

Question: Can she request a hardship distribution for the above situations in the form of a loan offset? It seems strange given that the proceeds will be used to repay a loan, and not to fund the intended expenses, but I have always read that hardships can be in the form of loan offsets.

Note that the participant could take a hardship in cash (because she is indeed eligible for the distribution) and then use the proceeds to separately repay the loan. I am aware of no requirement that a hardship distribution actually be used for its intended purpose. Once the hardship exists, the participant is eligible for the distribution. They could blow the money at the casino for all the Plan Sponsor knows.

PS, the plan is in a 90 day black out right now so my idea in the previous paragraph would not work.

Stock appreciation rights plan would like to pay out the SAR's value in fixed installments over five years after the date of exercise. Employer desires installment payments over time for cash flow management purposes. Does this constitute a "feature for deferral of income other than the deferral of recognition of income until the exercise of the stock appreciation right" that blows the SAR's 409A exemption? The plan's structure meets all the other criteria for exclusion from 409A coverage. Are most employers simply paying out the full SAR value in the year of exercise? Thanks.

ABC Company is a non-ERISA Salary Reduction Only plan. The new plan sponsor is considering changing the plan to be an ERISA plan. What steps are necessary to effect this change from the plan sponsor and/or legal counsel.

I'm trying to determine how to send out a QE letter for a divorced couple. The employee has divorced the spouse and there are two children. The spouse and children are losing coverage so I need to send out letters for each. If everyone elects COBRA coverage, are each charged as employee only, or would they be able to be charged at the employee + children rate?

How would the premiums be charged if only one or both children elect?

And finally, is this something that would apply to all carriers or would it be carrier-specific?

Many thanks!

I have a client with a cafeteria plan that offers a premium account, medical reimbursement account, and dependent care reimbursement account. A participant has elected to not participate in the health insurance offered by the employer and to instead be covered by her spouse's employer's health insurance plan. Is it permissable to reimburse the amount paid as a premium for her through the cafeteria plan? Is there anywhere in the code that I can reference to explain this to the client?

is it an option?

I know you can roll a roth 401(k) or 401(k) after paying taxes into a roth ira, but is the reverse true as well?

what about executive physicals and high deductible health plans. Does an executive physical plan preclude the executive's participation in a high deductible health plan? Is the only option to provide the executive with taxable compensation to cover the cost of the physical?

There is no market for a bond in the trust and a sucessor trustee will not accept. The plan sponsor has instructed the prior trustee to "write off" the asset from the trust. This the prior trustee will not do, stating that it is impermissible.

Can anyone provide a specific reg section in support of Not writing the asset off? Or, is it permissible to write off the value of an asset in the trust, in which case, is there a specific reg section supporting that type of action?

Thank you

Guidance needed here!

Client has a participant who has died without a valid Designation of Beneficiary. The Participant was not married. the plan document calls for a beneficiary succession that includes his parent(s). The participant's mother resides and is a citizen of Mexico. The Plan Sponsor wants to pay the vested account balance (exceeds $5,000) to the participant's mother but is unsure as how to proceed with the assets going to a non-US resident. Is it as simple as getting the mother to make the election for the distribution and sending here a check less the 20%?

Situation: ER has a 401k plan. ER establishes a nonqualified deferred compensation plan calling for payments of $X each year for the year the particular EE retires and next 3 years. The $X payment in year of retirement will be reported on a Form W-2 along with the EE's earnings for that part of the year before retiring. (The 3 payments in future years will be reported on Forms 1099.)

Question: If EE before retiring this year elects and before the $X payment for this year becomes available, may that $X payment be electively deferred into the 401k plan?

Sorry if this is the wrong forum, but can someone tell me what is required if a money purchase plan is overfunded? Can the money stay in the contract to be allocated for next years contribution.

Are 401(k) deferrals and 403(b) contributions combined for 402(g) purposes? I have an employee who participated in a 403(b) plan with another employer before coming on board with my company in July 2008. Employee wants to participate in our 401(k) but I don't know if I need to limit deferrals into 401(k) for 2008 for 402(g) purposes, based upon what employee contributed to 403(b) already for 2008.

How are catch-up contributions affected?

Thanks!

Background:

Plan document holds that Compensation means Section 3401(a) Wages and all other payments employer must furnish statement under IRC 6041(d), 6051(a)(3) and 6052. In addition, Compensation is adjusted to include any deferrals under 125, 132(f)(4), 402(e)(3), 402(h)(1)(B), 403(b), 457(b) and 414(h)(2). Lastly, the Plan does allow testing (including ADP and ACP) to use 414(s) Compensation.

Potential Problem:

Compensation furnished by client is Medicare Wages (Box 5), increase by contributions for health insurance and disability (both presumed to be under 125), and reduce by the value of taxable (>50K coverage) group term life premium. Is this reduction a problem?

Circumstances:

Plan under audit and IRS Agent wants to know why Compensation used for Testing was not "Box 5 Value". I believe that the compensation used is fine under IRC 414(s), but is there a problem with other aspects of Plan (e.g. profit sharing allocation)?

Thanks for your input!

Sole practitioner is joining large medical group and bringing one employee. Group wants to amend plan to include service with the sole practitioner, making one doc plus one employee immediately eligible in the large group's plan.

Any problems?

Can a participant do a Rollover from an IRA into a Qualified Plan?

I took over a plan from an insurance company which had a prototype document. I had never dealt with this type of document before.

The original document was signed in 94, then in 02, they sent replacement pages for the gust restatement.... then the next amendment was in 05 and was the Automatic Rollover Amendment.

I asked the insurance company where the Egtrra amendment was and was told that they "sent a letter" to all plan sponsors in '01 saying they would be restating the plans with egtrra and since my client terminated service in 07 (yes, 07) they can't won't be restating it for egtrra. Which is fine, since the plan is terminating... but where is the egtrra amendment. Was it required?

A defined benefit plan permits a participant to designate a nonspouse beneficiary. The form of benefit is a life annuity. If the participant dies at age 45, the plan provides that the nonspouse beneficiary can wait until early retirement age (55) or normal retirement age(65) to commence receiving distribution. But the IRS model 401(a)(9) language appears to state that the benefit to a nonspouse beneficiary must commence by the end of the fifth year after the date of death. But I read reg. 1.401(a)(9)-6 q&a 10 to say that the five year rule can be ignored. Which is correct?

If a population of employees were acquired through an asset purchase, and the employees' service with the prior company was grandfathered for eligibility and vesting.....would the original date of hire with the previous employer be used for determining whether the employee falls into the excludable or non-excludable group for non-discrimination testing? My reasoning tells me that due to being an asset deal, the employer has changed, so the new employees would be considered "new employees" even though service is being grandfathered. Thoughts?