Does anyone have an opinion (preferably informed, but I'll take what I can get) on whether the following situation would be likely to trigger an IRS or DOL audit:

For a welfare benefit plan, on the 2006 Form 5500, an Administrative Services Only contract with an insurance company was reported on a Schedule A, even though it shouldn't have been. On the 2007 Form 5500, Schedule A, the ASO contract is not reported.

Does the DOL or IRS compare a new annual report filing with previous years' filing to identify differences? My inclination is that the agencies will not care. Am I wrong?

I have a client that recently aquired a few companys. They have 9 "locations" that have seperate Tax ID, Seperate Group numbers for the carrier, an operate as a seperate cost center. Total employees covered are 144. None of the individual locations have over 100 employees.

Do we need to file a 5500 based on the common owership, or are each "location" veiwed seperately and thereby no need to file a 5500?

I have a 401(k) document that lacks QNEC provisions and yet they are in the position of having to make QNEC for leaving out a participant. Is this going to be an issue down the road?

Situation: Husband and wife (no other EEs in the plan) want to terminate their frozen Money Purchase Plan, and roll to an IRA (both are age 65+). Currently, they have collectibles (i.e. artwork) in the plan.

I thought independent trustees existed who could handle the collectibles, so the clients would not have to sell them, but could retain them in an IRA, however I'm not finding anything online.

Is there any retirement plan, besides a qualified plan, that would allow collectibles as an asset?

W2=100,000

MRC = 100%UCL = 50,000

150%UCL = 80,000

1. The deductible contribution is 150%UCL + 6%W2 = $86,000 (correct?)

2. Client made $105,000 as 150%UCL + 25%W2. Since DC plan contribution is over 6%, 404(a)(7) applies.

What contribution amount is subject to excise tax? Is it $19,000 (25%W2-6%W2) or is it $49,000 ($19,000+ $30,000 (150%UCL-100%UCL))?

Does the non-deductible contribution have to be removed from the plan's asset (DC only, DB only, both)?

If $49,000 is subject to excise tax, will paying excise tax on $19,000 and removal of $19,000 from the DC plan's asset put you in #1 above and make the full 150%UCL deductible?

Has the DOL taken a position on whether telemedicine arrangements are subject to ERISA? Assume the benefit is offered outside of the er's health plan. My thoughts are that the arrangements likely are subject to ERISA but I would like to know the DOL's position since that is the one that matters.

We have a difference of opinion in our office on the following:

Participants have been reported on a Form SSA in the past as an Add because they terminated and did not take a distribution. They are still in that status when the plan is merged into another plan (and the other plan is the survivor).

In the final 5500s, do you report them as a D on the merging plan and an A for the successor plan so that you are sure that the Social Security Administration tracks that right and (assuming they do not take a distribution).

OR do you do nothing special for them in the merger relying on the Social Security Administration to pick up the merger/transfer data from the final Schedule H?

Any thoughts?

What are the SIMPLE EE salary deferral deposit requirements? Are ER's required to remit within 7 days due to the new ruling that came out in Feb 08 for employers with less than 100 employees? Or do they still have 30 days from end of the month?

Self insured health insurance plan provides employee's spouse not eligible for participation in employer # 1's group plan if spouse eligible for medical coverage through spouse's group plan. Employer' # 1's plan required that as a condition to participation, employee deliver a signed form which allowed employer # 1 to contact spouse's employer to confirm whether spouse eligible for group medical coverage. Form completed by employee and / or employee's spouse and returned to employer # 1. Later, from check with spouse's employer, it is learned that the form we were provied was false when provided.

Anyone have thoughts re: 1) ability of employer 1's plan to bring action to recover from employee claims paid which would have not been paid had a correct form been provided, and 2) ability to take disciplinary action against the employee who delivered to employer 1 the false statement pertaining to spouse's medical coverage? Thanks for any thoughts on this.

I am occasionally dragged to a casino by other family members (and I do mean dragged; I don't like gambling much) and end up with an objective of looking for ways to lose my money slowly rather than quickly. I don't play cards and can't stand slot machines, but I have stumbled across video Keno machines, which I spend most of my time on. What I like about keno more than slots is that with slots, you are at the mercy of the games random number generator (RNG) to pick the winning/jackpot number/sequence. That is, you can play and play and play and depending on how the machine is programmed to pay out, your odds of hitting the jackpot are entirely dependent on the RNG arriving at the jackpot number. With keno however, there are probably thousands, maybe hundreds of thousands, of "jackpot" numbers/sequences picked on each spin. You just have to have 1 of those sequences in order to win the jackpot. Of course, the more you bet, the bigger the jackpot. And the more numbers that you pick each game (usually you pick anywhere from 3 to 10 numbers), the greater the jackpot.

If you're unfamiliar with keno, the game is played as follows: Typically, there are 80 numbers to pick from (1 - 80). Per game, you can pick anywhere from 3 to 10 numbers. Lets say you decide to play 6 numbers. After picking your numbers, the machine will always draw 20 numbers. If 3 of your numbers "hit", you hit for maybe 3-1 odds. 4 numbers maybe 5-1, 5 numbers around 200-1, and all 6 numbers around 1600-1.

As I said, it just "feels" that your odds are better at Keno than slots because there are jackpot numbers drawn each spin, you just have to have the right ones. With that said however, I'm at a loss as to how to calculate what those odds are. Given my keno playing experience and the fact that I have only hit once in my life (since I was only playing quarters, my "jackpot" was only $400), I suspect that the odds of hitting are pretty long. But, could one of the math experts out there determine what those odds actually are? The factors are: 80 numbers are available, I pick 6 numbers, the machine picks 20. What are the odds of my 6 numbers being among the 20 picked?

1.415(a)-1(d) refers to a 'default' rule on how to handle someone exceeding the 415 limit. just what the heck is the default (besides "whatever Mike Preston wants it to be")

1.415(a)-1(d)(3) Incorporation by reference--(i) In general. A plan is permitted to incorporate by reference the limitations of section 415, and will not fail to meet the definitely determinable benefit requirement or the definite predetermined allocation formula requirement, whichever applies to the plan, merely because it incorporates the limits of section 415 by reference.

(ii) Section 415 can be applied in more than one manner, but a statutory or regulatory default rule exists. Where a provision of section 415 is permitted to be applied in more than one manner but is to be applied in a specified manner in the absence of contrary plan provisions (in other words, a default rule exists), if a plan incorporates the limitations of section 415 by reference with respect to that provision of section 415 and does not specifically vary from the default rule, then the default rule applies. With respect to a provision of section 415 for which a default rule exists, if the limitations of section 415 are to be applied in a manner other than using the default rule, the plan must specify the manner in which the limitation is to be applied in addition to generally incorporating the limitations of section 415 by reference. For example, if a plan generally incorporates the limitations of section 415 by reference and does not restrict the accrued benefits to which the amendments to section 415(b)(2)(E) made by the Uruguay Round Agreements Act of 1994, Public Law 103-465 (108 Stat. 4809) (GATT), apply (as permitted by Q&A-12 of Rev. Rul. 98-1 (1998-1 CB 249) (see §601.601(d)(2) of this chapter), which reflects the amendments to section 767 of GATT made by section 1449 of the Small Business Job Protection Act of 1996, Public Law 104-188 (110 Stat. 1755)), then the amendments to section 415(b)(2)(E) made by GATT apply to all benefits under the plan.

(iii) Section 415 can be applied in more than one manner with no statutory or regulatory default. If a limitation of section 415 may be applied in more than one manner, and if there is no governing principle pursuant to which that limitation is applied in the absence of contrary plan provisions, then the plan must specify the manner in which the limitation is to be applied in addition to generally incorporating the limitations of section 415 by reference. For example, if an employer maintains two profit-sharing plans, and if any participant participates in more than one such plan, then both plans must specify (in a consistent manner) under which of the employer’s two profit-sharing plans annual additions must be reduced if aggregate annual additions would otherwise exceed the limitations of section 415©).

I'll try this question one more time, a bit more simplified, since there were NO responses to my first post. I'll give up the ghost if I get no responses this time. (I see this as an "optional form of benefit" anti-cutback issue, not an "accrued benefit" anti-cutback issues.)

A DC plan permits a beneficiary to select payment of a death benefit over the beneficiary's life expectancy. (A participant can only select a lump sum at termination of employment.) Plan is restated. Death benefit payout over life expectancy is eliminated, and replaced with a mandatory 5-year payout rule. Ignoring the non-spouse rollover rules that may permit a beneficiary to take a life expectancy payout from an IRA, is either of the following beneficiaries protected against the elimination of the life expectancy payout in the DC plan:

• Beneficiary of a still-living participant (at least as to the benefit accrued by the participant prior to the elimination of the life-expectancy death benefit payout)?
  
• Beneficiary already receiving a life-expectancy payout?
  

(It is interesting to note that the regs prevent the elimination of a protected benefit based simply on the fact that it is payable to a beneficiary. (Reg. Section 1.411(d)-4, Q&A-2(a)(4).) Also, the regs consider death benefits paid AFTER the annuity starting date to be a protectable optional form of benefit in some circumstances, but say nothing about death benefits payable BEFORE the annuity starting date. (Reg. Section 1.411(d)-3(g)(6)(ii)(B).))

The treatment of credit balances under PPA has multiple issues.

436 would require a permanent release to comply with AFTAP. But it only gets invoked if the actuary has done the AFTAP certification.

430 depends on the election to use or keep the COB. How much is a decision for the employer.

Quarterly payments require burning of the COB. But if so, how does that election affect the 430 minimums?

I am looking for a more recent article than the excellent Buck article reported on BenefitsLink last November.

Our payroll system does not automatically change a participant's deferral rate to zero upon separation from service - should it? What is happening is upon rehire, the deferrals start automatically even without the participant processing a re-enrollment on the recordkeeping system (different system than the payroll system).

Plan doc is vague on this subject and describes this issue in terms of break-in-service rules but that's not the issue here.

Thanks!

I was wondering how people are funding for lump sums at the 415 limit under PPA.

There are 3 things to consider:

1) Plan AE

2) 5.5% and 94 GAR (maybe changes to '08 Applicable Mortality but not yet)

3) 105% of benefit using 417(e) rates

1) and 2) seem straightforward: compute the LS at the ASD and discount at the single segment rate to attained age (AA). But how to compute 3)?

I can see three conceivable ways: a) compute LS at ASD using the deferred segment rates and discount from ASD to AA using the single segment rate * 105%; or b) compute the LS at ASD as if the person were the same age as on the ASD and discount from ASD to AA using the single segment rate * 105%; or c) compute LS at AA * 105%.

Not to influence your answer, but I would pick a). Then take the lesser of 1, 2) or 3).

Hey there,

I'm 16 years old, currently in highschool with a part-time job. I make aproximately $3744 a year (before taxes) from this job and want to make the best use of it for my future (specifically college). Recently, one of my coaches mentioned a roth IRA account as a tool for me to invest that money into. After doing some background research, I was left with a few questions:

-As an incoming senior to highschool, I will be filing out the FAFSA for college. Would the money i invest into the rothIRA prevent me from getting the maximum amount of financial aid availible to me?

- Do I have to report what's in my roth IRA to FAFSA?

- Is getting a roth IRA a good idea for my situation?

- If not, what's a better alternative?

- is it a good idea to invest into the roth IRA for the purpose of being able to take that money out for college later?

I'll post more questions when they pop up, any and all comments are appreciated. Thanks!!

Some more background info:

- My parents make ~45k combined annually

- First generation immigrant

- first to go to college in immediate family

- family of 4

- little to no investment by my parents into my college (they want me to go to city college--yeah, right)

- Not very likely to get a LOT of scholarships (or significant ones)

As you can see, I need to make sure I can get as many loans and aid from FAFSA as possible..

Thanks again.

I became a new partner July 1, 2008. The partnership has a fiscal year of June 30th. The current partners deposit their max Simple IRA deferrals by July 15. The partners treat these as calendar year 2008 simple IRA deferrals. However IRS PUB 560 page 11 states "When To Deduct Contributions - You can deduct SIMPLE IRA contributions in the tax year within which the calendar year for which contributions were made ends. You can deduct contributions for a particular tax year if they are made for that tax year and are made by the due date (including extensions) of your federal income tax return for that year.

Example 1. Your tax year is the fiscal year ending June 30. Contributions under a SIMPLE IRA plan for calendar year 2007 (including contributions made in 2007 before July 1, 2007) are deductible in the tax year ending June 30, 2008."

One of my questions is should the July 15 contributions for the 6/30/08 fiscal year be treated as made for the Simple IRA 12/31/07 calendar year or 12/31/08? The reason I ask is because I want to make Simple IRA deferrals out of my guaranteed payments from 7/1/08 through 12/31/08 and deduct them on my 2009 Form 1040 againt the 6/30/09 K-1 I receive. However the current partners tell me I can't do this because I would need to deduct that period on my 2008 Form 1040. I wont be able to deduct on the 2008 1040, since I have not been allocated any earned income yet from the P-ship. Basically I want to make my deferrals monthly instead of doing a lump sum each year. Based on the IRS Pub shouldn't I be able to deduct my deferrals for the period 7/1/08 through 12/31/08 against my 6/30/09 K-1?

Any help would be appreciated.

Thanks

We wanted to see how other TPAs are handling or would handle the following situation. This is kind of long, so please bear with me. . .

401(k) daily val plan. Plan sponsor’s payroll provider calculates the match on a per payroll basis. Plan sponsor uploads payroll file to our website, we download and process the deferral and match contributions. If the matching contributions are included in the payroll file, our recordkeeping system will buy the match that is on that payroll file – it does not recalculate the match to determine if the match was calculated correctly. So, we get to year-end, and in the process of doing the annual administration and testing discover that the payroll system incorrectly calculated the matching contributions. For those that the payroll system shorted the match, that’s no problem – the plan sponsor will simply deposit the additional contribution due. However, for those that the payroll system overmatched . . . We propose doing negative contributions in the appropriate amount, placing those funds in the suspense account to be used to reduce future matching contributions or to pay plan expenses. Additional items to consider:

- The plan allows only salary deferral and match contributions

- The plan does not provide for forfeiture reallocation

- The match is not discretionary – the formula is for example 100% on the first 5% deferred calculated on a per payroll basis; deferrals exceeding 5% of comp are not matched

- The match is actually allocated to participants’ accounts per payroll

- There are regular “corrections” to payroll files. For example, at the end of the year when the census data is sent to the plan sponsor for verification, it will come back with changes to individual’s compensation (because manual paychecks were issued that did not get included on the payroll files, the payroll file reflected comp that actually wasn’t paid, etc.). This can create a true-up situation as well.

- For some reason, many payroll systems are either unable or unwilling to put the appropriate caps in their system (i.e., the 415 compensation limit, the maximum deferral percentage that will be matched, etc.)

Couple of examples:

1. HCE whose total compensation was $300,000 ($12,500 per payroll) and who deferred $15,500 ($645.83 per payroll) for the year. His deferral % is 5.17%. The plan’s match formula is 100% on the first 5% deferred calculated per payroll. The payroll system calculates a match of $625 on every payroll for a total of $15,000 for the year, neglecting to stop the match when he reaches $11,500 ($230,000 comp limit x 5% = $11,500 maximum match). So at year end this participant has received $3,500 too much in match.

2.NHCE whose total compensation was $50,000 ($2,083.33 per payroll) and who deferred 8% ($166.67 per payroll) or $4,000 for the year. The plan’s match formula is 100% on the first 5% deferred calculated per payroll. The payroll system calculates a match of $4,000 (neglected to limit the match to the first 5% deferred) when the match should have been $2500. So at year end this participant has received $1500 too much in match.

Our position would be that until the administration and testing is done at year end, these allocations are not “final” and that true-ups of this nature are done regularly in the industry (think of daily val custodians who are not TPAs – they process the contributions as provided by the plan sponsor; at the end of the year the TPA determines whether any true-ups/corrections (negative or positive) are needed. The custodian does not receive compensation information, and the TPA may not receive any census data until year end, so neither can determine until year end whether any contributions are in violation of the plan’s formula or the regs). Operationally it would not be feasible to check the calculations on every payroll before that payroll is processed, especially when it is an automated system.

An opinion has been expressed that our proposed method of dealing with this type of situation would ultimately result in an operational defect possibly leading to plan disqualification because the plan is not following (1) the plan document (limiting the match to 5% of compensation) and (2) the regulations (415 compensation limit), and that this would need to be corrected via EPCRS. Additionally, it has been said that there is no mechanism in the regs to allow us to remove these types of excess contributions from a participant’s account (our argument is that failing to remove the excess would result in a failure to follow the plan’s matching formula). Finally, the regulations require that all plan assets be allocated to participants; however, if the plan does not allow forfeiture reallocation and does not have a profit sharing provision and the match is not discretionary, there is no mechanism in the plan to allocate to participants.

We wanted to get a feel for how others in the industry handle this type of situation. Thanks for any feedback.

We have a situation in which an employee embezzled funds from the employer, and now, as part of the plea agreement, wants to pay back the employer with funds from the employee’s profits sharing plan. I know ERISA generally forbids assignment, but there is an exception in the reg (26 C.F.R. § 1.401(a)13). Has anyone ever dealt with this situation before??—is following the procedure in subsection (e) of the regulation all that needs to be done? Does anyone know of a case discussing this situation? Any help would be appreciated—thanks.

Under the "currently includible" definition of compensation (aka, "Safe Harbor 415 Compensation"), compensation includes all wages, salaries, fees and other amounts received by the employee for personal services rendered in the course of employment with the employer, but only to the extent includible in gross income. See Treas. Reg. §1.415©-2(b)(1).

Do you think "signing bonuses" would be included in this definition of compensation? In other words, are "signing bonuses" for personal services rendered?