OK, I can see we'll have a few clients that we won't be able to certify caledar year AFTAPs by 10/1/08.

If we certify them AFTER 10/1/08 (say certified on 10/27/08) we are "deemed" below 60% for the rest of 2008 and restricted in 2008, but we use the late 2008 AFTAP for the presumptive % for 2009 (less 10% on 4/1/09) is that correct ?

A is a sole proprietor Sch C filer with no employees and has a 401(k) Individual plan putting away the maximum $45k say in the 401(k) account in 2007. He provides professional services.

A becomes a 50% partner in an LLC in 2008, the other 50% owned by B in an operating business. The professional services provided by A and the business - are otherwise unrelated and different.

Does this jeopardize A's intended maximum contribution to his 401(k) plan for 2008? Is this 401(k) plan required to be offered to all employees of the LLC business?

Is there a flowchart or a decision matrix out there somewhere that provides guidance regarding when an EBAR calculation can be used and when it cannot?

Thanks in advance for your feedback.

Does anybody know of any good recent articles that would give statistics on what average deferral rates are for given compensation levels?

1/1 plan anniversary. ADP test for 1/1/06 to 12/31/06 failed. A correction needed to be made by 12/31/07.

There were 3 HCE's who were due a refund of $1500 each. They all terminated employment on 11/8/07 and rolled their money out of the plan into another financial institution. The rollover occcurred in November of 2007.

Now, I know that the $4,500 was not eligible to be rolled over. However, the plan sponsor did not notify the former employee's to tell him this.

So here are my questions....

What should the plan sponsor do at this point? Is this considered an operational failure? Do they need to self-correct using the EPCRS? Or, because the money left the plan prior to 12/31/07, is that considered a correction within the 12 month correction period? Or does their lack of informing the former employee's come into play?

The plan sponsor really doesn't want to use the One-to-One method and have to fund a $4,500 QNEC.

Thoughts?

I just started teaching very part-time at a local community college. I don't need the pay immediately - I have other income - so I signed up to send 95% (I've gotta leave something for beer and cigarettes) of my quite small paycheck to their 403b plan.

I just got my first pay stub and see that none of that money is currently taxable. This seems to be as good as a deductible 401k. Have I got this right? I should be in at 100%, no?

(You wouldn't mind if I had to hit you up for a cigarette now and then, would you?)

Newbie

I am aware that the deadline to implement a new safe harbor plan for single employer plans this year is Oct 1, but I'm wondering if there is any loophole or way around that? Would using the services of a Professional Employer Organization like Administaff for payroll, benefits, and 401(k) make any difference to when we could set up the plan? Thanks in advance.

Situation with prospective client. Owner's son works for the company, earns more than $105,000, and owns more than 5% of the stock. This is a company in the construction industry and excludes union employees.

The son currently is a member of a union and accrues benefits under the union pension plan. Can he be covered under the 401(k) plan without covering all union employees? It would seem that you cannot have a collective bargaining agreement with benefits the subject of "good faith" bargaining when one of the individuals is also an owner of the company?

Any opinions/suggestions?

Hello everyone! I'm hoping your various expertise can help me understand some basic things about my 401K.

I am 35 and just started contributing to my company 401K last November. I contribute $759 per pay period (every two weeks), with my YTD contributions being $14,283. My employer contributes $91 per pay period, YTD $1,714. I also contributed these same amounts thru out November & December of last year. My current account value is at $16K. The 401K fund is managed by Prudential.

Here is my question/confusion. I've been in this just about a year now and I know NOTHING about investing, nothing about stocks ...etc. I didn't/don't pick the stocks or securities or what ever it is they buy with my money, I just picked investor goals and time until retirement. They have me listed as a moderate risk investor and 10-15 years until retirement (which I just switched to 5-10 years in hopes that would make them purchase safer investments for my fund).... ANYWAYS.... almost a year now and EVERY single quarter I have lost money, every quarter! Why wouldn't they just throw the money into something completely safe at a 2-3% interest rate rather than losing the 3-6% each quarter they are losing? They show a pie chart of where my money is "invested" and it appears to be pretty diversified to me... but these guys that manage these funds, isn't it their job to switch around investments within the funds in order to not get a loss? I looked and looked and couldn't even find a way to switch my money from this type of investment to something completely safe (like government bonds at 2% interest)... I mean 2% interst is better than 3-6% loss evrey single quarter... and I worry about what this market crisis is going to do to my money now. I feel like I'm just throwing my money away, the whole idea here is to save for retirement, not gamble. It just doesn't seem right that in order to participate in a 401K that I have to gamble my money away.

What would you do if you were me and remember, I have no understanding of how all the funds/stocks/etc... work... I don't care about making tons of money, and I can understand a loss here and there, but one year strait of losses, and now probably a huge loss with the market crisis... I'd be better off buying bonds, but that can't come out of my checks pre-tax and my employer wouldn't match that...

any ideas/suggestions?

Thanks in advance!

Kathy

What is the most that can be contributed to a DB pension plan in 2008 and still be tax deductible? It used to be normal cost plus 10-year paydown (?) of nonfunded amounts.

Now there is "Target Normal Cost." Can more than this be contributed and deducted? We may want to fund-up our probably soon to be frozen plan.

If we freeze the plan at 12/31/08 (last day of plan year) will there be a target normal cost for 2008? Certainly none for 2009, right?

Can anyone point me in the right direction for locationg a medicare & Medicare gap grid comparison for A& B (even D would be benficial)? I searched google but found only medicap plan specific coverage (such as aetna only not compared to A & B). Thanks!

Can you please help me. My husband is age 65. I am age 51. I was granted 100% of his accrued benefit, that was a lump sum of $200,000 if he took it and a monthly benefit of $1390.00. I just received papers today from CBS that tells me that it is now only worth a lump sum of $92,000 or $501.00/month. I knew there would be calculations involved, but not this adverse. Please advise. Every Excel calculation I do and every annuity assumption I do does not equate to these numbers.

If a plan fails its ADP test but recharacterizes some of the deferrrals for an HCE, can those recharacterized amounts be disregarded for top heavy purposes? It appears based on my initial research that you can disregard "catch-ups" for top heavy purposes, but only for the plan year in which they are made. I need to verify that "catch-ups" in this case can be disregarded even though the amounts weren't over the 402(g) limit - they were just recharacterized due to a failing ADP test.

Does a plan termination trigger Required Minimum Distributions for non-owners?

Example:

Participant (72 years old, non-owner) is still employed. Plan terminates as of 12/31/2008, assets to be paid out late in 2009. Does this require the participant to take an RMD as of 4/1/2009? Or does the participant's actual distribution trigger the RMD?

Forgive me if this is not the correct or best board for this post. (I've seen a similar question on another board that didn't get any responses so thought I might pose the question here given the higher traffic on this board.)

I have a real blind spot with respect to behind-the scenes administration and processing of 401(k) investments. Could someone provide a snapshot of the process for handling dividends paid on employer stock offered as an investment option in a 401(k) plan. (Plan simply permits participants to direct investment to be made in employer stock as one of several options--employer does not make any contributions in employer stock.)

I guess my assumption is that cash dividends owed to each participant would be calculated and paid to the plan / trustee just like with regular shareholders and that the plan would then allocate and invest those cash amounts in accordance with the participants' investment elections on the date received (i.e., that the cash dividends could be used to buy additional shares of company stock plus other mutual funds the participant had elected and would not simply be plowed back into employer stock alone). If so, are the dividends usually allocated immediately or are they commonly held and combined with other contributions (e.g., the elective salary deferrals under the next paycheck)? I am also curious to know what plans typically do about fractional shares of employer stock.

Thanks for any light that can be shed on the general process invovled.

I know that salary deferrals are generally not subject to a substantial risk of forfeiture such that a 457(f) plan cannot provide for salary deferrals. However, what if the plan provides that the employer will make matching contributions on the salary deferrals? Does this sound like it will work?

From Defined Benefit Answer Book Q19:104

Example:

The funding target of $1,452,362, in Q 19:102, is used in this example. The value of assets in the plan as of December 31, 2007 is $1,000,000. The plan had a funding standard carryover balance of $100,000. Therefore, the value of assets to use is $900,000. The transition rule from Q 19:105 is used, so the funding target is multiplied by 92 percent, or $1,336,173. The shortfall amortization base is equal to $1,336,173 less $900,000, or $436,173. This base is amortized over seven years using the segment rates in effect. Since there are two segment rates in effect over a seven-year period (the first segment rate is effective for the first five years, and the second is effective for the last two years), the calculation of the amortization is a little more complicated. The present value at each year must be calculated using the particular rate, and then added together...

I thought the transition rule (i.e 92% of target liability) is used for the exemption from the shortfall amortization calculation. But if not exempt, full target liability is used to calculate the shortfall and the shortfall amortization base.

Did I miss some corrections, explanations, etc. that stated that 92% of the funding target could be used to calculate a shortfall amortization base?

DC newbie question.....

In a profit sharing plan permits in-service distributions provided that the "Plan Administrator has allocated the contributinos to be distributed, for a period of not less than 2 Plan Years before the distribution date."

How is the amount eligible to be distributed calculated? Is it accumulated contributions only? Is it accumulated contributions +/- earnings? Is it the account balance 2 years prior to the date of distribution?

Thanks!

Has the DOL actually opined to say its appropriate to use the DOL Calculator to calculate lost earnings on a late contribution for purposes of the VFCP? There doesn't seem to be a consensus on this issue. The IRS clearly states that the underpayment rate is the appropriate rate to use to calculate the excise tax; the DOL provides a calculator for a stated purpose of calculating lost earnings on late contributions based on the underpayment rate (Example 1 in the instructions to the calculator); but as far as I can tell, the DOL's formal guidance (i.e., the VFCP) says you need to use the "higher of" best invsetment earnings in plan and underpayment rate.

We've generally used the calculator, but I'm now questioning the appropriateness of this technique. Please, any thoughts?

Thanks

Employer sponsors DB plan and 401(k) Plan. Employer terminates DB plan and wants to amend 401(k) plan to provide that 401(k) participants who were former DB participants are entitled to an extra contribution. Is this OK as long as the plan passes 410(b)?