Does anyone know when we have to start using the new revised Form 5330 that requires the preparer to use their SSN or the PTIN? Or do we continue using the old format until further notice?

As we know the 415 regs require the inclusion of compensation paid after severance in the definition of compensation if it is paid by the later of 2.5 months after severance or the end of the plan year of severance, and it is regular pay earned before severance. As such, it can also be deferrred on. Ths issue is if the payment (and deferral) occur after the end of the year but within the 2.5 month window, in what limitation year are they included? A large consulting firm recently put out a release with the following example.

EE terms on 12/31/08, receives final paycheck for vacation, etc. in 1/09 (no actual date given.)

Deferrals taken from the final check (and a matching contribution made.)

The example then says the compensation, deferral, and match are all counted in the 2008 limitation year because of the regs. They go on to say that this rule can complicate year end testing and tracking compensation for employees who are later rehired in the year of the final paycheck. Not to mention bringing a '09 deferral into '08 could cause a 402(g) violation.

I have read the regs many times (especially 1.415©-2(e)(3)) and can sort of see why they say what they do, but I don't see it as clearly as they make it sound. However, if we assume that the payment is made later than the first few weeks of '09, their assertion is not logical, primarily for the reasons they cite as complications. I'm not sure the first few week thing applies anyway.

I'm curious what others think about this.

Does anyone know when we have to start using the new Form 5330 that requires the preparer to use either their SSN or PTIN? Can we use the old format for years beginning 2007?

A copy from the obituary provided by Don's family follows:

Donald R. Levy, 82, of Tuckahoe, NY passed away suddenly from cardiopulmonary arrest on Sunday, June 29th at Sound Shore Hospital in New Rochelle, NY. He was the son of the late Gertrude and Saul Levy, and widower of the late Carol Levy. Donald is survived by his children Cathy Levy of New York, NY and Daryl Levy of South Orange, NJ.

He was an attorney and benefits consultant. A graduate of Harvard College and Harvard Law School, he received an MBA in accounting from New York University. He served as Vice President and Employee Benefit Consultant to Johnson & Higgins as Vice President-Human Resources and Director of Employee Benefits at UST (United States Tobacco Company), as Senior Consultant with William M. Mercer, Inc. His publishing activity developed in post retirement, after a few years with Prentice Hall and RIA. He continued with his own publishing business and authored many books, including the Pension Handbook. He taught at the University of Connecticut, served as a panelist for the Practicing Law Institute, and lectured before various professional groups.

In lieu of flowers, memorial contributions may be made to the American Heart Association.

If additional information is needed, please contact Don's daughter:

Cathy Levy

415 E. 78th St. #2A

New York, NY 10075

2008 AFTAP = 61.5%

COB > 1,000,000

Amount of COB necessary to bring AFTAP to 80% = 850,000

What is the sequence of events? Must I go the long way:

Certify AFTAP=61.5%

Provide notice of restriction

Get client to elect to burn COB

Recertify new AFTAP = 80%

Rescind notice of restriction?

Or can I just go to the end result:

Burn COB as mandated (is the client election still needed?)

Certify AFTAP = 80%

We are taking over a plan that had as a distribution "non-cash" distributions. Our VS document does not allow for this option. Is non-cash distribution a protected benefit and therefore cannot be eliminated from the plan when we update for EGTRRA document? If true, then either we alter our plan document to allow for this option, turning it into an individually designed plan document. Or, go to a service provider who utilizes this option and keep it as a prototype/VS.

Any thoughts?

Thanks

I recently started working as an administrator for a very small (1 FT/4 PT EEs) religious organization. After processing my first payroll there, I realized that my predecessor in the office (let's call him "J") had been underwithholding and misreporting payroll taxes because he was treating his health insurance premiums as if they were subject to a Section 125 plan for the past several years...only problem is, there isn't one in place.

Background: There are two EEs participating in the district health insurance program. One of them has insurance benefits paid by the employer (which is spelled out in the EE's employment contract); J (a part-time employee) was allowed to participate in the plan provided he paid the entire ins. premium through payroll deduction. Soon after enrolling in the group health insurance, J did a little research and suggested setting up a 125 plan. Apparently the executive board did not follow up on the request, so J just took it upon himself to deduct the insurance premium amount and calculate the FIT/FICA/Medicare on the remaining pay.

BTW, things are further complicated by the fact that J is still employed there (in a non-administrative capacity). J will be coming off the group plan and starting coverage with his new employer in another month. At first I was willing to let this go, thinking that there's only a month remaining (and that we are very unlikely to be audited). But now that I realize I'm supposed to sign off on the Form 941 for this past quarter, I'm having second thoughts.

Can anyone tell me what the potential liabilities are for:

• the employer?
  
• the employee, J?
  
• myself?
  

I'm concerned about going to the board as J is very well-liked and I am...well, new. I want to be sure I have all my ducks in a row before I create what I imagine is going to be a HUGE stink, and a very uncomfortable situation for everyone. Thanks in advance for any advice!

A DB plan was frozen, post EGTRRA, but the accompanying profit sharing plan stated that the top-heavy minimum benefits would be provided in the DB plan. The combined plans are 95%+ top-heavy.

Since the DB was frozen, the employer has not made any profit sharing contributions.

Other than the document problem with the PS plan, does anyone think that the DB must be unfrozen?

Can we amend the PS to provide a 3% TH minimum? Can we provide that 0% is the TH when no key employees are benefiting?

Any other thoughts?

We have an Executive Health Plan for 12 execs, unfunded, uninsured. In the past we have added the cost of the physical to the employee's imputed income and grossed it up for taxes. I was recently told it isn't taxable as it's diagnostic in nature, so we no longer need to pay the taxes on the benefit.

Also, I believe the number of eligible participants excludes it from a 5500 requirement.

Can you help me confirm both? Thanks!

Is it correct to say that Column (d) cost information for the Schedule of Assets (Held At End of Year) and the column © cost of acquisitions information for the Schedule of Assets (Acquired and Disposed of Within Year) may be omitted when reporting investments of an individual account plan that a participant or beneficiary directed with respect to assets allocated to his or her account (including a negative election authorized under the terms of the plan).

What is an "Individual Account Plan" ? Does a 401(k) Plan for one Corportaion qualify as a Individual Account Plan?

Any help is greatly appreciated.

ALEX

The following is the scenario: Participant terminates, 90 days later, is rehired by same company, different location , in another state. Several months after rehire, but in the same year, plan fudiciary makes distribution of full account balance as normally if term status, unbeknownst to the plan adminstrator. Later fact finding discovers term status trumps active when system has term and active under same soc sec number. Individual remains in plan to this day.

Would this be considered a prohibited transaction if plan documents do not allow in-service distributions? Participant received 1099R and is ok with tax and penalty on his end. Does not have the ability to pay any back at this point. If corrected, who would be expected to replace the funds ? Fudiciary service provider or adminstrator? Should the participant account balance be restored whole even after receiving cashout in full? A Significant dollar amount is involved.

Thanks for any help in advance.

If a school district pays a retiring teacher a severance payment based on accumulated sick leave (a teacher with no accumulated sick leave would be entitled to no severance) and allows the teacher to receive payment in lump-sum at the time of retirement or receive payment in the following year, does the school district need to be concerned about 409A regs? Do they need to offer an election to the teacher?

A plan has a non-uniform retirement age of 62. Therefore, the benefits must be normalized to 65. I understand that testing assumptions are used for the conversion so the ratio of the APRs is easy. However, is it an interest only or interest and mortality adjustment?? Does it depend on whether the definition of actuarial equivalence includes pre-retirement mortality??

Does anyone have any thoughts about whether an employer who maintains a Top Hat plan (and has already filed) needs to file a statement with the Department of Labor if the employer adds another Top Hat plan? The CFR states that "[o]nly one statement need be filed for each employer maintaining one or more plans." Do any employers actually submit a new statement upon establishing a new Top Hat plan?

A participant experiences a life event (birth of a child) and wishes to increase his health FSA election in the plan year in which the event occurred. The child was born 6/17, but the participant did not notify the employer until after the last payroll had run for the plan year that he wished to make an election change (but before the end of the plan year). Now the plan year has ended (6/30) and the employee wants the change to happen. The change should be honored, but how does the employer collect the funds?

DB Plan... Is there a regulation that prohibits a plan from allowing a participant in pay status from changing their election after it has begun? Specifically, could the plan offer the option to annuitants to "cash out" after they had already started receiving annuity payments?

My company uses a 3rd party 401k tester.

I was studying and trying to understand the NDT test section of the results. When I inquired about the second test group which appeared to be a small group of NHCEs separated from the main employee test data I had submitted, I was told the testing procedure:

Eliminates/disaggregates NHCEs with less than one year of service as of the last semi-annual entry date of the plan.

Eliminates/disaggregates NHCEs under age 21 as of the last semi-annual entry date of the plan.

and that the tester's reporting department was confident the test had been done correctly.

The plan allows entry at age 18 but has a service requirement of 12 months which must include 1,000 hours of service. Plan entry dates are monthly, enrollments are quarterly.

Hiring and attendance policies of the company are such that it is impossible for a new employee to meet the 12 months of employment condition without also meeting the 1,000 hours of service condition.

I have stated to my plan administrator that I don't believe the testing is being done properly.

Since the plan does not allow participation until an employee has met the 12 months of employment condition, it is my contention that there are no employees with less than 12 months of service and eliminating/disaggregating such employees is a specious procedure which could cause the plan to be disqualified. I believe the testing should be redone without eliminating any plan participants due to the "service exception" mentioned in the testers manual.

I have also suggested that eliminating employees under 21 at a mid-year date is an aggressive approach. A more conservative approach would be to eliminate only the employees under 21 as of the last monthly entry date of the plan year.

I like "conservative" in relation to eliminating appearance of conflicts of interest or manipulation of tests.

Are my comments correct or incorrect?

Thanks.

A question from a "recreational actuary" (mere mortal engineer who remembers a little algebra, trying to understand how this stuff works)....

I've been looking for the proper way to calculate life expectancy given the life table (Lx's & qx's) & haven't found the key.

In the context of a lump sum PV from a SL annuity PMT & the interest rate (all of which I know), I can solve the annuity PV equation for n...

n = -log(1-PV*i/PMT)/log(1+i)

then add this to age @ the first payment. This would be the LE that my plan administrator used, right? (They don't want to disclose their secret sauce recipe & the phone droids don't know a life table from a coffee table.)

Then I look at the GAR94 (or AMT2008 or whatever) table, find Lx for my age (rounding down to integral age) *0.5 and find the corresponding age. Rationale is that 1/2 of those alive @ age x will be dead by then so that's the LE (median). I don't know how to account for odd months, however. Linear interpolation? Some other curve fit? How do I do that? But even with this discrepancy, I'm off by about 2 years (calculated n is 2 years less than my life table analysis so the LS is about 4% lower). What am I doing wrong?

Thanks.

In 2007, HCE defers $15,000.

ADP Test fails.

$5,000 is recharacterized as catchup.

$1,000 is returned (incidentally after 3/15/08 but before 12/31/08)

In determining the HCE's maximum ER contribution while applying the cross testing formula, would $9,000 be the correct amount to use, which would exclude both catchup and the corrective distribution?

Another question - if the cross testing is using Otherwise Excludable for the NHCE's who can defer immediately but are not yet eligible for ER, does that mean they would also be excluded from the standard ADP test?

A client called with a bizarre situation. It seems they thought they had terminated our services and moved their plan to another provider in 2006, although we have no record of such a request. Apparently they now have assets with 2 providers and they are not clear if they have 2 plans or if the new provider restated our plan and just dropped the ball on transferring the assets.

The EFAST hotline shows receipt of the 2006 5500 for plan 001 and nothing for a plan 002. FreeERISA shows the form that we prepared for 2006 and nothing else. If the new provider prepared a form for the assets they hold using plan 001 that the client filed along with the one we prepared using plan 001 for the assets that we hold, would both of them show up on either EFAST or FreeERISA?