Would you agree that if a participant has a choice to defer to a 401(k) plan or a nonqualified plan, this choice violates the contingent benefit rule of Code Section 401(k)(4)(A)?

Can anyone provide any guidance with respect to converting a multiemployer money purchase plan to a 401(k) plan? Are there specific rules as to what this type of conversion requires? Will the funds presently in the employee's account be treated the same as funds contributed after the conversion?

An employer maintained a money purchase and profit sharing plan. The plan year for the plans, and the taxable year for the employer, is the calendar year.

The employer has amended the money purchase plan to terminate it and merge it into the profit sharing plan effective 4/30/08.

What is the deadline for the employer to make the final contribution for the 01/01/08-04/30/08 short plan year money purchase contribution?

Am I correct in thinking the contribution could still be deductible if made on 09/15/09 (taking into account 404(a)(6))?

Reviewing 401(a)(9) and its requirements regarding distributions, I saw the uniform life table. However, what do you do if the trust is the beneficiary? Not necessarily a trust fund for a particular person (though I hope to have the answer for that situation), but for example, a trust for a non-profit organization? Is a trust in that legally-but-not-biologically a person category that a corporation falls under?

I want to confirm my understanding of the attribution rule concerning children over 21 before I act on it.

PBGC regs 4041.2. For determination of a majority owner, attribution rules of IRC S414(b) apply. IRC S414(b) then refers to S1563 for attribution.

Per S1563(e)(6), the attribution between children over 21 and parents apply only if one of the parties involved owns "more than 50%" before application of S1563(e)(6).

So, if a father owns 50% or less and his two kids, ages over 21, each own 10% say, the chilfren's ownership is not attributed to the father or father's ownership is not attributed to the children. Is this correct or am I missing anything?

I have a 401(k) plan with a 1/31 plan year end. A new owner wants to explore starting up a SIMPLE IRA for those 401(k) participants. My understanding is that if a benefit accrues in a plan year, a SIMPLE can not be implemented in a calandar year that starts within that plan year. To prevent the exclusive plan rule from being violated, can the new owner terminate the 401(k) plan before the end of the calendar year?

For example, the current plan year is 2/1/08 -1/31/09. Can he terminate the 401(k) before 12/31/08 and open a SIMPLE IRA effective 1/1/09?

Are Roth 401k contributions treated the same as traditional 401k contributions with regard to non-discrimination testing?? For example, are Roth 401k contributions included in Average Benefits Testing as traditional 401k contributions are??? Thanks.

I have a client who would like to have a three month "waiting period" before new employees are eligible to participate in the SIMPLE plan. I can't find any eligibility requirements other than the minimum compensation and can't find anything that would allow this length of waiting period, but feel like I might be missing something.

The way I am interpreting the rules, an employer can have a one or two year "waiting period" by requiring that the employee earn $5,000 (or some lesser amount) during either the one or two years prior to the plan year in which the employee is eligible to participate. The employer could also waive the prior year compensation minimum, but require that the employee be "reasonably expected to receive $X (not to exceed $5,000) in the current year." I interpret that to mean that as long as the employee is expected to earn the minimum amount (based on rate of pay and/or # of hours scheduled), the employee is eligible to begin participating in the SIMPLE as soon as he/she is hired.

It would be easy enough to figure out what is the average earnings for three months and set that as the minimum compensation for the current year and in effect have a three month (give or take) "waiting period" if the current year minimum must actually be earned before the employee is eligible to participate, but I don't think that is what is intended.

Any thoughts on this? Have I missed something that would allow the employer to set a "waiting period" of less than 1 year before employees are eligible to participate?

I have a calendar PS 401k plan where the 2007 3% nonelective SH contribution was not going to be funded until 9/15/08. There was no employer contribution for 2007. A 2008 SH notice was given to the employees stating a 3% nonelective SH contribution would be made.

All 401k contributions have been deposited timely.

This corporation has fallen into hard times and they terminated their plan on 5/16/08 with appropriate notice given to the employees.

If the corporation goes bankrupt and cannot fund the 2007 and 2008 Safe Harbor contribution, what happens?

I have a calendar PS 401k plan where the 2007 3% nonelective SH contribution was not going to be funded until 9/15/08. There was no employer contribution for 2007. A 2008 SH notice was given to the employees stating a 3% nonelective SH contribution would be made.

All 401k contributions have been deposited timely.

This corporation has fallen into hard times and they terminated their plan on 5/16/08 with appropriate notice given to the employees.

If the corporation goes bankrupt and cannot fund the 2007 and 2008 Safe Harbor contribution, what happens?

Does anyone know if a Roth 457(b) provision was included in the Farm Bill?

Thanks.

What happens to an IRA in the following situation:

Domicile is CA. Will is pourover. Trust is ABC for a married couple. First spouse dies. IRA is in name of survivor with decedent as beneficiary. IRA is community property. The RBD has been passed.

Does half of the IRA somehow get poured over to the trust?

-Todd

One of my cash balance plans is using EAN as the valuation method. I've generally seen PUC method being used. Any comments on the choice of this method.

1. A January 2008 article in BNA Compensation Planning Journal (Richey/Hopkins/Boekeloo) stated that, under Notice 2007-62, forfeiture due to

(i) involuntary termination for reasonable cause, or

(ii) voluntary termination

would not constitute substantial risks of forfeiture. In their view, the only thing that clearly works under 2007-62 is involuntary termination without reasonable cause.

Is that a consensus view? It's not clear to me that 2007-62 and the 409A reg definition of SROF go that far, and the focus was instead on clarifying that rolling risks of forfeiture, non-competes and deferral plans don't work.

I may just be reading this incorrectly. Any thoughts?

2. Any word on when IRS will get 457(f) SROF regulations out? Seems like many 457(f) plans that rely on short term deferral exception from 409A will need to be amended by 12/31/08 to avoid 409A, so prompt issuance of regs is necessary so employers know what they'll need to do.

Thanks

I am fairly new to x-tested plans, so forgive me if this is a dumb question. : )

Have a client with a Non-SH 401(k) and cross tested PS allocation. They are is looking for options to help them pass their ADP testing in 2008. Is it possible to fail the ADP test, but not need corrections as long as the plan passes 401(a)(4) general non-discrim testing? If so, can you provide a cite?

Thanks!

Assume a 401(k) safe harbor plan utilizing the 3% nonelective feature. The

plan wishes to restate to a prototype EGTTRA document.

The plan has 1 HCE and 2 NHCEs.

The plan divides employees into two groups for the profit sharing

allocation: HCEs and NHCEs.

Under the rules described in LRM #94, this plan can only have one NHCE

allocation rate if they adopt a prototype plan.

The plan also has an end of year requirement on the profit sharing

contribution. NHCE #2 terminated during the plan year.

The HCE revceives a 15% contribution.

NHCE #1 receives an 8% contribution.

NHCE #2 is not technically eligible for the profit sharing, but because

they benefited due to the safe harbor nonelective, must receive the minimum

allocation gateway. Therefore, they receive a 2% contribution to satisfy

the minimum gateway.

Would this plan violate LRM #94? Or should the "allocation rates" for this

purpose be determined prior to the additional allocation necessary to

satisfy the minimum gateway?

Assume NHCE #2 was not eligible for the minimum gateway because they were

an otherwise excludable employee under 1.410(b)-7©(4), but the plan is

top heavy and an additional allocation had to be made to satisfy the top

heavy minimum. Would the potential varying allocation rates due to the top heavy minimum cause this plan

to violate the prototype rules for cross-tested formulas?

Thank you!

Laura R. Harrington

Am I right that a "Stipulation" is not a DRO even though it stipulates exactly what the terms are. It is signed by both parties, their attorneys and a Standing Master In Divorce (whatever that is).

If a client has a 401(k) profit sharing plan (for 5 years) and the profit sharing contribution has not been used and the client does not intend to make a profit sharing contribution should they amend the plan and eliminate the provision?

Okay, guys, Friday quiz time:

Assume parent-child controlled group wherein parent and child each maintain an individually designed plan. Parent's EIN puts it in Cycle C (though I am told they filed end of January 2008); child's EIN puts it in Cycle E. As far as I am aware, neither entity made any elections under Section 10.06 of Rev. Proc. 2007-44. I don't know when the CG status first came into effect.

To further complicate matters, child used to maintain its plan on a VS document, but is in the process of restating it as an individually designed plan.

In the process of trying to determine when the child needs to file:

a) Section 10 is entitled "exceptions" to the general rule re: EIN-based filing and 10.06 begins "in lieu of" Section 9 (among others) which sets forth the general EIN-based rules re: filing. So do the rules of Section 10 trump the general rules? (i.e., if there's a CG, must it file either on Cycle A or on the cycle of its parent's EIN? Can CG members ever file under their own EIN?)

b) As far as I can tell, the parent's EIN is on Cycle C but they've already filed. So does the child need to file under EPCRS as a late filer?

c) If there's a world in which a child subsidiary could file on its own cycle, in this instance, as a prior adopter of a VS doc, must it file in the 2 yr window for VS docs? Or can it wait and file by the Cycle E deadline of an individually designed plan?

Yet another example of why I dislike Rev. Proc. 2007-44 . . .

I am curious how others are doing the calculations when the assumed payout is a lump sum.

415 benefit limit BOY = 18,500

415 lump sum limit BOY = 165,000

Plan benefit (w/o limiting to 415) = 19,500

Plan benefit lump sum (again w/o limiting benefit to 415) = 168,000

Plan benefit lump sum (if first limiting benefit to 415 of 18,500) = 159,400

So the question is would you limit the benefit to the 415 benefit limit and then take the lump sum value of that and compare it to the 415 lump sum (i.e. 159,400 vs. 165,000 = 159,400)?

Or would you just compare lump sum limits (i.e. 168,000 vs. 165,000 = 165,000)?