We are taking over a cash balance plan where the benefits do not satisfy the Paul Shultz meaningful benefit standard for 401(a)(26). Has anyone had any success arguing with the IRS that benefits which do not meet this standard are still meaningful for purposes of 401(a)(26)? Any experience you can relate would be helpful.

Medusa

Does anyone have any helpful information on a formula fcr changing the vacation accrual date from anniversary date to the first of the fiscal year?

Please provide your thoughts about an unusal pay practice that I have encountered on a new position. As a benefit professional, I am very concern that this practice is not compliant with 401k regs. There are two groups of employees who reside in the same classification under the plan. Both groups are in the same incentive plan. The company pays One group's employee's incentive in the form of cash and 401k employee deductions are applied as any other compensation. The company pays the other group's incentive in the form of a gift card where the employee recieves gross up for applicable taxes AND the company 'grosses-up' for the employee's 401k contribution plus adds the normal employer contribution. Since both groups of employees are in the same incentive plan, the same classification for the 401k plan, I believe this is preferencial treatment and also is not considered qualified compensation (for the gross up of employee contributions). The internal legal review believes this is in compliance. Can you provide any guideance whether this practice is compliant or not. If not, can you provide specific case law or reg to help guide me to the light? Thank you.

A DB plan's safe-harbor benefit formula is years of service times the sum of 1% of average compensation plus .65% of average compensation in excess of maximum covered compensation. The Plan is terminating and has excess assets at the time of distribution. All benefits will be distributed in a lump sum.

Q: If excess assets are allocated prorata based upon lump sums, does such allocation violate the permitted disparity rules under 401(l)/? If so, then is an appropriate allocation based upon a proration using the lump sum value of the non-integrated portion (i.e., the lump sum value of years of service times 1% times average compensation)?

We met an attorney who said a pension plan can be written such that

a person who would get a pension from the plan based on disability could receive the lump sum OR the monthly pension as tax free?

Has anyone heard this?

Company A purchases the stock of company B on April 1, 2008. Company A has 401(k) Plan with 2% match and company B has safe harbor 401(k) Plan utilizing basic match contribution. Attorneys decide they do not want to terminate company B Plan prior to April 1, 2008. Plan is to liquidate company B in the next few months. Company B has six employees of which 4 will be terminated upon liquidation and 2 will be hired by company A. Obviously not terminating the Plan prior to April 1, 2008 has made this a headache.

With regard to company B Plan: Both documents have the 410(b)(6)© language so operating separately until liquidation is not a problem. I want to terminate company B's Plan. Upon liquidation the 4 employees will have a severance from employment so I don't see a problem with paying them out. The 2 other employees (who were the owners of company B prior to the acquisition) will not have a severance from employment and distribution of their account would cause Company A's plan to be successor plan if they are allowed to participate within 12 months after final distribution from Company B's Plan. Would terminating the Plan and providing for an elective transfer for the 2 employees from company B's Plan to Company A's Plan be a means around the successor Plan issue?

The safe harbor contribution would have to be made up to the date of liquidation and I was thinking that I would not have to revert to ADP/ACP testing since the termination of the Plan was due to liquidation of the sponsor. The fact that a parent sub controlled group exists on the date of liquidation make me unsure though.

Any thoughts and other issues that should be addressed would be appreciated.

Does anyone have any knowledge of what's going on with the NJ Division of Taxation on this issue and what employers are doing?

It appears that NJ is attempting to tax salary deferrals at the time of deferral, unlike the timing for federal taxes (at distribution). This is contrary to their prior stance that they would tax deferrals at distribution if the plan is unfunded, etc. Their theory seems now to be that employees are in constructive receive of the amounts when they are earned since they can control their deferral percentages. The law and regs in NJ may support this view, but they have flip flopped on their approach, creating an inconsistency in published guidance, and now won't clarify when they should be taxed.

This poses a problem for employers who don't have certainty as to when the requirement to withhold income taxes arises.

Anyone know how companies are handling this problem, or if they are ignoring it, etc?

Client has solo 401k plan well under the $250,000 threshhold. From the short reading it appears he does not have to file. But I was told by the administrator, a year late that he needed to file one because of the control group.

I'm not a CPA, just want to make sure my client is given accurate information.

SuperRob

A client receives a 1099-R for his distribution of pension benefits. Another 1099-R is issued for the child support distributed pursuant to a QDRO. This 1099-R is sent to the ex-wife, but his social security number is used on the 1099-R. The client wants to "combine" the 1099s so that only one is issued and issued to him. Since he's already paying the taxes on the child support distribution, I don't see why these couldn't be combined. Does anyone see something I'm overlooking?

IRC Code 414(u) military deferral, Rev Proc 96-49, CFR, IRC Code 414(u) military deferral, Rev Proc 96-49, CFR et al.

Military leave

Somebody returns from military service, they left work in June, they resume work, therefore they are entitled for a contribution for the year they left, even if they left before they could work 1,000 hours.

All clear.

Not so clear; what is the contribution based on?

Actual compensation from the year the person left?

Compensation from above extrapolated for an entire year? (Say you worked six months and made $10,000, do they extrapolate $20,000 for a full year?)

Compensation from last full year worked?

A client has a DB plan. One of the employees who is not yet in pay status is no longer able to work. He has been receiving LTD benefits, but the insurance company stopped them. (The premiums for the coverage were paid by the employer). The individual is appealing the denial of further LTD benefits, internally at the insurance company. In the meantime, the employee has a screaming cash flow need and so has reluctantly begun taking retirement benefits.

A-Can the LTD insurance carrier now deny the LTD benefits because the individual is in pay status as a 'retiree' under the DB plan?

B-If the LTD benefits are reinstated in the appeal process, can the DB plan and individual agree to "undo" his retirement at this time--stop further DB payments and the individual pays those DB payments back?

Has anyone looked into who can sign the 5330 as a paid preparer? Is it limited to those that can practice before the IRS or can anyone sign? I can't find anything to show it's limited to the former.

Is there any fix for failure to timely file as a QSLOB, short of requesting an extension to file through a PLR request? (as granted in PLRs 200543062, 200534027, and 200414049). I have a case where this may be an issue, following a huge gobbling up of many smaller companies by a larger one. I don't see anywhere that such a failure can be fixed through the EPCRS process.

A plan already offers a 100% J&S and a 50% J&S annuity. Do I still need to add the QOSA 75%? 417(g) indicates my applicable percentage for a 100% J&S is a 50% QOSA.

If a 401(k) plan does not offer QJSA as a distribution option, do I need spousal consent to do a cash out distribution greater than $5,000? I have looked in several books and really can't get an answer.

I sure appreciate any help.

jimmy

Non-profit organization sponsors DB plan which fails coverage on its own. In addition, the organization sponsors 403(b) plan with employer match and automatic employer contributions. Can I use "employer money" (match and automatic) to aggregate with DB to demonstrate compliance with coverage?

Any feedback including the cite would be extremely appreciated.

In 2009 we will have to prepare 5500s for 403(b) plans. If the participant count is over 100 then we will have to have an audit done.

The question is the counting of participants. Will this follow the normal rule of 'eligible' employees or will the rule be modified for only 'participating', that is 'contributing' employees?

With regard to a 401(k) plan automatic enrollment if the employer withheld elective deferrals when the employee elected not to participate can the employer self-correct under the self-correction program?

Many provisions in the pre-approved plans are already obsolete due to PPA, such as some gap period income, corrections for excess annual additions, etc. And, of course, no pre-approved plans contain provisions for non-spouse beneficiary rollovers and other PPA additions.

Has the IRS issued any guidance about how to get PPA provisions added to plans adopted by clients using volume submitter or other pre-approved document?

Thanks.

I got lost in regulations. A sole prop/partner can deduct 20% of income (25% of net) for a contribution to a plan. Can the partner ALSO deduct the $15,500 401(k) contribution in addition to the 20%? If so, is there a direct or indirect cite to this?

I am 'discussing' this with an accountant who says no.