I've already seen forms by different Inherited IRA custodians where the designated beneficiary is allowed to in turn, name his/her own beneficiaries. What is the authority for this, if someone has it? Does this hinge on state trust law issues? And what trust nuance does it hinge on if it does -- whether beneficiaries in a, say, irrevocable trust, can name their own beneficiaries?

I would really appreciate any input. Thank you.

Bearlee

It is my understanding that a plan sponsor must have an 80% funding percentage to use the credit balance / pre-funding balance (whether to satisfy the minimum required contribution OR the quarterly contributions). Is the calculation of this percentage as follows:

(Actuarial value of assets - pre-funding balance) / Funding target

I believe that is correct but can not currently find the cite to verify it.

Thanks in advance for any and all help!

We were recently contacted by one of our clients who told us that they just purchased a foreign company. (I do not think which country is important, but if it is let's say Mexico or Canada.) They wanted to allow the employees of the foreign company (all are citizens of the foreign country) to participate in the plan. I was told by one of my colleagues that this could be done, but I was asked how this would affect the testing of the plan. Specifically, they wanted to know about ADP/ACP, 410(b) coverage, and 401(a)(4) non-discrim.

My thought is that the employees would be considered NRAs. As NRAs, they could be specifically excluded from the coverage group. However, since they are permitted to participate, this fact is not relevent.

Now they are in the plan. My next thought is since they could be a statutory exclusion, they could be treated as Union employees. If this is correct, does this mean that they would be in their own ADP/ACP test? (Do they get an automatic pass on ACP?) Do they get any sort of automatic pass on coverage? Or because they are eligible for the plan, are they simply treated as any other non-union employees?

Any help would be greatly appreciated? Also where to learn more about this (EOB, answer books, etc...) would also be very helpful.

On a Profit Sharing Plan where we send out the PPA notice once a year. The Plan is a pooled account in which I have been sending a list of assets and their values as of 12/31/07.

I have heard that we can show a percentage after each investment instead of a dollar amount.

Example:

Microsoft $40,000

AT & T 20,000

TowneBank 35,000

Microsoft 42.11%

AT & T 21.05%

TowneBank 36.84%

Is this correct?

I was just wondering because the total account balance of the entire Plan is over a million dollars with 4 participants in the Plan and a few of the participant's account balances are around $1,000 so the Employer does not want the employee to calculate how much each employee has in the Plan.

Thanks

I am interested in hearing others' opionions or experience with 401(k) plan products that appear to permit individuals to use their 401(k) plans to invest in / fund the startup of new companies.

My understanding is that an individual looking to start his or her own business can transfer or roll over his or her 401(k) plan balance under a former employer's plan to a new 401(k) plan sponsored by a private company newly established by the individual. The new 401(k) plan then presumably uses the funds to invest / buy shares of stock in the new company. The end result is that the account holder (as head of the new company) gets to use his or her 401(k) funds to finance the new company without having to take a distribution from the plan or having to borrow money from the bank, etc. The stock in the new company remains a plan asset. As I understand it, one such program is marketed by Guidant Financial (among others) and is marketed frequently to those wishing to start their own franchise.

I haven't discussed the legal aspects of all of this with ERISA counsel but i cannot see how this would not raise a host of at least potential self-dealing and prohibited transaction issues. I am also unclear exactly how the plan holds the investment in the company stock--is that an investment option for all plan participants or is there a way to limit that investment option just to the owner's account? Is that treated as an investment in "employer securities/" or is that some pooled plan investment? Does it make any difference if the 401(k) account holder is the only plan participant? Does it make any difference if account holder the sole owner of the business?

My usual instinct is to run from such products but I am intrigued that these appear to continue to be heavily marketed.

If an individual starts to receive SEPP in annual distributions, can frequency of payments be changed (i.e., can individual take annual distribution one year, switch to quarterly in year two and then to monthly in year three)? I don't want to allow changes in frequency if it would result in application of 10% penalty. Besides a PLR issued in 1989, I can't find much guidance.

I am a student who purchases insurance through my university and the premium is reimbursed(pretax) through my father's Premium Reimbursement Account with his employer.

I have seen something about new regulations coming out that say that the spouse's and dependent's policy will no longer be reimburseable in this type of account, only the employee.

Is this correct?

Thanks for any guidance.

Employer has previously been pulling elective deferrals to its 401(k) plan from each participant's paycheck first (i.e., before pulling amounts for the cost of group health coverage, FSA contributions and child support payments). However, in several instances, an individual has not had enough money to pay the full premium for health coverage (or to make a full child support payment). Can the Employer alter the hierarchy such that 401(k) elective deferrals are pulled from a paycheck last? Thanks.

Employer is switching from a regular health plan design (high premium but a smaller deductible) to a High Deductible Health Plan and an HRA effective June 1, 2008. The rest is somewhat confusing because I keep hearing "terms of art" that I do not think really apply. So please bear with me.

Prior medical plan has a $100 p/person deductible. Plan Change is effective June 1st Medical Plan Deductible is $2000. HRA Plan is the employee must pay $200/person first, then the employer will pay the remaining $1800 at 100%. The question is: We know that deductible satisfied under medical plan will carry over to satisfy a higher deductible under the medical plan due to a plan change. But can any deductible satisfied under the medical plan by the employee prior to June 1st be credited toward satisfying the HRA deductible ($200)?

Clearly, this is very confusing. First, I thought that HRA is Employer Only. However, I think the idea is that the employee must spend $200 before the employer will reimburse. How do you work that in mid-year?

And, I thought that the HRA could not reimburse expenses that were incurred prior to the time it was in existence.

??

Any thoughts ??

??

Here are the facts: An employee terminates at the end of Year 1. Five months later in June of Year 2 he is rehired and comes back to work. However, he only works during the summer months and he works less than 500 hours. This pattern continues for years. Essentially, he only works from June through August. He never works more than 500 hours.

A Profit Sharing Plan states that a break in service occurs when an employee is credited with less than 501 hours of service in an eligibility computation period (January 1 to December 31). If an employee is rehired before a break in service then he becomes a participant on the date of reemployment. If he is rehired after a break in service he becomes a participant once he completes a year of service (i.e., 1000 hours of service).

Did this employee have a break in service before he was rehired?

Any ideas of when this employee gets back into the plan, if at ever?

Attached is a example a benefits attorney and I worked up.

Any comments are welcome.

Restricted_Benefits_Notice.pdf

Can I use the 10% safe harbor earnings adjustment method when correcting for failure to include eligible employee under EPCRS? The 10% safe harbor earnings is provided for under gap income guidance but I am wondering if I can stretch it to fix this situation?

Thanks.

We have an individual who wholly owns two corporations.

The two corporations co sponsor a pension plan.

The owner is the only person who is an employee of both corporations.

Say the owner earns 50,000 in one corporation (the one in which he is the only employee) and $25,000 in the other, which has all the employees.

The pension formula will use the entire 75k when computing the pension benefit and for non discrimination testing.

Let's assume we are dealing with the 2007 plan year.

Is there a required way in which the minimum funding and/or maximum deduction must be allocated?

That is, would the funding for the corp with the owner and his 50k be based on just the 50k and the funding for the other corp be based on the additional 25k of owner comp and the comp and benefits of the employees?

Or can the total deduction be allocated in other ways, if desired?

The only statutory knowledge I have observed is in 413©(4)(A), where it indicates that each employer shall be treated as separately maintaining the plan.

Curious to hear other views and related statutory or regulatory cites.

Thank you.

Suppose you have a calendar year DB plan that froze after the magical September date in 2005 (let's say as of 12/31/2006). Further, the Plan offers lump sum payments. The Plan is 100% funded with no credit balance. The Plan pays lump sums but the Plan sponsor wants eventually to terminate the Plan but realizes the Plan will may need to be better than 100% funded to facilitate the distribution. So, the Plan sponsor instructs his actuary not to provide an actuarial certification. Therefore, no 2007 certification is given and no 2008 certification is given.

So, while the substance of the law has been met, the form has not. Thus, the Plan cannot distribute lump sum benefits.

Has anything been missed other than to duck the guy handing out the subpoena?

Suppose a small defined benefit plan terminates with excess assets. Also, the same employer maintains a defined contribution plan. Each year the plans are general tested and have had no problems passing 401(a)(4).

Our understanding is that excess assets in the DB plan could be allocated in any manner the document allows as long as that allocation is non-discriminatory and passes 401(a)(4).

If the DB plan terminates now (prior to any benefit accruals for the year) and ends up allocating excess assets during the year, are those allocations general tested along with DC plan allocations made for the year?

Thanks much.

401k plan has 3% SH nonelective contribution. No problem with meeting the requirements for the ADP safe harbor.

Plan also has discretionary match. If discretionary match is subject to a "last day" requirement, does that knock you out of the ACP safe harbor? If you say "yes," can you provide a cite to the pertinent section of the regs?

I'm taking over a plan that requires 2,080 hours for a full year of credited service, and gives 1/12th credit for 173 hours if the 2,080 threshhold isn't met.

Is this legal? I thought the maximum hours for credit could only be 1,000.

My gut tells me this is a bad idea(that it to have anyone in our office talk to

former or current plan participants othet than trustees or sponsor.

Is there anything besides a gut feeling someone can say as to why not to do this?

Does it turn us into fiduciaries?

ty

Plan A has eligibility requirements of age 21 with 1 year or service and quarterly entry dates. An employee meets the age and service requirements on March 1, 2008 and becomes eligible on the next quarterly entry date of April 1, 2008. The first pay-date in April is April 4, 2008 - but this pay date applies to services performed from March 21 to March 28, 2008.

Should the employer withhold 401(k) for this participant's April 4 paydate? - even though the pay applied to a period of service prior to the effectvie date of the participant's eligibility?

I think they need to withhold on the 4th but I can't find specific language in my document to state when to begin - other than the inference that you withhold when you become a participant - I see no reference to what period the pay applies to, just the date it is paid.

I have an outside TPA telling me to withhold based on applicable pay period instead of pay date - but I would think that could result in a violaiton of the max eligibilty rules - holding someone out of a 401(k) longer than is allowed by law. It also does not jive with how W-2's are prepared and my compliance testing is done.

Any thoughts would be appreciated.

I have a client who is a pastor at a church. He has a 403(b), and is the only participant. He has Fidelity mutual funds - no annuity. He wants to terminate his plan, and roll the account into an IRA R/O with me, while staying employed there. He doesn't want to establish a new employer plan after this situation is resolved. I assume he can do this, but want to know what, if anything he needs to do IRS wise. Fidelity has told us that they will do this with a letter from the plan administrator indicating their desire to terminate the plan, and to hold Fidelity harmless. Can someone help me?