403(b) Plan over matched in 2007 by just $15.00. Does that amount have to be taken out of the participant's account? Should over match be included in the acp test?

I was at a seminar on Safe Harbor plans several years ago. Stephen Forbes of Corbel made a statement about truing up safe harbor match. He said a plan can use the payroll period matching on a safe harbor plan and not do an annual true-up. However if any mistakes were made on those payroll period contributions, then you have to true-up all participants. I had never heard that before nor since.

He said it in passing and gave no reference. I have never been able to find any reference regarding that statement. Does this sound familiar to anyone? Thanks for any help.

Hi! I might be behind on this, as we're still working with Relius Admin 11.1.3, but does the future release eliminate teh need for SSN as an identifier? We're facing more and more employers who are reluctant to provide SSNs, and using fake SSNs becomes a whole other nightmare (since we're on standalones).

I know some pension software (ASC for instance) just uses employee name, no SSN or ER ID necessary. If 12.0 doesn't accomadate this, has anyone heard of Corbel going this route in the future?

thanks!

Does anyone have any experience with reimbursement for au pairs services from a DCAP? We have done some research but have come up with some conflicting information.

Can upfront fees paid to the agency to obtain the services of the au pair be reimbursed from the DCAP? Since DCAP expenses are considered incurred when the services are provided, it seems that they could be reimbursed. In the specific situation, the services will be provided to a newborn, therefore, the employee does not currently participate in the DCAP. Can the agency fees be reimbursed if they were paid before an election in the DCAP was made?

Is the weekly stipend payable to the au pair reimbursable – does it depend on whether/not the au pair files an income tax return, or whether not an ITIN is obtained?

Any information/cites are appreciated - thanks.

Includible Comp is basically defined as wages "includible in gross income." Can someone tell me if there is a good resource out there for what this means? Without some sort of a good resource, you would need a CPA to get some work done!! I was disappointed in the level of detail in the EOB on this topic.

Although my primary request is to find a good resource, in particular I am looking into ST sick-pay paid by a third-party, but included on the participant's W-2.

Boy val with a 2007 AFTAP of 79% is certified 3/1/2008. The plan offers lump sums so it must burn the FSCB at that very moment if that will bring the funding status up to 80%. Without a 2008 AFTAP, the deemed AFTAP will be 69% at 4/1/2008, so again more FSCB is burned to bring up to 80% (if available).

However, it's very probable not to know what the FSCB is before 4/1/2008 to know if restrictions apply. My assumption is that without the information, one must assume that there is no FSCB available to burn and restrictions apply. Once the information is then known and if the FSCB is sufficient, restrictions can be lifted.

How are other people handing this? I am trying to avoid any range certifications at all cost.

If a corrective lump sum payment for missed installments throws a participant into a much higher tax bracket, would the concept of making the participant whole require the employer to provide additional remediation for the added tax burden?

Has anyone seen ANYTHING from IRS that provides some guidance as to how to perform the 55% average benefits test? A related question is this: Assuming one feels confident that he or she knows how to apply the test, and you perform it during the year so that you can adjust participation by HCEs in order to avoid flunking the test, isn't the test a moving target such that you can't predict the results with any certainty? For example, if all of a sudden near the end of the year you have one or more NHCEs drop out of the plan (under the change in status exception), won't that require a corresponding adjustment to HCE participation (assuming it's not too late)? Is everybody ignoring the test and IRS is looking the other way, and I just don't know that? Thanks for any insight.

I have a couple of questions. A client of mine called and said he wanted to terminate his 401(k) Plan. It is your standard 401(k) plan with a discretionary match, it is not a safe harbor. He has not contributed in many years. His accountant told him he could not terminate the plan until the end of the year because some participants are contributing. The plan document says he can terminate at any time. My understanding is that with a 401(k) plan that is not a safe harbor, you could terminate at any time as long as you make all participants 100% vested. Is this correct? Also, he wants to start up another plan for participants. He is thinking of doing a SIMPLE 401(k) Plan. My understanding is that with successor plan rules, he could start a SIMPLE IRA in the same plan year, but not a SIMPLE 401(k) Plan. Is this correct? Also, my suggestion to him is to terminate the plan and not deal with setting up another because the SEPs and SIMPLEs involve employer contributions (sometimes mandatory I believe with the SIMPLEs) and he doesn't have the cash to make any employer contributions is the near future. Any thoughts there?

Thank you.

plan year ends 12/31/07 on a safe harbor 401(k). The plan doc states the plan will match on an annual basis rather than payroll by payroll. The company has until 12/31/08 to fund, but just to confirm, the company gets the deduction for the 2007 plan year even if they wait to fund the plan after they file their corp return, correct?

The 414(w) regulations permit 90-day permissible withdrawals. These are not eligible for rollover,

are taxable in the year distributed and are not subject to the 72(t) additional tax on premature distributions.

I can't find anything stating whether the taxable portion of a 90-day permissible withdrawal is subject to federal income tax withholding. I assume since these are not eligible for rollover, the normal 10% withholding rules apply?

If these are not subject to federal income tax withholding, can you please provide the reference material or cite. Thanks!

I have read the final 415 regs and do not see where 2 ½ months is defined. Has anyone seen any guideance

Below is an extract from a Mercer GRIST article I just stumbled across that was published right after the proposed regs were published in September. I don't see that the proposed regs issued in December closed the loophole described in the second point. Any comments?

No AFTAP presumption or certification.

Before an actuary certifies the AFTAP, lump sums

and benefit accruals are not restricted, unless presumed AFTAP rules apply, Otherwise, a plan

may not stop benefit accruals (except by prospective plan amendment), even if the employer is

certain the restriction will apply after the AFTAP is certified. This rule has strange – and perhaps

unintended – consequences for the 2008 plan year:

First, because benefit restrictions were not in effect for the 2007 plan year, no plans have a

presumed AFTAP at the start of 2008 plan year. This means no plans are subject to lump sum

or accrual restrictions during the first three months of the 2008 plan year and before the

actuary has certified the 2008 AFTAP.

Second, if the plan has obtained a certification of the 2007 lookback AFTAP by the start of

the fourth month of the 2008 plan year (April 1, 2008 for calendar-year plans), it has a

presumed 2008 AFTAP on that date only if the 2007 lookback AFTAP was within one of

two ranges specified in the regulations: at least 60% but less than 70%, or at least 80% but

less than 90%. All other plans that obtained timely 2007 lookback AFTAP certifications –

that is, plans with 2007 lookback AFTAP below 60%, at least 70% but less than 80%, or at

least 90% – are not subject to lump sum or accrual restrictions during the first nine months of

the plan year and before the actuary has certified the 2008 AFTAP. If the final regulations

retain this rule, some well-funded plans could have restrictions triggered six months earlier

than some poorly funded plans.

Example. Before April 1, 2008, calendar-year pension Plan A obtains an actuary’s

certification that its 2007 lookback AFTAP is 83%. This is within one of the ranges (at least

80% but less than 90%) that triggers a presumption on April 1, 2008. Unless Plan A obtains

by April 1, 2008 an actuary’s certification that its 2008 AFTAP is at least 80%, its 2008

presumed AFTAP is 73% (prior year’s 83% AFTAP minus 10%), triggering partial lump

sum restrictions starting April 1.

Example. Before April 1, 2008, calendar-year pension Plan B obtains an actuary’s

certification that its 2007 lookback AFTAP is 55%. Because Plan B’s 2007 lookback AFTAP

is outside of the ranges that trigger presumptions on April 1, Plan B may continue benefit

accruals and unlimited lump sum payments through September 30, 2008. In fact, to stop

paying lump sums before October 1, 2008, Plan B must obtain an actuary’s certification that

the plan’s 2008 specific AFTAP is below 60% (because “less than 60%” isn’t a permissible

range certification).

IRS representatives have indicated informally that they did not intend to allow plans less than

90% funded to take advantage of this six-month extension. Therefore, sponsors of plans with

2007 lookback AFTAP below 60% or at least 70% but less than 80% should look for changes in

the final regulations that may require them to obtain 2008 AFTAP certifications by the fourth

month of 2008.

How are people interpreting the distribution requirements of this? It appears to me that blanket distribution is required, but I am seeing indications that some organizations intend to distribute it only to payees. Anyone have insight into how the IRS (or other applicable authorities) view the distribution requirement?

Since we are getting down to the final deadline for AFTAPs and calendar year plans, I wanted to know if anyone has heard any formal, or informal, news on how to deal with a new BOY 1/1/07 val with 0 assets and 0 liability?

If not, what are most of you doing? Are you certifying to 0% or 100%?

As I read it, benefit accrual restrictions do not apply to new plans for the first 5 years , although lump sum restrictions do apply immediately. Hence, if 0% is certified, a notice would be required to restrict lump sums (how ridiculous)!

thanks.....

Sole prop has Schedule C income of $50,000. Has both a DB and a 401(k) plan. DB cost is $70,000.

I've always understood that this brings his income to zero, so he can't make any 401(k) deferrals. Am I crazy? If he already made them, I assume they must be refunded?

I'm having a bad morning. Driving in to work, with temperatures in the single digits and close to 2 feet of hard packed snow on the ground, I turned on the radio and the Red Sox were playing (behind already!) Major league baseball, under way in Japan, with March still roaring like a lion. This surrealistic start has left me completely off balance.

Have a situation where a terminated employee returns to work.

He did not intend to defer, since back on a part time basis. HR (payroll) screwed up and started deferrals based on his pre termination election (this occured in 2007). Participant wants the money back.

How to handle?

The Plan says a rehired former participant reenters Plan on DORH, so he was an eligible participant for deferrals.

I'm thinking that we can deal with this in a similar manner as an "opt out" in an auto enroll plan, ie: simply distribute and 1099.

The other option is to do a trustee check (mistaken contribution), and let them deal with it through payroll.

Thoughts?

Hello,

Participants received required annual AE notice prior to 1/1. Must they also receive notice of automatic increase taking effect 4/1?

Much thanks,

Melissa

If a plan allows deferrals on post sererance compensation, does the sponsor have to match those deferrals in cases where there are no allocation conditions on the match? From my interpretation of our 415 amendment, this would appear to be the case but it doesn't feel right.

If a participant is not yet at normal retirement date, can we still calculate the benefit at normal retirement date under the plan formula, then limit it to 415 at normal retirement date, then apply the accrual fraction, to obtain the accrued benefit. This is an issue when the normal retirement benefit is something like 255% compensation reduced for yrs of service less than 25 years. A participant with 5 years of participation now and 40 at NRD, limiting the benefit to 415 at NRD, would have an accrued benefit of 100% X 5/40 = 12.5%. But not limiting the benefit before the accrual fraction would give 255% X 5/40 = 31.9%.

The preamble to the final regulations states: "As indicated in the preamble to the proposed regulations, where a participant's accrued benefit is computed pursuant to the fractional rule of section 411(b)(1)©, the limitations of section 415(b) apply to the accrued benefit as of the end of the limitation year and, for ages prior to normal retirement age, are not required to be applied to the projected annual benefit commencing at normal retirement age from which the accrued benefit is computed."

Does the "are not required to be applied" mean "do not apply" or "do it either way"?

Any thoughts?