An ERISA attorney for a client is insisting that the regs are not clear regarding the 3 year vesting requirement for existing Cash Balance Plans. He thinks that, analogous to DC Plans, that the pre 2007 accrued benefits can continue to vest at the pre PPA rate and the 3 year schedule only applies to post PPA accrued benefits. I believe the regs make it clear that the 3 year schedule applies to the entire accrued benefit.

Has anyone heard any interpretation similar to this one?

A 401(k) plan will be terminating this year. It has been determined that one item on Schedule I has been filled out incorrectly going back to the year 1997. Specifically, participant loans were listed as Loans (other than to participants). Does this need to be amended for each year going all the way back?

I'm new to this board, so I apologize in advance if there is already a thread on this topic...

I am trying to determine HOW the compensation limit must be administered in terms of limiting of contributions by plan participants. I have seen lots of opinions but have yet to find an IRS ruling or opinion clarifying how plans must handle this. I'll give two scenarios to clarify my question...can anyone lead me to something issued by the IRS with regard to how they view this guideline?

1) Employee A does not participate in the plan until May. By that time, he has already made in excess of $230,000 in eligible compensation. Can he contribute to the plan beginning in May, or has he lost his chance since that annual limit has been reached?

2) Employee B does participate in the plan but gets a very large bonus on 3/15 which she chooses NOT to defer 401(k) from (although it is eligible earnings). The bonus puts her over the annual compensation limit of $230,000. Does she now lose her chance to continue deferring from base earnings at her regular contribution rate?

I appreciate any help anyone can offer...I am just having a hard time finding anything concrete.

Thank you!

Fidelity Employer Services Company LLC is the administrator for a QDRO I am working on.

Fidelity says that it requires an affidavit signed by both parties attesting that the AP is a former "spouse" under the definitions under the Federal Defense of Marriage Act. Interestingly, Fidelity says it will not transfer any funds until it has the affidavit.

In my case Husband has not responded to any of my correspondence, so I am anticipating that he will not sign the affidavit.

Have any of you encountered this situation? What have you done? What is your advice?

ER has a nonqualified, top-hat DB plan for a former member of management who has retired. The payments are made out of the employer's general assets. It is merely a promise by the employer to pay X amount per month for the remainder of the retiree's life. The individual retired 12/31/2006, and payments began in 2007.

It would appear such should be reported on Form 1099-MISC, Box 7. Is this correct?

It also appears that such will not be considered earnings for purposes of reducing his Social Security Benefits (he's 63 years old). Is this correct?

Where can I find the definition of "Separation from Service" in the Code and/or in ERISA? If it comes through other guidance, a description of such guidance would b helpful so that I may retrieve it. Thanks in advance!

Nonprofit agency with 403(b) plans and about 100 employees makes periodic evaluation and assessment of plan investments. Upon advice of broker plan sponsor agrees to make certain plan investment options obsolete and to "map" existing investments in those options to comparable alternative choices.

Broker/investment provider (a major national firm) provides a notification letter for the sponsor to distribute to participants, identifying discontinued options and new options that account balances will be transferred to (and that will receive future contributions).

Broker/provider gets notification letter to sponsor only a few days before planned investment transfer. Plan sponsor does not understand that notification letter needs to get to participants within the applicable time window.

Investments move to new mapped options.

How can the employer repair the broken 404© process under this situation? Individual meetings between affected participants (around 36 folks) and the broker, offering to let participants back out transfer and select new options, plus earnings, if any)? And/or detailed disclosure to all about performance/fees of old investment options versus new ones?

I would appreciate any suggestions.

Would an IRA that owned shares in a corporation be considered as the same person as the individual for determining whether two or more entities consitute a controlled group? For example A owns "A Inc" his IRA owns "B Inc" would A Inc and B Inc be a controlled group?

Thanks

I have a plan that is intergated with social security for the profit sharing contribution. They also make a matching contribution that is 50% up to 6% of comp. The plan is top heavy. For 2007 the profit sharing contribution is 3.08% of compensation. I know how to allocate the contribution if the plan is top heavy, 3% to all and for the remaining allocated on the excess comp. What is confusing me is the match and the top heavy minimum. If I allocate the profit sharing contribution prorata on comp plus excess comp (as if not top heavy) and then add the match, everyone but one receives at least 3% of comp. I guess my question is do I ignore the match when it comes to allocating the profit sharing contribution and everyone would receive the top heavy minimum with the profit sharing. I hope that isn't too confusing.

Are aftertax contributions allowed under money purchase plans and what is the authority for this?

A named designated non-spouse beneficiary received QRP account due to death of participant in 2003. She started a 15-year installment payment stream. First installment payment made in 2004 (year following year of death), then subsequent payments made in 2005, 2006, 2007, and 2008.

Plan requires non-spouse beneficiaries to take payment in either lump sum within 90 days following the end of the year of the death, or in installment payments not exceeding 20 years.

The 5th installment payment has been paid in 2008.

The designated non-spouse beneficiary now wants to rollover the remaining balance of $150K to an Inherited IRA.

Given that the plan does not specifically limit the distribution to a 5-year rule, but rather allows non-spouse beneficiaries to take installments up to 20 years, I am not sure the new non-spouse beneficiary rules provide for the ability to roll any of these assets to the Inherited IRA this long after the death (since the rules did not exist at that time for Inherited IRAs).

I do not see any exception for a death that occurred years ago (prior to 2006), to allow a post-2006 PPA non-spouse beneficiary rollover to an Inherited IRA to be allowed this late in the installment process that will provide a tax benefit.

Any thoughts as to an allowance of an Inherited IRA after this prolonged period would be appreciated.

Thank you,

Andmik

Under Code Section 401(k)(10), a distribution cannot be made in connection with a 401(k) termination if the employer maintains another DC plan. However, IRS regulations provide that this limitation will not apply if at all times during the 24-month period begining 12 months before the date of termination, fewer than 2% of the employees who were eligible under the terminating plan as of the date of termination are eligible under the other DC plan of the employer. I have a client with an acquired 401(k) plan that is now frozen and has only current one employee who still has an account. This person is an active participant in the client's ongoing 401(k) plan, and the client wants to terminate the acquired plan (merger is tenatively out due to the recordkeeper's high fees, even for one account). Since there is no one who is now eligible under the acquired plan, it would seem that the client is okay. However, it concerns me that the regs would appear to allow any employer to satisfy the 2% rule merely by freezing a 401(k) plan before termination. Can anyone give any insight on this issue?

If a plan sponsor erroneously contributes to much to their plan. What are the acceptable methods of getting the money back out.

In this case, the max deductible contribution is $37,000, and the client put in $78,000.

There was no error in the actuarial calculation, so I don't know what prompted the larger amount to be contributed. Can it be removed as a Mistake in Fact?

I always thought that if the amount exceeded $25,000 that you had to apply to the IRS to get them to disallow the deduction, which would allow a removal of the contribution.

Thanks!

I have a few plans close to being over funded (even in this market) and want to make sure I'm pulling out all the stops to avoid it if possible. What are the main changes in final 415 regs that might cause one to have a grandfathered (preserved) benefit higher than new regs would allow. I can think of the compensation now being limited to the 401(a)(17) comp limit, what other changes should we be looking for ?

Question: If a plan fails the 2006 NDT test and GAP earnings were not calculated, what is the appropriate action to take to "fix" the GAP earnings piece? Can they simply distribute the additional "earnings"? Or since we are beyond the 12 month 'correction' period, was/is the test not consider "fully corrected" and now must the plan correct under EPCRS-which then means you can not apply the "otherwise" excludable rule and do a one-to-one qnec?

Any help/thoughts would be greatly appreciated.

For comp attributable to stock options to be perf-based comp, the regs provide that the "plan under which the option..is granted states the maximum number of shares... to ANY employee."

Your experience re: there being simply an aggregate/max limit for ANY (meaning not any one employee can exceed this max limit) versus the per employee limit? Trying to deal w/ a plan where only max is specified, but not employee limit -- client likely to come under IRS audit.

Does a plan termination create a short plan year for testing purposes? Here is a little background:

Due to an acquistion, the plan sponsor amends the plan to terminated the 401(k) plan effective 1/31/2007. The participants are now participating in another plan. All assets of the "terminated" plan are in the process of being distributed to the participants. (They may have the option of rolling into the other plan). For 5500 purposes, they would continue to file normally until the final assets are distributed. For testing, would they run a "short" plan year test from 1/1/-1/31/2007? If this is the case are the compensation/contributions(415) prorated for the 1 month period?

Any help would be appreciated?

An employee on medical leave of absence is eligible for subsidized health coverage as long as the premium is paid. If deliquent in their payments, they are sent several notifications warning of potential cancellation. We recently cancelled coverage for someone who went out on medical leave in 2000 after they fell behind over 2 months. This person contacted the TPA for our self-insured plan and was told she was eligible for COBRA. We disagree as we do not feel that this is a qualifying event. Are we wrong?

Mom & Pop are covered under Pop's employment, Pop resigns from employment and takes New York State COBRA for he and spouse. One month later the baby arrives - how is the baby covered under COBRA and for how long?

Markova

I have an calendar year ongoing plan with a beginning of year val date. Plan benefits were frozen in 2006. The 1/1/07 val has been completed but the 2007 Schedule B has not. There is a 2007 minimum required contribution of $0. The expected 2007 contribution is $500,000. There was no contribution made for 2006.

At 1/1/07 I have the following AFTAP info:

Assets / CL = 82%

(Assets - COB) / CL = 62%, which becomes 52% at 4/1/08

In the 8/31/07 proposed regs on benefit restrictions, Section II(A)(5) on "deemed election to reduce prefunding and funding standard carryover balances" says that if a plan "is presumed to have an AFTAP less than 60% under the Section 436(h) presumption rules, then the plan is treated as if the plan's funding standard carryover balance and prefunding balance are insufficient to increase the plan's AFTAP to the threshold percentage".

So it seems that even though waiving some of the carryover balance at the 4/1/08 measurement date would allow this plan to pay 50% partial lump sums, that is not possible and the plan is therefore restricted from paying any lump sums until the 2008 AFTAP is certified before 10/1/08 and if that funded percentage is 60% or more.

Is that correct, or have I misinterpreted or missed something?