The plan wants to provide for different allocation groups for the two doctors. One would be physicians over age 45 and the other would be physicians 45 and under. Can we do this? I've always been wary of using age for things like exclusions from participation and such. Is it a problem for Xtested allocation groups? Thank you.

We have a 3-tiered match formula. When testing each tier for BRF, the highest tier fails. How is this corrected? Via QNEC/QMAC?

Employer plan provides deferrals and match after 6 months, no age requirement. Effective 2009, the employer wishes to offer a safe harbor match to participants who are not otherwise excludables but not require age 21. They also want to offer a less generous match to the otherwise excludables until they are eligible for the safe harbor match. Is this ok?

To top it off, they currently offer a unique match formula: the greater of 100% of deferrals up to $20 (per pay) or 50% of deferrals up to 4% of pay. If they were to change to safe harbor, is it possible to ensure that noone's match is less than what the participant would have received under this current formula?

I SAW THIS POST ON ANOTHER DISCUSSION FORUM AND NO ONE WAS ABLE TO ANSWER - I'm curious as to what the answer to this would be- can anyone here help?

25% deductible limit for aggregate testing

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I am performing some aggregate testing for a cash balance plan with profit sharing plan. We are hitting the 25% compensation deductible limit. We are doing the testing for the plan year 1/1/2007 – 12/31/2007.

There were some employees who left during the year 2007; they were paid their match on salary deferrals. Since they will not be paid any profit sharing, I am of the opinion that their salary cannot be added into the total salary amount (my associate has added them into the total compensation and hence increased the 25% total compensation deductible limit).

Can anyone help answer or point me to a link that clarifies this

Is it possible that as an alternative to converting a traditional DB plan to a Cash Balance plan, that you freeze the existing DB plan and start a new Cash Balance plan. Doesn't this in effect give you the A plus B scenario?

If a safe harbor 401(k) plan that makes the 3% safe-harbor nonelective contribution for all NHCEs (HCE excluded) is also top-heavy, does the plan satisfy the T-H contribution requirement if they have non-key HCEs who are not receiving the 3% S-H contrib?

They do not want to make any additional er contrib besides the 3% to all NHCEs.

Has anyone assembled a spreadsheet for determining minimum contribution requirements under 430 (incorporating use of credit balances) and including all of the trigger percentages they would be willing to share? In particular, there exists the cart-horse proposition of knowing what your client is thinking of contributing before you determine whether or not to use the FSCB (old carry over). Here is the minimum if you want to make the bare minimum contribution; here is the minimum if your planning to make more than the bare minimum contribution.

E.g., FSCB=3,000, TNC+Amortization=2,000. Bare minimum = $0 but client contributes $2,000. If quote bare minimum, we end up with FSCB=1,000 and PFB=2,000. Whereas if we don't use FSCB, we end up with FSCB=$3,000 and PFB=0, which is more desirable.

Employer subcontracts all of its work to a unionized subcontractor. Unionized subcontractor contributes to Fund on behalf of subcontractor's employees. Employer remains obligated to contribute under CBA, but has no employees. Has the employer ceased covered operations such that it is subject to withdrawal liability or does the subcontractor's continuation of the work constitute a continuation of operations. Is there any authority on this issue one way or the other?

We have a client that has a welfare plan. During the plan year the company was sold off. A small portion of the company was bought by new owners, new name, new tax id #, but same employees.

They are using the same plan document. I believe they need a new plan document for the new company with new effective date, tax id, etc. The HR person has a different opinion.

I also believe the Form 5500 for the welfare plan should be filed as final.

If I need to include more info - please ask!

Any thoughts on all of this would be appreciated.

Thanks.

We received one of the IRS's notices of late filings of 5500 for 2004. It is for a 401(k) plan sponsored and administered by a company we acquired in 2003 (through stock acquisition). I have a copy of the board resolution which states that the plan was terminated prior to our acquisition of the stock of the company. Unfortunately, the prior plan administrator did not indicate on the 2003 5500 filing that it was the final return and actually showed plan assets in the trust at the end of 2003. (I'm still trying to determine where those assets went - we believe they were either distributed to participants or rolled over into our 401(k) plan.) How should I handle this? If I amend the 2003 filing, who would sign as plan administrator and plan sponsor since the plan was terminated prior to our acquistion? Any help would be appreciated!

I'm having a bit of trouble thinking this through:

Benefit Frozen 1/1/1993. The participant's frozen monthly AB at that point is $1000

Participant reaches NRA at 1/1/1996, but continues working.

Effective 01/01/1999, new formula applies to post 98 svc. The Benefit is the Frozen AB at 01/01/1993, plus the new benefit formula times service after 01/01/1999.

Lets say that the new formula is 2% times Post 98 service and the participant's salary is $100,000.

At 01/01/1999, the participant's benefit is the $1000 actuarially increased from 1/01/1996 to 01/01/1999. Correct? Lets say this is $1,200.

What is the benefit payable when the participan retires at 01/01/2009? Greater of one of the following?

a. $1000 actuarially increased from 01/01/1996 to 01/01/2009; or

b. Post 98 service benefit through 01/01/2009 ($1,666.67), plus $1200. Should the $1200 be actuarially increased from 01/01/1999 to 01/01/2009?; or

c. Post 98 service benefit through 01/01/2008 ($1,500.00), plus $1200 (actuarially increased from 01/01/1999 to 01/01/2008?), actuarially increased to 01/01/2009.

d. Something else?

To pass the non-discimination test for our dependent care flexible spending account, we need to reduce contribution levels of HCEs from $5000 to around $3500 for this calendar year. We are in the process of hiring a new HCE - should we also limit this employee's contribution level to $3500 to be consistent? (I'm aware that the determination of who is an HCE is made based on prior year's earnings, which would be zero in this new employee's case.) If you think the contribution should be limited, does it make a difference if the employee was hired later in the year and his actual earnings would not meet the HCE definition? Your thoughts are appreciated!

We're having a disagreement about how a plan that terminates its safe harbor contribution mid year is treated for top heavy purposes. Some of my associates believe that because the plan was safe harbor on the determination date, the fact that they amend away the safe harbor during the year does not change their top heavy status during the year of the amendment. Others believe that although the balances are determined as of a date when the plan was safe harbor, once the amendment is effective, the top heavy exemption goes away immediately. We haven't been able to locate any authority to support either position.

Knowing that a gut feeling is not necessarily a reliable authority, I'm hoping someone here has something more definitive.

This discussion pertains to Plans of fewer than 500 participants. In short, we're dealing with plan sponsors where there is no benefit expert HR or CFO and more often than not, you're dealing with the company owner.

Without regard to employing the full yield curve, there appear to be 10 possibilities in selecting funding segment rates -- with or without phase-in and using one of five look-back months. If phase-in is employed, then employer may elect (without IRS approval) to revoke the phase-in election in 2009. However, adopting the phase-in after 2008 requires IRS approval.

In establishing the interest rate assumption historically, the type of investments and long-term investment policy would be considered. Now, it appears we're into crystal-balling the bond market and all we can say is here's the effect for 2008 and here's the potential effect on 2009 if your decision regarding 2008 goes south.

However (if I've got this right and please comment if you see otherwise), this is more complication than sponsors of small Plans want to take the time for, if they could even understand it. Consequently, they will say "do it." As such, unless there is some compelling reason to do otherwise, I intend to recommend "phase-in" with fifth look back month. This seems to offer the most flexibility (5th month facilitates more reliable pre-plan year estimates). This means for most 2008 calendar year valuations, I would be proposing using (5.66%, 5.85%, and 6.03%). For this selection, only the look-back month appears to require an employer election.

There are two issues: (1) What should you being telling the plan sponsor as far as what his options are and their ramifications and (2) How does the employer make the election?

This is a damned-if-you-do and damned-if-you-don't situation. It seems as if you're almost greenmailing the client into going with your recommendation, which while not good, is what he wants. We do so much of this anyway without getting into "cya" exercises. The alternative is to paper the client to death describing the meaning of the election and the potential consequences (and why we're not using the full yield curve!). Since the phase-in is for two years, except in certain situations, I'm thinking about simply downplaying it. In short, it generally will not be a material decision.

I am not seeking universal agreement and would welcome comments as to approaches considered.

i represent a plan sponsor that would like to purchase property from the plan at FMV. My research tells me that he can do this by filing for a class exemption and waiver of the excise tax under the VFC program. can anyone confirm this is a correct interpretation?

A client wants to use a definition of compensation that qualifies as a 414(s) safe harbor for purposes of contribution and testing. Specifically, they want to define compensation as wages, etc. but excluding reimbursements/expense allowances, fringe benefits, moving expenses, deferred compensation, and welfare benefits (mirroring 1/414(s)-1©(3)). From a factual perspective, they do not want to have to include noncash items (e.g., use of company car, gift certificates awards, etc.) in the amount from which employees are permitted to defer. Potential contributions to the plan include elective deferrals, matching contributions and employee after-tax contributions.

Questions:

(1) Can such a plan use a 414(s) safe harbor definition of comp for both testing AND contribution? That seems odd to me from a logical perspective in the sense that a comp def that satisfies 415©(3) satisfies 414(s), but here they're using a def that satisfies 414(s) but not 415©(3) . . .

(2) If the answer to (1) is yes, mustn't the plan use a different definition of comp for other purposes in the plan - e.g, defining HCEs, Key EEs, etc.? And, in that event, doesn't the plan need a separate definition of comp for those purposes? (Noting then that def would need to comply with the 415 regs.)

(3) Would these answers change if the plan permitted a discretionary profit-sharing contribution? Would that only come into play in years the employer opted to make such a contribution?

The following appears as the instruction for Box 2 of the 2008 5498:

Box 2. Rollover Contributions

Enter any rollover contributions to any IRA received by you

during 2008. Include a direct rollover from a qualified plan

(including a governmental section 457(b) plan) or section

403(b) plan. Also include any qualified rollover contribution, as

defined in section 408A(e), from an eligible retirement plan

(other than an IRA) to a Roth IRA. For the rollover of property,

enter the FMV of the property on the date you receive it. This

value may be different from the value of the property on the

date it was distributed to the participant.

It appears that direct Rollovers to a Roth IRA from 401(a), 403(a) & (b) as well as 457(b) plans are reported in the Rollover Box of the Roth 5498 and the Roth IRA box is checked in Box 7 instead of reporting these transactions as conversions in box 3.

Is this a correct interpretation?

If your plan doc's actuarial equivalence uses say 5% for pre- and post retirement interest rates, interest credit on theoretical account balance is 6%, and valuation funding assumptions were 6% (assume same mortality table for both funding and plan doc), would your annuity benefit for unit credit funding be determined based upon:

1. Project acct bal at 6% to NRA; convert to annuity using funding assumptions of 6%

2. Project acct bal at 6% to NRA; convert to annuity using actuarial equiv. of 5%.

3. Something different (please share any alternate approach)

Any thoughts ? Is there a definite black-and-white approach or are there alternative approaches equally feasible ? Thanks for any input.

A company sponsors a 401k plan.

They want to terminate their current plan and distribute plan assets.

Is there a time frame (eg. 12 months) before they can implement a new plan?

Does anyone know a specific citation on t his issue?

Thanks.

Solo 401(k) plan (owner and spouse) went over the $100,000 threshold in 2006 so a return was filed.

Their balance is now greater than $100,000 but less than $250,000.

Since the threshold is now $250,000, must I continue to file since I filed for 2006 or do I just stop since their balance is less than $250,000?

If you know where I can find this information, I would really appreciate it.

Thank You,