2008 distribution. Is the present value for someone say 12 years out from NRA equal to the product of (a) annnuity factor at NRA (based upon the 1st segment rate) times (b) the discount factor (12 years out would be based on the 2nd segment rate) times © the accrued benefit ? Assume no pre-NRA mortality discount.

Or is it more complicated than that ?

Suppose we have a plan established in 2007. The principal was hired 1/1/2002, makes 225,000 and has an NRA of 62.

The plan formula provides 5% of comp times years of service. Before the application of 415, the accrued benefit as of 1/1/07 is 225,000 x .05 x 5 = 56,250. As of 12/31/07 it's 67,500. After 415, both ABs are 15,000.

For 2007, when we determine the benefit accrual for Unit Credit Normal Cost purposes, do we have:

1 - 225,000 x .05 = 11,250

2 - 15,000 (EOY) - 0 (BOY) = 15,000

3 - 15,000 (EOY) - 15,000 (BOY) = 0

For Accrued Liability purposes, do we have 67,500 minus whatever we determined

for Normal Cost? Or are we limited to 15,000 minus the whatever piece?

For 2008, do we fund for the entire accrued benefit (227,500 x .05 x 7 = 79,625) or just the benefit after the 415 limit (185,000 x 2/10 = 37,000)?

Thanks for any thoughts on the subject.

I terminated employment in Feb. 2007, and received a letter from my employer stating that I was eligible for a distribution of my account balance, less a $125 processing fee. I chose to roll the distribution to an IRA, and this was processed in October 2007.

I recently (after my first distribution) received another letter from my employer stating that there was about $400 in my account. I was sent the same distribution forms to fill out, and told that I would be paid the balance of my account as of the date of distribution, less another $125 processing fee.

My daughter works for a TPA firm, and has told me that the funds in my account may have been from a contribution that the employer made after I had withdrawn my funds. She also said that when this happens where she works, they are able to send a letter to the investment platform instructing that a residual distribution be made according to my prior elections. Most importantly, they do not charge an additional distribution processing fee.

So, my question is... does anyone have a legal reason I can bring up as to why I should not be charged an additional distribution fee? If I had realized I had more money coming to me, and that this would happen, I would have waited another couple of months to receive my distribution.

Thank you!

Can an HCE receive a bonus FOR 2007 that is paid by March 15, 2008 and defer all or a portion of the bonus for purposes of 2007?

The spouse of an HCE is an "employee" of a small business, but was paid no W-2 wage for 2007. Assume the business is an S-corp. The HCE has drawn W-2 pay of $200,000 and there is $100,000 in taxable income left that will otherwise flow-thru to the HCE as S-corp. dividends. The client's TPA has suggested that the HCE pay his spouse $18,000 of the $100,000 as 2007 W-2 pay now (in 2008) and claims that this can be done because the 401(k) rules have been liberalized to permit pay received within 2-1/2 months of the end of a plan year to be treated, at the recipient's election, as pay relating to the prior year. In this case, the TPA claims that if the business bonuses the HCE's spouse $18,000 by March 15, 2008, she can defer up to $15,500 of it to the 401(k) plan FOR 2007. I know the final regulations make an exception for post-severance pay, but this seems almost too good to be true. Is the TPA right? How would such a bonus/deferral be reported? For example, would the spouse's 2007 W-2 include the bonus paid in 2008 as 2007 pay? Would it reflect the deferral made in 2008 as a 2007 deferral? Since the employer is generally obligated to issue a W-2 by January 31, 2008, wouldn't the decision to treat part of the $100,000 as the spouse's pay need to be made before January 31, 2008?

The TPA seemed very confident, even a little cocky, that this was OK so I felt uneasy questioning it too hard in front of the client. It just seems too good to be true, though. Any thoughts would be greatly appreciated.

We have a large plan with demographics that are really tough...no phones, no computers, no access to a fax, etc. Would anyone see issues with taking hardship requests over the phone on a recorded line. The participant would be told the available circumstances for hardship and asked which one applied, etc.

Appreciate anyones thoughts

Plan has a loan program that limits the amount that may be borrowed to 1/2 of the vested balance, and requires a pledge of the vested benefits as security for loans.

The loan program requires 5 year repayment period, unless to acquire a primary residence. Then it may be longer.

If the loan repayment period is longer than 5 years, i.e. to purchase a primary residence, must the loan be secured by a mortgage on the primary residence being purchased or will a pledge of the vested benefits be sufficient?

Employee participates in 401k safe harbor (matching) plan for two years, then quits with vested benefits. She re-hires on a year later (there was a break in service year). Now she only works 200 hours per year.

On re-hire she is allowed to participate at the next plan entry date. She makes elective deferrals and receives the safe harbor match.

If continuing to incur break in service years, will she become ineligible after the 5th break in service year occurs?

If she had not made any elective deferrals (and otherwise had no vested benefits) when she quit before re-hiring, would the answer be different?

Can anyone point me to a comprehensive list of the states that haven't adopted the federal tax treatment of I.R.C. Sec. 125 -- either completely or partially?

Most states agree to the federal law. But, it's well known that New Jersey generally includes cafeteria plan elections in taxable income (with a few limited exception). I believe that Pennsylvania also picks and chooses the types of elections that are excludable from income.

I'm doing some piecemeal research that's taking too long. Has anyone compiled the information in a single resource?

We currently have an HRA plan that allows for premium reimbursements of health insurance policies. Any reimbursements have always been only for individually purchased policies for the employee, spouse, dependents.

We have an employee who is divorcing and whose wife has cancelled the children's individual plans and signed up for the group plan at her company. I am assuming she is now paying her share of the premiums using pre-tax dollars.

The father (our employee) wants to submit for reimbursement for the children's premiums/and actually for the spouses as well until the divorce is final through our HRA plan. I don't believe we're allowed to reimburse him for premiums which have already been paid for using pre-tax dollars but can't seem to find where I read that before.

In the event his divorce dictates that he is responsible for paying the children's premium costs how will that work as far as filing a claim/reimbursement request through our HRA? Do we have to have him show proof he's reimbursing the wife for this cost?

I hate that employers are forced to managers of employees personal needs. But that's the mess the government has gotten us into!

My client failed to sign an amendment to their 401(k) plan updating their plan for the final 401(k) regulations by the end of their 2006 plan year. Any idea on how to fix this?

Consider a 401(k) plan where participants elect to defer a percentage of compensation pre-tax during year. When a participant's compensation reaches the compensation limit during the year, e.g. $230,000 for 2008, can the person keep deferring from compensation from the remainder of the year, if the participant has not yet gone over the 402(g) limit?

I've seen information in the ERISA Outline Book that seems to say yes, but I've gotten feedback from others that say no.

One relatively hidden point that seems to be important is that the participant must have elected (I don't know any plans that have this operational election) to defer a specific dollar amount, even if it is equal to the current 402(g) limit, and that makes the compliance part work, since the deferrals would be accelerated as necessary theoretically to avoid coming from excess compensation.

Would it be arguable that a participant's election of a percentage, where the application of the percentage to the participant's entire year of compensation would result in an amount over the 402(g) limit, is deemed to be an election to defer the maximum allowable 402(g) amount? This would have the same compliance outcome as the previous paragraph.

Employer has two plans.

Plan 1 - 401(k) safe harbor basic match plan - covers 3 hce's and 5 nhce's

Plan 2 - Prevailing Wage plan - covers the 5 nhce's (plan 1 above) who work in field

Employer wants to exclude the 5 nhce's from the 401(k) plan becuase he does not want to give them the safe harbor match. Can they do this if I aggregate the plans together and try to pass coverage using the average benefit test? I'm assuming the prevailing wage contribution is so large in relation to the nhce's salaries that the plan will pass ABT on a contribuiton basis and thus coverage. Is this allowable, or do I have to keep them in the 401(k) plan?

401(k) plan is top-heavy but the only contributions to the plan are 401(k) and safe harbor - so doesn't it get out of the mandatory top-heavy minimum because it is a "consists solely" of plan? Or does the prevaling wage going into the other plan screw up the consists solely of portion of the plan? Any guidance is greatly apprecited.

We know that loans from a qualified retirement plan cannot be included in a participant's list of creditors that he wants to write off. However, apparently his lawyer doesn't know that and included the plan loans (2) anyway. The plan administrator received a notice from the US Bankruptcy Court.

Does the plan administrator need to respond to the notice? There is a deadline to file a "complaint objecting to discharge of the debtor or to determine dischargeability of certain debts." The instructions say that if a creditor believes that the debtor is not entitled to receive a discharge you must start a lawsuit by filing a complaint in the bankruptcy clerk's office. I can't believe that the plan would have to go that far.

Let's suppose you have a somewhat typical small 401(k) plan - <100 employees. Some of them make deferrals - maybe 60% of them. Of these, there are a few - say a half dozen or less - who have not made an election as to what investments will be chosen, so they must be deposited into the "default" fund. Historically, this has often been a money market fund.

So here's the question: the employer must make the determination as to whether the fiduciary liability relief available by complying with the QDIA requirements is worth the potential hassle. While I would expect that most fiduciaries would want this protection, what potential penalties are there if they don't? I know there's a 20% civil penalty based upon the "applicable recovery amount" under ERISA if there's a settlement agreement with the DOL. Presumably a participant could bring suit for recovery of the difference between what they think they "should" have earned and what they actually earned - but these amounts are likely to be extremely small, and unlikely to be pursued in court. What else? For my own edification I'm trying to understand what the realistic risk is in most circumstances.

For additional discussion - could all or most of this be avoided more simply by a Plan Administrator having a deferral election which plainly states that the election is NOT valid UNLESS it is accompanied by an investment election? Of course this wouldn't help if there are employer discretionary or nonelective contributions for participants who aren't deferring, but if it is a straight safe-harbor matching 401(k) this might work.

Is an employer legally able to say, "make an election within the next 90 days or I'll fire you?"

Just looking to generate a little discussion.

I have many small DB plans that currently have an EOY val date. Many are DB/DC combinations and for that reason I like an EOY val date because I can do everything at once. Under normal circumstances a number of these plans would not have the 12/31/07 val completed by 4/1/08. Forgetting about the range certification for this discussion, my understanding is that at 4/1/08, without the 2007 results, the AFTAP would be considered less than 60% and the applicable restrictions would apply. Virtually all of these plans are less than 5 years old so the restriction would be limited to not making accelerated distribution payments (lump sums). Most of these plans are small and would not be making lump sum payments during that period anyway. Most of these plans will be 100% funded when certified. My understanding is that the restriction would apply until the 2007 val is completed and the 2007 AFTAP is certified (based on the 2007 results minus 10%). My understanding is that although a plan may be restricted from making lump sum payments, no amendments or notices are required. (A notice would be required if a benefit freeze applied.) If all of the above is true, for these well funded small plans that are less than 5 years old, on a practical level I don't see that there is any concern if the 12/31/07 val is not completed by 4/1/08 and therefore the restriction on accelerated payments applies (for a few months). If that's the case then for the clients that can't or won't get me the 12/31/07 val data before 4/1/08 I don't have to worry about switching to a 2007 BOY val or doing a 2008 range certification in order to have a certification done by 4/1/08.

I would appreciate some feedback with respect to the above. Right, wrong, pitfalls?

IF the above were correct, then taking it a step further:

Unless there is a change in the current law to accomodate EOY vals I will need to do a 1/1/08 BOY val so that I could get the 2008 AFTAP completed by 10/1/08. Otherwise, if the 2008 val isn't completed by 10/1/08 the plan will again be considered less than 60% funded until the 2008 val is completed. But if the plan is under 5 years old that might not be so bad and I could stick with a 12/31/08 EOY val. Just let the plan go below 60% from 10/1/08 until the 12/31/08 val is completed, say that's 7/1/09, then if any lump sums are payable, pay them between 7/1/09 and 10/1/09 (assuming the certification shows 80%+).

Could this be a strategy for:

A. Keeping life simple

B. Getting dis-enrolled and sued into the poorhouse

C. Neither A. or B. but at least a good long BenefitsLink posting

Are per capita QNEC's subject to the same limitations on targeted QNEC's?

So basically, after the final 401k regs, are per capita QNEC's essentially dead, assuming you have a low paid terminated HCE?

Does anyone know of a report in Relius that shows stock ownership, both direct and by attribution?

The participant will not be 70 1/2 until June 2008. If he takes a distribution in January of 2008, that will count toward the RMD for 2008, correct?

For the past few years, our audit firm (one of the big 4) has performed an annual ERISA claim audit for our self-insured plan on-site at the TPA. For 2008 we have changed to a new TPA. As part of our contract discussion, we wanted to include specific language addressing this. According to the TPA, this is not standard with their other accounts. Is the audit firm (which we have also changed for 2008) following a specific guideline or just being overly vigilant?

A participant in a DB plan wants to know whether he and/or his wife are eligible to make deductible contributions to traditional IRAs for 2007. The DB plan was frozen in 2005. However, the employer was apparently required to make additional contributions to the plan--what they are claiming are "actuarial adjustments"--before terminating the plan in August 2007. The question here is whether there was active participation in the plan in 2007. Normally, relying on Notice 87-16, I would say there is no active participation in a frozen DB plan. However, does the fact that some sort of actuarial adjustment was made change this? I'm guessing that it does.