Are the assumptions below correct? I have seen conflicting information regarding the Safe Harbor.

2 companies, 1 owner owns 90% of both = controlled group

Looking to set up safe harbor (basic match) for company A and no plan for company B

Coverage - need to include all employees of A & B for coverage testing

ADP/ACP - only plan is Safe Harbor, all employees of company B are not eligible and thus excluded

Any clarification would be appreciated. Thanks.

Employer's DB plan has a 10/31 YE whose limitation year is defined as the calendar year that ends within the plan year. Because the plan is fully funded and no contribution can be made, they are considering adding a DC plan so that something can be contributed. Assumedly, the new plan would also have a 10/31 YE.

If the limitation year in the new DC plan is defined the same way as the DB's, it appears that there wouldn't be a problem if only profit sharing contributions were made. However, if they opt for a 401k plan, wouldn't the deferrals have to come out of the compensation that was paid only during the two month overlap between the PY and the limitation year? If this is true, defining the limitation year the same as the plan year would seem more practical, but I was wondering if there was anything in the law that prevents an employer from having two plans with different limitation years. I know this would be difficult to keep track of, and I can't say I'm sure how their CPA would take deductions if contributions to both plans would be allowed some time in the future, but we're trying to find the simplest way for them to make contributions while their DB plan is fully funded. All help is greatly appreciated.

Have a friend who is teaching probability and statistics and I mentioned to her that there was approximately a 50% chance that a person would live to life expectancy. She asked could I prove it. Being immersed in libation, nothing came to mind and I didn't care to reinvent a wheel. Can anyone point to a demonstration (e.g., society transactions, book on life contingencies) of this intuitive conclusion?

So if I understand the rules correctly, if we don't have the AFTAP done by 12/31/07 for 2007 then 1/1/08 we are deemed to have a 60% AFTAP for contingent events and amendment purposes, but under a transitional rule don't have benefit restrictions (e.g., lump sums) until 4/1/08 (calendar plan assumed). So for those of us stubborn or slow to change to BOY vals, with little hope of getting all 2007 vals done for AFTAP purposes by 12/31/07, are we SOL ?? Any friends out there sharing these woes ?? Do we still have hope for divine intervention by IRS for EOY vals that might relax these rules and/or a Congressional delay on these rules ? Misery loves company, so I'm looking for friends out there if anyone is in this situation too, and if so, what if anything are you doing about this at this point ? Maybe there isn't much to be done except for whatever few frantic Vals/AFTAP could get done by 12/31/07.

The Golden Phone

>

>

> A man in Topeka , Kansas decided to write a

> book about Churches around the country. He started by

> flying to San Francisco and started working east from there.

>

>

> Going to a very large church, he began taking

> photographs and making notes. He spotted a golden

> telephone on the vestibule wall and was intrigued with a sign, which

> read 'Calls: $10,000 a minute.' Seeking out the pastor he asked about

> the phone and the sign. The pastor answered that this

> golden phone is, in fact, a direct line to heaven and if he pays the

price

> he can talk directly to God.

>

>

>

> The man thanked the pastor and continued on

> his way. As he continued to visit churches in Seattle,

> Dallas, St. Louis, Chicago, Milwaukee, and around the

> United States, he found more phones, with the same sign, and the same

> answer from each pastor.

>

>

> Finally, he arrived on the East Coast. Upon

> entering a church in Boston. Behold - he saw the

> usual golden telephone. But THIS time, the sign read "Calls: 35

> cents."

>

>

>

> Fascinated, he asked to talk to the pastor,

> "Reverend, I have been in cities all across the country and

> in each church I have found this golden telephone and have

> been told it is a direct line to Heaven and that I could talk to God,

> but in the other churches the cost was $10,000 a minute. Your

> sign reads only 35 cents a call.

>

> "Why?"

>

>

> The pastor, smiling benignly, replied, 'Son,

> you're in Boston, Massachusetts now, home of the Boston

> Red Sox, Patriots and Celts

> You're in God's Country, It's a local call.

Potentail client contacted us interested in establishing a one-man DB plan. Currently age 60, would run for five years w/ NRA of age 65. Salary and past salary well over max limits, more than 10 Years of past service.

Originally ran a proposal w/ the following 415 limits:

Lesser of $180,000 x 5/10 participation, $225,000 High 3 limit (over 10 Yos) so no proration.

Client was interested; in further discussions as to prior plans etc., admitted that had a DB plan in the past back in the 80s. No hope of locating specifics other than a LS payout of $140k at the end of '88.

Went through the 415 final regs for guidance (multiple annuity starting dates). W/O guidance, considered figuring benefit equivalent of payout using 94GAR @ 5.5%, payable at age 65 for offset. Also checked against 1983 IAM @ 5.0% (common assumptions during 80s). Seemed that 94GAR @ 5.5% provided higher offset, so would go with that amount. Benefit came out to a little under $3000/mo at age 65.

However, just realized now that there was participation under prior plan. Client said plan had been in effect for 5 years in past.

So now think that the limit should be:

Lesser of $180,000 x 10/10 - $3,000 x 12 offset, and $225,000 - $3,000 x 12 offset, which actually results in a higher allowable benefit than originally contemplated under initial proposal.

Any comments or anything I'm missing? Have basically no hope of getting prior plan document, but I thought "worst casing" the offset seemed to be in line with the final 415 regs (although I know that the MASD stuff got pulled).

I have a client who does self-funded health ins. administration, but uses us for the FSA/dcap. They have a calendar year flexible spending plan. They want to start an HSA March 1, 2008. They want a 2 month year, just January and February 2008, then terminate that plan. Then start a new plan March 1, 2008 with dcap, but only limited purpose FSA,and have that be a short plan year ending 12/31. First new full plan year would be 1/1/09 to 12/31/09. They do not have the 2 month and 15 day extension period.

Does anyone have any thoughts on this? Thanks. My call with them to discuss is Thursday at 9:30.

Can anyone point me to a source (or share your own examples) which provides guidance on reasonable formula's used to calculate an individual participan't investment rate of return that can be communicated via a participant account statement?

I am assuming that any reasonable method can be used to determine this individual rate of return on an accoun statement. I would expect that it is prudent to describe (on the statement) to a certain detail the formula/manner used to arrive at the rate.

Although I have used various methods of calculating rate of return for other purposes, I have never actually communicated this to a participant such as providing it through an account statement generated by a recordkeeper.

Any help would be appreciated.

Thanks

Does anyone have, or know of, a chart illustrating the different provisions applicable to ACA, EACA, QACA?

I have some questions, a couple specific ones and another, more general question, in light of 409A's regulation of extensions of option exercise periods that I would welcome others' thoughts on:

1. Is it fair to read 1.409A-1(b)(5)(v)©(2) providing that extensions of a stock right before April 10, 2007 solely in order to provide the holder of such stock right an additional time beyond the time originally prescribed within which to exercise such stock right are disregarded for 409A extension purposes as broadly as it seems to be drafted? That is to say, if we had a case where the option term (actual term, not just a post-separation exercise period) expired at the end of 2006 but the parties basically permitted the optionee to exercise the option in early 2007 before April 10, 2007 there should be no 409A concern.

2. What if similar situation as in 1 above with option expiring on December 31, 2006 and parties permitted optionee to exercise expired option in 2007 any way but after April 10, 2007. Option was in-the-money at time of exercise. I am assuming there is basically no way to rescind the actual exercise. (Assume that you could rescind the amendment / extension of option term prior to end of 2007 provided the option hadn't been exercised but here the option was basically extended / exercised at the same time.) Option was not drafted to be 409A compliant so am assuming we have 409A violation dating back to original grant. If option was all vested prior to 2005, could you argue it is grandfathered? Assume not since it has been materially modified by the extension. Does that mean optionee would have been treated as receiving non-409A compliant deferred comp on option spread amount as option vested and would owe 409A excise taxes and late filing penalties and interest?

3. Curious what people are doing with in-the-money options with original terms that are about to expire. Have seen many 6-7 year option terms of small start-ups that are about to expire. The options are in-the-money but there has been no change in control and none are on the immediate horizon for the companies so optionees are faced with exercising, paying taxes and having to hold illiquid stock. (Obviously, usual risks for private company options but 7 years ago everybody assumed company would have undergone some liquidity event and so wasn't a real issue.) I don't see any way to really extend the original option term under 409A. I suppose you could let the old options expire and grant new, discounted options with 409A-compliant terms but that's not really very desirable. If you grant restricted stock, that results in immediate taxes to optionees without any liquid market. (Query whether those approaches might result in some form of illegal substitution.) Granting new replacement options that aren't discounted obviously causes optionees to forfeit appreciation to date. Anybody come up with creative ways to hold on to the optionees' appreciation and not require exercise or taxes?

Plan is a safe harbor plan, with immediate eligibility for elective deferrals, but one year of service required to be eligible to receive safe harbor match. (Plan is tested appropriately using disaggregation). Is the safe harbor notice required for all employees, or only those eligible to receive the match? I have not been able to find guidance one way or another.

Code Section 409(o)(1)© provides that the plan must provide that unless the participant elects otherwise, the distribution of the participants' accounts will be in substantilly equal period payments over a period of 5 years (extended for large account balances). Does this mean that the plan has to offer installments? Does this mean that a plan can't just offer a single sum payment option (permitting distribution of stock or cash at the election of the participant)?

We have not done very many RMD's for DB participants. The last one may have been back before 2003 when it was treated as in individual account plan.

Question: If the participant reaches age 70 1/2 and his souse is the sole beneficiary, can the RMD be based on a 100% J & S even if the normal form of benefit under the plan is a life annuity? Alternate Forms of benefit payments include single sum, annuity (variable or fixed) over the life or joint lives of the participant and beneficiary, or installments. The QJSA is 50%.

Thanks much.

Have a client with an existing grandfathered 401(k) plan

They want to have 2 different levels of eligibility for different employee classes

One class of employee would come in right away

The second class of employee would continue to wait

2 questions:

1. Can we have a municipal 401(k) plan with 2 different eligibility definitions?

2. I'm thinking that as we're only going to be considering employees who have zero compensation in the prior plan year, that all these employees would be NHCEs. Is that right? Or am I thinking to much like a for profit 401(k) plan?

Thanks

Are there Regulations/Guidance mandating what type of investment funds forfeiture account assets must be invested in?

We understand that low risk is a must, but do these type of assets have to be in Money Market Accounts?

Thank you!

Former HCE wants to get his lump sum and is willing to pledge real property as collateral. Anyone here ever work with someone who can provide the escrow arrangement? Could this be done where a lien is recorded on the property in favor of the escrow co?

Thanks.

I've been trying to locate a resource to help me understand how each state treats 457(b) public and private plan distributions.

Please let me know if you know of a guide that you have found helpful. Maybe this has already been discussed in another thread on this site? If so, please let me know.. thank you.

Thank you.

401k plan fails ADP test for 2004. We are attempting to correct under SCP by the deadline of 12/31/07. If the HCE who should have had the refund terminated in 2004 and received a distribution in 2004 does that satisfy the refund. Is the refund deemed to have occured as long as it happens within 12 months of the plan year end failure ? We are trying to minimize the corrective QNECs required under EPCRS.

According to the Treasury regulations, an auto-enrollment notice "must include the provisions found in 1.401(k)-3(d)(2)(ii) to the extent those provisions apply to the arrangement." I think that this could be interpreted to mean that you don't have to include any of the information contained in that section of the regs if you don't have a safe harbor plan. On the other hand, the use of the phrase "to the extent" can be mean that you need to include some of that information even if you don't have a safe harbor plan. For example, it could be argued that some of those provisions apply to a non-safe harbor plan, like the provisions of that section that require a notice to include the type and amount of compensation that may be deferred, the periods available for making deferral elections, withdrawal and vesting provisions etc. Am I reading too far into this? If so, why would they use the phrase "to the extent"?

An Employer is shopping for new health care insurance providers. It found a carrier where the coverage for the employees would be the same as it is now, with only a minimal increase in premiums. The Employer pays 80% of the premium and the employees pay 20%. The Employer was satisfied until it learned that one employee (an over age 65, long-time and still active employee) would cost $2,000 per month. This was about 1/6 of the total cost of all employees. It would like to have the employee sign up for a Medicare Advantage type plan so that Medicare pays first. The Employer will pay the cost of such plan for the employee. Is this a violation of age discrimination laws because the Employer is kicking the employee out of its plan? Is this ok for the employer to do since it will pay the cost?

Any guidance would be greatly appreciated.

Thank you