A curent client sold their business May 2007. The company has a calendar year profit sharing plan. The company is still "active" for tax purposes, etc... Is it correct to assume the plan valuation/reporting can be done as of 12/31/2007 using prorated compensation/415 limits from January 1 - May 15th?

Plan year is calendar year. Is it absolutely too late to start a qualified auto enroll plan on 1/1 for an existing 401k plan?

A plan has 1/2 year eligilibity and semi-annual entry dates. A participant was hired 6/1/2007 and worked for four months and then went on medical leave. She will not be back by December 31, 2007. Do the service spanning rules apply in this case and will she be eligible to enter the plan on 1/1/2008? I know that service spanning applies for absences less than 12 months, but I wasn't sure if this would apply to her situation because she won't be back on the first date of eligiblity. Thank you.

Can anyone explain the rules regarding moving NHCE into a rate group with an HCE in order to pass testing? I have been told you can do this but it sounds a little fishy to me. I don't understand how you can give people in the same class different allocation rates-or do you have to amend the document? If so, when does it have to be amended by and do you list those people in a class by themselves?

Does a plan sponsor need to carry an ERISA Fidelity Bond when they have more than 1 plan (401k and a DB plan)?

Could the bond have both plans names and all parties involved?

A plan came to us with a participating employer. There were two companies owned by the same one owner.

7/24/2007 the owner notified us that effective 7/31/2007 he sold the company that was listed as a participating employer in the the plan document.

The one owner delayed in contacting us further as we asked for more details.

Today, the company that was sold still has participants deferring into the other company's plan.

When the sale of a participating employer happens, must the partic. employer have their own plan setup in time to have their deferrals go into this new plan? Or can they contiue to defer until their own plan is setup?

Deferrals made after the effective date of the sale, how does this affect the 2007 testing and 5500?

Any guidance or other things to consider is appreciated.

Thanks in advance.

Has anyone else had a sudden influx of IRS letters requesting 5500s for plan numbers that do not exist. Many of our plans are getting letters requesting information for the 2005 plan year for plan #002.

I would appreciate any background on the following from the IRS's FY 2008 Federal State, and Local Governments Work Plan:

"In FY2007, FSLG completed 17 examinations of Health Reimbursement Arrangements (HRAs) that did not meet the requirements of the Code. All 17 examinations involved the same provider. FSLG entered into a closing agreement with the provider in lieu of employment and income tax to resolve similar HRAs provided to more than 500 government entities. Based on the facts it was determined that a section 6700 examination of the provider was not necessary. FSLG has identified several additional providers of other HRAs that do not appear to meet the requirements of the Code. FSLG will conduct additional examinations to investigate these programs. Upon completion of these examinations, FSLG will also consult with Counsel to determine whether a section 6700 examination should be conducted with regard to the promoters of the HRAs."

Has anyone amended their 125 plan to allow for rollovers from the flexible spending account to an HSA? How did you handle the September 2006 date that was included in the rules?

On December 3, the PBGC issued technical advice stipulating in particular that PPA interest and mortality provisions "(regardless of whether they were added to the plan before, or on or after, the plan’s termination date are not effective for a plan with a termination date before the beginning of its 2008 plan year, even if the distribution date is after the 2007 plan year." This is in contrast to the position they took when GATT was introduced (See ASPPA asap NO. 06-38; November 15, 2006)

See this important link: http://www.pbgc.gov/practitioners/law-regu...nt/tu16272.html

Regarding determining who must receive a notice, my understanding is that anyone who is defaulted must receive the notice (annually) and that it's okay to give the notice at least 30 days in advance of the initial entry date (the first point that ee becomes eligible to participate) because such an ee MIGHT become a default enrollee.

What are recommendations for example, for a hypothetical plan w/ 500 active participants, 300 who are eligible but not contributing and 1,500 employeees. Thus 700 not eligible due to age and service, but will become eligible eventually unless they first terminate.

Of the 500, assume it's estimated that 75 are defaulted, but the employer is not certain which employees. The employer could of course log onto the investment company's website and participant-by-participant determine who resides in QDIA and who does not, in order to determine who to give the annual notice to.

The first year, this would be more work because all employees w/ accounts would have to be "tested." From thereon out, it would simply be a matter of checking who that was added in the last year as contributing participant, that was also defaulted. Not so much work in second and subsequent years.

You are a TPA and you explain this to your client. Client states that is too much work, but does not want to pay the TPA to do the work (TPA is capable of doing the work in terms of time and resources). TPA however not happy to do the work w/o being paid. TPA discloses the notice research requirement but in turn states that the time will be billed, and is not able to procure permission from client to do the work (thus by default becomes the resposibility of the client - assume this is delineated in the services agreement).

Client asks if it would be okay to just give the notice to everyone >30 days prior to initial eligibility, and then annually to any one who has an account balance. This would certainly cause all who are required to have the notice, to have it.

However, I have heard that it is not considered wise to just pass out the notice on a blanket basis as requested by client in my hypothetical example.

What are your opinion(s) of distributing the notice as the client wishes to, in order to avoid the analysis that would be required in order to determine who actually is supposed to receive the notice? What are the inherent dangers of doing so?

Thank you.

Plan had SH provisions for 2007. On 11/1/2007 they amend to remove the provisions as of 1/1/2008. Is a SH notice needed that actually tells the participants that no SH contribution is coming? The participants will receive the SMM related to the amendment. Would that need to be delivered to participants by the same time frame as the old SH notice?

The Plan Sponsor, a non-profit org, sold their healthcare facility to another non-profit org. All of the employees now work for the other non-profit org. The one key employee no longer receives compensation from the Plan Sponsor and has started a new non-profit org. The Plan Sponsor is terminating their Money Purchase Plan. The want to file for an IRS letter. Can we make distributions to everyone including the key employee since he is no longer an active employee? What happens if we pay out everyone before the IRS issues its determination letter? Would the plan be terminated if we pay everyone out and don't have the IRS letter yet or would we have to wait for the IRS letter in order for the plan to be considered terminated?

I am working on a new 401(k) plan for a client that will be using the new 401(k)(13) safe harbor and which permits participants to make a permissible withdrawal under Section 414(w). The recordkeeper is pushing back and saying that this is not permitted since that would make the plan an EACA (eligible automatic contribution arrangement) rather than a QACA (qualified automatic contribution arrangement). I feel that a QACA can provide for permissible withdrawals at least in part because the proposed regulations on the timing of furnishing the notice specifically recognizes that a QACA may provide for permissible withdrawals, since they allow such a plan to provide the annual notice to a newly hired employee as late as the date on which s/he commences employment. . Does anyone have any thoughts on this?

I have a calendar year plan. The owner is a deferred retiree whose high 3-year average (for both plan and 415 purposes) is $695000, established over the years 1997-1999. His accrued benefit by formula at 12/31/07 is 18750/month, his 415 $ limit is 17375. I believe I can grandfather the 17375 as of 1/1/08 when I have to limit his high 3 to 200000.

Am I right?

Hi,

This may be a basic question but I can't seem to find the answer on here. I want to take the 401(k) I have with an old employer and roll it into my Roth IRA. My Roth IRA plan administrator said I need to make sure the 401(k) is roth first and then roll it over. I have no idea how to do this. I don't think my former employer offers Roths, just 401(k)s.

What are the exact steps I need to take to make this conversion happen properly?

Thx!

We have a client that is a member of a controlled group. As you know, for coverage purposes you must consider all members of the controlled group. We only recordkeep one of the plans. The group that is recordkept outside of our company does not pass coverage on its own and their ratio is so low that they do not pass using average benefits testing either. One would think the obvious solution would be to aggregate for coverage then aggregate all other tests as well. This is where the problem is. The plan that does not pass coverage is a "Safe Harbor" plan. Based on this, it is our understanding that while they could be aggregated for coverage, the Safe Harbor status does not permit them to be aggregated for ADP/ACP and other testing. In addition, the testing methods (current vs prior) are not the same. Our plan using the current year testing method for ADP and prior year testing for ACP.

The plans have submitted a VCP filing to the IRS asking to amend the testing method and for the safe harbor plan not to be safe harbor which would allow for aggregation. The IRS's initial response was not positive. They have said they will not allow the plan to be amended not to be safe harbor. At the point the IRS has not made a decision on what correction method to use. The VCP filing covers plan years 2003-2006. For the plan that is recordkept here, the 2005 and 2006 NDT test fails, but would pass on an aggregated basis. Since they are not confident in having the VCP approved, the plan will be making return of excess distributions (ROE) for the 2006 plan year. However, they did not make corrections for the 2005 plan year. At this point, I believe it is too late to simply make a distribution and since it is beyond the 12 month period following the close of the plan year, and a QNEC contribution would need to be made. In addition, it is our understanding that the plan can no longer apply the under 21/less than a year of service option for testing. By not applying this option, the ROE amount jumps from about $11,000 to over $900,000. Is anybody aware of any relief for de minis amounts? The ROEs on a disaggregated basis is about $45 per person.

Have you run into this situation before? Or do you have another suggestion that would allow the plans to be aggregated for coverage and then ADP/ACP?

Is the VCP fee for failing to amend for the final 401(k) regulations based on the fee chart in Section 12 of EPCRS or is it considered an "interim amendment" and thus subject to a fee of $375?

My plan doc does not allow for inservice withdrawals. However, I have a participant that has attained age 65 that wants to take one. Do we have to allow for this?

Does anyone who is familiar with expense credits have an opinion on whether Treas. Reg. §1.415©-1(b)(4) applies to them?

Just to be clear, when I say expense credits, I am talking about a plan transferring the assets of a plan to another vendor (nothing about the plan changes but a new vendor will manage the assets). There may be a rear-end load to cover sales charges and other contract expenses. To help minimize this, many vendors offer an expense credit. The employer does not make any addition to the plan to make up for this.

Treas. Reg. §1.415©-1(b)(4) reads:

(4) Transactions with plan. The Commissioner may in an appropriate case, considering all of the facts and circumstances, treat transactions between the plan and the employer, transactions between the plan and the employee, or certain allocations to participants’ accounts as giving rise to annual additions. Further, where an employee or employer transfers assets to a plan in exchange for consideration that is less than the fair market value of the assets transferred to the plan, there is an annual addition in the amount of the difference between the value of the assets transferred and the consideration. A transaction described in this paragraph (b)(4) may constitute a prohibited transaction with the meaning of section 4975©(1).

Please note: All references are to the regs under 415 c which were turned into copyright symbols. Not sure how to stop that :angry: