How do I set the plan level default investment in Relius?

I recevied a proposal for a DB / DC combo plan that to my estimation is horribly incorrect. At the very least it is extremely agressive. I put down my thoughts on what I thought was wrong and now I have received back some explanations of why the person that put it together thinks it is correct.

Now I need a little help proving that it is wrong. If anyone wants to help that would be great. I've been in this pension world for a number of years, but I can't recall all the code sections that apply. I typically know the answer, but for some reason I have a hard time remembering what section it actually refers to.

- The actuary is assuming increases in the dollar limits of 5% per year form now until forever.

- He is using a 3% interest assumption with a -9 setback.

- The plan specs lists a retirement age of 65, but he is using a funding assumption that the owners will retire in 10 years.

- He claims this is a floor offset where none of the employees need to receive a DB contribution, because they all receive a 5% DC contribution.

- He claims the gateway test passes with the 5% DC contribution to the employees.

The owners are 34 and 36 and receive over $150,000 in contributions each to the DB plan. The employees receive nothing in the DB plan. He claims the plan passes discrimination testing. There are about 15 employees, 2 of which are yuonger than the owners, but not a whole lot younger.

Now I think this plan stinks left right and all over. But we are at the point where I say it doesn't work and he says it does. I think at the ver yleast this is the most aggressive plan I have ever seen that needs at least 7.5% in the DC for gateway, and I think he only tested the DC plan and diregarded any DB contribution that the owners received in his discrimination testing.

So any thoughts on what revenue ruling or something I can point to that at least shows you can not assume increases in the dollar limits? I can't tell him he can't use a 3% interest rate assumption or an assumed 44 retirement age. it may be nuts, but I can't tell him he is wrong. At least I don't think I can.

We have a client who amended his plan to include safe harbor match as of 1/1/07. He did almost everything right - posted his notice on time, handed out a new SPD with the notice, enrolled his employees on time, started deductions as of the very beginining of the year and has made the safe harbor match to all eligible ee's from day one as well. However, he actually signed the document on the first business day of 2007 - 1/2/07.

Is this a valid safe harbor plan for 2007? Everything I've read says to adopt 'before' the beginning of the plan year. Is there some stretch of logic that would make this valid - i.e. he signed it at the very beginning of the day In operation, the employees were not damaged in any way - they knew about the safe harbor in a timely manner and were able to defer and receive the match from day one.

He just put pen to paper one day late. Thanks so much for your help.

I posted a little while ago, but can someone please describe the loan requirement rules for 1/2 of the vested account balance? Plan allows multiple loans - participant took out a small loan a couple of years ago and wants to take out another. His account balance includes the remaining loan balance that needs to be repaid. Do I calculate 1/2 of his total vested account balance by adding the remaining balance of the original loan to his account balance - then figure out 1/2 of that balance and that is the total loan he can have outstanding (including 1st loan and loan he will take). Thank you.

This was at the end of the recent ASPPA ASAP:

Probably a dumb question, but what is this saying?

In order for a plan to be top heavy, the top heavy ratio must be greater than 60%. One of my colleagues is caliming that the rules surrounding top heavy do not detail how many decimal places must be used in the calculation. He is further stating that the ratio that is slightly above 60% (i.e. 60.15%) can be rounded down to 60% and the plan would not be top heavy. My recollection is that the ratio must be carried out for two decimal places and anything over 60% makes a plan top heavy. My problem is that I cannot find this in any reference book or the regulations.

1. Please confirm my thought.

2. Please identify where this can be found. (regs would be best)

Thank you in advance.

Several years back, the Service issued a PLR concerning a qualified excess benefits plan under section 415(m). In that ruling, the Service refused to take a position on the application of FICA to benefits accrued under or paid from such a plan. I've been unable to find any more recent guidance on this subject--does anyone know if the Service still takes a hands-off position? As a practical matter, what are gov't employers doing about the FICA issue?

I was brushing up on audit requirements, so that I could address a CPA's concerns about skyrocketing audit costs for one of his clients, and in the ERISA Outline book, it says that if the employer sponsors two separate plans, that the participant counts are not aggregated in determining whether the plan is a large plan or a small plan for purposes of the 5500 filing requirement.

So if a portion of the plan is spun off, such that the participant counts to both plans are less than 100, then they file as small plans and avoid the audit if they meet the other small plan exemption requirements?

I'm generally a small plan guy, so I just wanted to make sure that I was understanding this right. Did I miss anything?

Thanks!

Dennis

Does anyone know whether the automatic enrollment notice must be provided to (1) every participant in the CODA that includes the automatic enrollment feature or (2) only those participants in the CODA who have not already made an election or opted out?

The IRS model notice suggests that the notice must be provided to (1). Is that right?

How are other practitioners approaching this issue?

Thanks in advance for your help!

You have a plan the allows multiple loans with a maximum of 50,000 or 1/2 of the participant's vested benefit. Minimum loan of $1,000.

Participant has a total account balance of 10,000 (including a loan outstanding). Participant takes out a loan for $3,000 two years ago for 5 years. The outstanding balance left on the loan is $2,000. If the participant has a total account balance of $10,000 (which includes the $2,000 loan), how much can he take out in a loan? Is it $3,000 (1/2 of 10,000 minus the $2,000 loan already outstanding), or is it $2,000 (1/2 of $8,000 minus the $2,000 already outstanding?

Thank you for your help

Have an IDP cycle A filer that is due 1/9/08. Obviously missed the the 1/31/2007 deadline. My question is, do I need to include the 2005 cumulative list or the 2006 cumulative list? If filed timely it states the 2005 list but seems to be silent on the 2008 filing deadline.

I am trying to help a client determine if they can offer purchasing PTO as a benefit under the cafeteria plan if they don't offer this benefit to both divisions of their company. Again, they only want to offer purchasing PTO as a benefit for one division. It is important to note that there is only 1 HCE/KEY employee in the division that they want to offer this benefit to and he will not be using the "purchased PTO".

From what I can see there are really three tests a cafe plan needs to satisfy: (1) concentration test; (2) nondiscrimination test; and (3) eligibility test. There should be no issue with test (1) or (2) because there will be no HCE or Key employees utilizing this benefit. I'm just not sure how the eligibility test fits in.

Can anyone shed some light on the eligibility test or any other tests I should be concerned with?

Employee currently age 64 is considering retiring in 2008 at age 65. She made over 100k in 2004 and 2005 but did not in 2006 and likely not in 2007 either. Plan is under funded and I'm trying to determine if she's a Restricted Employee for lump sum purposes. I see that Former HCE are part of the Restricted Employee def'n but I'm not totally sure she is a Former HCE as the def'n appears a bit more unique than simply being over the 100k threshold in past years. I've inserted a CCH blurb that I'm struggling to interpret correctly.

Given the above facts, and the attached blurb, does she appear to be a Former HCE in both 2007 and 2008 ?

Strategy wise, I'm trying to determine whether she could retire a few months earlier than planned say in 2007 (Plan allows for an ERA after 55 & 10 YOS) and if there is NOT a separation year before her pay out, could she get a lump sum before 12/31/07 (i.e., maybe she's not a Former HCE until 2008 after her separation year). Employer wants her to get a lump sum too so any strategy that might help her not be a Former HCE they would support if it can be done. There are only a few HCEs so a top-25 election doesn't help.

Thanks for any help. Opinions welcomed.

Former_Highly_Comp_EE.pdf

An employer has a 401(k) plan - they have had an inordinate amount of employees sign a one time irrevocable waiver out of the plan prior their initial eligibility. Don't know why and I think something is fishy but that is the employer's issue.

My issue is the plan is not passing coverage of the 401(k) portion of the plan. So now I have to utlize corrective measures - i.e. an 11(g) amendment.

My question is - I assume that I CANNOT add back employees who have signed the waiver and give them a QNEC to increase the NHC coverage group benefitting under the plan (i.e. pass ratio percent test)?

I assume I am going to have to give a QNEC to the NHC who are not excluded and get the plan to pass the ABT.

Any thoughts would be appreciated.

Do the QDIA regs apply to governmental plans? Thanks.

The Washington Post carried a news story about James LaRue who claims his employer failed to implement investment changes he requested and subsequently lost $150,000 as a result of the employer's failure to act:

http://www.washingtonpost.com/wp-dyn/conte...7112500356.html

I read the article and persused the plaintiff's brief and nowhere do I find any discussion pertaining to how Mr. LaRue requested investment changes and whether or not such requests were in accordance with the Plan docuement. It almost sounds as if he simply verbally asked someone to make changes and they didn't.

Does anyone have any background information on the entire transaction?

Do the QDIA final regulations apply to governmental plans? Thanks!

Employer has a cafeteria plan that provides each employee the option to choose up to $10,000 in benefits under the plan. The plan has both a FSA and DCAP arrangement.

There are employees who have no dependents and thus choose up to $10k in FSA benefits through payroll deduction. Those using daycare usually split the participation between the two components- $5k to each- through payroll deduction.

Our new HR person is telling us that this is discriminatory since some employees cannot elect to receive more than $5k in the FSA. I countered that this is not true, rather they could receive up to $10k if they chose not to participate in the DCAP.

Is this discriminatory? No key employees participate in the plan.

Has anyone seen any definitive IRS guidance on Federal income tax withholding to be made next year in the case of a participant who makes a direct rollover from a qualified plan to a Roth IRA? It seems under Code Section 3405© that it would be necessary to withhold at a mandatory rate of 20% because this would constitute an eligible rollover distribution that is not being rolled over to an eligible retirement plan. Can anyone help?

Can a 501©(9) transfer transfer assets to another 501©(9) trust? For instance, can a SUB Fund transfer assets to an HRA account or a H/W Plan?

I have looked at GCM 39052 which seems to state that this can be done and does not violate the inurement rules. If my conclusion is incorrect or if you know of any other sources for this question, please let me know.