For purposes of granting military leave service under a defined benefit plan, how far back in time must be examined to determine missing service periods? Certainly under USERRA effective since 1994, I could see adding military service hours and pay to determine the correct accrued benefit. What about for service prior to 1994? We're hearing some suggestions to go back basically forever, but that would be a nightmare from an administrative perspective. Do you think that 1994 is an appropriate and/or best practice and/or acceptable practice?

Hey Ya'll - what are ya'll using for electronic filing of Forms 1099R? In the past, I have used software which has filled in the data fields for the printed forms, but haven't filed electronically yet. Want to be up and running on this before 2008! Thanks for your help.

An NQDC arrangement provides for a lump sum this year, but the service recipient wants to distribute a life insur. policy in its place. Is this permissible under the regs.? I tend to think it's not permitted but am not positive. Thanks!

Husband (Fred) and wife (Wilma) are co-owners of a business and both are covered by the company's DC Plan.

Both Fred and Wilma had a "required beginning date" of 04/01/07 for purposes of commencing their required minimum distributions from the Plan.

Fred died in 2006, prior to his required beginning date. Wilma received her 2006 required minimum distribution based on her 12/31/05 Plan balance.

In 2007, Wilma (as Fred's surviving spouse and beneficiary) rolled over Fred's Plan balance to her account under the Plan. No money was actually moved. Wilma simply ended up with a "rollover" recordkeeping account in her name and will be issued a 2007 IRS Form 1099-R reflecting the direct rollover of the death benefit.

Since the rollover of Fred's balance to Wilma's account was not effected until 2007, am I correct in assuming that this rollover amount is NOT included in Wilma's 12/31/06 Plan balance for purposes of calculating her 2007 RMD - but will be included in her 12/31/07 Plan balance for purposes of calculating her 2008 RMD?

Consequently, Fred's Plan balance was not (need not have been?) included in any RMD calculation for either 2006 or 2007?

Just trying to make sure I've got my "head screwed on straight" on this one.

Thanks for any and all comments, confirmations, clarifications, etc.

I know one of the options for paying participants out when they refuse to return their paperwork is to an FDIC account. I have no problem and routinely do so to IRAs. We have several participants in a terminated plan that are proving difficult, and any advice would be welcome. I also realise that the unclaimed property route is available, but its extremely cumbersome for the state the plan is in and we want to use it only as a last resort.

Participant One: completed and signed the distribution form. Check was issued. The participant refuses to cash it. Its been quite a few months, check was reissued, still won't cash it. Any ideas? Technically since the participant exists and we are in contact with them and they even responded, I don't see that it qualifies as "lost"

Participants two and three: have account balances just under $500, we cannot locate them, are there any banks or financial institutions willing to open accounts? the smallest IRA rollover I've found an institution willing to take is $500. I thought a regular bank or credit union might, but of course I haven't found one that will let me open up an account in another person's name w/o their knowledge or consent. Any ideas on this one?

Again, I am trying to avoid the state's unclaimed property route.

Thanks.

What ever happened to the proposed phased retirement regulations from 2004 (age 59 1/2)? Have they been abandoned?

It seems to me that the IRS should clarify Notice 2007-86 by clarifying that the following regulations are applied by substituting references to December 31, 2008 for references to December 31, 2007, and substituting a reference to January 1, 2008, for the reference to January 1, 2008:

1.409A-1©(3)(vii) (transition rule for written plan requirement)

1.409A-1(i)(3) (specified employee identification date)

1.409A-1(i)(4) (specified employee effective date)

1.409A-1(i)(7) (nonresident alien employees)

1.409A-2(a)(13)(i) and (ii) (initial deferral election with respect to compensation paid for final payroll period)

1.409A-2(b)(2)(iv) (installment payments transition rule)

Or do you think these substitutions are obvious?

I have a plan where there were some participants overpayments and some have underpayments (of both deferral and match monies) due to administrative error in the allocation. Simply put, the plan is jacked up and there are many issues deeper than this one.

But looking at EPCRS, the correction methods in Appendices A and B don't appear to squarely fit this circumstance. EPCRS seems to focus on exclusion of eligible employees for their share of allocation or contribution. Plus, Section 3 earnings adjusments in Appendix B says the calculation for lost earnings is only to be used for underpayments, not overpayments (corrective reductions).

I'd appreciate any help. Thank you in advance!

A calendar year Safe Harbor 401(k) plan provides a 3% SH contribution and has a discretionary profit sharing provision.

The client wants to keep the eligibility for deferrals the same. The client wants to keep the eligibility for Safe Harbor contributions the same.

The client wants to change the eligibility for only the Profit Sharing portion (e.g. lower the 1 year requirement to 6 months). They are having a great year and want more NHCEs to receive some of the year's profits via the plan.

I have made the attempt by looking at 1.401(k)-3(e) and its reference to 1.401(k)-1(b).

Is this an allowable change in this plan year, or must the provisions become effective no sooner than the beginning of the next plan year?

If this is not allowable, which section prohibits this change?

What if they want to only change the Entry Dates for only the profit sharing portion, from 2 entry dates per year to 4 entry dates per year, can that be effective during the year?

What if they also want to improve the vesting for the profit sharing portion only (move the schedule to 5-year graded from 6-year graded), can that be effective for this year? This does not affect the HCEs, they are already vested. Please tell me an employer can provide a better vesting schedule?

A Sole-P, over age 50, maintained a SEP-IRA to which he made a $6800 contribution in 2007. Later in 2007 he joined a 401k sponsored by an LLP (he is a partner) and made a employee 401k contribution of $20,500. Is this allowable or is he considered in excess of the limit?

Mahalo!

I know that a terminating plan must be updated for all current legislation. However, does the amendment (i.e. PPA) need to be done before the assets are distributed or after? Please provide citation. Thank you.

I have a client that allows thier members to drop coverage that is under a Section 125 plan for any reason. Example, they have an employee that is covered under AFLAC per tax, and if an employee decides that they dont want it anymore, they are allowing the member to drop with a 30 day notice. Is this allowable under section 125?

The regs require that a plan designate only one time and one form of payment for a distribution event. Based on a strict reading of this rule, it is arguably a problem to provide a benefit (which is clearly subject to 409A) at separation from service with 33% of the benefit payable with the first payroll followng the separation (essentially a partial lump sum) and 66% of the benefit payable in equal monthly installments for five years beginning the first day of the month following termination. This looks like a lump sum and installment payment, which are two forms of payment. However, I interpret the regs to allow this type of a payment, looking at the payment "package" as the form of payment. Instead, it would not be permissible under this rule to provide that if you separate from service on Monday, you get the 33%/66% structure but if you terminate on Friday, you don't get the 33% but take all in monthly installments. Do you agree with this interpretation or do you think the rule requires the strict construction?

Can a plan switch in mid year from calculating the s/h match on a payroll basis to an annual basis, retroactively effective to 1/1/07? As a result, the s/h match already deposited in 2007 will be applied to the final year-end s/h match that would be determined. I think the answer is "no", but wanted to check if anyone knows otherwise.

Also, if a s/h match is determined annually, can the employer make s/h match deposits on a regular basis during the year anyways? Assuming the employer "plays it safe" and makes sure no one would accidently receive more via these deposits than they would when the final match total is calculated, I can't see where that would be a problem.

Thanks

I have a highly compensated individual who will remain employed but will lose coverage under a self-insured health plan because of his limited hours. He is 60 and will need coverage beyond the regular COBRA limit. Can we offer to continue his COBRA coverage beyond the normal COBRA limit, assuming we receive approval from the stop-loss carrier, without running afoul of the 105(h) nondiscrimination rules? I'm thinking that we can as long as the he pays the premiums on an after-tax basis, but would appreciate anyone else's views on this. Thanks in advance.

Suppose you have an existing profit sharing plan with a 1/31 year end.

You can amend the plan to add safe harbor provisions as long as it is done more than three months before the plan year end (we are getting close). Do safe harbor notices still have to be provided 30 days prior to this or is there an exception for a plan conversion?

A large 401(k) plan uses Fidelity's daily valuation platform. Participants can access their accounts through a Fidelity telephone number or their website. A participant who terminated in a prior year and is eligible for a distribution has been trying to "time the market" and take a distribution when his account balance is high. We made the decision to request a distribution on a particular date but was unable to do so because the plan sponsor's records did not initially show that he had a termination date. By the time things were sorted out, about two weeks later, the participant received his entire vested account balance (which, by then, was about $5,000 less than it had been two weeks earlier). You guessed it, the participant now wants the plan to compensate him for the $5,000 he "lost" due to the delay in his distribution.

Has anyone seen any articles or case law on this issue (or have any opinions--informed or otherwise)? There is nothing in the plan document or SPD that suggests a participant will receive the value of his vested account balance as of any particular date.

Thanks for any guidance.

Odd situation... 19-year old employee, should be covered thru State program by DHS and foster care system. Coverage was wrongly terminated in August. She is now in process of getting reapproved and was told by DHS to not take our insurance during annual enrollment.

My question: Suppose she's denied in a couple months. (I wouldn't expect her to be denied but just thinking ahead while we're still in open enrollment.) Is that denial of coverage a sufficient change in status at that time? I know if she was actively covered and lost it, then it would be. But what about where the State's rules say she should be covered and DHS said not to take it and is then denied?

If you fail an ADP or ACP test, you have 12 months to make a correction. If you don't make a correction within the 12 month prescribed correction period, then you have a failure on your hand. You can use the One-to-One Correction Method, which involves the refunds being made and a QNEC allocated to the NHCE's.

I have a client who failed their 2003 ADP test. The test was completed in 2/2004. They did not properly process the distributions. Now it is 2007, they want to make the proper distributions. We told them that they could still make the distributions to the HCEs (with the applicable earnings), but they would also have to make the 1-to-1 QNEC to a group of the NHCEs. We reviewed the original corrective distribution calc, brought forward with earnings and told them how much needed to be distributed. We then attempted to calc the 1-to-1 QNEC. When we did so, we came up with an HCE who gave us some problems:

HCE: He terminated in 1/2004. He rolled over his funds in 2/2004. For his situation, he would still need to be notified of the corrective distributions and need to get some of the funds out of his rollover vehicle. Our questions/comments are as follows:

1) Since he took his funds prior to 3/15/2004, the employer would not have to include him in the 10% excise tax for the late distributions. (if he took his dist after 3/15/2005, then he would need to be included in the 10% tax calc. Correct?)

2) He would need to receive a 1099R in 2007 showing the taxable distribution. Correct? Do we need to provide that to him or should that be issued by his IRA based on our letter?

3) Since the funds were taken from his account prior to 12/31/2006, does he need to be included in the 1-to-1 QNEC calculation? I believe that he should because even though all of his funds were distributed, the distribution was not done properly. Does anyone agree? Can anyone please provide a cite?

Any replies are greatly appreciated.

We are being told that our network instability issues are due to the fact that we use both Datair and Relius. Is anyone else experiencing this?