A Small Pension Plan changes actuaries. Per 5500 instructions, Schedule C is not required for a Small Pension Plan, but does the sponsor still need to send the notice to the Terminated EA as prescribed in the Schedule C instructions?

Seems to me, the answer here is "no." It might not have been in the same format as for a large plan where the Schedule C is required, but the prior EA is aware of the change. Is this good enough or do you think the prescribed notice should be sent, even if just to be on the safe side? I'm curious what others think or have done.

Can a sole proprietor opt out of a simple or SEP IRA plan for the first few years ?

He just wants a plan for now for his employees.

Thanks

I'm having trouble understanding the rules about adding a Safe Harbor feature to an existing profit sharing plan at the same time the plan year is converting from a fiscal year to a calendar year. I'm pretty sure we missed the deadline by a few days, but I would still like to understand what I'm reading.

A profit sharing plan has an August 31st year end. The employer just contacted us about adding a Safe Harbor 401(k) feature and changing the plan year. So there would be a short plan year from September 1 to December 31. If we had added the Safe Harbor feature by October 1, would that have worked?

I've read about the exception if the short plan year is created by an amendment (which we would do), but the 2 conditions confuse me:

1) the plan year immediately preceding the short plan year (Sept. 1, 2006 -- Aug. 31, 2007) satisfied the 401(k) safe harbor rules. (How could it do that? It wasn't a safe harbor plan then.) AND

2) the plan year immediately following the short plan year also satisfies the 401(k) safe harbor rules (no problem).

It seems to me that even if we had met the October 1 deadline, the client still couldn't convert to a safe harbor plan in 2007. But can we convert to a safe harbor plan beginning January 1, 2008?

We will begin offering same-sex domestic partner benefits in January. We are working with our payroll department to set up the federal and state taxation. We only offer a 2 tier structure - individual and family. My understanding in general is that if an employee elects to cover a same-sex domestic partner who is not considered a tax-qualified dependent , the cost of coverage for that individual must be deducted on an after-tax basis. Is there any difference in the way we would set up the tax status if the employee already covered a biological child and therefore had family coverage and now choses to cover a same-sex domestic partner? I have not been able to find a lot of information about this.

Assume a participant fails to include the current cost of life insurance protection in income for a number of years. If the participant dies, would the life insurance proceeds that exceed the cash surrender value still be excluded from income of the beneficiary or does the failure to include the current cost somehow blow that exclusion?

Anyone have any experience in these?

We have a client who want to amend the plan to permit.

From what I have read, the amount that is eligible to be transferred is the lesser of the balance in the account on 9/21/2006 or the balance in the account as of the date of transfer.

My experience has been that most employees have blown through their account by the middle of September, so I am guessing that not many would have dollars to transfer, or just a minimal amount.

For plans that contain this provision, is this a benefit that is utilized by many participants?

Thanks.

I have been reviewing the May 24, 2004 DOL Information Letter which indicates that having a number of employers included as part of an affiliated service group (ASG) under 414(m) is not, in and of itself, sufficient to establish the group as a single employer for ERISA purposes and thereby avoid MEWA classification.

In the Information Letter, the DOL notes that because an ASG can exist without 25% or more common ownership, common ownership / single employer status cannot automatically be assumed. It then goes on to note other guidance under 414(m) suggesting that 80% ownership is required but deferring to the IRS's interpretation of 414.

My question is how have others interpreted the Information Letter where an ASG exists with two companies jointly and equally ( 50 / 50) owning a third company as part of an ASG under 414(m). Based on the letter, I would assume that without an 80% ownership level established, there is some question as to whether a single employer exists because the DOL has not issued regulations addressing whether a lower than 80% interest is appropriate for MEWA purposes. Just wondering (hoping) that others may have a different interpretation or be aware of further guidance or arguments that common ownership exists in an ASG provided the ownership interest is more than 25%.

Would welcome any thoughts or prior experience in dealing with this situation. Client was interested in setting up a VEBA to fund self-insured health plan several years ago. Client got some bad advice or misinterpreted the advice it received (or both) and thought it could set up a grantor trust to segregate funds but still get tax benefits of a VEBA. Client established simple, plain-vanilla grantor trust and began setting aside and taking deductions on amounts in excess of its health plan expenses for the year. Accountants apparently went along with all of this. The excess amounts are not enormous but significant and there are several open years at issue. It seems to me they are likely looking at having to amend their taxes as a result but just curious if anybody had ever dealt with something like this or had thoughts on resolving. Thanks.

We took over a plan whose prior year 5500's weren't correct, so we've gone back and amended the returns. At that time, the CPA was listed as the Plan Administrator, so I asked him to sign the amended forms (once on the 5500 and on the Schedule SSA). He's questioning this, saying that we should have a current officer or trustee sign instead of him. Doesn't he have to sign since he was listed in the plan document for those years that I amending? Or does it really matter?

Any input on this would be greatly appreciated! Thanks!!

I have a situation where...

First, the plan has an off calendar plan year (Oct 31).

Second, the company terminated their DB plan in 2006

Third, they started a 401k plan in 2006 (eff 11/1/06)

Fourth, the participants rolled their money into the 401k plan (during Oct 2006 - before the PYE of prior year - issues I'm dealing with, since the effective date is 11/1)

Fifth, the accounts are individual (pooled) accounts at the investment company

In determining the balance to use to calculate the RMD, I would use the balance as of 12/31/06...correct? (not Oct 2006)

Thank you so much!

We have a client whose 401(k) Plan document provides for a discretionary match, and requires employment on 12/31 and 1000 hours of serve in order to be allocated the match.

The problem is that the corporation actually makes the match each payroll period and credits the participants' accounts. They can see the money on the website of the financial vendor. Nonetheless, if a participant leaves before 12/31 or does not have 1000 hours, they take the contribution (and income) back out.

Is there an argument that when the match is first credited to the participants' accounts (i.e., after each payroll) that this is the allocation, and it is not permissible to take the money back out at 12/31? If it is, any suggestions on how to continue to do a per payroll payment, but still require the 12/31 and 1000 hour employment criteria?

PPA calls for simplified reporting to be made available to plans with fewer than 25 participants beginning with 2007 plan years. Reading the description on pages 8 and 9 of the 2007 5500 Instructions which explains the new simplified reporting, the DC requirements appear to be identical to the 2006 reporting. How is this a simplification? Have I missed something?

Recipient's DC plan is being amended to exclude leased employees from future contributions. Leasing organization's DC plan is being amended to add the leased employees. Can the leased employees do an elective transfer from the recipient's plan to the leasing organization's plan? I'm looking at the rule § 1.411(d)-4, Q&A-3 which says that the leased employees must have experienced a "change in employment status" to an employment status under which they are not accruing additional allocations under the recipient's plan.

Our 401(k) plan document does not allow for matching contributions on catch-up contributions. However, HR has been matching catch-up contributions for 3 years and just discovered the error. To correct the error, we are going to take the overpayment out of participant's accounts (along with earnings). Do we need the participant's consent to do this?

Hi, I'm new here and appreciate the chance to ask some questions.

My husband has an ex-wife. At the time the court issued the Final Divorce Decree, the Judge divided the pension (Defined Benefit) based on the fact that he began receiving a full pension at 51 due to disability. Since this is California, she ruled that the portion above what he would have received if he had retired early was his separate property. We tried from 2004 until Jan. 07 to get ex and her attorney to issue a correct QDRO but they kept sending a model obtained from the Union that divides the benefits earned during the marriage equally. We have tons of letters to the ex and her attorney explaining the problem and one from the attorney for the Union explaining how the pension should be divided based on the court order but we had no luck getting a QDRO issued that properly divided the pension according to the court order.

In Jan. 07, we were in court (she now wanted spousal support but was not successful as it's been nearly 10 years) and at the end of the hearing, her attorney said my husband was refusing to sign the QDRO. Without reviewing how she had divided the pension and without reading the QDRO, the Judge signed it. HUGE SHOCK! Particularly because this Judge has always seemed pretty reasonable. Of course, the ex sent it to the Union and they immediately began withholding the entire 1/2 earned during the marriage from his pension because even though it doesn't follow the court order, it does qualify. This has been going on for months but so far we have been able to get the Union to segregate the monies until the court rules on this as we filed an OSC in July. Unfortunately, her attorney got a continuance until later tihs month.

We supplied the court with all the documents showing both the ex and her attorney knew the QDRO did not divide the pension correctly in the OSC and we wondered how they were going to explain this to the Judge. Instead, we received a Points and Authority response from her attorney that says it's a "Reconsideration" of an order made in January and that according to CA law, we only had 10 days to ask for a reconsideration. It is our understanding that since the court retained jurisdiction over the pension indefinitely that we can go back at any time over issues related to the QDRO. Are we wrong?

This is the last issue in a very prolonged and expensive divorce. Fortunately, my husband has had custody of his now 18 year old son all this time due to issuesI don't need to go into here. Unfortunately, even though she bankrupted $49,000 in attorney fees to her attorney, he is back representing her and he is not reasonable at all. He has a rep for dragging his cases out for years, which we have learned from experience is true. He did not even respond to the issue of the QDRO being issued incorrectly (we have asked the court to vacate it and start over) but says my husband is in violation of CCP 1008 and wants sanctions based on CCP 128.7.

Obviously, we do not have an attorney. We spent more than $100,000 on this case and can no longer afford one. However, I worked closely with my husband's attorney (even assisting him during trial with exhibits since I put the exhibit books together) and I'm pretty good at reading and understanding the law for some weird reason so we've been doing okay on our own. I have written many briefs that were checked by the attorney and okaye but I recognize I am not an attorney. Now we're wondering if we have made a huge mistake because we didn't file a request for reconsideration within the 10 days.

We are also wondering if we have any basis to ask the court to revist the issue of the pension and how it was divided because we believe the disability is not early retirement but is meant to compensate him for pain and suffering and future loss of earnings until he reaches age 62 or normal retirement age. We'd like to see the court give the ex 1/2 once he reaches 62 and nothing until then. I understand about the cases the court used to divide the pension (Stenquist and Justice) but a case involving a CA pension in North Dakota made it all the way to the ND Supreme Court in late 2004 and they ruled using CA pension law that disability is not early retirement so it is the separate property of the P and does not become a longevity pension until the P reaches normal retirement age and is then community property (In re Striefel). This is not a CA case, of course, so it may not matter but any opinions as to whether we have any chance of raising this issue with the court?

My biggest question is what is means when the court retains jurisdiction over a matter such as the pension. Are there statutes or caselaw we can refer to that will offset the ex's claim that we are asking for reconsideration? I've searched and searched under jurisdiction to find out how to proceed but come up empty. Any suggestions?Thank you!

This came from an auditor. Is the cancellation of the bond in a terminating plan that still has assets and 100+ participants a reportable transaction? I only find reference to transactions that are a percentage of assets.

Hi Again,

I have a new question, kind of unrelated to the one I asked a few days ago, so therefore new thread. Once I had a financial advisor tell me that it is better for me if I can afford it to contribute a whole lump sum to my IRA at the beginning of the year to do that instead of spreading out contributions throughout the year. His reasoning was that all of my money can realize its full potential for the year instead of partially (though that is optimistic to think it is potential to earn rather than lose), but I have my suspicions that he is used to saying that so he can get all of his commission up front at the beginning of the year instead of in little amounts throughout the year. But note that he is A financial advisor, not MY financial advisor, so he is not making commission off of me anyway. But then I read something about Dollar Cost Averaging and how it is better to spread out my contributions throughout the year? So which is right? Or is the difference even significant enough that I need to worry about it? I would be talking about investing in mutual funds rather than for example a volatile single stock.

Suppose you have a DB plan that is offset by the employer account balance in a PSP. Then lets say the DB plan is frozen for two years and then unfrozen. When the DB plan is unfrozen can the full employer account balance in the PSP be used as the offset? Keep in mind contributions to the PSP continued when the DB plan was frozen.

I would think the DB accrued benefit when frozen would have to be grandfathered otherwise you would have a 411(d)(6) violation. But once benefit accruals resume, could the full account balance be used for the offset provided that offset never reduced the grandfathered accrued benefit from when the plan was frozen?

For example, a participant accrues a benefit of $1,000 / mo for 4 years. AB = $4,000 reduced by act. equiv. of PSP account of $900, adjusted AB = $3,100. DB plan is then frozen for 2 years with a grandfathered AB of $3,100. When the plan resumes accruals (after the first year), AB = $5,000, act equiv of PSP account is now $1,400 leaving an adjusted AB of $3,600.

We are TPA for this plan and are being asked to amend the plan to change the eligibility/vesting from 2 year/100% to 1 year/6 year graded.

Of course, the two principals came in under the 2 year eligibility and are fully vested. No staff entered under the old provision.

Is there an issue relative to dscrimination in timing of this amendment? I haven't been able to find anything exactly on point.

Any and all help appreciated.

Med

After a Defined Benefit plan is frozen, can the number of participants increase for "newly eligible" employees after the freeze date? My concern is for the extra funding required in the plan when the participant count exceeds 100 participants. The "new participants" would not have any accrued benefit since the plan is frozen, so are they still counted? Thanks.