We recently reviewed a 401(k) safe harbor match plan for possible takeover. The plan sponsor was disenchanted with her current TPA for being unresponsive and unwilling to "hold her hand". They employ about 400 employees, have about 120 eligibles and about 30 participating. The first thing we noted was that the plan was very close to an audit....a very big surprise to the client as an audit will likely add $5,000 - $7,500 to their annual costs.....a lot for a little tiny plan with only $300,000 and 30 active participants.

She found that her payroll provider could offer her a very flexible plan with a pretty good investment lineup for reasonable TPA fees that INCLUDED the audit!

Anyone have an experience with this type of bundled competition? Can clients really get basically a free audit by using a payroll provider plan?

I just took over a governmental DC plan that only has after-tax EE contributions and an ER match on those contributions. The plan allows inservice withdrawals of the EE contributions, but not the ER portion. What account balance should be considered when calculating the taxable/nontaxable portions of the distribution if someone is just withdrawing money from the EE portion of the account balance? In other words, should the nontaxable portion be Contribution Basis / EE Account Balance X Distribution or Contribution Basis / (EE Account Balance + ER Account Balance) X Distribution? Does it matter as long as you are consistent in the calculations?

I would appreciate pointing me in the direction of official guidance/code/regualtions along with any answers you provide.

TIA

I have a 5-percent owner who has to start taking RMDs. The plan & plan sponsor file for extension every year and the contributions are often made in August of the following year. Are the participant's accrued contributions included in his 12/31 balance for RMD purposes? This is a profit sharing plan.

A 401(k) plan provides for salary deferral and matching contributions. There are 10 investment options, one of which is employer stock. Currently, less than 30 percent of all plan assets are in employer stock. In order to get a tax deduction for the dividends, it was suggested by an advisior to amend the plan to be an ESOP. The proposal is to treat the employer stock fund as the ESOP portion of the plan. The amendment would have the necessary restrictions and requirements to be an ESOP, but the plan design did not change. Participants can still elect to have deferrals and matching contributions invested in any investment, inlcuding employer stock.

How does this plan design meet the "primarilly invested" in employer stock requirement? Would the plan have to require at least that the matching contribution be make in the form of employer stock for it to be an ESOP? Any other issues?

I would appreciate any opinions as to whether the following definition of Actuarial Value of Assets for an End of Year Valuation is likely to be allowed under the new funding rules to begin in 2008:

"Beginning of Year Fair Market Value of assets brought forward to the end of the year by adjusting them (increasing) by the pre-retirement interest rate" (BOY assets X 1.0i ).

It's not really an "average" like the new Code sections for PPA 06 talk about so I'm wondering if this will work. Any opinions ?

For what it's worth the code cite is attached that describes alternative options to FMV.

AVA_Assets_2008.pdf

In paragraph (e)(4)(v)(A) dealing with investments in a default fund prior to Dec. 24, 2007, the DOL uses language that states "an investment product or fund designed to guarantee principal and a rate of return generally consistent with that earned on intermediate investment grade bonds" - I'm being told by investments folks that the rates of return on stable value funds would not be as high as the rates for intermediate grade bonds.

What is the DOL trying to say with this provision?

If an employee has a traditional 401(k)/403(b) and a Roth account in the same plan and must take RMDs, does the employee calculate the RMD for each type of account (Traditional and Roth) separately? Can the employee choose to take RMDs only from the Roth account or from the traditional account or is the employee required to take RMDs from the each type of account (traditional account Roth account)?

I "inherited" a terminated DB plan and we can't find the last participant to payout. Lump Sum value is about $11,000. According to the instructions for Schedule MP, only a plan subject to Title IV can use the program. Is there something equivalent for a non-Title IV plan? Thanks.

VEBA owns an annuity contract and receives payments thereunder. Do those payments have to be reported on Form 1099-R even though they aren't generally subject to tax, i.e., VEBA is generally tax-exempt.

A VEBA that is a MEWA wants to start an insurance agency. I have concerns regarding the prohibited transaction rules of ERISA and also tax law. This arrangement will qualify under PTE 84-24 so long as the VEBA does not exercise influence over management. The VEBA will own a minority share of the private stock of the insurance agency (for-profit corporation). To avoid the sharing of commissions, the insurance agency can declare dividends on its stock to get $ back to VEBA.

Now the concern: VEBA wants to make a capital contribution to the insurance agency. This appears to be a prohibited transaction under ERISA because the plan is transferring assets to a party in interest. I cannot find an exemption for this transaction under DOL guidance. Additionally, I have concerns that the transfer of assets by VEBA to insurance agency constitutes a inurement not permitted under VEBA regulations.

Anyone have any thoughts?

A client hires professional employees on a temp-to-perm basis, and would like to have them covered by their very generous plan from the day they start as "leased" employees (they want it to be a selling point to attract the employees). That's in quotes because these employees are (almost always) hired as "real" employees usually 90 - 180 days from the day they walk in the front door.

So... while these employees are employed by the employement agency, they are not employees of the sponsoring employer, so they can't be in the plan. And I can't call them "leased" employees because they don't meet the 1 year discussed in 414(n)(2).

Is there anyway to get these employees (or should that be in quotes?) into the plan? The company is trying to be more generous, and is shocked that it is so difficult to do so. Thanks.

Old client - new auditor - large plan

Auditor wants to see 10% of retiree original calcs and forms - many going back 20+ years.

Auditor says they must select from those receiving payments - not necessarily processed during audit year.

Considering IRS statute of limitations and PBGC record retention, this seems abusive.

Is this is a reasonable request to audit calcs done 20+ years ago? Are there any relevant auditing standards here?

Just trying to confirm that 204(h) notices are still required if a contribution formula is reduced in a MPP?

Thanks.

My wife owns a S-Corp and several years ago we started a cafateria plan. I am a former accountant and took it upon myself to become educated about 529 plans and wrote and implemented the plan. It has been running for over five years now and everything has gone smoothly. The plan is very small and only has three or four participants during any year out of four or five eligible employees (I know that my wife and I are not eligible to participate of course). I understand the basic rules and regulations about eligibility and participation as well as how the plan needs to operate and as far as I can tell we are doing everything correctly. If we had to pay a TPA to implement and administer the plan we would probably not be able to offer it to the employees as it would probably cost us more than it saves the employees in taxes. The main reason we started the plan is to be able to offer health insurance to the employees that needed it while not having to pay for employees that don't need it (the plan is funded by salary reduction agreements). We also have a medical FSA that a couple of employees take advantage of and a dependant care FSA which no one currently uses. I am comfortable that as a whole we are running the plan properly and have been very careful about making sure I am following the rules. I know it is a bit after the fact but I am looking for opinions from people who have more experience working with 529 plans about whether we are making a mistake operating this plan ourselves. I waded through the rules and regulations and although there are alot of them they all seemed pretty straight forward when applied to our situation. As long as we run the plan correctly as far as enrollment, eligibility, granting benefits, applying the use-it or lose-it rules, etc... should we be pretty safe? Were 529 plans created with the idea that a TPA would always be used or is it feasible for business owners to run the plans themselves? Are there many other small business owners who write and implement 529 plans on their own? I know these are pretty general questions and I will probably get a wide variety of responses so feel free to make whatever comments you would like. Thanks for any input you can offer.

Matt

Hi, I have several IRA accounts. 2 of them I have even distribution withdraws set up. Since starting the distributions the accounts have grown substantially. Is there any way to move some of the money to another account without penalty? Or, is there any way I can increase the amount of the distributions? I am only 51 but retired.

Thanks,

DD

Can an ER define what is reimbursed from an FSA to an EE (via the plan document?).

Can an employer set up a STD plan with two levels of benefits- say 60% for hourly and 70% for salaried employees???? I would think they can since benefits are not being provided under a 125 plan.

Am I missing any nondiscrimination testing issues?

If the employer can't do that, is there anything that prevents the employer from setting up two separate STD plans...one for hourly and one for salaried employees?

Tx. in advance for any feedback.

What happens if a plan sponsor accidently over paid $1,000 on participant distributions (That is the combined overpayment on about 5 accounts)?

How do you correct this?

Do they just make an additional $1,000 deposit to make the cash account whole? Any ideas?

I am actuary in behalf of a frozen, salaried DB plan with 60 participants. The Plan offers unreduced retirement for persons who retire from active service after reaching age 62 and completing 20 years of service. For other actives (and terminated vested), an actuarial reduction applies if payments begins before age 65. The Plan also offers lump sum payments to about 2/3 of these participants on a minimum actuarial basis (though the immediate payment would be lump summed).

The Plan is currently underfunded (on whatever rationale basis you would like to postulate). The Plan's investment counselor is suggesting that once the Plan gets funded on a PPA 2006 basis, that the funded status can be maintained by immunizing the portfolio. I had always thought of immunization making sense for a large groups of pensions in a periodic payout status where the only contingentcy is

mortality.

In this particular situation, the patterns of distribution are unpredictable and leveraged by a few handfuls of participants. So, it may not be possible to maintain a 90% funded percentage. In addition, it would seem that by investing purely in fixed instruments, the plan would be foregoing investment opportunity and the bottom line is that aggregate contributions (at least in theory) would be higher.

Any comments on the counselor's investment recommendation? Am I overlooking the obvious?

Basically what my description says. I cannot find out anything about QDRO for my ex husband's pension since it was filed with the court in 2001. All I have is a card saying it was filed. I've tried calling everyone I can think of. I don't know any of my options.

Any help would be very much appreciated.