I got a call today from a client who wants to terminate their 401(k) safe harbor [3% non-elective] plan as of 12/31/07. The company is not going out of business; the employees/participants will still be employed on 1/1/08. Everything I can fund says that you have to give notification if it is the safe harbor match that you are eliminating, but nothing specifically speaks to the non-elective contribution.

The plan gave the required notice in November 2007 that they were committing to a 3% plan contribution for 2008. Doesn't that create some sense of obligation on behalf of the participants? Or at least something with respect to the document that it is a safe harbor plan? If we have to run an ADP test for 2008 that's OK because with no one deferring, it can't fail, but isn't there a "bigger" issue here?

Thanks...

I have a request to "re-register" the shares of a participant's account into accounts in the name of a self-settled (or grantor) trust.

My thoughts are this cannot be done but I want to be clear with the Participant as to why and what are the alternatives.

1 - The participant is not the owner of the shares held in his account because since the Qualified Plan assets are held in trust the Trustee of the Plan owns the shares and not the participant. The participant has no rights to re-register or re-title while held within the Plan trust.

2 - The participant can name the trust as the beneficiary for the account (so long as J&S rules either don't apply or are satisfied).

I am fairly certain regarding #1 - but I don't know enough regarding #2 to indicate what is the effective difference between having the shares held within the living trust (as requested) and having the trust simply be the beneficiary of the participant's account.

What would be the different treatment, if any, since it is a self-settled (grantor) trust whereby the settlor/grantor and trustee is one in the same and essentially has control of the assets until death anyway.

Thanks in advance.

Details:

- Prelim ADP testing is failing for a 1/31 plan year end.

- HCE that is terminated is going to get a refund.

- HCE is rolling over entire account to an IRA.

- HCE is demanding distribution immediately.

- Corbel Prototype Document

The three options we see in no order:

Option #1 - Hold the distribution until after the ADP test is complete and refunds are paid.

Option #2 - Pay out a percentage of the account and the remainder after the refund is paid.

Option #3 - Pay out the entire distribution and try to get the money back or reclassified by the receiving IRA.

I'm wondering if I have missed any options and how others are handling similar situations.

Our health, life, ad&d & STD plan are all part of 1 wrap plan.

We have about 80 union emloyees covered under our STD plan but are not eligible for any of our medical or life/ad&d plans. THE STD plan covers the NY mandated temporary disability benefit of up to $170/wk.

They are covered under another union plan for those benefits

I see an exemption for not needing an SAR for plans with <100 who have only a plan for state insured disability.

THe SAR encompasses premium payments for all healt & welfare plans.

Must I send an SAR to these union participants?

Much thanks

I am the Plan administrator of a Profit Sharing Plan of a single employer. In June 2007 the office of Plan Sponsor was “raided” by about a dozen agents from several agencies (federal and state). Among the material removed from the office was a notebook containing the current Plan, SPD, FDL, the most recent Administrator’s Report, and other items. I did not learn of the removal of the plan information until a meeting in October. At that time I directed the office manager to contact the agency who had possession of the plan information and request a return of the original documents. As of today that has not been done.

1. Does anyone have any experience in this area?

2. Is the following ERISA section the correct one for requesting the return of the original documents?

104b-1(b)(3)(i)

(i) In the case of a plan not maintained according to a collective

bargaining agreement, including a plan maintained by a single employer

with more than one establishment, a multiple employer plan, and a plan

maintained by a controlled group of corporations (within the meaning of

section 1563(a) of the Internal Revenue Code of 1954 (the Code)),

determined without regard to section 1563(a)(4) and (e)(3)© of the

Code), documents shall be made available for examination in the

principal office of the employer and at each employer establishment in

which at least 50 participants covered under a plan are customarily

working.

I have a question on the calculation of average benefits % for aggregated DB/DC plans. Its a cash balance plan aggregated with 401(k) PS plan. In the calculation of ABP, do we also have to include the deferrals in the DC calculations.

eg my plan has match, profit sharing and now cash balance.

Do I need to include the deferral amount for each emplyoee along with the match, PS and cash balance contributions and then calculate the average benefits percentage. Or is it safe to only count match, PS and cash baalnce contributions and exclude the deferral. Last years calculations by the prior analyst show that he does NOT add in the deferral while calculating the ABP.

Help!

Due to plan error, some participants missed matching contributions. The plan wants to make-up the missed contributions using forfeitures. The plan document allows use of forfeitures to offset matching contributions, so that seems okay. Plan also wants to use forfeitures to cover participants' missed investment gain on missed contributions. Is this a legitimate use of forfeitures? Thanks.

Does anyone know where the people responsible for employee benefits programs go to get or discuss ideas on how to reduce or contain employee benefits costs?

I would think that there must be some Forum, Newsletter or Conference etc where ideas and experiences are discussed and exchanged. Otherwise it would seem that they operate in a vacuum and only know what the providers tell them or steer them towards. If they only go by what is published in the popular media then all they would be getting is what the provider and agents (consultants) are trying to create buzz about.

I have been looking and asking, but there seems to be nothing.

401k plan with SHNEC and New Comp plan passes testing but only after limiting the ownership group to a contribution that is 10k-12k lower than maximum for each of 2 owners. There are additional employees recently hired that could change the results dramatically....

Can we amend the plan to make the eligibility for the profit sharing (and forfeitures) immediate while at same time leave eligibility for deferals and SH plan at 1 year with 6 month entry dates? At same time we would be removing the 1000 hour requirement but leaving in the employed at end of year requirement.

Plan is not top heavy and won't be for another 5 years or so at current contribution levels.

Doable?

I know this seems like a basic question, but is it still permissable use pre-participation comp in a DB plan to develop a higher average comp for the plan's first year? Not that I believe it matters, but the plan would only cover a Sole Proprietor and the prior years' net Schedule C is much higher than it is for 2007. Thanks.

I have a client that is setting up a HDHP with an HSA option for the employees. The employer is contributing $ 500 for each employee to their HSA. The business is a C corporation. The business owners were wondering if there is any limitation for the owner/employee to receive the $ 500 employer contribution to the HSA? Thank you!

If you take an early distribution from your IRA for qualified education expenses (avoiding the 10% additional tax), does the brokerage house have to do a mandatory withholding even if client will have no tax due on the amount (low income year)? Thank you!!

I have an employer that has an employee that works enough hours to meet eligibility for their company health insurance. However, this employee has also been a student at the local college, and had student health plan coverage while enrolled. The student has now graduated, and will be working full-time. The change in hours does not effect her eligibility for health insurance with the employer, but would her loss of coverage as a non-student give her cause to enroll in the employer's health plan now, or is she required to wait until open enrollment?

Any help is greatly appreciated.

If an employee dependant has to have a phychological test for his schooling, can this be put through the employees Section?

Just looking for thoughts on the matter. In particular, with regards to the possible anticutback issues?

Can a sponsor change the safe harbor from a match to a 3% non elective after the start of the year, or after the 30 day notice has been given?

I am a newbbie to forums protocol so please forgive if this post is inappropriate. In particular, I have posted this question on another forum and have not received useful replies. Some direction is felt to be urgently needed, so I am asking for some guidance from your expertise. Thanks in advance!

I realize that the second point below is hardly apropos to this forum but any insight offered will be greatly appreciated. It is point (1), however, that is the most puzzling for me. FYI, I would probably be classed as a knowledgeable, responsible investor. I am well past retirement age, and have been managing my own investments, principally equities, annuities, and real estate, for nearly 55 years. I am now at a point that I do not need the RMD required of my Traditional IRA, and, in fact, could reduce taxes by managing my own annual withdrawal amounts. So, with that info:

Procedural Question:

Subject: LLC owned by Self-Directed ROTH IRA - Initial Formation Quandaries

Background:

In a couple of years (2010), certain investors will have the opportunity to convert existing 401K and Traditional IRAs into ROTH IRAs in a tax-advantaged environment. The requirements are straight forward and unambiguous - choose an acceptable ROTH Custodian, rollover the existing IRA funds into a newly established ROTH, pay the attendant taxes, and invest the ROTH funds in assets which are permitted by the Custodian and not disallowed by the DOL or IRS.

Interestingly though, there are additional provisions in the interpretation of ROTH rules and regulations which allow for the implementation of “checkbook control” of a self-directed ROTH IRA. However, the initial procedural steps necessary to properly structure such an entity are not well documented, and it is this area that I wish to pose the following questions.

1. The “operating” environment of a properly established LLC which is under the control of a self-directed Roth IRA (ROTH-LLC) is pretty simple. A Custodian administers the ROTH Account. The ROTH Account owns one asset - all membership units of an LLC (which were subscribed to and paid for from the capital deposited to the ROTH Account). The LLC is managed by the individual investor who owns the ROTH Account. All day-to-day business activity of the LLC (viz., investment and management of the assets represented by the influx of the original ROTH capital) is conducted by the manager, who, annually, reports the status of the LLC to the Custodian and to the responsible department of state in which it is registered.

But how one starts from scratch and arrives at the time when this environment is the norm is not clear.

Consider the following scenario. One of the most basic inhibitions of the ROTH-LLC body of regulations is that the investor/owner shall not co-mingle private and IRA funds. This is illustrated with the common example in which the LLC wishes to acquire an asset but does not have sufficient capital to purchase ownership. A tempting solution for the manager is to use his/her own capital in sufficient amount, when combined with that of the LLC, to effect the purchase. However, such deals are simply not allowed. Now, here is my quandary.

In the beginning, the LLC must be in existence before the ROTH Account can “invest” in it by purchasing all membership units. In order for the LLC to exist, the owner must supply at least enough capital to cover all state registrations and filing fees. Since no ROTH funds are accessible in this stage, the expenditures are necessarily funded by the investor/owner from non-IRA wealth. At a later date, assuming all other steps are successful, the Custodian “approves” the purchase of this new LLC for the ROTH Account. At this point, what exactly is the ROTH buying? The LLC at this point has not assets, no income, and only expenses to show for itself. Not a particularly attractive investment candidate for a due-diligence investor. Further, the LLC must have a bank account. To open an account requires the deposit of some minimal amount of cash. It seems that there is no way to rationalize away the fact that the cash in the bank, as well as the expenses carried on the books, represent owner-invested funds. So, can anyone explain the conundrum evident here?

2. A further point of my ignorance is that it is not clear what constitutes “doing business within a state”. Most states require a company, including LLCs, to register with the appropriate state department(s) if the company “does business” within that state. I have been repeatedly shuffled from agency to agency while attempting to obtain an answer from my state government what constitutes doing business within this state. Paraphrased, the bottom line answer has been, “you had better not be doing business in our state if we ask for your provenance and you can’t produce it”

My confusion is illustrated by the following example. An LLC is organized and properly registered in, say, Nevada. The only “asset” of the LLC is municipal bonds issued by, say, New York City. Now, how is the doing business concept applied in such circumstances? It seems obvious that the LLC is doing business in Nevada, but what does New York think? Is the LLC “doing business” there by purchasing municipal bonds specifically anchored to NY assets? Again, any clarification of such questions would be greatly appreciated.

Jim1Best

I really really hope someone is willing to help with a few questions!!

First a little background. I have about $100,000 invested in my employer’s retirement plan. The present plan with the present financial company is a SARSEP that my employer has had for many years. My employer now has decided to switch both financial companies and retirement plans. The new plan under the new financial company will be a 401k plan. This switch will take place after the first of the year. I have asked my employer if the old SARSEP plan with the old financial company is being terminated or is it just not going to be funded any longer by my employer (pay role reductions). Seems I can’t get a good answer.

Now my question and forgive me I don’t know much about the financial world but want to watch over my retirement investments as best I can and not get myself trouble with the IRS.

The staff from the new financial company, at a recent meeting, stated that any money now in the SARSEP plan could stay where it is or it could be rolled over into the new 401k plan (just 2 options discussed). I asked what, if any, fees would apply if money was rolled over to the 401k plan and I really didn’t get an answer except we can discuss that when we meet on an individual basis.

Question 1: Are there other options available other than the 2 stated above?

Question 2: Is it customary for the new financial company to charge fees for the funds rolled over to the new 401k plan or is the initial movement of funds waived of fees?

Question 3: If I have a choice and leave the $100,000 it the SARSEP at the old company, and this plan is no longer available thru my employer, can the money now in the SARSEP plan be moved into a rollover IRA (regular or traditional IRA) at the old financial company, or any other fund company for that matter, to get it out of the old SARSEP plan. OR does it have to be rolled over into another qualified retirement plan and nowhere else since I’m not quitting or changing jobs? I would honestly like to move the money out of the SARSEP and into a regular or traditional IRA with a company like Vanguard instead of rolling it over into the new 401k plan, if possible, but have no idea if I can do that. I will still fund the new 401k with future pay role reductions but don’t want to put any part of the $100,000 now in the SARSEP in the new 401k if I don’t have to. **Hope this makes sense.**

I have searched the net for these answers and everything I find relates to either quitting your job or changing jobs. Nothing I have found discusses or relates to staying with the same employer and the employer changing financial companies and plans (what you can and can’t do in this situation). I cannot get good information from my employer – I just don’t think they understand this situation any better than I do.

Again any help would be VERY helpful and thank you.

Karen

The following URL provides a handy capsulation of applicable interest rates: http://www.datair.com/rates.htm

There has been an unofficial IRS moratorium on 414(e) church plan private letter rulings for a while. However, there were at least 3 rulings in 2007 concerning church plan status -- PLRs 200708090, 200747022, and 200743036. Does anyone know if the moratorium is over, or if these were exceptions?

Thanks!