I have to value a Workers Comp offset in PA. The Pension is from private industry. I want to find a more favorable rate than currently published PBGC rates. Can you point me to some better rates. I believe my client could get a better deal than off the shelf PBGC rates.

Since all employees who are eligible to participant in a 401(k) Plan, whether or not they join the plan, are considered to be "benefiting" under the Plan.

My question is how can a 401(k) plan fail the Ratio Percentage test? Is it possible than less than 70% of the non-highly ceompendated employees are not eligible to participant in a plan?

Are there any compliance issues unique to a plan that computes its match on a pay period basis?

Here's what I am concerned about:

Jackie earns $70,000 and elects to have 25% of her pay deferred each pay period. The plan sponsor makes a $1 for $1 match up to 6% of pay. The match is computed on a pay period basis and her employer uses 26 pay periods per year.

Jackie's gross pay is $2,692.30 per pay period, 25% of which ($673.08 is contributed to the 401(k) plan). Each pay period, the company makes a match to her account equal to the lesser of (1) 100% of her deferrals or (2) 6% of pay for that pay period. Jackie receives a match of $161.54 each pay period. After 23 pay periods, Jackie has made deferrals equal to $15,480.84 and has received matching contributions of $3,715.42. In the 24th pay period, she makes a deferral of $19.16 and receives a match of $19.16. Due to the 402(g) limit, Jackie is unable to make a deferral in the 25th or 26th pay periods (and, as a result, does not receive a matching contribution for either of those pay periods). She makes a total deferral of $15,500 and receives a total match of $3,734.58 (5.34% of "annual pay").

Jackie's twin sister, Erma, also earns $70,000 but she is quite intelligent and after reading the plan's SPD realizes that if she elects to have 22.14% of her pay contributed each pay period she will be able to make the maximum deferral of $15,500, but, unlike Jackie, will receive a total match of $4,200 (6% of "annual pay"). Erma is able to create an extra match for herself of almost $500 just be completing her deferral election form differently than Jackie.

Assume the plan sponsor does not make a "true-up" so that Jackie and Erma both receive the same match.

I know that the ACP test is generally performed using annual pay so that Erma's ACR will be greater (6%) than Jackie's (5.34%). Is there a benefits, rights and features issue since Jackie and Erma are eligible for different rates of match (assume Erma is an HCE via ownership)?

The final 403(b) regs require the accumulated benefit in a new contract immediately after an exchange to be at least equal to the accumulated benefit in the old contract immediately before the exchange. The IRS/Treasury have indicated that this rule has been in existence under ERISA sec. 414(l) and that they won't answer any questions because this is an ERISA issue.

Obviously, a surrender charge upon exchange of the old contract would not comply.

* But, what if the new contract has a CDSC; would that comply?

* What if the cash value and cash surrender value in both the old contract and the new contract are the same, but the new contract has higher purchase rates due to increased longevity; is that a violation?

* Contracts don't usually match up feature for feature - how precise is the valuation requirement when comparing the accumulated benefits under the contracts? What considerations go into the determination of the amount of the accumulated benefit?

I believe there is general agreement that for funding the target uses a 24 month average rate set by the Secretary and that PVAB minimum lump sums are calculated using a yield curve without the 24 month average.

Does the PBGC variable rate premium use the same yield curve as the PVAB? It appears to read the same but would appreciate another set of eyes.

Thanks in advance for any and all comments.

Is there any way you can set up a plan that will pay benefits to offset the limitations of 401(a)(17) (salary limitations). We have an Excess Benefit Plan for the 415 limits, but have been told that we cannot use this plan to offset the 401(a)(17) limits. Has anyone set something up that accomplishes this?

A retired participant who holds after-tax contributions in his account has been receiving RMDs for a few years. We have always calculated the after-tax to pre-tax dollars to be distributed on a prorata basis. Now this participant would like to roll his entire balance out of the Plan to an IRA and is insisting that the entire RMD for 2007 be made as a return of his after-tax basis but we don't agree. He thinks Q&A 9 in section 1.401(a)9-5 gives him that right. Any enlightenment from anyone on this issue would be appreciated.

I have a participant requesting a hardship distribution, but am having trouble determining if it qualifies. Plan does not permit loans, there are no other in-service withdrawals, and hardships are limited to elective deferrals. Plan uses safe-harbor standards for hardship.

His reason for taking the hardship is an upcoming surgery that will have him out of work for 3-4 months. However, the only thing he has on-hand to determine "immediate and heavy financial need" is his monthly mortgage and property tax statements, which don't qualify under safe-harbor standards.

His argument: "If I don't pay these, I'll get evicted or foreclosed." Is this a valid argument?

Anyone who has a 401(k)/401(m) safe harbor plan and is matching on a per pay period basis - do you conduct a true-up at the end of the year or do you have your system set up to continue to provide a match for a participant that reaches the IRS deferral limit before year end?

I ask because I have gotten two different opinions on this and am curious what the practice has been for those with safe-harbor plans. I know that there was a notice that went out in 2000 that stated that you could eliminate the need to true-up safe harbor plans when matching on a pay period basis, but I was further told that the 2004 regs did not state this.

The final regulations provide that matching contributions are to be a percentage of “safe harbor compensation,” a newly added definition that provides that compensation is the participant’s compensation for the plan year - not per pay period basis.

Comments would be greatly appreciated.

Thank you

Hi,

I have a participant who should have received a rmd 4/1/2007. He will receive two this year. My question is - for the rmd that was due 4/1/2007 - I should use 12/31/2005 ending balance to calculate this rmd - correct? Even though the distribution is now late.

Is there a reg that discusses this specifically? I know that this is the correct way of handling this, I just want to have support in my file for handling this in this manner.

Thank you!

Linda

Can anyone help me and point me in the right direction in starting a Pension Consuling Business?

Is the match contribution in a 403(b) required to vest as quickly based on the PPA regulations for a 401(K)? (3 yr cliff or 65 yr graded)

An individual who is a member of a health and welfare fund retires. He declines continuing his health insurance benefits and opts instead for Medicare. However, he still keeps his dental, vision, and Rx drug coverage under the Plan.

He subsequently gets married. The member and his new wife want to now enroll in the full plan (or whatever benefits are offered to retirees).

Under the HIPAA special enrollment rules, is the Health and Welfare Plan required to allow the member and his new spouse "back" into the plan as a whole (under retiree benefits)?

Thanks.

We have a client that has an ADP test failure for 2006. The HCE participant will have a 415 violation because he deferred $15,000, received a match of $15,000 and they have a money purchase contribution which totals $22,000 for him. He is under 50 so nothing can be recharacterized as catch-up. The money purchase contribution has not been funded yet. Can I refund the $4000 for the ADP correction, reduce his match to $10,996 (same as deferral after correction) and use the extra $4,000 credited to his match acct as a portion of the money purchase due to him? I have not been able to find anything that shows which correction comes first and if there is a 415 violation. Just curious if my creative accounting would fly. Thanks for any input.

Suppose a profit sharing plan contributes 5% to some participants and 8% to others. Since all participants are getting 5% or more, can the DB plan benefit be offset by a uniform 5% and be OK with respect to 401(a)(26)?

Thanks in advance for the help.

Treas. Reg. Section 1.105-11©(2) contains the eligibility nondiscrimination test for self-insured reimbursement plans. Section ©(2)(iii)(D) contains an exclusion from testing for employees included as part of a bargaining unit. I don't see the same exclusion in Section ©(3), which contains the Benefits test. Can an employer exclude collectively bargained employees when it runs the Benefits test for its MERP?

Aloha! I have a new client who thought her prior TPA was filing her 2006 Form 5500. She found out yesterday that nothing has been done. She's asking if we can prepare the 2006 5500 and wants to know her options.

Facts:

1) Client is a Sole-Proprietor with a 401k PS Plan - 8 participants

2) Plan has over 300K in assets

3) No Form 5558 was filed

4) Plan was eff 1-1-2000 (so it's not new...)

Any insights on how to approach this situation? Do we just file with the TSL (tear stained letter)?

Mahalo nui!

To receive an unforeseeable emergency distribution, does the participant have to elect this distribution event at the time of deferral? I do not believe so but others I have discussed this with disagree. They ask, "Show me where in the rules you can avoid the election." They have a somewhat good point, I believe, by saying that the regs require an initial deferral election, which includes an election as to the time of payment.

I realize the final regs explain that the employee can retain discretion whether to apply for such a distribution but it does not directly address the issue. Anyone have any thoughts or language in the final regs I can use to support my position?

Current ps plan NRA = 59.

Poposed cash balance plan NRA = 62.

Plans are to be aggregated for 401a4.

I expected to see all BARs/EBARs calculated at the aggregated plan's latest uniform NRA of 62. Instead the ps plan EBARs are calc'd at 59 and the cb plan BARs are calc'd at 62. When I questioned the folks at Relius about it they pointed me to 1.401a4-9b2iiA and B. Is that what's meant by "...treating all defined contribution plans... as a single plan, and all defined benefit plans...as a separate single plan..."?

A client has a DC with retirement age 60 (used by the broker for early distribution purposes) and a DB with retirement age of 65. They want to aggregate the plans for testing purposes.

Does this require the testing age for both plans to be 65 (because the definition under 1.401(a)(4)-12 needs to be followed)?

Thanks for any responses.