How will the proposed DOL initiatives on fee disclosures effect 403(b)(7) plans? (E.g. will there be additional reporting requirements on the 5500 - Schedule C to include fee disclosures/amounts?)

Try to make a long story short. We have or should I say had a client that did not make all of the employee deferrals for 3 employees. This isn't the first time this happened. We discovered this issue the first time in PYE 2005. We are the TPA on this case and perform all testing and Form 5500 work at the end of the year. At the end of 2005 we discovered that the client had not made all of the deferrals for several employees. We informed them of the situation and they agreed to make the deferrals and we calculated the gain/loss and the employer made the contributions and we took them through the voluntary compliance program and reported on the 5500 that the employer did not remit contributions on a timely basis.

Fast forward to 2006. We contact them as usual to get their updated census information...they do not respond. Finally they send us 2006 information. We find that again they did not remit the all of the deferrals. We contact them and let them know of the problem (which we believe they were well aware of) and they tell us that they will fix it. We file an extension and send them a letter describing all of the deficiencies and how they must be correct. After repeated emails regarding the need to get this fixed the contact us in late September and want to meet with us. I meet with them and give them a letter stating all of the deficiencies and the cost to correct it all. We also ask for payment in advance before any work will commence. They say no problem you will have the check the next day. October 15th comes and goes..we sent reminder emails with no response and no check. We sent them an email acknowledging that they did not make payment and we did not file the Form 5500. I will be sending them a formal letter telling them that we are no longer the administrator for their plan.

We have never run into this before believe it or not. My question is should we report them to the IRS. Do we face liability if we don't. Several of the employees have terminated and did not receive all of their deferrals. My feeling is we have an obligation to report this to the DOLE/IRS and we could face liability if we don't. What is your opinion and has anyone else gone through this before. How should we contact the DOL...what is involved?

thanks

Hello -

We administer several 403(b) Plans and we do not always receive enrollment forms in a timely manner. As a result, it's very common that someone contributing for the first time will error out of our recordkeeping system. I am wondering how other companies handle this issue. Could we request that the Plan Administrator not send us the funds for those who we have not enrolled?

Thanks!

My client as a defined benefit plan and a 401(k) profit sharing plan that covers ALL the Partners and Staff employees. The remaining employees (Associates) have a 401(k) plan with deferrals only. Can the compensation of the associates be used to determine the combined deductible limit of 25% + 6% of compensation? A former collegue has told me that the compensation used to determine this limit should include compensation from all employer sponsored qualified plans.

I'm hoping someone out there has had this happen to them or knows where to look for a specific answer.

I have a December year end plan with a plan provision that requires 1,000 hours to accrue a year for benefit accrual purposes.

The participant in question reached normal retirement age and worked past their normal retirement date in 2001.

Prior to retiring in 2001 she worked more than 1,000 hours in 2001.

She retired, requested and received a lump sum distribution of her entire benefit.

The second week of December she returns to work on a part time basis.

She has not worked more than 1,000 hours in a plan year since before she retired in 2001.

But, she returned to work in the same plan year that retired in.

The plan has a clause about not duplicating the benefit.

It's easy to see that we don't use the compensation earned prior to returning to work.

Her years of service for benefit accrual purposes aren't used, etc.

However, as she was employed on 12/31/2001 and she did earn over 1,000 hours of service during the entire calendar year, I'm having a hard time finding out whether or not she should get a year for 2001.

Anybody got any help on this?

Thanks

Christopher

I am doing DB/DC combined plan testing for a plan that had to refund part of the 401(k) deferral for an HCE in order to pass the ADP test. I just want to verify that the amount of the deferral that I include for the average benefits test is the net amount, in other words, the deferral amount after reduction for the refund, is that correct?

May a municipality recognize prior "nongovernmental" service for its current employees with respect to their past years of service with a private fire protection organization. I understand that 415(n) permits the employees to purchase "permissive service credits" for nonqualified service, subject to certain restrictions. However, it is not clear to me whether the IRC prohibits or limits the ability for a municipality to amend its plan to recognize prior service with the private organization.

Hi,

I have stock option granted in 2004 and is subject to 409A because of discount. The company is trying to fix the issue by fixing the price and is waiting for SEC's approval, so called tender offer.

I get a very good offer from a another company but may lose it if I sit here and wait for the tender offer. so i am thinking to quit before the tender offer is presented and exercise all my vested share within one month after the termination (the term of the grant).

I never exercised my option except a few hunder shares in 2005. Nothing in 2006 and 2007.

My questions are:

a) Will that subject to 409A penalty tax? As termination of employement is the allowed event of distribution per 409A, i think it should be fine, but not very sure.

b) Do i need to amend the plan before quit? Or can this consider a reasonable, good-faith compliance with 409A wiithout the need to amend the plan.

c) Will my exercise in 2005 has any impact? Are my option tainted because of exercise in 2005? Will aggregation rule apply?

Thank you very much for help,

Michael

hi.

i am in the benefits world but in a very small niche. we administer 457(e)(11) plans, which are exempt from 457. but we try and draw from the rules of 457 or erisa rules because the guidance for 457(e)(11) plans is little to none.

the overwhelming majority of our our DC plans are pooled accounts utilizing a rabbi/grantor trust. the plan assets are the sponsors until the volunteer reaches the payout age which creates the taxable event. the gov't sponsor sets an investment policy and invests the assets conservatively (usually no more than 20% exposure to stock-based mutual funds).

we have some clients that really want to have the option for participant directed plans. we are investingating daily recordkeeping platforms or hooking up withanother TPA to provide this.

some of these govt sponsors think that they will remove, or substantially reduce, their fiduciary responsibility by letting the participants direct their own investments rather than having to set an IPS to direct the investment of the entire asset pool.

my questions really are, if participant direction is allowed:

1) what are the requirements under a traditional 457 plan as far as education to the participants. does the sponsor have to have an investment professional available for education, or can everything be delivered via web site stuff? n if an investment professional must be involved, can it be over the phone or does it require any manditory face-to-face availability?

2) how much does this really take the sponsor off the hook? what if a participant looses his whole account due to bad investment choice - does the sponsor have any liability for allowing the investment option, or giving the choice of participant direction?

3) in your opinion, should a govt sponsored plan that is set up as i mentioned - where he plan assets are assets of the sponsor (local govt) until the participant meets the payment eligibility requirements, even allow participants to direct the investments? since the assets are technically the sponsors (this creates the substantial risk of forfeiture) is it prudent or even allowable for the participant to direct the investment of the sponsor's assets? i am sure they are precident here, but would like your take. we don't want to cloud the issue that the trust assets are the sponsors assets.

thanks so much.

We need to correct allocations made in 2006 that used W-2 wages minus deferrals as compensation. Can we self correct this by adding money to the people that were shorted? Or, do we only raise those that received a smaller percentage than the average of the highly compensated employees? Is there another answer?

Does the answer change if we were told the plan will not allow QNECs?

I have a prospecive client who has a 401(k) plan with both collectively bargained (CB) and non-collectively bargained (NCB)employees. The CBs are part of the of the same CBA. The CBA provides every is elig to make 401(k) contributions, but different employer contributions for subset CB employees. For example, one subset CB employees will receive a match and no PS contribution. Another subset will receive a PS cont, but no match. Another will receive a match and a ps, but the levels are not the same as either of the two previous subsets. Since it is in the CBA, we are going to follow it. Our question is what testing needs to be done on this? 410(b), 401(a)(4), ACP? I would guess that the ACP is not required for the CB employee disaggregated portion, but I am not sure. Any help would be greatly appreciated. Also, any cites would also be appreciated.

Additionally, they are also talking about using a comp definition that does not meet 414(s). For the CB employees, does a comp test need to be done. My guess is yes if there are HCEs as part of the CB employees. Again, any help would be greatly appreciated. Also, any cites would also be appreciated.

We need to calculate the allocations for a 401(k) profit sharing contribution. The plan indicates that we should use W-2 wages as the definition of compensation. We assume this means Medicare wages, which include the employee deferrals. Is this correct?

I'm sure that this has been addressed, but I cannot seem to find the question posed:

With regards to the new 75% QJSA requirements (effective for plan years beginning after 12/31/07), are the requirements effective for elections made for plan years beginning after 12/31/07, or for distributions made for plan years beginning after 12/31/07?

Thanks in advance.

I've been out of DB's for a while so please bare with me. A CPA client asks, "What is the DB discount rate and what can be used for a projected earnings assumpton?" Then he asks, "Isn't there a correlation between the 2?" Can anyone help me answer these questions,

Thank you in advance

The 415 compensation definition is also the basis for determining nondiscriminatory (414(s)) compensation to test a plan under the ADP/ACP tests, and under 401(a)(4).

Did the final regulations clarified whether or not the definition of compensation would be an "alternative definition" if it excludes any or all of the optional post-severance compensation.

If it is considered an "alternative definition," then each plan using the "alternative definition" would be required to pass the compensation ratio test every year.

Can a plan credit service with an unrelated employer for eligibility, vesting and accrual of benefits? If so, what are the potential pitfalls (like how are we going to verify the prior service, and what if all of the employees in this category are HCEs)?

Thoughts are appreciated.

If you freeze a 401(k) plan, can you allow loan repayments to continue.

Have gotten correspondence from PBGC saying that it does not cover preretirement death benefits including qualified preretirement survivor annuity. Can anyone provide me with a cite for this position as it applies to a multiemployer plan? Thanks.

Suppose a DB plan currently has defined the plan's interest rate and mortality as the GATT applicable rate and mortality. The plan goes on to define the Section 417 interest rates which shall be used as a minimum: the applicable mortality is the commissioner's standard table from Code Section 807(d)(5)(A) and the applicable interest rate from the 30-year Treasury securities as specified by the Commissioner for the lookback month(s) prior to the stability period.

In the 2008 plan year, if the plan is not yet amended for the 417 change from PPA, must the plan compare the lump sum determined by using the old GATT mortality and full 30-year treasury interest rates (the existing terms of the plan), to the lump sum determined from the new required 417(e) blended rates and its new mortality?

Or can we just switch immediately in the 2008 plan year to just use the new blended rates and mortality with any 411(d)(6) worry, even if no amendment is in place describing these new rates and mortality?

Suppose a new DB plan has a formula where the accrual will provide 1/10 of 415 dollar limit for one of the employees (the maximum accrual in year #1). Suppose the plan starts 1-1-2008.

When determining the maximum allowed for funding purposes, is that employee's maximum cushion actually limited to the 415 limit at the end of that first year, thus not truly allowed fund (for that ee) the 50% cushion?