I need help with a question. A QDRO assigned 50% of a participant's vested accrued benefit to an alternate payee (the "AP") using the separate interest approach. The participant ("P") retired a few years ago and took his 50% as a lump sum payment. The AP has decided to leave her 50% in the plan.

The AP is quickly approaching age 70-1/2. The P doesn't turn 70-1/2 for another few years. The AP wants to leave her benefit in the plan as long as possible and only begin drawing it out as required under the MINDI rules.

Does the AP have to commence distribution of her benefit by April 1st of the CY following the CY in which (1) SHE turns age 70-1/2 or (2) P turns age 70-1/2?

P is very sick and likely will die before he turns 70-1/2. If he dies before he turns 70-1/2, does the AP have to commence distribution of her benefit by April 1st of the CY following the CY in which (1) SHE turns age 70-1/2 or (2) P would have turned 70-1/2 had he survived?

Thanks in advance for your help.

I'm reviewing a DRO for a plan. The DRO awards a percent to the AP as a separate interest. The DRO also specifies that the AP is to be treated as the 'spouse' of the portion awarded to the AP (rather than the benefits retained by the participant).

There is no significance to DRO specifying that the AP is the 'spouse' of the awarded benefits, because no QPSA/QJSA rights apply to awarded benefits.

It would seem that since the QDRO concept is an exception to the general rule of anti-alienation from the participant, that the QDRO ought not be interpreted expansively. So on top of the literal reading, there's reason that the plan would also not presume to apply this 'spouse' treatment for the AP to the benefits retained by the participant. Does this general rule of legal interpretation apply to QDROs?

This provision in the DRO does not preclude it from being a QDRO.

Since the plan merely reviews the DRO to determine if it qualifies as a QDRO, it would seem that it is not the place of the plan to bring this error to the attention of the alternate payee and the participant--the participant may not be too happy about the plan doing so and thus setting in motion a course of events that might lead to the participant's rights to the retained benefits being encumbered by the AP fixing the QDRO and being the 'spouse' as to those retained benefits.

Is there a duty on the plan to bring the error to the attention of the AP?

can you give a 3% safe harbor profit sharing to NHCE's and a 3% regular non elective to HCE's and still pass coveraqe. you do this under a cross tested plan document with each employee as his own rate group.

Hello.

I have 2 employees who have taken hardship withdrawals and while on suspension have taken a second hardship withdrawal. Do I tack another 6 months on the end of the first 6 month suspension period (i.e., suspend contributions for a year), or can I start the 6 months over at the point of the second withdrawal? If there is IRS guidance on this issue, I'd love to know where to find it.

Thanks!

An employee's spouse will begin teleworking shortly and we were asked whether contributions to the Dependent Care FSA can be reduced as a result of this change. Our SPD identifies a qualifying event as an employment status change that affects eligibility which I do not believe this situation fits. However I think it is a valid question especially in today's working environment as often times working at home is the only way one can retain a job and this might not have been predictable. I assume that we are not the only employer that has been asked this question. Thoughts and comments based on the regs??

I have never done a loan refinance in all the years I have done distributions. We have taken over a plan recently that allows for 2 loans at a time and this person has requested a new loan of $2500 plus his outstanding balance on loan #1, $1500. He has plenty of money in the account, so the limit is not an issue. My question has to do with the due date of the loan. Loan #1 is due 12/26/07. He is requesting 2 years on his new loan, and the date he wrote on the Handcock form is 12/26/09. He is adding that additional 2 years of the end of loan #1. Is that ok to do? My thoughts would be that the 2 year period has to start from now, not December. Loan #1 was taken out last December and was for a period of one year.

So what should the lenght of his loan be?

Let's assume we have an S-corporation (if that matters) with a single owner-employee and a solo 401(k) plan. Let's further assume, for simplicity, the owner-employee pays himself a salary of e.g. $20,000 in April of a given tax (= calendar = plan) year, say 2007, and $80,000 in December 2007.

The owner-employee defers $15,500 of his 2007 April's salary as EE contribution.

He further contributes $25,000 (25% of this year's total salary) in January 2007 as profit sharing contribution.

Questions:

After reading the "final regulations" on timing of contributions, prefunding, etc., does everybody agree that

(1) there's nothing to object to paying salary twice a year, say in Aptil and December; i.e. no regular payroll but irregular payroll;

(2) there's nothing to object to deferring the maximum yearly amount of $15,500 on the first payroll date;

(3) there's nothing to object to contributing the 2007 profit sharing contributions (not "matching contributions") any time during the year, like e.g. in early January 2007.

It looks like most folks belive that the prefunding "final regulations" don't apply to timing of profit sharing contributions (but only matching contributions; and we would just define all contributions as profit-sharing rather than matching), but I wanted to check if this assumption can be taken for granted, and if there might be anything wrong with the above setup. Even though obviously no well-defined payroll period exists in this case, I would think that it can be assumed that the $20,000 salary in April would relate to Jan-March's service. (Must it be defined somewhere what period a payroll payment relates to??) Also, the rule that contributions must not precede related payments or draws seems to apply only to sole proprietors, not to (single shareholder) S-corporations?

Of course we shall assume for the moment that the plan document does not contradict this setup.

Thanks,

Equity comp plan provides for accelerated vesting upon participant's retirement (age 65 or older). Over age 65 participant receives restricted stock award with three year vesting. As such, despite the three-year vesting provision, because the participant is over age 65 participant can retire at any time and the restricted award will vest. Therefore the three year provision is essentially meaningless except to the extent that the participant cannot transfer the shares while remaining in employment before three years is up.

Is there a "substantial risk of forfeiture" under 409A because the award is not "conditioned on the performance of substantial future services" such that the award must comply with 409A's requirements? I think that the answer is different than it would be merely under Section 83 but I don't know what the answer is.

This seems to be a basic question but I can't find any authority that discusses it. I only find discussion stating that restricted stock subject to a SRF does not constitute deferred compensation. But I know that already. See page 41 of the final regs.

Any thoughts are appreciated.

I have a plan with a participant who has worked the required hours for accrual but has received no compensation ( a spouse of course...). The plan provides a de minimis benefit of $10,000 per year. Now the plan is terminating. The participant has accrued 4/10 of the de minimis benefit which is a $4000 annual benefit payable at age 65. The present value of this benefit is approximately $26,000.

When I read 1.415(b)-1(f)(2) of the final regulations, I believe that although I cannot pay this amount out as a lump sum, since the payment in a particular limitation year would exceed $10,000, I can pay it out over any fixed period, for example over 3 years. Any disagreement?

Part 1:

I would like to check my interpretation of Testing Age in 1.401(a)(4)-12.

Combining plans for 410(b) and 401(a)(4).

DB Plan NRA = Later 62 or 5 YOP (NRD is first of mo. following)

DC Plan NRA = 65 (NRD is first of mo. following)

No EE is at or past either plan's NRA. No EE comes under the 5 YOP NRA provision.

EE1 is in the DB Plan Only

EE2 is in the DC Plan Only

EE3 is in both plans.

Testing Age:

EE1 = 65

EE2 = 65

EE3 = 65

Agree/Disagree????

Part 2:

What if the NRD in the DC plan is the last day of the plan year NRA is attained (the DB NRD is first of month following NRA). Therefore, in the DC plan, some particpants actually retire at age 66 based on age nearest birthday. Would that change anything? The regs only use the term "normal retirement age" not "normal retirement date". I can add that my software vendor uses age nearest at NRD. If age nearest at NRD is applicable, would everyone's testing age be 66 or just those that are actually 66 at NRD (the rest would have an age 65 testing age)?

This is the first year an auditor asked for a SAS 73 report.

I don't ever recall providing this report to an autditor, and after reading a summary of this, it appears that the auditor would be the one who is required to disclose this report if the auditor enganges a specialist, such as an actuary to review the valuation.

We are the TPA that prepares the valuation.

Are we responsible for this report?

Thank you.

We have a 401K Plan with participant investment direction that is valued quarterly using "balance forward" calculation methodology. A bit old fashioned, but there are still some of these left.

Would you agree that we need to add to the quarterly statement by describing the "investment limitations" i.e., that they can only change their investment allocations once per quarter and that any such change will be effective as of the first day of the following quarter? Or do you think I am reading too much into this PPA requirement?

Does anyone know of a good write-up regarding the impact of FMLA on retirement plan administration? I know they must be treated as active on the last day of the Plan Year, but I'm curious if they need to be credited with any hours of service?

Part 1:

I would like to check my interpretation of Testing Age in 1.401(a)(4)-12.

Combining plans for 410(b) and 401(a)(4).

DB Plan NRA = Later 62 or 5 YOP (NRD is first of mo. following)

DC Plan NRA = 65 (NRD is first of mo. following)

No EE is at or past either plan's NRA. No EE comes under the 5 YOP NRA provision.

EE1 is in the DB Plan Only

EE2 is in the DC Plan Only

EE3 is in both plans.

Testing Age:

EE1 = 65

EE2 = 65

EE3 = 65

Agree/Disagree????

Part 2:

What if the NRD in the DC plan is the last day of the plan year NRA is attained (the DB NRD is first of month following NRA). Therefore, in the DC plan, some particpants actually retire at age 66 based on age nearest birthday. Would that change anything? The regs only use the term "normal retirement age" not "normal retirement date". I can add that my software vendor uses age nearest at NRD. If age nearest at NRD is applicable, would everyone's testing age be 66 or just those that are actually 66 at NRD (the rest would have an age 65 testing age)?

I am contemplating rolling over my 401k assets into a Roth IRA and a traditional IRA. My 401k contains both qualified (taxable) and non-qualified (already paid taxes) assets. My 401k administrator will issue separate checks when I roll them over. If I understand the new rules for 2008 (and that's a big IF), I can roll the qualified monies into a traditional IRA and the non-qualified monies into a Roth IRA. I'm also thinking that both of these transactions will just be rollovers not subject to any current taxation in 2008.

Am I correct in my interpretation of the new rules for 2008? Am I ignoring any other consequences? Are there any other things to be aware of with this proposed transaction?

Thanks in advance for any help!

A payroll company put in a PS/401k plan for a client who had a PS/401k plan with me. They established it as a new plan rather than a restatement.

I seem to remember but cannot find that the TP Grp election must be consistent for all plans of the employer.

I used the top paid group election. They did not. Since their document is executed later than mine does that effectively amend my doc?

(I would just tell the client that the payroll company is now handling the entire thing (the new plan vs restatement treated as a mistake) but they used a standardized PS doc and that will cost the employer thousands of dollars compared to my new comp plan to get the same max allocation to the partners. So I am trying to see if I can do anything to work around all this. Lots of issues to chuckle about...)

Thanks

I am looking at a plan that had a QDRO come in that the plan qualified. The terms of the QDRO was that the benefit of the alternate payee is not distributable until the participant turns retirement age. (In my opinion, poorly drafted).

Despite this knowledge, the PA went ahead and processed a rollover to the alternate payee. Despite it being rolled over, the participant cashed the check (the check was made out to the IRA institution for her benefit, and some bank cashed it into her checking account).

While the QDRO didn't support the distribution, the Plan Document is a prototype document that permitted it.

Question 1 -- Is there any guidance that states the distribution is OK since the document supports it? (i.e. can the document override the qdro?)

Question 2 -- If not, what is the correction method? I'm thinking this is an overpayment under Section 2.05 of the ECPRS -- which means (1) the PA makes reasonable efforts to get the money returned and (2) if it is refused to be returned (where we are now), the PA makes the contribution to the suspense account to be used for future ER contributions.

So an insurance broker asks me to take a look at this client's DB plan. He is a sole prop and has a smallish $200,000 whole life insurance policy in the plan for a number of years. He wants to increase the death benefit and is wondering how high he can go.

While playing around, I come across a few sources that indicate an owner-employee can not deduct the current cost of life insurance. **Screeech** (that is me slamming on my imaginary brakes)

Ok so I do some thinking about this. Typically a corporation can deduct the entire premium and then the individual pays the taxes on the Table 2001 rate or some other equivalent. In essence the individual is paying the taxes for the insurance coverage for the current year. This gets me thinking that the reason an owner-employee of a sole prop can not deduct the premium is because by paying the Table 2001 rate you are in essence taking a deduction on the schedule C and then paying the tax on the 1040. In essence they are just canceling each other out right? So we are really doing the same thing as the corporation just skipping a step because we aren't taking the deduction on the schedule C for the cost of the current life coverage. If this is correct, it is kind of a pain, because I have to indicate to the client what his total contribution is and then indicate what his deductible amount is. Plus explain the difference. I guess I won't hav eto explain why he is receiving a 1099, but I think his exisiting actuarial firm has been treating this like it was a corp and issuing the 1099 all along.

The client wants to do a 1035 exchnage on his current policy into a UL with some no lapse guarantee. I think it stems from a term policy he holds outside the qualified plan that is getting too expensive and he wants to let it lapse, and pick up the death benefit coverage inside the plan for the deduction. The UL policy is fairly inexpensive so I figure the investment part of the policy is minimal. The way I see things, he may only be able to deduct about $4,000 of the $15,000 premium. I guess that is better than nothing though.

There may not be enough information here to make a thorough review of the situation, but if someone could concur or disagree with my analysis of the reasoning behind the sole prop losing the deduction for insurance that would be a good start for me. I already started the conversation with the broker and it was going down a bad path. I'll don't mind going there, I just don't want to be proven wrong later.

Eligibility is first of month following 3 months of service. Document also has last day/1000 rule for match. Turns out the employer prefunded the match on a payroll by payroll basis rather than annually as the plan document stated AND they neglected to wait the 3 months for a few participants.

Fortunately this is first year of match so terms can forfeit entire account balance and I can figure the shares that were purchased early and have those amounts liquidated.

But there are a number of individuals who received a match but did not work 1000 hours and client wants them to keep the money. Is that an amendment (eliminate the 1000 hour rule) that we can do retroactively? Match amount is not discretionary so it won't change/reduce anyone elses benefit.

Is anyone aware of a New York State law stating that 401(a) plans are no longer available, as of January 2006, to public sector employees, for purposes of employer contributions.