I have an eligible participant who made salary deferrals in 2006 and was terminated in 2006 with less than 500 hours. My question is should this person be included in the 2006 ADP test?

Same situation, but the participant did not make any deferrals in 2006. Should they be included in the 2006 ADP test.

What are the factors in determining if they should be included?

Thank you, AJM

Can anyone point me in the direction of something that says that if a loan is considered a deemed distribution but is due to termination of the plan, then the 10% penalty does or does not apply?

Thanks in advance,

Crystal

Can a 401(k) Plan - one life plan (only employee) invest 100% in real estate?

My vanilla world of equities and mutual funds restrict my knowledge at times!!!

Thanks

Has anyone ever heard of a plan that is able to condition the form of distribution based on the terminated employee's willingness to sign a non-compete clause with the employer? This plan states if you sign a non-compete clause you can have a lump-sum payout, but if you don't sign it, you have to take an annuity payment only.

Seems to me to be violating the contingent benefit rule, but the plan claims to have a determination letter on it.

A doctor client in California maintains a medical practice ("Company A") that employs several common-law employees that are covered under a 401(k) plan maintained by Company A. The doctor's wife owns 100% of the stock in Company B, that is engaged in the real estate business. There is no business relationship between Company A and Company B. Additionally, the husband is not involved in Company B, not is the wife involved in Company A. Company B proposes to establish a defined benefit pension plan thay will cover only the wife, Company B's sole employee. Under 1563(e)(6), we are taking the position that the stock in Company B is excluded from the attribution rules and there is no controlled group present.

I understand that Mr. Watson's book states that in a community property state, there would be attribution. Is anyone aware of any cases or PLRs on point?

Thanks. Ed

I have occassionally used the DOL EFast info number (866 463-3278) to check on a client or takeover client past filings - like did they actually file.

On a new takeover the sole proprietor files a 5500 EZ. Is the EZ filing supposed to be on that system? I notice that FreeErisa does not have EZ filings at all.

does a Form 5500 have to be filed with the EBSA for all qualified plans?

What are any thoughts about a plan sponsor's obligation to re-run ADP tests if they find out that they were done incorrectly?

Situation: Employer A and Employer B (members of a controlled group) both adopt Plan X. ADP test was performed separately for each Employer. Both tests pass.

Do we need to go back to perform the tests together?

What if this has been going on for 4 years?

What if this has been going on for 10 years?

Do we have to go all the way back? Is there a statute of limitations?

Thanks for any feedback.

I have a 401(k) client with the assets, around $1,000,000, invested with a national mutual fund company. The participants have investment choice and the plan complies with 404©. An insurance agent is trying to convince the plan sponsor that about 1/2 of the plan assets should be liquidated and individual annuity contracts purchased for the plan participants.

1) I recall that the DOL has expressed concern about individual annuity contracts in qualified plans. Is my recollection correct?

2) Does purchase of the annuities take the plan out of 404© compliance?

Any thoughts are welcome. Thanks.

Members are participating in an LLC-sponsored 401(k) plan. what are the members contributions if there are no income allocations? IRC Section 401©(2)(A) defines "earnings" as "net earnings from employment." If no income allocations is there no contribution for that year?

Any help would be appreciated.

At last year's EA meeting, I asked an IRS representative why it took the IRS over 20 years to address the "participant v employee" compensation issue under IRC Section 415. The reply: "We had other priorities and didn't get around to it." I'm thinking, in that time, a lot more difficult challenges have been faced and there have been seminal breakthroughs in medicine, technology, communications, and warfare. Plus, we somehow got our daughter out of high school.

The final IRS 415 regulations take up some 210 pages depending upon the font and point size. What's going on here? Did we really need them to "get around to" this?

Perhaps, the IRS should revert to its erstwhile name, Internal Revenue Bureau.

Two seperate plans ESOP and Profit Sharing with 401(k) features. Same eligibility for entry into both plans.

3% safe harbor contribution is made to the ESOP to fund repurchase liability each year. Typically no match or profit sharing is made to the P/S 401(k) Plan.

Employer is wondering for 2007 if they can have the following contributions:

3% Safe Harbor to the ESOP

2% Profit Sharing to the P/S Plan to all NHCEs

Maximum amount allowed under rate group testing for HCES

So I guess the bottom line question is, am I disallowed from using the 3% safe harbor in the gateway test just because it is made to the ESOP?

I know for certain 410(b) testing I have to mandatorily disaggregate the ESOP but I've gotten myself so lost in the regs this morning my brain hurts!

I have a 401K plan that failed the ADP test the last two years. I told them the amounts to refund but they have failed to do so at this time. What do I do next? How can this be corrected? Any insight would be appreciated!

I do not have much experience with Multiple Employer plans. A client is considering separating its DB plan into a multiple employer plan. There are 4 separate plans involved (they do not meet requirements for controlled group status). Does any one have a reference for procedures involved in restructuring the plan? Are separate agreements regarding funding obligations or termination liability of each company required or are these issues addressed within plan document?

A one participant owner/employee client has a plan year through 3/31.

They had large windfall and are trying to maximize deduction.

I prepared a 3/31/07 valuation and said based on estimated assets the max deduction (150% UCL) was $500k.

Apparently the CPA reports this to the client. The client is happy.

The CPA gets back to me later in day with actual assets. The assets have a large gain and the max deduction goes down to 400k.

A week later, the CPA tells me that I need to use the 500k results.

Any ideas?

I suppose I can check into changing the asset valuation method from market value to a smoothing method. It's a year-end valuation.

The plan is at 415 limit and an amendment to a lower ret age has to be in effect for two years, per 404. So that won't help right now.

The facts above have been simplified for purposes of this thread.

Now the kicker is that the CPA's referred to above work at my firm, thus the demand is coming from internal management.

Thanks.

A colleague who does a lot of work on participant-directed DC plans told me earlier today that virtually all DB plans have adopted an investment policy statement. In my experience, I have not seen any DB plans with investment policy statements (granted, I work on smaller DBs--generally under 500 participants). I am just wondering whether other DB folks (1) see IPSs on their DBs and (2), if they do, how they go about defining the investment objectives. In the case of a DC plan, it is easy to see a disgruntled participant suing the plan for breach of fiduciary duty resulting in poor returns. In the case of a DB plan, the company simply puts more money in the plan if the assets underperform the actuarial assumptions. Anyone care to comment?

interesting - the 'correction methods' under the old regs 1.415-6(b)(6) have been eliminated. (these included the return of deferrals for 415 violations.) however, the news regs say you can use the old rules pending further guidance, but only if you qualify under the EPCRS program.

and those comments are only found in the preamble not in the actual regs, so when you get a new copy of the regs and throw out your old one, hhmmmm. lets see, you might not have the preamble, and if the old regs aren't included somewhere in your new copy, you won't even have that.

gotta love it!

oh, the further guidance depends on comments received via EPCRS (Rev Proc 2006-27, section 2)

If an eligible employee fails to submit the necessary paperwork to establish the HSA, what happens to the employer's contribution if the employee is now terminated.

The employee did not elect to contribute to her HSA, but did elect employee and spouse HDHP coverage.

The employer contributes a certain amount for employee and spouse coverage under a HDHP so it submitted her contribution to the financial institution each month (2 months).

It was just discovered that her account was never established as a result of the financial institution sending the employer contribution back to the employer.

How must this refund be handled:

1) Sent on to the terminated employee without tax consequenses since it was all employer contributions

2) Employer keeps reimbursement since employee failed to establish HSA

3) Must terminated employee open the HSA so contributions can be deposited.

I do see in 26 CFR Part 54, III that an employer is not required to make comparable contributions for a calendar year to an employee's HSA if the employee has not established an HSA by December 31st of the calendar year.

The employee was hired on 12/4/06. She was eligible for the HSA on 2/1/07. She terminated employment on March 10, 2007. The employer had submitted their contribution to her account for February and March 2007.

Your help and guidance in this matter is greatly appreciated.

My client divorced her spouse in 2002 and a QDRO was ordered but because of subsequent litigation and other problems the full QDRO right has still not been satisfied. Recenlty, a court ordered a significant interest award because of the delay. The other party proposes to pay the interest in QDRO form. My client's accountant is concerned that the portion of the QDRO attributable to interest might be taxed when the QDRO is entered even if the full award is rolled over to an IRA (DC plan is involved that allows immediate QDRO distribution). -- Is there any way the QDRO might be taxed when entered? 1041 provides for no gain or loss with respect to distributions pursuant to a divorce, but case law says that 1041 does not apply to any portion of such distributions applicable to interest. Will that case law apply to the interest portion of a QDRO?

Thanks in advance.