May a plan provide that if a participant elects an optional form of benefit and the participant dies within one year after the annuity starting date, that the beneficiary receives a minimal pension benefit (defined as same benefits that participant received up to a total of 60 months). But if the participant lives one year then the beneficiary receives benefits under the optional form.

411(a)(3) would seem to permit this. However, Treasury Regulation 1.401(a)-20, Q-10(a)(4) states that once the annuity commencement date occurs a plan must pay the benefit in the distribution form elected. It is my understanding that Treasury Regulation 1.401(a)-20 is directed at the QJSA and QPSA, does it apply to optional forms of benefits in this instance?

Any thoughts? They are greatly appreciated.

The Plan Document for a DB plan states that for early retirement purposes, a year of service is 1000 hours. In actuality, the Plan measures service in "elapsed time." Setting aside the operational failure, can the Plan amend the Plan Document to conform with current practice w/o violating 411's anti-cutback provision?

My initial thought is that this would violate 411. Any thoughts?

1.401(a)(4)-3©(3) --- "safety valve"

I haven't been able to get any good explaination regarding this reg... anyone have any comments?

A company set up a Top Hat plan back in the 90s. We just found out that they did not file a letter with the DOL as required. Is there an amnesty program for this type of error? The company is willing to comply, but we're wondering what penalties might be involved.

A participant has a qualifying change in status (in the particular case in question, a marriage) and changes their Medical FSA election. Their inital annual election was $500. In early April, participant submitted a claim and was reimbursed for $500 with receipts in excess of that amount. Late April, participant marries and changes annual election to $1000. Participant submits claim in July for $490-over half of the receipts submitted with claim are from prior to the qualifying event (marriage). Is participant entitled to reimbursement of the claims incurred before the increase in election or only those incurred after the change in status and election change. Participant is not trying to submit claims for the new spouse from before the marriage...most of the expenses are actually OTC. The question is does the benefit itself cover the participant retroactively even with a prospective election change? My instinct and I believe some backup (changes must be on a prospective basis) indicate that he should only be reimbursed for the expenses incurred after the election change and not those incurred before but it was an interesting question and I wanted to get input from anyone here who has any thoughts.

Has anyone heard of any informal guidance pertaining to the actuarial certification? In particular, how will the EA certify the funded percentage if it is to reflect prior year accrued contributions made after the certification date? Presently, the EA would not sign Schedule B until after receiving evidence that all contributions have been made.

I have some series EE savings bonds from the late 80's and early 90's. I know some are drawing 6% and probably 4% interest. Would it be wise for me to cash these bonds and put the money into a Roth IRA? Or just leave the bonds alone?

Could someone please clarify whether cash-basis reporting is permitted for the 5500-EZ specifically? I'm a sole proprietor, and my search of this forum (where I found nothing explicit on this though between the lines it seemed to be an option) and other sources yielded contradictory results, and I'd be grateful for clarification.

The IRS instructions for the 5500-EZ aren't helpful. By contrast, the instructions for the full 5500 (Schedule I) are clear: pick one basis (cash, accrual, etc.), the choice is yours, just be consistent. But the instructions for the EZ don't discuss accounting basis, and the only reference I find seems vague and contradictory:

"Line 10b. Enter the total cash contributions received by the plan during the year and the contributions owed to the plan at the end of the plan year including contributions for administrative expenses."

That's all it says. That seems like a muddle of cash basis (total received during the year) and accrual basis (owed at year end), so I phoned the IRS's 5500 help line for clarification. The opinion the rep offered was specific and allowed no room for choice. I was told my calendar-year plan's 5500-EZ for 2006 should not include those contributions made during 2006 that were designated for 2005, but should include the 2006-designated profit-sharing and salary-deferral contributions I will be making in 2007 before the filing deadline. (These optional contributions were considered to be "owed".) In short, I must use the accrual basis.

Is this true? Are the accounting basis rules for the 5500 and the EZ really different? If accrual is really the only basis permitted for the EZ, it complicates my reporting, and I'd appreciate input ...

For 2005 (the first year the $100K threshold was reached), I submitted the plan's first annual filing -- on the full Form 5500, only because a copy of the 5500-EZ (for which I'm eligible) wasn't obtainable by the deadline. Following Schedule I's instructions, I chose the cash basis, consistent with my business accounting basis. That 2005 filing reported all contributions actually received during the 2005 plan year (including those designated for 2004) and excluded those 2005-designated contributions which were made in 2006.

So ... if it's true that EZ filers must use accrual-basis reporting, do I need to continue filing the full 5500 for 2006 and future years in order to remain consistent in using the cash basis? Or, if I want to use the EZ going forward, must I now switch horses in midstream and do an amended 2005 filing changing to the accrual basis?

Thanks in advance for any light you can shed.

I am looking for information on how to respond to the assignment of a field auditor to examine an employee benefit plan that the auditor was previously employed with. Is anyone aware of how the plan can properly object to this auditor being assigned to this particular plan? I have not received a response from the Office of Government Ethics or the DOL as of yet.

Have a client who is moving from one state to another. The client is not leaving the employ but is just moving. Carrier got wind of the change, probably through change of address request, they are not licensed in the state client is moving to and say he must be removed from the plan.

Company wants to keep him on, but carrier says they can not. Understand that.

Well the company now wants to offer this employee COBRA and is asking if this type of situation warrants it. I have never seen this as a qualifying event, he still works for them.

I know that if an individual transfers within a single company but losses coverage that isn't a qualifying event. Seems like the same situation.

Any thoughts?

Profit sharing plan paid out only employee in 2002. This left just the owner and he now has mostly non qualifiying assets, $700,000.

Schedule I 4k

My question is: can he claim a waiver on audit without a bond based on his being the only person in the Plan?

A plan that currently credits vesting on the basis of 1,000 hours in a plan year (the calendar year) is contemplating an amendment to the elapsed-time method. According to 1.410(a)-7(f)(f), as explicated by the ERISA Outline Book, each employee's vesting service during the computation period in which the transfer takes place is the greater of (a) the period of service under the elapsed-time method from the first day of the computation period through the day of the change, or (b) the service under the computation periods method for that computation period which includes the date of the change.

Is the "computation period" the plan year? I do not see how anyone could be credited with vesting service under the elapsed-time method for a partial plan year (January 1 through August 1, the proposed amendment effective date). The hours method would have to prevail for the year in which the amendment takes place. Elapsed-time could only apply to vesting after the amendment year.

I'm convinced I am missing something, somewhere, though.

I think I know the answer, but I need some reinforcement today...

YOS eligibility, dual entry dates, safe harbor 401(k) plan, Employer makes safe harbor match contribution. Plan is top heavy. When the Employer does make a discretionary profit share it is a cross-tested formula.

There are 2 family owned Hotels (A & B), different Employers, EIN, etc., but controlled group. All owners and HCEs are with Hotel A. Hotel B employees are allowed to defer and receive safe harbor match, but are excluded from the cross-tested profit share allocation.

Profit share passes coverage. However because the plan is top heavy, the Hotel B employees who are not contributing and those not receiving at least a 3.0% match rate will need to receive at least 3%, correct?

The Employer does not want to give ANY profit share allocation to the Hotel B employees, but I did tell them last year that in a year that they make a profit share or there are reallocated forfeitures, top heavy contributions would be necessary for the Hotel B eligible employees.

Background:

Retiree medical ppo plans allows dependent coverage

COBRA dependent premium cost is less expensive than retiree dependent premiums

An employee who recently retired has decided to drop his spouse coverage since the COBRA rates are less expensive than retiree dependent premiums. Once the 18 months end, could the spouse automatically be added as a dependent back on to the retiree plan? Is that considered a qualifying event? Or would she need to drop COBRA during open enrollment to be placed under the retiree's coverage before the 18 months are completed?

Suppose a client misunderstood his DB plan 2 years ago, thinking all of the assets were his (the plan had one owner and 2 NHCE eligibles in the plan with accrued benefits). Suppose a ____ financial advisor convinced the owner/employer/sponsor/trustee (same person) to move all of his DB funds into his personal IRA. Suppose this happened just before the valuation date of November 1, 2005.

Now suppose that a VCP application is now underway, and the correction method will be to propose moving all of the IRA money back to the plan (the IRA had no comingling and no distributions). Suppose all of the assets from the IRA are in the process of being transferred back into the plan.

If you were the paid enrolled actuary, what would you do regarding the Schedule B for 2005?

Option 1: Would you wait until the assets are actually transferred back to the plan before signing a schedule B for the 2005 year?

Option 2: Would you run 2005 valuation with zero assets and offset the owner's benefit by the value of the amount that went to the IRA? Note: the plan assets were larger than the value of the owner's benefit.

Option 3: Once the assets from the IRA get moved back into the plan account, would you run the 2005 valuation using the 11-1-2005 value of the IRA to be considered "plan assets" and sign a schedule B for that?

Option 4: any other ideas out there?

Same questions for the 2006 valuation and schedule B too.

Oh, and assume that firing the client is not really an option now since they have begged for mercy by paying you in advance in the form of an unusually large check for val work and VCP work.

What was the year in which loans by Plan Participants against their plan accounts was authorized by Congress (giving rise to Internal Revenue Code Section 72p and the like)?

Did loans first get authorized against defined benefit plans, or was the public law first applied to all pensions (defined contribution & defined benefit).

The name or number of the specific public law would be very much appreciated.

Also, what is the earliest date your 401k/404c began offering loans?

Many thanks.

-TrustButVerify

I have two separate TPA's giving me two separate answers.

If I chose to defer post tax (Roth) to my 401k, do the limit of $15,500 still apply? Or are the 401k roth limits the same as the roth IRA?

Can someone verify if Roth deferrals are considered in year end testing or are they not included?

Thank you

I would like to know if anyone has opened a Roth IRA through Buy and Hold. I know there is an annual fee of $25 but if you set up a monthly E-ZVestsm with 30 days that fee will be waived. What is the minimum amount you can invest? And what your thoughts are on going through Buy and Hold.

I know this has been beaten to death, but my understanding is the following:

An employer may deduct up to 150% of UCL in its defined benefit plan for the plan year beginning 1/1/2006 even though it also maintains a 401(k) Profit Sharing plan. However, only salary deferrals were made to the 401(k) plan in 2006. Also, the DB has been in existence with all HCE's participating for over two years. Also, there has been no HCE benefit increase in the DB plan in the past two years.

Does the fact that the 401(k) plan contains profit sharing money from 5 years ago disqualify the DB from the 150% of UCL deduction?

I just had two of these rejected.

They were final filing for terminated plans that made final distribution in Feb or March 2006.

I used a 2005 form and marked it final and wrote 2006 by the 2005 in the upper right. I filed them in August, 2006 (way before the 2006 form was available).

IRS issued a letter saying "not in government approved format".

Any ideas on how to do this? I see that the instructions do not seem to say "mark up the form" any more.

Thanks