We have a nonprofit client who currently has a 403(b) plan with a discretionary employer nonelective contribution. Their advisor has inquired about a floor-offset arrangement with a DB plan, using the employer's nonelective contribution to the 403(b) as the account that will offset the DB benefit. Is this permissible?

I am leaning toward "no" but wondered if anyone else has had this question before. In any case, they will be made very aware of the increased fees and testing issues involved.

I’m trying to better understand how to credit service using the elapsed time method on a plan year basis. I want to avoid crediting each employee on their hire date for simplicity reasons. Is there more than one way to accomplish this?

1.409A-1(h) provides that an employee is not considered to have separated from service during a bona fide leave of absence for up to six months, or later, if and as long as the individual has a statutory or contractual right to reemployment.

Can the right to reemployment be conditional? I am considering whether certain employees that have been laid off, subject to a right of recall in the event the company recommences hiring, have a "contractual right to reemployment" and are therefore considered to have a continuing employment relationship. The language in the regs (specifying military, sick, or other bona fide leave) leads me to believe that such recall rights do not establish a right to reemployment, and they are consequentely separated from service.

Some thoughts coming to mind.

Suppose you have a case that only had deferrals and a safe harbor match (and maybe rollovers)

The fund house has the ability to reflect vesting on the quarterly PBS's (assuming you upload them from your files), but does not have the capability to hard code sources of funds as always 100% vested.

Further assume that a) you only upload vesting for participants with an account balance at 12/31/06, and:

b) You cannot upload vesting for a participant not already enrolled at the fund house.

Now, you have new participants entering the plan after 12/31/06, so their vesting is showing as 0% in the deferral and safe harbor match sources.

Since we only update vesting once a year (at the Plan Year End), have we complied with the good faith requirements or not?

I guess we can argue that the participant's vesting at the end of the prior year was 0% since they had no account balance.

What else can we do? This requirement is an unfunded mandate, and we certainly cannot afford (or are staffed) to deal with each new participant as they enter the plan.

Thoughts?

Company A maintains a 401(k) plan for its employees. There is a classification of employees which A requires to undergo a 3-4 week training period. If the prospective employee successfully completes the training period, s/he is appointed an employee of that classification. Company A counts eligibibility and vesting service from the date on which an individual is appointed to the status of an employee of the classification and not from the commencement of the training period. Is A permitted to exclude the training period from the calculation of eligibility and vesting service? Does it make a difference if the plan document states that service is counted from the date that an individual is appointed to a certain status?

An employer wants to pay certain plan fees, but will only do so if he can deduct the fees as an expense against income.

If the company pays for these expenses and takes a deduction, then the amount the company pays is really an employer contribution and is subject to the allocation formula in the plan, correct?

It seems like this could lead to problems, but I'm not sure why. Does anyone have experience with this situation?

Thanks

Last thing I read was that an IRS official said that he was "hopeful" that final regs. would be published by the end of March.

Does anyone have any up-do-date information from the Horse's mouth that he or she would care to share with us?

One of our employees is covered by our HDHP and her spouse is covered by a Medicare advantage plan. The employee makes pre-tax contributions to a Limited FSA for herself and spouse. Recently, the spouse had several acupuncture treatments. These are not covered by his health plan. Does anyone think that the acupuncture expense could be reimbursed by the Limited FSA ?

I have a prospect/nonprofit who is interested in an erisa 403b plan. The previous CFO set up a non erisa 403b plan and then the nonprofit put ER contributions into the plan. The CFO also embezzled money and evaporated! I am working with the new CFO and at this point they have frozen the previous plan so they can make it right (or try).

The new CFO was directed by counsel to discontinue old plan and set up a new plan so they can effectively deal with the mess. Counsel recommended non-erisa 403b and then a 457 if desired. The new CFO is interested in an ERISA 403b plan so they could do a discretionary ER contribution if and when desired. They are uncertain as to how often they will actually make an ER contribution and whether it would be a match or just ER contribution. The new CFO likes the accounting of the 5500 for the plan.

1. Does having an ERISA 403b plan have limits relative to the non erisa 403b? Example: Could there be a limit what an HCE can put into the plan in a year the nonprofit did not make a contribution to the plan?

2. If having an ERISA 403b limits in any way what the HCEs can contribute, wouldn't it make sense to do a non erisa 403b and then put in a 401a and 457?

The nonproft has about 50 employees and 35 participants, 5 of whom are HCEs. My thought was to go non erisa 403b for simplicity and then add bells and whistles with 401a and 457. Am I on track?

This is a great forum. Thanks for reading.

Troy

Sales Guy Trying to Keep Pencil Sharp

There are several terminated participants who have account balances in a recent takeover plan that we are TPAs for. For 2 of these terminees, they left years ago, and the employer has no information on them, not even their Social Security Numbers. Any advice on how to go about finding someone without SS #'s?

Another concern is that even if we "find" these lost participants, how can we identify that they are who they are? They can say "Yes, I am John Doe, here is my SS#" but since we can't confirm that the SS# is correct, doesn't that create a potential problem for the Plan Administrator. Paying out to someone other than a participant or beneficiary?

Here's the short question -- a participant's first RMD is due on or before April 1, 2007. How far back can you go to determine if the full RMD was distributed?

Here's the longer fact situation -- Participant turned 70 1/2 in 2006, therefore, her required beginning date is April 1, 2007, and she must receive her first RMD on or before April 1, 2007. The way I read the regs, that RMD is the "distribution required for the employee's first distribution calendar year." (1.401(a)(9)-5 A-1© ) The employee's "first distribution calendar year" is the year in which the employee attains age 70 1/2 -- in this case 2006. (A-1(b) ) Participant received distributions in 2006 exceeding the value of the RMD due to her on or before April 1, 2007. Has she fulfilled the requirement?

I understand that in subsequent years, she can not "carry forward" any distributions in excess of her RMD to apply in future years (in other words, if she received more distributions in 2007 than is required, she could not apply the excess to satisfy her RMD in 2008). But it makes sense to me that if this first RMD is essentially for calendar year 2006 (even though it is not required to be taken until April 1, 2007) the "on or before" language would include distributions taken in 2006.

Does anyone agree? Disagree? Have an on-point reg that you can cite for me?

I have a client who wants a deferred comp payment date to be based on certain "liquidation of the company" events. Assuming this date can be objectively determined, should I be concerned about whether this satisfies the requirement that the payment is made as of a "specified time or pursuant to a fixed schedule"?

Employee's residence is in a big city. Employee travels each Monday to a temporary home near her employer, where she stays for the week. She returns home to the city each Friday.

Can her transit expenses traveling each Monday and Friday be reimbursed under a qualified transportation plan?

I have a calendar year plan that has a match allocation at 6/30 and at 12/31. The conditions are 500 hours and employed on 6/30 and then 500 hours and employed on 12/31. The match formula is the same. I ran coverage at 12/31 including all non-excludables that benefit during the year which includes a participant that receives a match at 6/30 then subsequently terminates in August and does not receive the 12/31 match. How do you account for the two sets of allocation conditions? Do you test under BRF's - current availablity? Or is coverage and ACP testing enough?

Anything interesting come out of the meetings that anyone wants to share?

Previously our Sec 125 TPA would keep our experience gains and roll them from year to year, to use for admin fees or to fund any new expenses that hit before there were enough contributions for the new plan year. This year we just got a letter from them saying they won't be doing that any more, due to IRS guidance regarding the use of a trust and some other rule changes, and they sent us a big check to cash out our account for the last plan year. So I am pondering how to deal with these funds, and I thought I would set us up a separate bank account, to keep them segregated (as they are plan funds which must be used exclusively for plan participants or admin fees), but then I started thinking of my tiny amount of ERISA training and things like funded and unfunded and plan assets started going through my head and now I am wondering if maybe that wouldn't be the best thing to do, because it will change our ERISA requirements? But I really don't know, it is all very confusing.

Can anyone help me determine the best place to keep those experience gains and what sort of ERISA obligations could occur with each method?

Also on the letter from the TPA, they said they could pay claim out of any bank account we set up if we provide them with the information, so I thought that sounded like an interesting idea, so then we could receive the interest of the money, but again, I was wondering if that would further complicate things...

Thank you!

A plan failed the ADP test for 1/1/06 to 12/31/06. After distributing the refund, it is found that part of the HCE's match must be forfeited.

The plan sponser realized that this should have been done for the 2005 plan year, but wasn't. One of the HCE's who received an ADP refund for the 2005 plan year should have had some of his match forfeited.

Since it has been over a year since the 2005 ADP refund was made, does anyone know the ramifications of not forfeiting the match would be? I don't see that there is a "deadline" to have to funds forfeited. And I don't see anything in the EPCRS about this.

Anyone have any thoughts on what the plan sponser should do?

The PBGC instructions for ACM filers say assets are market value as reported on line 2a of the 2006 Schedule B, which for our plans do not include receivables or payables. The current liability amounts, however, reported on the 2006 Schedule B are net of payables. Should payables be added back into the liabilities?? Is anyone else having issues with the new asset reporting method for PBGC purposes?? Any help is appreciated. Thanks.

My colleague and I are trying to determine which value should be used for trust accounting/asset purposes.

When accounting for the total plan assets, should the cash/contract value or surrender value be used?

Should the contract value be used until a distribution takes place and the difference between the contract value and surrender either be forfeited or in the Gain/Loss?

Dr. turning 70.5 in August, 2007

Dr. Works for teaching hospital... receives W-2 (assuming a 403b... not my client)

Also owns practice where he is a 50% owner.

As long as he is still employed by the hospital and receives a W-2 he does not have to take a RMD. The practice of which he is a 50% owner he does... correct?

Thanks