If a DB Plan Sponsor wants to give 4 NHCEs non-reduced benefits without making NRA, naming them by amendment, is this allowable? This just doesn't seem right but seems that I have seen amendments like these. Citations? Thank you.

I have two related companies (ASGs) where one is passing the coverage test but the other is not (both are top heavy).

The Company A plan provides for 401k, matching and cross-tested PS contributions. For the PS portion, 3 HCE’s received a $27k (or 12.272727%) contribution and 8 HCEs & 8 NHCEs receive a 4.50% contribution, to be eligible for a contribution participants must be employed on the last day and worked at least 1,000 hours.

Company A passes coverage and the cross-testing with no problem and would prefer not to increase their contribution above the 4.50% level.

The plan for Company B has a cross-tested PS contribution only with 1 HCE receiving a 20% contribution and 1 NHCE who did not receive a contribution because she terminated before 12/31/06. Company B fails the coverage test.

Can Company B adopt a corrective amendment to provide for a 5% contribution to the terminated participant which would then allow Co. B to pass the coverage test and satisfy the minimum gateway requirement and not impact contribution percentage that must be given to the Co. A participants (i.e. min. gateway)?

Do the new requirements regarding Plan provisions apply to all eligible Participants or only those people who have an account and are receiving some sort of statement?

Are VEBA's typically set up to fund specific benefits, making it difficult/impossible to alter and use funds to fund a "new" benefit?

As an example, a current VEBA is set up to fund Group LTD premiums - could funds later be used to fund Exec. Life premiums as well?

In negotiations w/ union. They want us to modify our self-insured plan to provide the same coinsurance amount for medical/surgical and mental health benefits but want us to continue to keep the visit limitation (e.g., 30 visits) for only mental health benefits.

I generally understand the MHPA to prohibit dollar or lifetime maximums for mental health than medical/surgical benefits, but I think the MHPA says that the plan can still have coinsurance, co-pays, limits on the number of visits, etc. on mental benefits are ok - if it does not result in a combined limit that would act as an annual limit. For instance, I looked at the DOL's website and there is an example where when you combine a dollar limit with a limit on the number of visits - that this constitutes a combined limit that is akin to an annual limit (not allowed by the MHPA if the same limits are not placed on medical/surgical) - e.g., 50 visits allowed per year and $40 paid per visit would be an annual limit of $2,000 on mental health benefits that does not apply to medical/surgical benefits.

Does the coinsurance suggested by the union work the same way (e.g., the 20% coinsurance x 30 visits could be an annual limit too?).

Or am I thinking wayyyy to much about all of this?

If:

1) an S-Corp is planning to deduct a large DB contribution for 2006, and

2) they file for an extension for their S-Corp return to September 15, 2007, and

2) they plan to contribute on or before September 14, 2007 and then file the S-Corp return,

then, are the individual S-Corp shareholders required to extend their individual 2006 tax returns (1040) in order to justify that DB plan deduction against the S-Corp income for 2006 for their tax purposes?

I wouldn't think so, but I am not a CPA.

The client's CPA asked this question.

The EGRRA amendment allows a traditional IRA rollover into the plan. I have researched everything I could find & it looks like we are just supposed to treat this IRA rollover like any other unrelated rollover from a qualified plan. Other than requiring the participant to certify there are only pre-tax contributions and earnings in this rollover, is there anything else to watch out for? This really looks too easy to be true. What's the catch?

what is the correction method for failure to take deferrals from an automatic enrollment 401(k) plan? my thinking is it has to be the same as the correction for failure to allow an employee the opportunity to defer.

I understand that nongovernmental 457(b) plans are not eligible rollover plans. But, is there a way to transfer funds from one nongovernmental 457(b) plan to another nongovernmental 457(b) plan without triggering income tax inclusion?

Can QJSA and installment options be eliminated as optional forms of benefit from a 403(b) plan?

Is anyone aware of a sample or model supplemental unemployment fund documents or summary plan descriptions that I can review?

Company A participates in a multiple employer plan. Company A will be merged into unrelated Company B, and its employees will participate in Company B's 401(k) plan after the merger date.

If Company A withdraws from the multiple employer plan on the day prior to the merger, will that be considered a "plan termination" so that its employees can receive distributions from the multiple employer plan under the "plan termination" exception of 401(k)(10)?

I think "yes." If Company A had sponsored its own plan and terminated it before the merger, 401(k)(10) would have permitted distribution. The only thing different here is that the multiple employer plan is not terminating because it will exist for other employers after Company A ceases particpation.

Alternatively, if it's not a 401(k)(10) plan termination, is the merger itself considered a "severance from employment", even though the Company A employees will work for Company B after the merger date ?

I'm new to 401Ks having just set up a new plan at a new company and having no 401K experience so please bear with me.

At my employer's instruction, I set up a plan with no matching but leaving the window open for future matching. I have told all employees that we will review matching when we get a clearer idea of this year's financial situation.

Now I have heard from one of our first employees that our boss signed a contract with him giving him a 3% match. My boss says that we can do this for him but not for the others because an Employment contract trumps other rules. Is this right that we don't have to treat everyone equally? Doesn't seem right to me. Expert advice please.

A tax-exempt entity sponsors a 457(b). The plan allows the participant to make an election regarding the form of payment. The participant elects 4 annual installments. The participant left employment in December 2002, but before that, in July 2002, an election was made to delay the distribution until March 1, 2007. The employee is now at another tax-exempt and they are discussing doing a direct 457(b) transfer.

Since March 1, 2007 has already gone by, the first installment (of the 4) is "considered to be made available" and is thus taxable in 2007. However, the participant has never utilized their additional election option to further delay distribution. With regard to their remaining 3 installment payments that are due, could the participant make such an election now to delay those distributions?

I looked under 1.457-10(b)(6)(ii), "in the case of a transfer between eligible plans of tax-exempt entities ... the transferred amount is subject to §1.457-7©(2) (relating to when amounts are considered to be made available under an eligible plan of a tax-exempt entity) in the same manner as if the elections made by the participant ... under the transferor plan had been made under the receiving plan."

Does this section of the regulation lock the 4 installment option into place in such a way that the next 3 installments cannot be delayed?

Also, was it ok that the participant made the election to delay payments even before they left their old employer?

I have stock held in a DRIP program (pfizer, not that it matters...). I was wondering if it is permissible to have a certificate issued for some number of shares and then to deposit that stock into my roth IRA account. Is this allowed or do contributions have to be in cash? What about taxes on the gains while held in a taxable DRIP account? Any answers or insight would be most appreciate. Thanks

I'm at the point where I will not be able to contribute to my Roth IRA for 2007 because my income is over the limit. In order to provide the same effect, my financial advisor would like me to open a Variable Universal Life Insurance (VUL) policy. I am single and do not need extra life insurance, and I don't like the idea of insurance acting as an investment.

Are there any other alternatives available for me that will replace the Roth IRA other than the insurance? I also have a 401k, but like the idea of tax-free income in retirement. Any input would be greatly appreciated.

Assume an employee executes and submits a salary deferral agreement, but deferrals are never withheld from his compensation. Doesn't the employee have some responsibility to make sure deferrals are taken out and contributed to the plan? If this failure lasted for a 3 year period, it seems like the employer's liability should be limited to something less than 3 years...perhaps to the first year alone? Help!

A health and welfare fund subject to 1.501©(9)-2 is made up of employees. A related business of non-employees wants to join the fund. However, according to that regulation, the non-employees can make up no more than 10% of the VEBA.

1) How is the number of employees calculated?

1a) Is it just straight number of employees, or are spouses & dependents included?

2) Is the number flexible, or is it set at a certain time?

Thank you.

We have a guy in who left employment but was deferring on severance pay after he left. I told them that it was a gray area and technically they're not supposed to defer on severance, but it thay allowed it, they had to give him the SH on that pay, too. They opted not to and to return the deferrals. can they do that and would you return earnings, too. ?

Prefacing this by saying I'm not a DB guy so pardon the ignorance...

Tax client of ours added a DB plan to DC-New Comp plan. Deductible contributions more than doubled and client talked about how 90% of contributions are going to him and his wife. Which of course drew our attention. Client has always "pushed the envelope" in terms of tax issues. Now we are wondering if he is doing the same with this approach to retirement planning. At our request, the client provided us with current year allocation schedule and we have found that the plans are New Comp and Cash Balance plan.

I've read through a few things on the Cash Balance plan but as one might think they don't talk about the areas where the laws can be pushed and potential for abuse might exist. What I'm afraid of is that someone sold him on something along the lines of an abusive 412(i) plan but using the Cash Balance plan as it's vehicle. Is this something that could possibly blow up on him down the road? Is there a possibility of a reversion of some sort? If there is potential for problems down the road, is there something that will specifically point me to where to look to see if this plan falls within the acceptable versus nonacceptable realm? Do I look at coverage? Turnover? Inability to fund long term?

I want to be clear that I don't think the client is specifically doing anything wrong or that the investments are inappropriate, just that the plan may not necessarily be in his best interests in the long term. I think that we would be remiss if something were to be looming on the horizon and we didn't let him know; even though we weren't specifically engaged on the retirement plan piece. Could be perfectly legitimate and we clap him on the back and say good job. Just want to make sure.

Thanks in advance...