Can a 403(b) Plan merge into a 401(k) Plan and what are the ramifications of such a merger?

One requirement for a stock option to fall outside of 409A is that the option be on "service recipient stock." The Final Regs indicate that service recipient stock does not include stock subject to a put or call right if the price paid pursuant to such right is based on other than FMV. Can this requirement be satisfied if an option provides the employer with a call right in the event of an employee's termination for cause and provides for a repurchase price at the lesser of FMV or the amount the employee paid for the stock at exercise? I realize this repurchase right is not at FMV but the "for cause" repurchase right basically triggers a forfeiture by the employee and I guess I don't understand what the rationale for this penalty feature causing an option to be subject to 409A.

On a side note, if an option is subject is subject to 409A, isn't almost impossible to comply with 409A. Wouldn't you have to indicate that an exercise must only occur on a 409A permissible payment event?

I'm passing along this question and unfortunately I don't have the exact terminology in front of me.

If a plan has an excess of PBO to Assets the shorftall is a balance sheet debt, right?

If a plan has an excess of Assets to PBO is that a balance sheet asset? Or does the term "non-current asset" apply and make the answer no?

If a 401k plan has a 12/31 PYE, while the fiscal year for the company ends 6/30, how would we go about making a PS contribution? For example, the ER wants to contribute $10,000 for the fiscal year end 6/30/07. Would that have to be allocated based on 12/31/07 eligibility and wages? And if that is true, then we would have to wait until after 12/31/07 to deposit (ind account plan). But then that means the employer would have to extend the company's tax return beyond 9/15.

Is all of this correct? Is there a better way to handle this?

An employee is single at the time of retirement. All procedures are followed.

After he is retired, he gets married. He now wants to elect a QJSA for he and his new spouse. The Plan is silent regarding this issue.

May/Must the Plan allow the new election? Case/statutory law that backs that up? Thanks!

I have been out of town and had question raised by an attorney who I work with.

Has there been a recent IRS decision to go after GATT Limits even on compliant plans? If so do you think they will get away with it? I think the rumor is that Holland wants to collect back taxes on people with compliant plans on the amount he figures they are over-funded.

Is this possibly a 412(i) issue?

Can annual plan audit and consulting fees be passed on and deducted from participants accounts?

Hello,

I'm not sure if this is the right place to post; if not, perhaps someone can suggest a more appropriate board.

I own my business. I am the only employee, the biz is a C corp and is 12 years old. I have sought advice from my accountant and from Charles Schwab (who administers my retirement plans) but cannot seem to get a definitive answer. I'm also not the most savvy about this stuff.

I have two plans, a Profit Sharing and a Money Purchase at Schwab. They were implemented a few years back to allow me to make maximum (up to 25% I think) contributions to my retirement. I am not required to make a PSP contribution but remain required to make a MPP contribution.

Since the rules have changed, I would like to fold the MPP plan into profit sharing so I just have one plan and am not required to make an annual contribution. My company has had a couple of lean years and I need the cash to operate.

My company's fiscal year runs from Aug 1 to July 31.

I was told by Schwab that there are certain timing requirements for when I can liquidate and rollover the MPP distribution to the profit sharing account but they cannot be specific. I am trying to find info to figure out the following question:

If I eliminate (and merge) the MPP plan before the end of the fiscal year, do I still need to pay out a contribution for the fiscal year about to end? If it requires a board of directors vote, that is fine because I am all the directors.

If no one knows the answer to this, perhaps you can refer me to some area on the Web where I may find it?

Thank you so much! I appreciate any help you can provide.

I'm looking at a plan that covers bargaining unit and non-BU employees. The plan provides a general benefit of 1.5% x years of service x final average salary for all employees, but BU employees make mandatory contributions and get a 2% multiplier and an early retirement benefit. The plan was amended a few years back to provide that BU members who move into a non-BU position retain their eligibility for the better benefits, but they must continue to make the mandatory contributions. Thus, with respect to non-BU participants in the plan, some, but not all, individuals must make mandatory contributions (and receive the better benefits). This is not a voluntary arrangement -- all former BU employees must make the contributions, and the other non-BU employees may not contribute to receive better benefits. None of the employees are highly compensated.

Does anyone know of any reason this arrangement is not permissible? In particular, whether the employer can require contributions from a subset of employees.

Thanks!

If anyone has been doing projections beyond 2008, what are you using for estimated segment rates for Current Liability? At first, I was just using the RPA rate (5.78%) for all 3 segments, but I think that is a little low. An actuary at another firm recommended 5%, 5.6%, 6.1% for the 3 rates.

Anyone have any idea? What would the segments be based on current market conditions?

2 different car dealerships are part of 1 plan. It is a multipler employer plan. According to the regulations, each employer has to be tested separatley for ADP/ACP testing.

There is one participant of the plan who worked for both employers during the year. To make it easy, let's say he worked for Company A from 1/1 to 6/1 and he worked for Company B from 6/2 to 12/31.

While at Company A he deferred $5500 and made $44,000. While at Company B he deferred $6000 and made $55,000.

Correct me if I'm wrong, but on the ADP test for Company A, his deferral average will be 5.56% ($5500/$99,000) and his deferral average for Company B will be 6.06% ($6000/$99,000).

Or, would his deferral average for Company A be 12.50% ($5500/$44,000) and 10.91% for Company B ($6000/$55,000).

I think his deferral averages would be 5.56% and 6.06% - but I just can't seem to find any documentation supporting this. The ERISA Outline book says you must use Section 414(s) compensation to calculate deferral percentages. It also says "an employee's section 414(s) compensation includes his compensation for all related employers, regardless of whether the employers maintain a single plan or separate plan".

However, these are not related groups. If they were, then they'd be a controlled group and not a multiple employer.

Any thoughts?

If the PBGC premium is paid by the corporation, can it be counted as a contribution to the plan?

With the advent of the new PPA rule that allows a non-spouse to rollover a death benefit the question arises can that non-spouse beneficiary take a partial lump sum distribution and then rollover the remaining proceeds to an inherited IRA? Or does it need to be all or nothing? Would this have to be spelled out in the document?

A client sponsors a DB plan and a DC plan. Other than "cash out distributions", the DB does not presently permit any lump sum distributions. The client wants to terminate the DB plan. The client wants to amend the DB due to the termination as follows:

(1) Any participant who is not employed on the termination date may elect to take a lump sum distribution; and

(2) Any participant who is employed on the termination date may elect to take a lump sum distribution conditioned upon their agreement to make a rollover contribution of the lump sum distribution to the client's DC plan.

The rationale behind (2) is that the client doesn't want currently-employed participants to take the present value of their accrued benefit in the DB plan and blow it on the proverbial "new Mercedes".

Does anyone see a problem with (2)?

I ask because the TPA firm that administers the DC plan claims that (2) violates Treas. Reg. 1.401(a)(31)-1, Q&A-9, and, as result of the violation, the contributions would not technically qualify as "eligible rollover contributions" and cannot be accepted by the DC plan. Assuming (2) is problematic, as suggested, if the DC plan permits participants to request immediate distribution of rollover contributions, does that affect the conclusion (even though it would undercut the client's rationale)?

Thanks!

Participant balance is greater than $5,000.

Standardized Corbel 401(k) Document.

Plan has elected distribution option: QJSA 100%.

Spouse has signed non-spouse beneficiary designation form.

Who (if anyone) needs to consent to the loan?

I am attempting to establish the proper election under Section 125 for a Health Benefit Plan that is partially subsidized by the employer. For example, a single employee premium is $280 per month of which the employer contributes $200 and the employee will pay $80. The employer contributes the same $200 regardless of the coverage elected (single, ee + dependent, or full family). The employee does not have any latitude as to the $200 ER contribution; if he participates in the health plan, the $200 subsidy is contributed, if he chooses to waive the health plan coverage, the $200 is NOT available for any other purpose.

Under these circumstances and assuming the employee wishes to pay the premium with pre-tax dollars, is the proper election for $960 ($80 times 12 months) or is it for $3,360 ($280 times 12 months)? It seems like the employer contribution is not elective as it is not available in cash or benefits. Furthermore, under these same circumstances in the past, the gross earnings of the employee electing redirection of salary have never included the employer subsidy for any other purposes like 401(k) wages or in tests for highly compensated.

Any help is greatly appreciated.

Apologies if this has been asked and answered already...

I am going to avoid wading into the morass created by Mr. Holland and pose what I hope to be a simpler question about 404(a)(7), as amended by the PPA.

We know that the PPA modified the combined plan deductability limit to exclude from consideration employer contributions to DC plans that are less than 6% of compensation. The question is this: for purposes of determining the "25%-of-what" question, do you take into account only compensation earned by participants in the DB plan or can you take into account compensation earned by participants in the DC plan as well (to the extent they are not already picked up under the DB plan)? If the under-6% employer contribution was not excluded from consideration, I think the answer would be a fairly clear "yes" -- comp paid to beneficiaries under both "plans" would be taken into account. If a participant in the DC plan otherwise "benefits" during a particular year, it seems like the comp paid to him/her would still be picked up for purposes of the 25% limit, which could have the effect of juicing up the DB plan contribution.

I have heard that some IRS folks have informally agreed with the idea that you still count comp for participants benefiting under both the DB and DC plans even if the DC plan is excluded from consideration. Since I haven't heard this straight from the horse's mouth myself, I wondered if (1) anyone had a thought about this issue generally; and/or (2) anyone has heard one of the IRS folks expanding on this point at a conference, etc.

Thanks!

A doctor is switching jobs and will be working with more than at least 3 different organizations. He will have the ability to defer salary into a 401(k), 403(b), and 457 plan, all separate plans of different employers. Can he contribute $15,500 into each plan, or does the 402(g) limit apply cumulatively over all plans?

Thanks

One of my clients (a brokerage firm) has been receiving an influx of calls about Qualifying Recognized Overseas Pension Schemes (QROPS).

One website http://www.hmrc.gov.uk/PENSIONSCHEMES/qrops-list.htm

I figure something must have occurred recently – some change in UK plan provisions etc that has prompted these calls.

Apparently, they are being told by their plan administrators that they can rollover amounts from their UK Pension plans to a retirement plan in the United Stated, if the plan is part of the QROPS program.

From what I was able to gather –after reading some of the material on the website- this may be limited to some type of superannuation scheme.

As we know, these plans do not satisfy the definition of an eligible retirement plan for rollover/transfer purposes.

Also, the term ‘Pension” usually means something different in other countries. For instance, in Jamaica, pension means a superannuation fund.

Jevd, I figure you may be getting these calls as well?.

Has anyone else come across this?

I would like to confirm my understanding on temps that are hired as a common law employee.

The temp would need to meet the 414(n) requirements before they would be considered a leased employee for plan purposes.

1. If the temp did not meet the leased employee requirements (e.g., did not work on a substantially full-time basis in their first year), you would not count their temp service with the employer for plan purposes.

2. If the temp did meet the leased employee requirements, you would count the service while s/he was a temp.

3. If the plan excludes leased employees, will the same apply as in 1 and 2? I think yes, because in order to be excluded from the plan the temp would need to be considered a leased employee first and then they would be excluded as a classification of workers. Then you would count service as you would when someone transfers between excluded classification of workers, i.e., you would count all service for all plan purposes.