A local government agency provides a Section 401(a) Money Purchase Pension Plan (the "MPPP") in lieu of Social Security. The MPPP is intended to be an "alternative retirement system" under IRC section 3121(b)(7)(F). The Employer contributes 12 percent of compensation for eligible employees.

The MPPP requires that employees complete one Year of Service (12 months and 1000 hours) to be eligible. And, the MPPP has a 5-year graded vesting schedule.

Two questions:

1) Can the MPPP be an "alternative retirement system" if it imposes a one Year of Service eligibility requirement? Full-time employees who have not met the one Year of Service requirement are not receiving the minimum benefit.

2) Can the MPPP be an "alternative retirement system" if benefits under the plan are subject to a vesting schedule? It just strikes me as inconsistent with the idea of replacing social security if benefits can be forfeited.

Thanks.

We're testing an LLC client (taxed as a partnership) for 2006 and the ADP and ACP tets fail using the "reduced" compensation for the 2006 year. However, when we use the "unreduced" compensations, the tests pass. Which compensation should we use for the ADP ACP tests? Thanx.

Does an employer have to match or contribute a nonelective contribution for himself if he/she elects not to? Provided the contribution is made for the rest of the employees?

Nowhere does it state that an employer (100% owner) has to make the match or nonelective contribution for himself even if he defers the max for the year.

I have a client that sponsors a Simple IRA Plan for himself and employees. He matched the 1.00/1.00 up to 3% of comp for the employees but did not match himself. He deferred the max for the 2006 year but did not match himself. Is this ok to do in a simple IRA?

Thanks,

CConnell

Firm desires to merge their existing 401(k) Plan into a Multiple Employer Plan. Existing plan has loans but Multiple Employer Plan does not. The question is what should be done with several outstanding loans under the existing plan?

Does anyone know if Church Plans are exempt from Minimum Funding requirements of PPA?? I know they are exempt under 412, but PPA is 430. Thanks.

Plan is a SH Match (Basic formula) w/ Discretionary Match as well. The discretionary match has a last day/1,000 hour rule, so I'm running ACP testing,.

The regs say I can elect to exclude deferrals that do not exceed 4% of pay. Can I just exclude the Basic SH MAtch altogether from the ACP test? Or should I run the testing, all inclusive, and then subtract for everyones' contribution percentages (obviously if it's less than zero, I would limit to zero).

I have a question:

My system did an ACP calculation as follows:

The participant had a salary of 300,000.

The deferral was 20,000 - over 50 year old.

The match formula was 5% of compensation.

The match the company made was $ 12,000.

The system said a refund was due of $ 774.10

Isn't this wrong? Shouldn't the match have been capped at $11,000 - 5% of the 220,000 comp limit and therefore the participant should forfeit $1,000 and not receive a refund? Should the ACP test then be rerun with a match of $11,000?

Thanks - I am just beginning my testing skills - I'll have more questions

I've looked, but can't find one. Does anyone know of a case where a court required a plan fiduciary to pay sums to a plan for excessive fees that resulted from the fiduciary's breach?

In face of a bad year in terms of stop loss experience due to an ongong renal transplant failure, a self funded (with stop loss) medical plan sponsor is considering the imposition of severe limits on expensive dialysis treatments for all plan participants and their dependents effective at the next stop loss contract year renewal.

What are some of the legal, ethical, financial, moral and communciations issues that need to be considered (if there are none which can't be resolved, could this technique be extended to cancer, heart disease, HIV/AIDS and other high cost diagnoses)??

Has anyone run into the situation where an NON US employee is working in the US and participates in the 401k plan. When they return back to their home country, how is their 401k handled?

Company A and Company B are part of a controlled group, owned by 3 individuals. All 3 individuals have compensation from Company A and B. Both companies are part of Company A's 401k plan. There is also a management group (Company C) that has no employees, but consists only of the 3 owners. They have compensation from this entity as well.

#1 Is it correct that all 3 company's are part of the controlled group?

#2 Because Company C contains only HCEs, we would not necessarily have to include it for plan purposes (i.e, no chance of discrimination since they are all HCEs)?

#3 If Company C is part of the CG, but is not part of the plan, would we omit compensation from Company C for plan purposes?

#4 Is Company C compensation omitted for 415 compensation purposes?

I believe the answers to the above are:

Yes, Yes, Yes, I'm not sure. Thanks for any replys

I'd like to pose something to those of you who frequently work with medical FSAs (either with or without cafeteria plans).

It's my understanding that an employer doesn't become the "Benefits Police" when it sponsors a medical FSA. The plan sponsor merely has to make a reasonable effort to determine that an employee has submitted an eligible expense claim. Usually, "reasonable" means:

(1) providing information and guidelines to participants

(2) obtaining documentation of a claim, and

(3) having each participant attest, when he/she signs and dates a reimbursement claim form, that the claim is for an eligible medical expense paid or incurred for the benefit of the participant, spouse, or dependents.

The employer's not held to the lofty standard of scrutinizing and investigating every request for reimbursement. Also, the employer probably doesn't want to take on the role of researching, analyzing, and applying federal tax law.

Any thoughts out there?

Not knowing much about HSA's, I pose the following question: Can an employer discriminate against his or her employees in setting up an HSA plan? That is, can the owners set up HSA's for themselves under a company HDHP and not offer the HSA to the employees?

Thanks for any replies.

I am trying to understand the practical value of 404(a)(1)(D)(ii).

If a plan has less than 100 participants, the unfunded current liability for HCEs does not apply the liability due to benefit increases (presumably includes entire CL for new plans) for two years.

The only explanation for this is that the IRS does not want an excessive plan deduction for a given year, because if the plan were to terminate then the plan sponsor could fund all liabilities at that time anyway.

The first question is does this apply to new plans, since they do not explicitly reference new plans?

The next question is provided by means of an example.

Say a plan is implemented 1/1/2005 with only one HCE participant.

Say we use the aggregate funding method and we only recognize the 100% of CL and not 150% CL for purposes of this example.

Year 1

minimum = 100,000

full funding limit = 200,000

unfunded current liability = 200,000

Say company contributes 200,000.

They are left with a credit balance of 100,000 a deduction of 100,000 and no excise tax on contribution above the minimum since contribution is less than FFL.

Year 2

minimum =100,000 before credit balance

minimum = 100,000 - 100,000 =0 after reflecting credit balance (ignore interest for the example)

FFL = 200,000

CL = 350,000

UCL = 250,000 (based on plan assets of 100,000 from prior year deductible contribution)

We now assume that the two year period is complete and the entire CCL can be reflected for the HCE.

It appears that if they contribute 150,000, they can deduct the full 250,000 from the 100,000 caryover and the 150,000 cash contribution.

So after two years they can fully deduct the entire CL of 350,000, by means of 100,000 and 250,000.

Without the two year wait the deductions could have been 200,000 and 150,000 for the same total of 350,000.

Are we in agreement with that analysis and ultiimately what was the point of the two year wait?

Thanks

Here is an interesting one that I have not seen any guidance on:

Employer's cafeteria plan provides for $X credit to FSA feature if employee opts out of medical coverage. Say employee uses all of the $X on day 1 of the plan year. Then, at some point, a qualified status change occurs (e.g., the employee's spouse loses coverage) allowing the employee to make an election change. The employee elects medical coverage under the employers plan (which if the employee had done so during open enrollment would have disqualified him from receiving the credit to the FSA). Is the employer out of luck with respect to the $X reimbursed? What if the employee only used a portion of the $X? Is the employee entitled to use the balance over the remainder of the Plan Year?

Any thoughts would be appreciated. . . .

Company A had a 401(k) plan that was top heavy and discontinued contributions to the plan last year. Owners of Company A are also 66% owners of Company B. Company B now wants to start a 401(k) plan. The employees of Company A started to work for Company B right away.

Would Company A and Company B's plans have to be aggregated for top heavy? Are the balances of Company A even considered in the top heavy ratio? Also, both companies plans would be in the same multiple employer plan.

In which year does the company report the contribution? The corporate tax year is a calendar year and the plan year is 10/1 through 9/30. For example, the 2005 py is 10/1/05 through 9/30/06. The corporation will pay the contribution before filing the corporate return (I assume by April 15, 2007). Would they include the contribution on the 2006 tax return? Thank you.

Comapny A Plan is merging into Company B Plan. Company A allows participants to withdraw rollover contribs any time. Company B requires distributable event. Can the right to the in-service withdrawal of rollover contribs be eliminated upon merger?

I've got a client that wants to prefund their profit sharing monies. However, the principals want to be able to immediately direct their contributions while the staff's contributions are put in a trustee directed profit sharing account. The staff will never able to direct the profit sharing money so I see this as a huge no-no.

If we go ahead and prefund the staff into individual accounts, we remove that as an issue but what do we do about the participants who term prior to year end? Can we call their contributions an excess and remove it from the accounts prior to distribution?

Principals are pretty unbending when it comes to this prefunding issue so I'm trying to find a solution here.

If an EE who is 55 yrs old and has had 10 yrs of service decides to diversify his/her ESOP account and takes a diversification distribution of

1) stock; and/or

2) shares

and does NOT roll it over into an IRA, i am assuming that the distribution would be treated as a non-qualified distribution and would be taxed accordingly.

Any thoughts?