Does anyone know if a plan that uses annual valuation can simply issue the same quarterly benefits statement prepared for a plan participant four times during the year, until the next annual valuation changes the values of each investment in which the participant's benefits are invested?

Or is the IRS interpreting this new requirement in a way that makes annual valuation incompatible with plans that permit participant direction (i.e., in essence requiring at least quarterly valuations)? If so, are values of any date within the calendar quarter okay?

Hi - I have a couple of questions related to a 457(f) Plan.

Here is the situation: The organization is a hospital and wishes to benefit two groups of physicians. One group is comprised of non-employed independent contractor physicians. The other group of physicians is made up of hospital-employed physicians.

1. Is there any reason that a 457(f) plan cannot cover both non-employee independent contractors as well as employees?

2. Am I correct that all deferred amounts for key employees must be reported on the organizations Form 990? And this applies for amounts deferred whether or not vested? So that means, every year the hospital would have to report amounts credited to the key employees' accounts whether or not vested, and whether or not distributed?

What if there are no key employees that benefit under the plan? The two groups of physicians in this case are not part of management and don't seem to fit the definition of "key employee". Does that mean that none of their deferred amounts need to be reported?

Thanks.

Well, they released the SAR program today, but...

Install on first computer went ok. Second computer, the uninstall of the 2006 version bombed and then completely hosed the computer. Am now in the process of wiping and reinstalling XP from scratch. Buyer beware...

Had some similiar problems with the 2007 Government Forms process. To put it mildly, am not too impressed with the programming changes occurring at our friends in Jacksonville.

I seem to recall that there is an exception to the general attribution rules that would not consider the following situatiuon to result in the finding that a controlled group existed. Of course, I can not locate the exception.

Wife is a dentist and owns 100% of the stock in a professional dental corporation. The professional dental corporation has 10 NHCEs. Husband has nothing to do with this professional dental corporation. He is not on the board of directors, is not an officer and is not employed by the professional dental corporation.

Husband owns 100% of the stock in a company that maintain a retirement plan. Does he need to include the employees of his wife's professional dental corporation in determinng if his retirement plan satifies coverage requirements?

Thanks in advance for your thoughts.

Ed

The following scenario is presented in an effor to better understand the application of Qualified Employer Secrity as a pension investment.

Say a one participant/owner DB plan has $400,000 in plan assets.

Say this owner has another company (Company B) in which he owns 100% of company.

Say Company B is worth $500,000.

Say the owner wants to use $30,000 of pension assets to invest in Company B.

It appears that the investment satisfies the 25% limit under ERISA 407(d)(5) and 407(f), since $30,000 is less than 25% of value of Company B.

It appears that the 10% DB investmeent limit under ERISA, since $30,000 is less than 10% of $400,000 (plan assets).

However, it is clear that the 50% requirement under ERISA is violated, since the issuer/owner of Company B owns 100% of Company B.

What if the owner owned only 50% of COmpany B and the other 50% were owned by a partner.

Would this investment be an acceptable pension investment of Qualified Employer Securities? Or is there more to it?

Thanks.

Do these need to be refunded?

Ok - have a safe harbor new comp plan, maximizing the Doc...

The plan has an employee who has worked for the client for 11 years all full-time thru 2005, always a plan participant. In 2006, she worked only 243 hours but did not terminate, so is entitled to the 3% SHNEC (or 3% top heavy; same #).

Can she be treated as an otherwise excludable for the plan year due < 500 hours or do I have to give her the 2% to bring her up to 5%? With the minimal amount of her comp it won't be an issue for the client but I believe she needs the gateway due to her status as a "continuing" participant.

I should know this, but brain cramping. HCE (over 50) contributes only $5,000 as deferrals. The other HCE goes big. Plan fails ADP and refunds are indicated. Client then asks for max PS calc, so we solve for the 50 year old to get $44,000. Voila! The 415 violation that has been created means his deferrals are all now 'catch up', and when the ADP test is then run it passes.

I do not recall there being any order of precedence in running tests, so this should work. Does anyone have thoughts to the contrary?

Our IT department has given up on the new Microsoft Vista. They have struggled for a week trying to get it to run with Oracle. Oracle and java script seem to be the issue. Per Microsoft it is an Oracle problem, per Oracle it is a problem with the operating system.

Can you say stalemate.

We have a client who mistakenly let an employee begin deferring in December 2006 when she was not eligible until January 2007. She deferred a total of $182.54 and had $0.16 in earnings as of 12/31/06. I have been told several different ways to rectify this and am looking for confirmation.

Should the participant's 2006 W-2 be amended to reflect no deferrals, the deferral amount plus earnings (GAP?) be refunded and a 1099-R be issued for 2007 using code P? Can we physically leave the money in the account and simply short her 2007 deferrals (though still amending the W-2 and doing the 1099-R so as to indicate no 2006 deferrals)?

If this is incorrect, what are other options? Consider the amount part of the employer PS contribution instead and have the employer repay her this year for the amount withheld and correct the W-2? We'd prefer to do a self-correction as a mistake-in-fact situation, especially since the amount is so small...

Here's a new one on me as TPA. A broker called me today and is handling the rollover for a terminated participant out of one of my client's 401(k) plans. The participant is rolling to an IRA, but also has an outstanding loan balance. The broker claims that the investment company will allow the participant to roll the loan into his IRA and then continue to make payments. Obviously I have experience with this when rolling to another qualfied plan that will accept the loan, but I have never seen it done rolling to an IRA. The broker claims he just did this for someone, but with a 403(b) account.

Can anyone confirm or deny that this is possible or acceptable?

I spoke with my client's investment firm and they said that they will distribute the loan, default and issue a 1099-R. I asked if it was possible to use code "G" on the loan distribution 1099-R and they are going to check and let me know...but I first need to know if this is even allowable.

Thanks in advance....

We just tookover a plan that uses a nonstandardized prototype and has a "special amendment" attached which incorporates a new-comp PS allocation (the document sponsor approved the amendment).

The plan is TH. Employees are allowed to immediately defer to the 401(k) on their date of hire, but must wait 1-year for a PS allocation.

Normally I would use the otherwise excludable rule and only give a 3% TH min to employees with less than 1-year of service. Employees that satisfied the 1-year wait get the gateway minimum.

The document does not specifically address the otherwise excludable rule or permissive disaggregation for coverage or testing purposes. Is it okay to use the rule?

It should be noted that the document was amended for the final 401(k) regs., and under that amendment it says it is allowable to disaggregate for ADP testing purposes.

Any thoughts are appreciated.

What law was it (and when was it enacted) that allowed for portions of qualified plan accounts to count as eligible rollover distributions? I could be wrong, but wasn't it sometime in the eighties?

A propspective New Comparability plan is considering the following groups:

Group A = Director of Finance (NHCE)

Group B = Highly Compensated Employees, Employees with at least 20 Years of service, or Employees over age 55 who participated in the prior Defined Benefit Plan.

Group C = NHCE with at least 10 years but less than 20 years of service

Group D = All other employees

Is the age 55 with prior DB participation requirement discriminatory?? Any other comments are appreciated. Thanks.

We have a restricted employee who previously elected to receive a single sum distribution, subject to the maximum annual installments. He has been receiving payments for the last few years in the beginning of the plan (calendar) year. For some unknown reason, the insurance company making payments failed to make the annual installment during 2006 and the participant never brought it up to the plan sponsor. Since the regulations state that “in any year, the payment of benefits … to a restricted employee shall not exceed an amount equal to the payments that would be made … under a straight life annuity…” I am concerned that the IRS could question the potential payment in 2007 if they correct the omitted 2006 payment. On a related (but less significant matter), I don’t believe that any interest could be applied to the missed prior year’s payment as the amount would exceed the straight life annuity amount.

Is anyone aware of any guidance or precedent for the IRS allowing the correction to be made with the participant receiving two payments during 2007? Or any justification for crediting interest? Thank you very much!

I am trying to understand the meaning behind the phrase “(or would have been made)” in Revenue Ruling 92-76 with respect to calculating accumulated amounts. We have historically calculated the restricted amount based on the first date that payments are made (“commencing when distribution commenced to the employee”) rather than when payments could have been made.

Participants who could have started receiving the straight life annuity payment (or, for example, a single sum distribution capped by the amount that could have been paid as a straight life annuity or paid into an Escrow account) at NRD but elected to defer their payments until the plan was funded, can find themselves in a significantly worse position with respect to the amount of Escrow needed if the plan continues to be insufficiently funded. Is anyone aware of justification to calculate the accumulated amount of the nonrestricted limit based on when the participant could have begun receiving payments? If not, does anyone utilize a plan provision to have such a participant elect annually to receive a partial withdrawal (not in excess of maximum payment) to start the clock ticking and/or lock in 417(e)(3) rates?

Thank you very much!

I was called by a man who has a plan where he is the only participant. The financial institution who established the plan did not tell him he needed to file an EZ once the assets were greater than $100K (or that is his stroy and he is sticking to it). The CPA completed the EZ going back to 2004 and 2005. He received a notice from the DOL stating he owed $8800 in penalties.

He produced for me some good info to argue that possibly he was a victim and if possible could the penalties be waived. I looked at the DFVC requirements and learned that a one participant 5500EZ filer is not eligible. I have a call into the DOL to ask what his options are.

Has anyone any experience in a similar situation?

Thanks!

Is anyone familar with what correction program a client would you if a Plan Document was never established but the plan has been operating as if it was?

I’m hoping for a little old-fashioned (and courteous) debate.

The Labor department’s EBSA has stated an informal view [FAB 2007-1] that the “level-fees” condition of the new statutory prohibited-transaction exemption for the first of the two different kinds of eligible investment-advice arrangements can be met looking only to the fees of the adviser, without counting fees of persons that control, are commonly controlled with, or otherwise are affiliates of the adviser if the affiliate does not render investment advice. I’m not seeking views on whether the view described in the bulletin is a correct interpretation of the statute.

The same bulletin reaffirms a view that a fiduciary who or that selects an investment adviser must do so prudently.

(To focus the discussion, let’s assume that the adviser that wants to use the new PTE is a company or other non-natural person, and that a human, if any, involved in rendering the advice is not himself or herself a registered investment adviser but rather is a representative or employee of the adviser company.)

Many practitioners might agree that at least some participants who use investment advice don’t know enough about the subject of the advice to evaluate independently whether an adviser gave advice that was compromised by a conflict of interests. (And those who do know enough might not need the advice.)

If a plan fiduciary believes this, how comfortable should he or she be in approving an arrangement concerning which an adviser is permitted to render advice that could be compromised by the adviser’s interests in recommending the investments and services of an affiliate?

1) Does the selecting fiduciary have a duty to consider independently the quality of the adviser’s disclosures about the conflicts?

2) Even if all conflicts are fully disclosed in very plain language, does the selecting fiduciary have a duty to consider whether some participants might lack the skills needed to evaluate whether a conflict compromised the advice rendered?

3) Even if the selecting fiduciary finds credible evidence that participants are capable of detecting whether a conflict compromised the advice rendered, is it sensible for a fiduciary to approve an arrangement that leaves a participant to pursue the plan account’s remedies only after the harm already happened?

4) Could a selecting fiduciary decide prudently that participants need advice so badly that even conflicted advice is better than none at all? If so, does it matter whether an unconflicted alternative is available to the plan?

5) What should a selecting fiduciary do to evaluate the probability or risk that the incremental investment returns that participants achieved because of following the adviser’s advice might turn out to be less than participants' incremental losses from following the adviser’s advice?

To be fair about starting the debate, my instinct is to doubt that a prudent fiduciary should approve an arrangement that lets a conflicted person render advice to a non-expert. But human nature doesn’t always neatly follow theory, my experiences are a less-than-complete sample, and I try to learn from others’ observations.

Your ideas, please?

Can membership fees paid to a YMCA be reimbursed by an FSA plan as "wellness"? Had an employee say that this was suggested by a tax preparer.