There is a severance fund. The trustees and administrators of the fund are also participants in it.

If the trustees and administrators vote to deny somebody benefits, it may look like a conflict of interest, because granting the benefit would diminish the trustees' and administrators' benefits.

There is no reason to believe that the trustees and administrators are acting arbitrarily or capriciously, and there are safeguards set up in the fund. There are certain procedures which must be followed, including appealing to the entire board of trustees if a person's benefits are denied.

What safeguards have you used or do you know of which would help eliminate this problem? Thank you.

A 401(k) plan excludes consultants from participating in the Plan. The plan has no coverage issues but regarding ADP testing, can you exclude this class from the ADP test?

Someone already posted a similar question but I can't find the thread, so forgive my duplication.

I read Rev. Proc. 2004-13 re how a plan that is courting top heavy status can make safe harbor contributions and avoid application of 416's rules.

However, is it possible for a plan that was top heavy in, for example, 2005 and in 2006 to use the safe harbor contributions for PYE 2006 and avoid 416 for that plan year? I know that top heavy status is determined on a year-to-year basis but can you use 2004-13 in a subsequent year without having first corrected a prior top heavy year?

thanks for any insight.

If a plan made corrective QNECs to eligible participants who were inadvertantly ommitted--assuming the QNEC was made during the same plan year as the ommission--can the QNEC amounts be included in the ADP test? I've searched the ERISA Outline Book, and haven't found anything.

I'm a partner in a small s-corp (4 ee), and we terminated a 401K plan in 2004. Unfortunately, our plan management firm didn't make clear to us (or we just missed it) that if someone covered in the plan kept funds in their account, we would need to file a 5500 for each year funds remained. We just learned of this requirement thanks to a "Request for Information About Your Form 5500" letter from the IRS, requesting a reason and/or filing of our 2004 5500. We're also, then, deliquent in filing the 2005 5500.

Here's my question, which I can't seem to get an answer on from the few CPA's we've contacted. The lack of 04/05 filings was due our misunderstanding of what "terminated plan" meant and our total lack of experience in retirement plans, so it was completely benign and unintended. If we state this in a letter accompanying our response, can we expect leniency from the IRS and DOL? Or, are we better off just filing using the protection of DFVCP and just swallowing the $1,500 max penalty that triggers? And if we use DFVCP, can we be reasonably assured that the IRS won't pursue additional penalties?

Input from anyone who's had a similar experience would be hugely appreciated.

It looks like this might be the 1st year we are required to use an accountant's opinion. Can anyone detail out what the accountant is looking for and if they look at the previous year as well?

Thanks Much!

Plan sponsor is changing from a C-corp to an S-Corp causing his fiscal year end to switch from 6/30 to 12/31. Their profit sharing plan also has a June year end and the pros and cons of also changing the plan year to a December year end are being considered.

They would like to make a contribution and take a deduction for the resulting 6-month shortened fiscal year ending 12/31/06. If the plan year is not changed, I guess the limitation year definition in the plan document would have to be amended to the fiscal year ending within the plan year, and the total contribution for the PYE 6/30/07 would be whatever was contributed/deducted for the short FYE 12/31/06? In this scenario, it would seem that the limits on annual additions and compensation would be unreduced as there would still be a 12-month plan year.

If the plan year definition was also changed to coincide with the calendar year fiscal, it seems that the limits would have to prorated to 50% of the maximum for the resulting short plan year. Are these choices accurate and are there any other aspects to be considered? All help is appreciated.

What is the last day on which a Sole Proprietor can deposit his or her "salary deferral" to a 401(k) plan? I understood that this is not the standard timing as used for employees. Is it 2 1/2 months after the plan year ends, provided that it is from income of that period, and a written election for the deferral was filed before the close of the plan year?

Two unrelated sub-s corporations have merged and formed a new company effective 1/1/2007. One company sponsored a SIMPLE and one company sponsored a non safe harbor 401k plan. The new company wants to sponsor a safe harbor 401k plan.

Does the fact that one of the companies had a non safe harbor plan create problems for the safe harbor arrangement in 2007? No contributions have been made to either plan in 2007, if that is relevant.

And if the 401k assets of the old plan are transferred over, does that create issue relative to the safe harbor status for 2007?

Are there any firms with SEP prototypes that can be used by an employer in addition to their defined benefit plan?

thanks,

Jim

Non-J&S, plan and SPD silent. Can we allow a participant to specify a dollar amount to a beneficiary with the remainder to another beneficiary.

It sounds unusual, but is it legally permitted?

I am over 50 and an active employee. I was told I need to double the amount of my total monies in a new Roth Ira (approx. $2,100) and send it to the IRS by 4/17/07, so the amount would be allowable for sure. Is this true? I thought there was no yearly minimum deposit. Also, can one still put monies into a Roth Ira if they retire early, until they desire to take them out? (after the 5 yr. non-distribution period of course)

[Found on the net:]

A group of alumni, highly established in their careers, got together to visit their old university professor. Conversation soon turned into complaints about stress in work and life. Offering his guests coffee, the professor went to the kitchen and returned with a large pot of coffee and an assortment of cups - porcelain, plastic, glass, crystal, some plain looking, some expensive, some exquisite - telling them to help themselves to the coffee.

When all the students had a cup of coffee in hand, the professor said: "If you noticed, all the nice looking expensive cups were taken up, leaving behind the plain and cheap ones. While it is but normal for you to want only the best for yourselves, that is the source of your problems and stress. Be assured that the cup itself, adds no quality to the coffee in most cases, just more expensive and in some cases even hides what we drink.

"What all of you really wanted was coffee, not the cup, but you consciously went for the best cups... and then began eyeing each other's cups.

"Now consider this: Life is the coffee, and the jobs, money and position in society are the cups. They are just tools to hold and contain Life, and the type of cup we have does not define, nor change the quality of life we live. Sometimes, by concentrating only on the cup, we fail to enjoy the coffee God has provided us."

God brews the coffee, not the cups... enjoy your coffee.

We're starting to do quite a few DOL plans, and need to find a competent check-writing software to make the production of monthly benefit checks easier.

Participants need to be maintained within each plan, summary/detail reports available for each check run, etc.

Storage & printing of a digital signature would be a nice feature.

Can anyone recommend a good software (or, conversely, recommend a software to avoid) for this purpose?

Thanks!

Mark

Is anyone familiar with software used to calculate the Sole Prop? I'd like to license a version, but am having trouble finding vendors.

I had an interesting question from a client today on the new PPA rule where a participant can request a hardship for a designated beneficiary.

The participant wants to designate two primary beneficiaries to get his death benefit. He want to designate 99% of his death benefit to his spouse and, with spouse consent, he wants to designate 1% to his son-in-law. Hw wants to do this to be able to gat a hardship distribution out of the plan to help pay his son-in-law's medical bills.

IRS Notice 2007-07, III Section 826 of PPA '06 defines a primary beneficiary as an individual who is named as a beneficiary under the plan and has an unconditional right to all "or a portion" of the participant's account balance under the plan upon the death of a participant.

While it does not appear to be kosher, it looks like this can be done.

Any opinions??

Thanks.

A plan that were are taking over administrative responsibility for is a 401(k) safe harbor plan. It provides for the 3% nonelective ADP contribution and a required match of 100% on the first 5% of compensation deferred. The match has no accrual requirements but is subject to a vesting schedule.

The current TPA has not been performing the ACP test, noting in the year-end reports that it is automatically passed due to the safe harbor status of the plan. I know that a discretionary match, to avoid the ACP test, must be limited to 4% of compensation.

1) Since this is a required match and under 6% compensation with no accrual requirements, is the ACP test thus automatically satisfied?

2) Is the vesting schedule on safe harbor match permissible?

Thanks.

My client wants to set up a phantom stock plan that would allow cash bonuses to be converted to phantom awards and then they are eligible to take 20% of their awards in cash 5 years after the initial award. If they don't take it they can defer but if they leave for any other reason than death, disability or retirement they forfeit any awards they haven't converted. It is also nonelective. It seems to me that they can decide to defer 12 months prior to the scheduled payment for 5 years. During that 5 year period if they were to die, become disabled or retire, they would get their awards in their account but otherwise it would continue to be subject to the substantial risk of forfeiture. If they leave during that 5 year period of subsequent deferral they would lose everything. Does anyone see a problem with my analysis or compliance with 409A?

I ERISA 407 includes "marketable obligations" as a qualifying employer security.

IRC 409(l), which applies to ESOPs, defines "employer securities" to include common stock.

Does that mean an ESOP cannot hold a marketable obligation as a "qualifying employer security?"

is anyone familiar with the substantial business hardship exception for terminating the safe harbor nonelective contribution portion of the plan? client had would like to keep the 401(k) portion of the plan going but in order to do so would need to qualify for the substantial business hardship. there are several factors listed in the code but the list is not inclusive of all factors. i am wondering if there is other guidance. ie. if you use the definition of substantial business hardship in 412 do you also need service approval?