I have a plan document that uses "Code Section 415 Safe-Harbor Compensation" definition which reads like (but does not reference) the general definition under 1.415-2(d). The company does not calculate deferrals on imputed income amounts for group term life and personal car usage. The plan document does say that Compensation shall include amounts received: “… for personal services actually rendered in the course of Employment…” and at the end it says “… Compensation shall include only that Compensation which is actually paid or made available in gross income during the Limitation year”. Do either of these provide a reasonalbe basis for not including these amounts in calculating contributions?

PAL

We administer a small non-pbgc DB plan for a company with 10 employees. The 100% owner of the corporation recently died and the company will no go out of business. It appears the company will only have the resources to fund half of the 2006 pension contribution.

We know there is a 10% excise tax and if the deficiency is not corrected the IRS could potentially impose a tax of up to 100%. It appears we could ask for a waiver of the 100% if we can show it would cause a hardship.

Has anyone had experience with this?

the rule says you only need to file a 5500 for fringe plans associated with a welfare plan with over 100 participants. what does associated mean? our client has a welfare plan but i dont know whether they are associated.

I am filing Form 5307 for a volume submitter plan that provides that employees with more than 5 Years of Service as of December 31, 2005 are not eligible for matching contributions (don't ask!). Passing the ratio test is not a problem. There are not many employees involved and some of them are HCE's. Nevertheless, I believe that Schedule Q with Demo 3 should be filed.

1) Am I correct regarding Demo 3?

2) Where would I find instructions for Demo 3?

Thanks.

I noticed in the winter 2007 ERISA Outline Book Quarterly Update there was a memorandum discussing the IRS' review position on the disagrregation of otherwise excludable employees for ADP testing. We do not get the quarterly updates. Does anyone know where I can get a copy of the IRS review on this subject (other than the quarterly update)?

According to the EPCRS, the correction for a defaulted loan that is still within the repayment period can be a lump sum payment, or reamortization of the balance over the time remaining in the repayment period, or a combination of the two.

I'm wondering if it's possible to start making the regular payments now, and then making the missing payments at the end as a lump sum or balloon payment?

How do you all determine hours of service for employees that are on-call. My specific fact pattern is this: Employer hires nurses to answer questions via telephone. These nurses are on-call for certain nights or weekends. If they never field a call, but are on-call, should they get credit for any hours of service? What about if they field multiple questions?

Thanks.

Where a child is over the age of 18 and no longer the subject of a state custody order, is an insurer still required to provide the "custodial parent" benefit information (including possible individually identifiable health information) or would HIPAA preclude the insurer from doing so without first getting authorization from the child?

What is the impact on the plan sponsor and plan participants if a plan is disqualified solely because it failed to satisfy the minimum coverage requirements?

Can participants move their assets to 401K -- in the event of frozen 403b plan?

If you're trying to accept a direct rollover from another plan and the other plan does not have a determination letter, how do you determine if the plan is qualified or not? Do you simply wait till some future date when you are informed as to the qualified status of that plan when they DO file for a favorable determination letter?

Does anyone have an opinion on whether allocating forfeitures against a 401(m)(11) safe harbor match would cause a plan to lose the top-heavy exemption? I'm not comfortable the reallocation of forfeitures satisfies the requirements for the safe harbor contribution, and think they may be treated as a discretionary company contribution, which I believe would blow the top-heavy exemption normally given to safe harbor plans. I have read Rev. Rul 2004-13 on this several times and become more confused each time. Thanks for any input.

An employee left one company to start her own business and had a loan in the first company's 401k plan. She immediately started a 401(k) plan with for the new company, and wants to roll the loan over. However, the first company had a repayment schedule based on monthly repayments, while the new company has twice a month payroll. We can recalculate the repayment schedule based on the different payroll frequency, but would that require a new promissory note as well?

I just learned from a Fidelity rep that withdrawals from my Roth IRA account are subject to 10% penalty if they are made earlier than 5 years since the date my Roth IRA account was opened. I am extremely confused. I have read in several books that if I open a Roth IRA account and contribute cash, I will always be able to withdraw the original amount I contributed with no tax or penalty. The earnings must stay in the account because they ARE subject to tax and penalty. I just read IRS Publication 590 and it talks about "conversion" contributions and qualified distributions, etc. I have no clue what they mean by all that. It seems that any withdrawal taken from an IRA account before 5 year period ends AND before one is 59.5 years old, disabled, etc. IS subject to "10% additional tax".

So which is it? Can original CASH contributions made to a Roth IRA account be withdrawn at any time for any reason as if from a saving account without any tax or penalty? Or ARE they subject to 10% penalty?

Company, an S-Corp 100% owned by its ESOP, is looking for a new building for its headquarters. Company is considering adding an IDA feature to its 401(k) to allow investment in the "whole world," but most significantly in an LLC that would own the new building. The IDA would be open to all participants in the plan, but the result will certainly be that several HCEs, who also own significant percentages of the Company's stock under the ESOP, will end up using their 401(k) accounts to purchase most or all membership shares of the LLC, which would of course receive rent from Company.

This sounds like a nest of prohibited transactions to me, though I know that (1) individual account plans are exempt (under § 407(b)(1) of ERISA) from the employer real property restrictions of § 406(a)(2), and (2) the investors don't become fiduciaries when they direct the investment of plan assets (their accounts)--so there's no plan fiduciary directing plan assets to a party in interest/disqualified person.

Can they do it?

HCE earns $300,000 and the discretionary match is $1 for $1 up to 4%. The person who processes the payroll does not realize there is a cap on compensation and deposits $12,000 of match into the HCE's account. The match should have been capped at $8,800. Do you run the ACP test on the $12,000 and than calculate the forfeiture and refund if applicable. Or do you forfeit the $3,200 and than run the ACP test. I looked in Sal's book and my interpretation is that you would treat it like a 402(g) violation and test on the full match. But I could not find a specific example for this situation. Any advice is always appreciated.

Thanks,

We had a pension plan and froze it to new entrants and accruals in 2002. We started a cash balance plan in 2003 woth every one starting off with a zero balance. Old DB plan was left intact to pay annuities accrued.

I read section 701 of PPA to require only converted cash balance plans to adopt 3 year vesting. Since we didn't convert, but started new plan, I think we can keep the 5 year vesting. Can someone please correct me if that is incorrect. The more I read PPA the less sense it makes.

A controlled group had 4 separate entities and a QSLOB filing was done about 10 years ago. Since then each QSLOB tested their plans separately.

We just learned that a fifth entity was brought into the fold in 2002. That entity meets all the SLOB requirements, but no filing was ever done with the IRS.

Question: Do each of the original 4 entities still stand on their own? Meaning, do we need to test each entity separately with the new company (aggregate each QSLOB with the new company), or does the entire controlled group need to be aggregated since 2004?

Thanks.

I have the distinct recollection that In-service withdrawals from profit sharing accounts with a Permitted Disparity formula are not allowed, but I have been unable to find the rule, if it (still) exists, in two prototype documents and the ERISA Outline Book.

Maybe I'm looking in the wrong place or maybe the restriction was removed and I am showing my age, or maybe I was dreaming.

Which is it?

Thanks

Encountered a situation involving the 2005 calendar year and an over contribution and over allocation of profit sharing contributions. More than one year has passed from the date of the contributions.

Plan is a safe harbor, 401(k) plan. The employer funded the plan entirely throughout the plan year (i.e., did not wait until the due date of the return). They were not keeping a good account of what went in.

When the allocation for 2005 was done in 2006, the owners/key employees were allocated a portion of the profit sharing contribution to get them to $42,000 limit (when combined with the 401(k) deferrals and safe harbor contributions). The staff was allocated profit sharing dollars under the same formula, and there remained unallocated $40,000 of profit sharing contributions The TPA proceeded to allocate the $40,000 to the staff only since the owners were maxed out.

The owners did not intend to give the staff any more than was required to get them to the $42,000. However, they didn't review the allocation report and didn't become aware of the problem until 2007.

Doesn't look like mistake of fact would help because the contributions have been in the plan for well over a year.

Have you ever seen something like this and what did you do to correct the unintended over allocation?

I'm looking for a way to keep the dollars there, but allocate them in 2006 plan year, even if it means paying a penalty and amending the 2005 tax return of the corporation.

Thoughts?