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.

PPA says that as of 1/1/07 we must make a reasonable attempt to comply with the new rules. The safe harbor for the "description of the consequences" statement must include a description of plan investment options available and fees applicable if the distribution is deferred.

How are people addressing this in advance of the final regs on this topic?

We need a copy of a 5558 for a new client which, presumably, was filed by client's prior TPA. Repeated attempts to reach Ogden, UT service center by phone have been unsuccessful. Any suggestions as to how to obtain this form or to get through to this IRS faciltiy? Thanks.

Is it possible to forfeit a non-vested account balance when the participant terminates rather than waiting until a distribution is requested or until a break in service occcurs. The document states "immediately upon distribution". Immediately upon termination is not an option. Is it even allowed?

We have a question from a participant regarding installation of a running board for a SUV (due to other medical issues, SUV was suggested by doctor).

Husband has broken two bones above ankle and doctor has recommended a running board to make it easier for him to get into vehicle.

The cost of the running board and installation is approximately $525 - should this be a permiited reimbursable expense under a health fsa?

We have already obtained a note of medical necessity from the doctor and the blue book price of the SUV ($32,000).

Any thoughts are appreciated - thanks.

A financial institution is currently the trustee of a small 401(k) plan. They are charging ridiculous admin/trustee fees to the plan administrator. What process should the plan admin take to remove them as trustee? A letter and board resolution?

What are the rehired rules if you are already considered a participant.

Eligible participant terminates employment and gets rehired 3 years later, don't they become eligible immediately upon rehire?

What if the document is silent on this issue and there is nothing regarding rehires?

A participant died in 2005 at which time he was 52 years old. His designated beneficiary is his brother.

The plan document follows the 2002 RMD Regulations which state that "distributions to the designated beneficiary will begin by December 31 of the calendar year immediately following the calendar year in which the Participant died" (ie - the default is the life expectancy rule). Using the life expectancy rule, payments must have started by December 31, 2006. However, no payments have yet been made. What are the options:

Option #1) Double payment for 2007 - Consider this to be a failure to timely pay a minimum distribution required under 401(a)(9) - - Appendix A, .06 of Rev Proc 2006-27 - - and distribute both the 2006 and the 2007 life expectancy payment in 2007. The 50% excise tax is going to need to be paid by the beneficiary.

Option #2) Transfer him to the 5-Year Rule - Since he did not start payments by December 31, 2006 pursuant to the life expectancy rule, and since the IRS has ruled in PLR 9812034 that it could not extend the deadline for starting distributions under the the life expectancy rule, the beneficiary must receive the entire account by December 31, 2010.

Any help is appreciated.

What if someone is in two SIMPLE IRAs of unrelated unaffiliated employer and over age 50. How does catch-up limit apply?

THanks

Are brokerage accounts legit for DB assets ? the first page of a recent monthly statement shows an individual as trustee and also has the name of the plan - is this sufficient info to know that the account is in compliance with any rules governing accounts that hold qualified plan assets ? are there any other issues that I should be wary of ??

Is a corporation which sponsors a 401(k) profit sharing plan "wholly owned" for purposes of EZ eligibility under the following facts?

1 participant (and possibly spouse) own 5% of outstanding stock

401(k) plan owns remaining 95% in rollover account(s) of the 1 participant (and possibly spouse)

I do not intend to engender with this post a discussion regarding the propriety of such an arrangement from a PT/fiduciary/exclusive benefit perspective since I know these so-called "ERSOPS" are controversial on this front. Just a simple Reporting question.

My thought is "Yes" it is wholly owned because 414(b) makes inapplicable the non-attribution rule of 1563(e)(3)© and, therfore, the stock is attributed to the participamt/bebeficiary.

Does this make sense?

Thanks for the help

I just reviewed a case wherein signifcant sums of money (salary deferrals of HCE's) were left in the plan after ADP testing for 2005 indicated a test failure. Distributions of the excess amount including earnings finally happened in December 2006 after I raised the question with the recordkeeper. When I asked the recordkeeper if the excise tax was paid or if the amounts were included in the 2006 W-2's, I got dead silence. Assuming either one of these problems remains an issue, what us the repair on this given that it's now Feb 2007. I assume that the W-2's can be adjusted but when is the tax due and is it just on the refund amount or that amount plus the earnings paid?

Former administrator erred in calculation of amount to be deducted from employees' pay due to a paydate for a 2006 payroll period falling on Jan. 2, 2007. This has shorted employees' 403(b) supplemental contributions by one full pay period. (For those electing maximum $15,000, amount short is $576.90). Current adminstrator stated nothing can be done. Is this correct?

Hello,

Our company maintained a SARSEP IRA until growth required us to replace this retirement plan with a 401k plan. A participant rolled over a portion of their SARSEP to the 401k in 2006. We are switching to a new 401k plan administrator in 2007. The participant would like to transfer the rollover amount from the 401k back to the SARSEP prior to the 401k administrator switch.

We've asked both 401k administrators (current and new) whether this is allowable and have received conflicting answers.

1) Old 401k administrator says that theoretically the SARSEP rollover amount is not subject to withdrawl limitiations and could be rolled back to the SARSEP.

2) New 401k administrator says that because the plan documents stipulate no in-service withdrawls until age 59-1/2 the SARSEP amount can't be rolled back to the SARSEP.

Can anyone provide additional details either way?

Thanks