I presume the new default investment rule, i.e., QDIA, will be available for missing participants under an ongoing DC plan? Correct?

Is there any authority out there for doing a top heavy determination on an accrual basis rather than a cash basis? For example, assume that a 401(k) plan is top heavy in 2004 but the employer did not make the top heavy contribution until 2006. Could the employer take this contribution made in 2006 into account in determining whether the plan is top heavy for 2006?

A question has come up with regard to severance pay and whether or not you can defer on it. Most of our plans are written with the definition of compensation being 3401(a) wages. After looking at the regs, this would seem to include severance pay. However, when looking at the ERISA Outline Book, it appears that deferrals are not permitted on severance pay because you are not an eligible employee (which makes sense to me) (Treas. Reg. 1.401(k)-1(e)(8) and Prop. Treas. Reg. 1.415©-(2)(e)). One thing that causes a question in my mind, though, is that 5.a. (Chapter 11 of the 2006 edition - page 11.47) says ". . .it has been the IRS' informal position that a former employee should not be treated as an eligible employee for any year in which post-termination compensation is paid but the individual is not employed for any part of the year. . . . " That makes sense when the severance pay is paid in a year other than the year in which the participant terminated, but what about when the termination date and the severance pay are in the same year? For example, an employee terminated 9/23/05 and received his final "paycheck" on the 9/30/05 payroll (this included compensation for all hours worked through his date of termination). However, he continued receiving severance pay through 12/31/05 (the "severance pay" was not on account of prior hours worked, overtime, unused vacation/sick days, etc.). He deferred on ALL of his wages, and the company matched. Was this correct? Logically, I would say no, but the regulations are not always logical . . .

Thanks for your help!

Form 5500 for a 401(k) won't be ready by Monday (audit and valuation not finished). Should we send what we have and then amend ASAP or wait and file DFVC?

Any suggestions?

What remedies are avaialble if the independent qualified public accountant's report is not attached to the 5500? Is the DFVC an option?

Thanks

Just wondering which group(s) of employees can an automatic enrollment feature be applied to -

1. As far as the qualified automatic enrollment feature described under PPA, the feature is applied to all eligible employees. Eligible employees mean all employees eligible to participate in the arrangement, other than employees eligible to participate in the arrangement immediately before the date on which the arrangement became a qualified automatic contribution arrangement with an election in effect (either to participate at a certain percentage or not to participate).

Suppose an existing 401(k) wants to begin the the qualified automatic enrollment arrangement effective 1-1-08. They are going to start at 3%. What about employees who have an existing election at 2%, or those who have made an election NOT to contribute? They are not eligible employees for purposes of the qualified automatic enrollment arrangement and therefore they cannot automatically enrolled and no employer contributions are required on their behalf?

So an existing 401(k) plan that has always required all eligible employees execute a SRA indicating yes/no re- their intent to contribute, can utilize the new qualified automatic enrollment arrangement, get a pass on the ADP/ACP/T-H and yet only start newly eligibles (those on and after 1-1-08) at the 3%, and all others remain at their current SRA elections until modified?

2. The group to which automatic enrollment can be applied seems different under the PPA's qualified automatic enrollment arrangement than what is currently available. Do you agree that if an existing plan wants to include the automatic enrollment and start it at say 4%, that all eligible employees as of the date the new feature comes into being who have made an election to contribute less than 4% (or not contribute), can be automatically enrolled and have their deferrals increased to the 4% - subject to the automatic enrollment notice being distributed timely? Thereby applying this feature to newly eligible and existing participants alike.

We have a multiple employer plan and one of the adopting employers is revoking their participation in the MEP as of 10/31/06 (under the MEP the plan is a 3% safe harbor 401(k) with comparability profit sharing) (has last day rule for the profit sharing portion). This employer is going to set up an individual plan with us; plan will be effective 1/1/06 with the salary deferral provisions effective 11/1/06. Of course, the individual plan will not be safe harbor. The document that we will be using for the individual plan does not have specific language stating that if the same employer has 2 plans that the contributions in one plan can or will be used in the second plan to meet the minimum gateway requirements. The language is:

". . . However, the amount of the Gateway Contribution allocated to each Non-Highly Compensated Participant (as described in subsection (i) above) shall be reduced by the amount of any Non-Elective Contribution or Qualified Non-Elective Contribution (other than a Qualified Non-Elective Contribution which is used to satisfy the "Actual Deferral Percentage" test or the "Actual Contribution Percentage" test) or Forfeiture allocated for the same Plan Year to such Participant. For purposes of subsection (ii), "415 Compensation" shall be recognized for the Plan Year.

We would like to read this section as allowing us to use the 3% safe harbor made in the MEP to count toward satisfying the minimum allocation gateway in the individual plan since it doesn't specifically say only contributions in THIS plan can be used for the gateway. Any opinions would be appreciated!

We are coming up on the January renewal time... The brokers/producers within our office feel that it is okay for plans to start late, mid to late January due to decisions about medical benefits not being made until late December. How can we convince them that this would make the FSA Plans non-compliant?

Good Morning -

I have newly-sold group, which is a Trust, which offers FSAs as part of the benefits package to the employers in the Trust. When we sold the case, we recommended the Trust set up one policy, rather than 20+ for each separate employer in the trust as they had been doing. This morning, we learned that there is a VEBA attached to the FSA (although it is not clear as to how the VEBA is funded at this time), and the Trust's outside legal counsel has advised that because of the VEBA, the Trust cannot set up one master policy, although FSA funds (all EE funded) from each employer can be comingled for purposes of claims payment.

Can anyone make sense of this for me? Naturally, we need an answer ASAP since we have a call with the group this morning. We still trying to track down internal legal counsel who has knowledge of both 125 and VEBA regs.

My ex and I were separated 1999 and Divorce Decree effective 1/2003. After almost 4 years of back and forth between myself, my attorney, the court and the plan administrator I finally have a qualified order. We tried to follow the model given to us but it seemed there was always something wrong with the order. I was lead to believe that my order was written to give my ex 50%, + losses and earnings, of the value of my 401K at the date of our seperation. Iwas told that placing a valuation date of 1999 would split the amount in the 401K as of that date and distribute 50% to my ex. I received the QDRO yesterday in the mail and I went to my benefits website this evening to find that 50% of todays value of my 401K has been disbursed to my ex. Was I misled about the meaning of the "valuation date" or is it possible the plan made a mistake?

Three guys start a new company in June. They don't hire any employees until July. They want to set up the plan to have effective date 6/1 w/ immediate entry if employed by 6/1. They will then amend the plan to require 1 year of service for entry. The amendment will be effective after 6/1 but before 7/1. What would prevent this from being ok? It just doesn't "feel" right.

Assuming agreements are subject to 409A to be safe (good reason termination is included), but the agreements use "termination" instead of "separation from service." It means the same thing, but is use of terminology that is different from the statute/regs going to be an issue here like it is (was) for 401(k) plans?

Hello

I would like to know the views of everyone on offshoring of some of the monotonous and mundane daily tasks to India. I ask since I am running a small retirement offshoring services firm based out of New Delhi, India.

Your views would be most helpful.

Best regards

Offshore Option

We represent a bank that is considering lending money to a small profit sharing plan so that the plan can purchase commerical real estate. The bank would hold a first mortgage on the purchased property. The bank is concerned that this may constitute a PT and subject it to liability as a nonfiduciary. Assuming that the bank is not an interested party and assuming that the real estate will be occupied by non-interested parties, is the transaction itself a PT? Should the bank require the trustees of the plan to provide it with a written opinion of counsel that the purchase of real estate and the bank's lending do not constitute a PT? Should the bank also require the trustees to indemnify the bank for any liability? I am assuming that even if the plan's investment in the real estate constitutes a fiduciary breach, this would not expose the bank to any liability. Thanks for the input.

I have a plan I work with that is currently operating under a prototype plan document. Recently, we reviewed the ownership structure and discovered that we may be improperly operating under that prototype document as it is not a controlled group, but is instead a multiple employer plan.

Company A is 100% owned by Bob.

Company B is 35.6% owned by Bob, 35.6% owned by Chris, 11.9% owned by John, 11.9% owned by Tom, and 5% owned by Scott.

Company B is almost a subsidiary of Company A - providing computer networking services to an insurance company (Company A) as well as many other local customers. Chris and John are also employees of Company A. This could be an Affiliated Service Group? Don't know if that even has ramifications to the issue at hand.

Anyhow, the owners thought they were within the controlled group rules. I don't see how, unless they can be considered an affiliated service group. They have been making matching contributions throughout the years, and even recently were converted to a safe harbor 401k plan. Both Company A's employees and Company B's employees have been contributing and receiving employer contributions. If this plan is not a controlled group, what must we do to fix this?

Thanks.

can someone point me to a page in the ERISA Outline Book where it discusses when employer contriubtions must be deposited to the trust in order to be treated as "relating" to a prior plan year?

It's clear as day when you're discussing 404 deduction limits, and 415 annual additions, but I can only find a vague reference to "the year in which the contribution is TREATED as allocated." 1.401(a)(4)-2©(2)(ii).

I don't think the 415 regs are necessarily always relevant because the limitation might not necessarily be the Plan Year.

Any help is greatly appreciated.

Curious how any of you handle this situation....discretionary match, payroll based using 50% up to 6% of compensation, no true-ups required per document...employee earns $25,000/month in first quarter and defers $5000 per month, maxing out deferral. Employer matches 50% up to 6% per month, therefore giving employee $750 Match per month, for a total of $2250. Employee can no longer defer as has reached max but continues to earn $25,000/month.

In this situation, based on your experiences, how does employer handle it so employee receives the full Match due ($6600)? Is payroll system set up to look at compensation annually (recognizing this employee makes well above the $220,000compensation limit) so giving $2200 per month for match during the three months employee is deferring? Doing this, however, creates a problem if employee terminates, for eg. in the fifth month. Or, do employers with this situation manually watch match system? Seems like a ton of work. Or, do employers notify employees that if they defer heavily in first few months (as in my example), they risk not getting full match they're entitled to due to payroll system having Match formula based on monthly earnings.

Thanks in advance for any assistance you can give me.

I have always swayed people away from investing in RE. Here is the plan...

Invest $100K of plan $ in rental properties AND use the plan as collateral for a loan to purchase the balance of the property. Or that is what I think their plan is. I have searched for more specific posts but none address the second part which is to use the plan as collateral for the mortgage.

Thanks!

in reading the roth ira rules, i came across this paragraph:

"You are not allowed to perform all of these following transactions under both the traditional and the Roth IRA.

Borrowing funds from your IRA to pay off debt or loans

Buying personal property with funds from your IRA

Selling your personal property to an IRA"

What is someone after the age of 65 wants to withdraw all his retirement savings (e.g $200,000) to buy his son a house... is he NOT allowed to do that?

This topic started in another thread, and I didn't want to post my question there because it was off-topic in that thread. That thread was http://benefitslink.com/boards/index.php?s...c=33564&hl=

How are you handling the vesting and withdrawal provisions in the safe harbor notice? Without being able to reference the SPD, the withdrawal section becomes almost a repeat of the SPD because the language of the Final 401(k) Regulations is that the notice must contain "withdrawal and vesting provisions applicable to contributions under the plan".

My concern is that the Final 401(k) Regulations do not limit this requirement to "withdrawal and vesting provisions applicable to safe harbor contributions under the plan".