Is a SARSEP protected during the bankruptcy of a company?

A corporation established a VEBA on July 21, 2006, but did not fund the VEBA prior to July 31, 2006, the last day of the corporation's fiscal year. Under Code Section 419(a)(2), is the corporation precluded from taking a deduction for the fiscal year ended July 31, 2006. I believe the answer is yes, but I wanted to check any way. Thanks in advance for your responses. Ed

I am a non-highly compensated employee of a large US corporation and participate in their 401(k) plan. I maximize my contribution each year.

I also have an unrelated video business (just me) and want to establish an "Individual 401(k)". I'm being told that between the two I am limited to $15,000 for 2006 (I'm not old enough for the extra $5,000).

Is that true? I'm asking because I'm getting two different answers -- my employer says no, my accountant says yes.

I want to put $15,000 into each plan.

Thanks for your help!

DnW

Is a ratio greater than the midpoint between the safe harbor and unsafe harbor a reasonable and prudent target for passing the nondscriminatory classification test when testing for non discrimination in amount of benefits?

And when the ABP ratio is close to 90%?

And when many of the employees excluded from profit sharing allocations make over $100,000 but are not considered HCEs due to top paid group testing and thus bring down the NHCE ratios?

Curious to hear thoughts.

Thanks.

I know this is probably a very simple question to answer but I was wondering if anyone could reference me to the regulatory documentation that states when employer (matching) contributions paid for the participant must be submitted to the plan. Also I was wondering where deliquent employer (matching) contributions are reported on the Form 5500, if there are required to be. looking for any sort of guidance. thanks

i know this is probably a very simple question to answer but I was wondering if anyone could reference me to the regulatory documentation that states when employer (matching) contributions paid for the participant must be submitted to the plan. Also I was wondering where deliquent employer (matching) contributions are reported on the Form 5500. looking for any sort of guidance. thanks

A group of companies intend to adopt one 401(k) plan for all employees of all 4 organizations, A, B, C (nonprofits), and one LLC (partnership). The reason for the question is to obtain feedback regarding risk. The plan is intended to be established on a volume submitter document that allows for multiple-employer adoption. The issue is that we do not know if they are considered to be a controlled group (or possibly an affiliated service group). Even so, with the use of this type of document, what risks exist if the employers decide not to hire an ERISA attorney to help them with their determination.

Here is their situation: 501©(3) entity A and 501©(3) entity B are controlled by their own separate boards as follows:

Entity A's board is comprised of 2 appointed members plus 3 other members. According to their by-laws, the 2 appointed members are each appointed by their respective county board of supervisors (there are 2 counties). Thus each county's board gets to appoint one board member for entity A. The 3 other board members are determined by the existing (sitting) board (1 per year to serve a 3-year term). Removal of any board member is done when their term expires (3 years) or is done by a vote of the other members of the existing board. Entity A provides vocational (job) assistance.

Entity B is also a 501©(3) entity. About half of the clients of entity B choose to do business with entity A. According to the by-laws for Entity B, their 5 member board is determined under the same methodology as Entity A. These board members for B could end up being entirely different, partly the same, or entirely the same - they are not tied to each other by the by-laws. It just so happens that the same 5 people currently sit on the board of entity B who also sit on the board of entity A. Entity B provides in-home care.

Entity C is also a 501©(3) entity. The selection (control) of Entity C's board members is handled by the existing (sitting) board of entity C. Entity C is not related (by clients or otherwise) to entities A or B. The board members are also not related.

Entity C and Entity A together own an LLC (50/50 partnership). This LLC will primarily provide services for one county, one which does not currently have a service provider.

Are Entities A and B a controlled group? I’ve been reading 1.512(b)-1 (for non-stock organizations) and I am interpreting this to mean that determination hinges on how the board members themselves are controlled (appointed and removed). If that is correct, then only 2 are controlled by the same outside groups?

Would A and B possibly be an affiliated service group?

Would the LLC be considered part of a controlled group with Entities A or C? I find no way to insert the LLC (partnership) into the potential controlled group picture with the non-profit agencies – proposed reg 1.414©-5(b) applies only to two exempt entities – right?

Is there any benefit to using a standardized adoption agreement anymore as opposed to having the exact same provisions on a non-standard agreement?

The prototype plan doc. excludes non-resident aliens with no U.S. source income. Client has hired a Canadian citizen. They understand that any W-2 EE with US-based income can participate in their 401(k) plan. This one has a few twists, however.

This Canadian EE has no taxable US income and does not get a W-2 form.

They have arranged to pay him through ADP Canada although they use PayCore (sp?) for all other EE's.

Employer considers this EE an employee, not a contractor or temporary EE.

He participates in other employer-sponsored benefit programs, such as life insurance and DI.

Employer now pays in to the Canadian program for him (CPP).

They understand that participation in their 401(k) plan would not necessarily result in any US tax deferral ability. They are more concerned with allowing him to defer so that he gets the ER match.

Under these circumstances, I'd like to know whether this Canadian EE can participate. I would assume he cannot as he would be excluded by the document. Any thoughts would be appreciated.

Thanks very much,

Has anyone seen anything related to the RPA rates that will be applicable to 2006 now that PPA has passed?

An employee of an HVAC company which sponsors a 401(k)sop wants to start his own company and rollover his acccount balance (appx $70,000) to his own company's plan. He will be the onnly employee and wishes to have a loan provision in the plan, obtain a $10,000 loan to assist with start up costs and effectively repay the loan back. I'm thinking this may be a prohibited transaction and that he could do a partial distribution of say $15,000, pay the taxes, use the net towards the start up costs and roll over the balance of appx $55,000.

thoughts?

Any ideas about how to address potential withdrawal liability after an employee led de-certificaiton of the union. There was no employer involvement/pressure but now no bargained employees are employed and it will be a technical withdrawal we are afraid.

Any ideas/similar experiences?

Can a multiemployer fund sponsor a cafeteria plan for the benefit of the employees of its member employers? Q-3 of the proposed 125 regulations seem to indicate not because a "cafeteria plan is a plan maintained by an employer for the benefit of its employees." Is there any way that a cafeteria plan (with premium payment, FSA, and DCAP features) can be structured to be located at the fund level and with only one Form 5500 filing for the FSA feature? Any suggestions are welcome.

I need a clear answer to this question after reading RP 2005-66, Sec 17, and the latest IRS FAQs.

Client in Cycle A has an individually-designed plan, GUST approved and up to date with all amendments (EGTRRA, RMD, cashout). Our firm has a Vol Sub specimen plan with IRS for approval. Client wants to switch to our volume submitter.

Sec 17.03 and 17.04 of 2005-66 and Q-6 of the IRS FAQs seem to dance around this issue, but I just can't make out the song!

MY QUESTION: Does client simply sign 8905 by 1/31/07 or must client adopt an interim plan, which is our specimen plan currently under review, by 1/31/07?

Thanks.

I have a client with a target benefit plan with the target age of 65.

Many of the employees are working past this age and are upset because they are not receiving any benefit from the plan.

Is there any way to amend the plan to enable employees working past 65 to continue to accrue a benefit?

My understanding of the target benefit plans is limited but I don't think it is as easy as just changing the target age to 70.

I was thinking of suggesting that they amend and restate this plan as a profit-sharing plan (as no one can seem to remember why they have this type of plan in the first place).

Has anyone encountered this situation with a target benefit plan before?

Any advice?

Many thanks.

We're looking for specific guidelines for plan audit's in respect to the participants in the plan. Specifically, does the IRS and DOL use beginning plan year participant count or end plan year count? We're under the impression that there is a breakdown of audit guidelines based on the number of participants. I've found the fee structure based on participants but nothing about other audit rules.

Participant has taken 50% of vested balance as loan. Several months later, the participant would like to take out the remainder of his monies as an in-service distribution. In-service distributions are allowed by the plan for any reason. Loan payments are still being made on the loan. Can the plan disburse the remaining funds as an in-service distribution or do the funds need to remain in the participant's plan account to support the oustanding loan balance? Thanks for your help!

The proposed Pension Protection Act of 2006 contains provisions that clears the disparity between ERISA and state payroll laws related to automatic enrollments. The disparity was that certain states prohibit the withholding of payroll without the employee's consent. In clearing up the disparity, the Act contains an omission concerning mandatory contributions which could be viewed as creating a violation.

I'm with a non-profit that has a 403(b). The contribution structure includes an irrevocable election. Eligible employees must make a decision to contribute during the first 60 days of employment. Once they begin contributing, the must continue for their full period of employment or re-employment. For those eligible employees who elect not to contribute, after five years they will be automatically enrolled and participation must continue so long as they remain employed. Contribution levels are 2% of wages (employer contribution of 7.5% of wages into a 401(a)) below the Social Security Wage Base and 4.7% above (employer contribution of 10.5% into a 401(a).)

I am looking for feedback/opinions concerning the mandatory irrevocable election of our plan structure and the proposed legislation. Is this omission viewed as creating a conflict with our plan? If so, any suggestions of how this could be resolved while maintaining our plan's structure?

We have a prospect that wants to consider getting out of his current 412(i) arrangement. Has anyone "converted" a 412(i) Plan to a plan funded through a trust?

Yesterday the US ct of appeals for the 7th circuit issued issued a unanimous decision (3-0) reversing the lower ct decision finding that IBMs cash balance discriminated on account of age because the benefit accrual formula included an interest component. The ct's rationale was the opposite of the district ct opinion which held that using interest to determine a benefit accrual formula for each year's benefit was discriminatory (because the compounding of interest would always result in a larger accrued benefit payable at normal retirement age (NRA) for any year 's accrual for a younger person who had a longer time before reaching NRA than an older person.) Age discrimination in pension plans protects employees under 40. The district ct had held that using interest in the annual benefit accrual formula to determine the amount of the accrued benefit paid at NRA was nondiscriminatory only in a DC plan. The 7th circuit held that ERISA does not forbid a benefit accrual formula in a DB plan from using an interest component since benefit accrual (the annual amount which is credited to the participant) cannot be defined to prevent the use of interest in computing the accrued benefit payable at NRA since each employee will receive the same % of pay at the same interest rate for each years accrual even if the accrued benefit at NRA for that benefit accrual will be greater for a younger employee because of the compounding of interest over a longer period.

Stay tuned. This case is nowhere near over. The plaintiffs can appeal to all of the judges of the 7th circuit or directly to the Sup Ct to reverse the decision, although there is no certainty that either ct will agree to hear the case or reverse the decision. The parties could settle for some amount less than the $1.4B exposure that IBM previously agreed to pay if found liable for age discrimination to avoid the risk of a total loss to either side (and save legal fees). There are cases pending in other federal courts on the question of age discrimination in CB plans. The pension reform act passed last week provides a safe harbor for CB plans on a prospective basis only but does not address the question of age disrimination in prior years.