For our 401(k) plan minimum coverage testing, we do snapshot testing and a three-year testing cycle, per rev. proc. 93-42.

Does the new Schedule R's part IV, that requires you to answer how you passed your minimum coverage test (ratio percentage v average benefit), mean that you can't use a three-year testing cycle any more? The instructions say that the three year testing cycle no longer provides an exception to filing the schedule as it did with the former Schedule T that contained all the minimum coverage testing information. But can you file the new Schedule R and mark "ratio percentage" in a year in which you didn't actually conduct the test? Or does the new form effectively repeal the three-year testing cycle option? This result doesn't make a lot of sense to me - I'm inclined to stick with the three-year cycle and check the box for the test that was originally passed - but I think the form's instructions aren't entirely clear.

Does anyone have any ideas regarding uncashed distribution checks (i.e. what to do with them?).

I'm not talking about uncashed deminimus distribution checks (lumpsums under $1k), rather checks that have been issued due to participant direction, and not cashed.

Currently, our service provider does not put a 'void-after-date on checks, so theoretically, a participant can hang on to his check for x-years, and then cash it. Meanwhile, the money is "out" there somewhere (gaining interest? that's another question!).

We've been advised by our provider than we cannot roll the outstanding money into IRAs (either Roth or pre-tax) because the participant has already provided direction.

Any ideas of what we can do with these monies?

A distribution from a participant's account was made from our 401(k) plan as a result of a termination of employment. The participant says that she didn't request the distribution. Our review of the distribution request reveals that she didn't sign the form. The check was made payable to her and sent to the PO box listed on the distribution form. Help! What are our obligations to the participant?

If an employer indicates that the SEP does not include employees whose total compensation during the year is less than $450, does this requirement apply only to determining when the employee first becomes eligible or does it apply to all years that the employee makes less than $450? For example, if A makes $ 400 in the first year, $3,000 the second year and $350 in the third year, is the employer obligated to make a contribution for A in the third year?

We have a plan that missed making contributions for two employees when they were eligible last year because the participant did not return an enrollment form.

We have determined that the client will need to make up the contributions plus earnings. Are they also obligated to file under the Voluntary Correction Program or is that only for employee deferrals.

Company X has a DCAP FSA as part of its cafeteria plan. For 4 recent plan years, the plan failed the 55% average benefit test. Is there any design change that can be made that will make it more likely for the plan to pass (other than excluding HCEs)? What if the company provides a matching contribution to NHCEs? Also what about tax reporting for the prior years? Any thoughts?

I was just curious as to whether anyone had an opinion on a TPA choosing to only make EOB's available online to participants. Instead of issuing EOB's to participants, each month a single monthly statement would be issued covering all medical claims for the previous month. EOB's for each single claim would be available online.

I was under the impression that plans- whether they be welfare or pension- may only use the internet to make disclosures if the employees were able to access the information at their worksite.

The employees in question here do not have access to computers in their day to day work.

Co A sponsors a safe harbor 401(k) with basic match.

Co B sponsors a safe harbor 401(k) with an 100% up to 6% safe harbor match.

Co. C will be formed. Co. C will purchase both Co. A & Co. B in asset sale 10/01/06.

They are hoping not to terminate the plans & trigger distribution.

They want to maintain safe harbor status.

They are not adverse to merging the plans.

I don't see how they can merge the plans in 2006 & maintain the safe harbor status because they use different match rates. Even if they were willing I don't see that they can increase the match rate under Co. A's plan to 100% up to 6% in 2006; it wouldn't meet the uniform formula requirement for the match. Am I missing something?

Is there any reason Co. C couldn't maintain both plans for the remainder of 2006 just to maintain the safe harbor status for both plans?

Thanks in advance for any guidance

I have converted the Explanation of the PPA (JCX-38-06, a pdf file) to a Word file. See attached (393 pages).

PPA_of_2006_JTC_Technical.doc

Can top heavy contributions have a vesting schedule?

if you use status code or category codes then you will have work to do as these are being replaced.

there will no longer be things like 'new participant' and 'terminated and fully paid out'. (Terminated ineligibles will now also have term dates)

oh joy of joys! guess I will have a lot of work to do on my report.

I promised someone at the Southern User group meeting I would post a census report that would show 'new ees'. I didn't do anything else but add a few formulas - I did not eliminate fields on this report that will have to go as soon as 12 is loaded. Granted update 12 will not be released or loaded for awhile, but as someone asked how to write a formula I am posting this report, so they will be able to copy the fileds into their reports.

so now, this report will indicate

new ees (even if they also terminate)

also what I call '5500'. these are new employees entering the first day of the plan year. (e.g. I would expect the 5500 begining year participant count to increase over last years by these folks)

this report curently will also provide warning message if ee has current year comp but term date of last year.

ee has no comp but is not terminated.

ee is 69 years old or older (a quick check for 70 1/2)

There are a bunch of counters at the bottom - guess these have to be zapped when 12 comes out.

The board of directors of a publicly traded shell company with no assets have received a valuation from an investment banking firm showing that the value of the company is $2 million. Yet, the stock is trading at a value which would indicate a market capitalization of $70 million. Clearly, the market does not understand the capital structure of the company even though the company has taken efforts to explain it (90% of the equity securities are in the form of preferred stock). Can the board grant non-qualified stock options using the $2 million valuation without having a 409A problem?

Hello All,

I have a new client who has been treating his SEP as a SARSEP. Can he go through the self correction program to fix this?

Thanks!

We had a transfer plan that had a match formula based on years of service. Per 1.401(a)(4) regs, non-uniform match is a benefit, right or feature. I performed a current availability test on the match and it failed for several years. The client determined a reasonable business classification to give certain people additional match to make the current availability test pass. We filed VCP since we were outside of the correction period of 9 1/2 months. After several discussions with the IRS agent regarding whether or not the client did an ACP test (they did) and whether or not this was really a demographic failure, the IRS sent the VCP back saying the submission is ineligible under EPCRS. So in the eyes of the IRS, if the match is tested in ACP, no further testing is needed.

I called the IRS for an explanation and the agent told me since this is a 403(b) plan, they have goodfaith reliance until the new regulations are finalized. My opinion is Notice 89-23 gives goodfaith reliance for employer other contributions, but not match.

The prior carrier was also doing the testing but not correcting as they went along. I find it interesting that I am not the only one doing this testing on a 403(b) plan. Any other opinions?

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I have a Roth IRA and moved to Ireland last year. I will not have a US mailing address soon and want to know what the options are for my Roth IRA ie is it possible, or practical to continue having them, what are the penalties for terminating them etc?

Does it make sense for a company to offer a NQDC plan to it's "core key" (their term not mine) employees if they are not likely to take full advantage of the 401(k) deferrals? The "core key" employees are those that are in management positions that they hope to use this plan to retain and/or attract.

Plan in question is a Profit Sharing plan that they are modifying to a SH with a match. They anticipate only about 50%-60% participation even with the match. Only 2 of those "core key" employees are true HCE/KEY employees. All the rest fall into NHCE category.

Likely that all of the "core key" will hit the 15k limit but only because of the quarterly bonuses that are provided. Otherwise they would fall short.

I just can't see the benefit of the second plan....but I've no experience in the arena either. Certainly an employer contribution funded plan makes sense but not employee deferral.

Also, am I correct in saying that the distributions are funnelled through payroll? And thus aren't eligible for rollover or anything of that ilk?

Thanks in advance...

I have a plan that terminated on 12/31/05. The plan has some lost participants and their assets have not been distributed. Does the 1-year waiting period to start a new plan begin on 12/31/05 or when all the assets are actually distributed.

Thanks!

Schedule I plan merged into another plan (all assets) 8/30/05.

No extension, no filing as of today.

If they file under DFVC, what penalities would they be facing?

we are doing a hybrid DC conversion. would we be offering a "right or feature" under ERISA 401(a), and hence subject to discrimination testing, if we allowed EE 65 and older to opt out of moving into the new plan and staying in the old DB plan?

Wife is self employed. She hires husband and pays him $15,000 per year. They both participate in the wife's 401(k) plan. Husband defers the full $15,000 into the 401(k) plan.

Husband is also employed elsewhere, his other position offers him a 403(b) and he participates.

Are 403(b) and 401(k) deferrals considered the same for an individual's maximum deferral limit? The missing piece of information right now is how much he participates in the 403(b). If the 403(b) does not count towards his 401(k) personal deferral limit then I won't bother tracking down that information.