Another question:

Suppose a company maintains a DB and a DC plan. We are cross-testing the two plans in order to pass nondiscrimination. Basically, all the NHCEs participate in the DC plan and receive a 7.5% gateway contribution.

The two owners participate in the DB. Enough NHCEs will participate and receive meaningful DB benefits to qualify under 401(a)(26).

The question is: Under this scenario, is it permissible to determine who participates in the DB plan according to a cutoff date for hire? In other words, for example, could we say that anyone who was hired before 1/1/95 is a DB participant and anyone who was hired afterward is not?

Q: 401(k) plan fails ADP test for 1/1/05 to 12/31/05 plan year. 4 Highly Compensated employees are due refunds below:

Employee 1: $4,000.00

Employee 2: $3,000.00

Employee 3: $2,000.00

Employee 4: $1,000.00

Employee 1 and 3 are still active. Employee 2 terminated on 1/31/06 and took a cash distribution. Employee 4 terminated on 7/14/06 and took a cash distribution as well. Employee's 2 and 4 have ZERO funds in the plan.

Since the March 15th, 2006 deadline is passed, the plan sponser must pay a 10% excise tax. Will this tax be:

A) 10% of $10,000. 10% will apply to all refunds, despite any distributions.

B) 10% of $6,000. The 10% will not apply to EE 2 and 4 since they have already taken a distribution.

C) 10% of $7,000. The 10% will not apply to EE 2 since his distribution was before 3/15/06. But it will apply to EE 4 since his distribution was after 3/15/06.

Are there any formal filing requirements associated with the termination of a VEBA trust, such as an analogue to the Form 1024 in the termination context, or something other than a final 990?

I'm wondering how some of you deal with providing a prospectus in a timely fashion when participants have the ability to change their investments on-line, and neither the Plan Administrator nor the Investment Advisor knows when a participant has made such a change. Large plans that offer a multitude of investment options to hundreds of people couldn't provide a prospectus for every investment to every participant.

I know that some investment managers simply say that all prospectuses are available on-line. Has the DOL ever differentiated between the requirement to "provide" a prospectus vs. "making one available?"

Takeover plan. Plan document allowed everyone hired as of 12/31/2003 to enter the plan.

There is a NHCE (hired prior to 12/31/2003) that typically works 9 hours a week. I have been told the employee will never work 1000 hours so will never actually accrue a benefit. He has never worked over 500 hours during a plan year either.

In my opinion this person is a participant in the plan because of the eligiblity language above. Once a participant - always a participant, right? This means I must include him in my general testing as eligible but not benefiting. Basically he gets a big fat ZERO and brings down my NHCE averages.

BUT

I was reading the plan document and in the 1-Year Break in Service definition it specifically says, "An Employee or Former Employee that works less than 500 hours in a plan year..." It rambles on some more, but the fact that it says an Employee is throwing me off. Does this mean that my NHCE has a break in service? Is he not included in the testing?

Now maybe I am reading this too literally. Maybe a person is considered an Employee the year that he terminates and can incur a break in service, and a former Employee is someone that terminated in a previous year that has no hours and incurs a break in service. So there is no way for an active employee to incur a break in service unless they terminate. There isn't such a thing as a "deemed termination" because the employee isn't working very much is there?

Tell me that I am over analyzing. Tell me that he is a participant and has to be included in the test forever until he is terminated. Tell me I can go back to surfing the internet!! The MLB playoffs have started. The NBA has started training camp. Not to mention all of the bad stuff happening in schoolsThere is a lot of news to be read.

Can a 403(b) plan include a pickup provision in addition to allowing salary deferrals?

I have a client which terminated it's plan in 2005. I was getting ready to do the final 5500 when I noticed on my trust report a blance of 300 bucks. I found out it was a loan that was never deemed when the participant cashed out in '05.

Am I going to have to do a form for '06? I really was just a processing mistake. All the other assets were distributed on or before 12/31.

If a spinoff occurs from a DB plan, is there a problem if the spun-off plan then terminates?

My understanding has been that the answer to the question is yes, because of the non-permanency issue. For that reason, if one company maintains the whole plan, it would be better to spin off the part they want to keep, then terminate the original plan.

However, of course, often this is not feasible, possibly because one company does not maintain the whole plan.

But whatever understanding I have of this matter comes from many years ago, and I am not sure it is correct. Any help would be appreciated.

My client wants to terminate his money purchase keogh. He has never had to file a 5500 EZ as plan only has about 12,000 in assets (has been in existance for 10 years). He is a sole proprietor and the only participant and really cant afford to contribute anymore. His broker told him that he could not just terminate plan (client wants to rollover to an IRA) as it is qualified and as such he needs to talk to his tax advisor (me) as the reason must be valid (ie company is going out of business). Is there a valid reason he can give for terminating this plan? He can't afford to make any more required contributions. (He will NOT be going out of business.) Also if he terminates this month (October) does he need to make a contribution for 2006? Does it get pro-rated for the year? Thanks so much for anyone who can help. As you can see, I don't have much experience with this but I am doing my best. I have read every posting on this forum and the questions were not answered. Also googled the subject, but no luck. I just want to advise him of his options and not make any mistakes. Thanks again!!

Def Comp plan provides for payment of benefits $x per year for y years upon retirement (with an objective formula for reduced benefits payable to participants who terminate before retirement.)

Since amounts will continue to vest (and therefore become deferred) in future years, at least part of the plan will be subject to 409A.

there are no deferement or payment options available under the plan as written. since there is nothing impermissible under 409A, is there any advantage to segregating the pre-2005 plan and maintaining the grandfathered status for those amounts? Is it correct that a violation of 409A in the non-granfathered portion of the plan would subject all defered amounts to penalties and taxes, whether grandfathered or not?

In 2005 a participant takes a plan loan to be used for the purchase of his primary residence, but elects to only carry the loan out for 5 years.

In 2006 the new house now comes with a new baby, and the participant would like to lower the payments on the plan loan.

Assuming the loan program allows for a 15 year payback on principal residence loans, is it possible to refinance the existing loan for 14 years, since the original loan could have had a 15 year payout? Or once the election was made for 5 years on the existing loan, is the participant stuck with that?

Thank you for any guidance.

Good Morning All,

I am trying to do some benchmarking regarding creative benefits for one of my clients. I am interested in seeing what kind of Out of the Box Benefits are being offered by companies these days (i.e., free massages at work, gym memberships, smoking cessation benefits, etc..)

Any and all suggestions are greatly welcomed.

Thanks.

Good Morning All,

I am trying to do some benchmarking regarding creative benefits for one of my clients. I am interested in seeing what kind of Out of the Box Benefits are being offered by companies these days (i.e., free massages at work, gym memberships, smoking cessation benefits, etc..)

Any and all suggestions are greatly welcomed.

Thanks.

at the bottom of the main board it says today's birthday is

Blinky (age 14). sounds 'fishy' to me.

A plan sponsor would like to offer the option of allowing the participants to elect life insurance coverage in their 401(k) plan. If the insurance company requires a minimum premium and/or face amount in order to write the policy, can this result in a failure of the benefits rights & features section of 401(a)(4)? My sense is that it will fail BRF because the insurance would be available as a percentage of pay for the owner which is much lower than what is available to the NCEs as a percentage of pay.

Hi,

I'm just starting out with this so take it easy on me.

My employer's plan has a max 401(k) limit of 15000 per year.

I would like to contribute the following:

15000 to 401k

4000 to Roth (I would open this one on my own via ETrade)

Total: 19000

Or do i have to contribute like this

11000 to 401k

4000 to Roth (ETrade)

Total: 15000

Husband and wife each have an LLC... can they have one plan between them? Why wouldnt they be able to?

A DBPP covers two employees. As the corporation that maintains the DBPP is owned by an irrevocable trust, both individuals (husband and wife) are considered to be NHCEs. The irrevocable trust is controlled by an independent trustee. They are the only two employees of the corporation that maintains the DBPP. These two individuals own another entity that does have common law employees that do not benefit under the DBPP.

The Company is interested in terminating the DBPP and the DBPP is currently underfunded. Is it possible for the two participants to waive the portions of their benefits that are unfunded?

I understand if these individuals were HCEs they could waive a portion of their benefits. Please do not comment on the 414 irrevocable trust issue. I am aware of the concerns with respect to that issue.

Thanks. Ed

I have an ER who is party to a CBA. I have learned that the Fund Administrator is going to audit the plan for years 1999 to 2005.

1) can an audit span this far back? i know a plan must be allowed to make annual audits but is there a "statute of limitations" for past years; and

2) in 2002, the ER was audited from 2000 through 2002, at which point we were informed that there was a deficit for 2002. we offered to settle and they declined to pursue it. is there a laches argument to be made or must we pay?

can anyone get me pointed in the general direction of the appropriate Code and/or Act sections?

thanks in advance.

I've got a client that had a plan that was in bad shape.... 12% participation with minimal interest in it. Through the help of a new financial advisor, decent education, the addition of a match and a change in the asset choices we've upped the participation to 50+%.

However, the "old" money is with the old custodian. As of July 1 of this year they've been running with both recordkeepers. Client wanted to seperate the two processes and was willing to foot the cost so who are we to argue...

Now we're going to consolidate the accounts. What I'm hoping to do is issue a blackout notice but at the same time provide them with a transfer request form that allows each participant to request a liquidation and transfer prior to the end of the blackout period. Since we're only talking about 6 people, the thought is that all would move their money voluntarily and we won't have to wait the 30 days.

Anything wrong with this? Do we have to wait until 30 days to request the transfer???