In a multiple employer plan when a new employer adopts the plan as a sponsor and has no look back year to determine HCE status based on compensation then absent any 5% owners I assume there are no HCE for the ADP testing that year for that employer.

But if a participant from another employer who sponsors the plan transfers to the new employer, does his compensation from the other employer in the look back year determine if he is an HCE in the new employer? From what I've read it seems not, but ....?

A new governmental defined contribution plan has a leave conversion feature for retirees -- automatic conversion for certain employee groups and conversion through pick-up contributions for other employee groups. The plan also has ongoing contributions. The plan has been submitted to the IRS for a determination letter.

The IRS has just informed the sponsor that the DL submission will be delayed because the Service is seeking "technical advice" on whether leave conversion plans violate the tax laws.

We are aware that, in December 2004, the IRS sent out notices to volume submitter sponsors of stand-alone leave conversion plans indicating that those plans may run afoul of the "recurring and substantial" requirement under the profit sharing plans. However, it appears that the IRS is rethinking its position on individually-designed plans with leave conversion -- even if they are not "stand-alone" plans.

Does anybody know what the IRS' concerns are? Or, is anyone familiar with plans that have a leave conversion feature, and if so, is the plan sponsor taking any action in response to this new IRS initiative?

Thank you.

Are we required to include elective contributions made to a nonqualified deferred compensation plan as "compensation" when determining HCE status? My thought is yes, since I don't see anything in the regs that permits the exclusion. However, plan administrators are telling me they do not include. Thoughts?

Can an employer pay Form 5330 preparation fees out of the Plan's forfeitures? the employer failed to submit employee deferrals to the Trust within the proper timeframe.

Thanks in advance for the help.

Tax exempt 457(b) plan holds assets in a rabbi trust. The deferrals are fully vested when made. Does the nature of the rabbi trust create enough risk of forfeiture that FICA should not be withheld at the time of the deferral?

Can the employer pay the plan audit fees and then have the 401(k) plan reimburse the employer?

Does anyone know if Texas restricts a municipality's ability to cut retiree medical benefits under a group health plan?

Thanks.

Can a Co. who incorporates lets say June 30th start a new plan as follows:

Owner is obviously an employee from day 1. Can a plan be drafted where anyone employed on 7/1/06 be automatically eligible for the new plan and any EE's hired afterwards would go through normal eligibility - 1yr for example. So, what if the hire date of the few Employees of the new Company have a hire date of 7/5/06. Therefore the only one eligible for the first plan year and second plan year would be the owner.

Problems?

I don't know if this make sense but I would like to know are there any significant diffrence on the type of Roth IRA that you would invest in a company Such as the "target funds" and regular funds? Thanks.

Just got back from attending the Western Pension and Benefits Conference summer meeting in Las Vegas. The final session was about fiduciary duties and was conducted by S. Derrin Watson. In his slide presentation he gave as an example of a PT the case where a qualified plan purchases a piece of real estate at fair market value (as set by independent valuation agreeable to both parties) from the sister of the owner of the Employer corporation. Although he acknowledged that the sister is not a party in interest (or disqualified person), he insisted that the transaction was a PT because the owner of the business certainly would not have had the plan purchase the real estate simply as an investment for the plan, but would only have entered into such a transaction to benefit his sister.

He asserted that the trustee who caused the plan to enter into the transaction would be liable for the excise tax relative to the transaction. (Presumably the transaction would need to be "corrected" as well.)

"I strenuously object." Congress obviously didn't agree with Mr. Watson's view or they would have named siblings of parties in interest or of fiduciaries as parties in interest in their own right. Has anyone run accross an IRS or DOL agent applying such specious logic to commercially reasonable transactions not involving a named party in interest? Does anyone agree with Mr. Watson's specious reasoning?

Doing some wotk for a new DB plan. Plan is cross tested.

Normal Retirement Benefit is % of Avg Mo Comp multiplied by Yrs of Serv limited to a max of 10 yrs.

The problem we are having is that each employee has a stated %.

NCHE1 gets 0% of Avg Mo Comp

NHCE2 gets 2% of Avg Mo Comp

NHCE3 gets 6% of Avg Mo Comp

HCE1 gets 6% of Avg Mo Comp

HCE 2&3 get 0% of Avg Mo Comp

Can you state a different percentage for each ee?

We usually do it by classification (i.e all owners get x% all NCHEs get y%)

I have a client with a 401k/ps plan established currently as a ps safe harbor plan design. Can we change it, as of 1/1/07 to a safe harbor match design?

Does anybody know of a source to consult for average rates of participation for plans with various matching contribution formulas? Broken down by compensation level would be ideal....

Thanks!

Facts: Plan A's year ends 1/31/06; Plan B's year ends 12/31/06

Both plans must be tested for coverage on a controlled-group basis for the plan years ending in 2006. Plan A is maintained by one member of the controlled group and Plan B is maintained by another member of the controlled group. Both plans are 401(k) plans.

Question: Plan A fails the ratio test on a controlled group basis for the year ended 1/31/06. The TPA wants to perform the average benefits test. What data should the TPA use for the ABR testing group with respect to Plan B? Can it use the 12/31/05 benefit percentages, given the fact that the plans's year has not yet ended for 2006?

Plan XYZ is a 'Supplemental Executive Retirement Plan' (SERP) which we

think is a 457(f) non-qualified plan. Participant F is retiring. The

Plan Sponsor is purchasing an annuity to fund Participant F's payout.

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Specific Questions:

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Q1-What tax form, if any should be used to report the purchase of the

annuity?

Q2-What tax form should be used to report the annuity payments?

I have a plan that is transferring from one insurer to another. The insurer's contract has a surrender charge for leaving before five years. Can the CDSC be treated as plan expense and be paid by forfeitures and/or the plan sponsor?

I'd like to follow-up with a question recently asked since I have a similar situation as this one:

http://benefitslink.com/boards/index.php?showtopic=32782

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A large calendar year plan was part of an ME plan with Paychecks. The client stops participation in the ME plan in April 2006 and assets are moved to another provider in May 2006. The document is restated effective 3/1/06.

1. Do you agree that this is a continuation of the plan and not a New or Successor plan?

Assuming it is a continuation,

2. On Form 5500, would the Beginning of the Year assets be shown on the form, or would they be listed under “Transfers of Assets”?

3. What is my beginning date for filing Form 5500? (1) The document restatement date, (2) the date the client starts participation with the new provider, or (3) the plan year beginning date?

4. Would participants that had been previously reported on Sch SSA under the ME plan needed to be added using code C?

Thanks!

Is a charter school eligible to sponsor a gov't 457(b)

Having a little debate on a takeover plan. I'm always willing to believe I'm wrong, so here goes.

The plan is new for 2005 - calendar year plan and fiscal year. It is a DB plan, based upon an approved VS document, but using a modified compensation definition that makes it fall outside of the safe harbors and the current VS language, so we are requiring that they submit for a determination letter as a condition of our performing TPA services.

As I read the RP 2005-66, this falls under the 5 year individually designed plan deadlines, which are dependent upon the last digit of the EIN. So let's just suppose it is 7. This would be "Cycle B" and therefore must be filed by 1-31-2008.

Filing currently (this year) on an "off cycle" is an option, but I don't find any specific deadline for this, since an off cycle filing is voluntary.

Any disagreement? I guess as a further question, do you see any benefit here to a current off cycle filing? I can't see any other than perhaps getting a quicker response. But the RP specifies that off cycle filings will only be reviewed once ALL on cycle filings have been reviewed and processed, so it could actually take longer than waiting. Maybe I'm missing some important point.

Thanks in advance.

Has anyone tried the new E-filing? We can't decide which method to use/try.