WIll the provision to not have an AGI limit to convert be for all years 2010 and after? I know the conversion in 2010 will not be taxed until 2011 and 2012 but I was wondering if 2010 is the only year you can convert without an AGI limit being a problem.

My understanding is that:

- 401(k) elective deferrals are disregarded when determining non-discrimination rate groups

- catch-up deferrals are disregarded w/r/t non-discrimination testing

- 401(k) elective deferrals are included in determining the actual benefit percentage for the average benefit percent test.

Does anyone know where these aspects are explicitly stated?

Thanks.

I am working with a plan that limits compensation for sales people to $50,000 for retirement plan purposes. These participants have actual salaries well in excess of $220,000. W-2 compensation applies to all other participants. Are these sales people considered high compensated for discrimination purposes?

If you can meet the minimum participantation requirements could you exclude employees who work more than 1000 hours in 12 months but are not considered full time in a nonstandardized plan?

I received a letter from a woman claiming to be the legal wife of a deceased participant. She says a 1978 divorce was fraudulent and the subsequent remarriage was invalid.

This participant retired in 1982 and died in 1987. The DC plan paid monthly benefits to the participant and later to the second wife(?) until the account was exhausted in 1991. Can the plan defend itself as an innocent victim if the marital changes were fraudulent? Could we be liable for half of the payments to the participant and all of the payment to the second wife?

I know this is more like the reverse of a QDRO, but I am hoping one of you has experience with something similar.

We have a client with a small 401(k) NC plan about 15 participants. In about 2 months, 8 of these employees will be joining the union. The 8 participants will now receive benefits from the union retirement plan. The union provides fully vested flat $10 per hour worked for every union member into their retirement plan. (Comes out to $2080 per person) The Union Plan does not have 401(k) provision.

The 401(k) is very popular feature to these union employees. Can we continue covering these employees in our 401(k) NC plan, (amending not to exclude collectively bargained employees of course) and use the contributions to the union plan to "offset" the contributions to the Profit Sharing? Except in one case each participant has typically received well in excess of $2,080 per year as a contribution.

Therefore the employer would be contributing part of the employee's contribution to the union plan, and the balance to the company's 401(k) NC Plan. (i.e. whatever number gets them up to the 7% they currently receive in the NHCE class of the 401(k) NC Plan)

If we can't recognize the union benefit toward the profit sharing testing, we would have to have all union employees stop their 401(k) contributions.

I see this kind of scenario when we have carve out plans, but the employer is sponsoring both plans. Does it make a difference that one of the plans is not sponsored by the the employer?

Thank you for any guidance.

Corporate sponsor liquidates and individual trustees want to properly document orphan plan status. Do the individual trustees now sponsor the plan as individuals? We are used ot sole proprietor plans, but this really is not the same (and the trustees don't have businesses running as sole proprietors).

They essentially want to continue the plan as frozen (and an orhpan) for a while before terminating it eventually.

We have a self-insured health plan and recently received a QMCSO with regard to one of our employees. The employee has enrolled the children without protest, but we are running into problems with our TPA being unwilling to provide the necessary documents for the children (via the custodial parent) to make claims. The three pieces of information that we have requested the TPA to provide are the claims address for submission of claims, ID cards for the children, and EOB's on the children's claims to the custodial parent. The TPA is claiming that they cannot provide this information without the employee's consent due to HIPAA privacy concerns. Of the three items, the only one that I think may have the employee's PHI is the ID card (with his ID number). I believe that the exception to the HIPAA privacy rule permitting disclosures in order to comply with the law is applicable here. Not only does the order require us to provide information on how to submit claims, it is issued pursuant to Washington law, which has a specific provision requiring us to provide "enrollment membership cards". The TPA is still insisting on a release from the employee and I have a conference call with them tomorrow to try resolve the issue. We are not concerned as much with this particular employee (it seems likely that he would sign the release), but we are concerned about less-amicable situations where the employee would not be willing to sign anything. Have any of you experienced this before? How did you deal with it?

Is the one-year delay in loan repayments for those affected by Hurricane Katrina/Rita/Wilma a mandatory requirement if an individual request it or is it optional and up to the financial institution holding the assets?

I have a client, a one-life group, who through no fault of her own, had a accum funding deficiency in the year prior to the year of plan termination. Her plan had been a 412(i) plan, which was in the 2004 PY converted to a "traditional" db plan. Last year we had some computer difficulties in getting the actuarial valuation out as a result of this conversion.

Once we fixed that - which was fixed after the Sept 15, 2005 deadline for PYE 12/31/2004, she had an accumulated funding deficiency. Now she is looking to terminate the plan. The plan still has an accumulated funding deficiency. Is it too late to say that she should remedy it by 9/15/2006 for the final PY? Does the exact date of plan termination matter? How do I report this on the final Sched B?

If this is too much free advice to ask for, please let me know. Thanks! Carol Caruthers

P.S. My paper on Theories of Dynamic Actuarial Optimization" was published on BenefitsLink on, I believe, Monday May 15. Any feedback would be welcomed. Thanks!

A terminated participant's Present Value of Accrued Benefits is $100,000. The plan contains individual life insurance policies and the participant has elected to receive the life insurance and maintain the policy as part of his distribution. The policy has a current surrender value of $20,000. He has elected to rollover the balance of $80,000 to an IRA.

For 1099R reporting purposes would he receive two 1099R's - the first reflecting the $80,000 rollover (code G) and the second representing the $20,000 current surrender value of the life insurance policy (code 7).

Would there be any tax withholding ($4,000 based on 20% of the $20,000 cash surrender value) or would it not apply, since a life insurance policy cannot be rolled over to an IRA.

Anyone had any issues or problems with a scenario with a client (one man plan) funds relatively modest amounts for his age and compensation (currently age 64 and over 200k comp) for 7 years and then in his final 3 years wants to max his funding. Using an Ind. Aggregate funding method I'm getting some pretty huge numbers given the past service/participation on the 415 limit where he previously was no where close to accruing at the 415 limit, but now essentially is "catching-up" to the 415 limit via huge accruals (amendment)and contributions. I guess I get a little nervous about this level of contribution (around 400k) though I don't see anything wrong with the math or funding method. Just curious if anyone has had any similar experiences and/or audit issues with such an approach. In the end he'll have the same maximum distributable 415 limit as someone funding more level amounts over a 10 year period, but it's just not a very smooth approach.

Client has an integrated plan with the base contribution approximates 8% of pay. Plan is also Top Heavy and intially failed 410(b) due to large number of retirements during the year. As a means of passing 410(b) I am able to include the top heavy group for average benefits testing under 401(a)(4). Do I then simply start at the 3% top heavy contribution and increase that number until I pass the 401(a)(4) test? Or do I have to start at the oldest employees (in terms of service, not age) and bring them in at the regular contribution rate in order to pass (in other words separate out the top heavy from 401(a)(4))?

ErisaNut...you and I had talked about this before and this was the reason that I was increasing the top heavy to pass 401(a)(4), just had lost my train of thought back then.

Any thoughts on T.C. Summary Opinion 2006-58

http://www.ustaxcourt.gov/InOpHistoric/runyan.sum.WPD.pdf specifically that the deadline for the SIMPLE contribution is January 31. From everything else that I have read, the deadline for depositing the salary deferral contribution (for the unincorporated business owner) is the employer’s tax filing deadline-

Regarding acquisiiton of employer obligations by a individual account plan (profit sharing plan in this case)the provisions of ERISA 407 provide that:

Immediately following the acquisition of such an obligation ( part of a new issue of employer stock in this case), the plan may not hold more than 25% of the aggregate amount of the obligations issued in such issue and outstanding at the time of the acquisition and persons independent of the issuer must hold at least 50% of the aggregate amount of that issue. Also, after the acquisition, the plan may not have more than 25% of its assets invested in obligations of the employer or its affiliates.

Can someone help me with the illusive defintion of "persons independent of the issuer" ? All of the new issue will likely be subscribed by current sharehlders, some of who are officers and directors. Would current directors, current shareholders, officers, etc. be excluded or included in that definintion ?

Companies offering Adoption Assistance benefits...... what is the $$ amount and eligibility?

I have 3500 coming soon and I would like to put it into a Roth Ira either thru Vanguard or Fidelity. The thing is... I am a college student and this past year have not been employed. Can i put this 3500 into a Roth ira as my current balance and then pickup a job and begin to contribute to the IRA? I guess I am just wondering how I can get this into the Roth at this time so I can start drawing the interest. Is there any way I can do this? Thanks

Hello. We have a situation I haven't experienced before and need some assistance. A small company that has a 401(k) we administer (I'll call it Small Co., since I'm not very creative) was recently purchased by another company (Big Co.) that is a member of a PEO. Big is part of the PEO's 401(k) plan and tells us that the employees of Small cannot participate in it.

1. Can the existing Small 401(k) be amended so that Big Co. becomes the plan sponsor and the plan will continue to cover just the Small employees?

2. Can it be run and maintained separately, or is it similar to a controlled group situation in that the PEO's plan and the plan maintained for the Small employees must be tested together?

3. Is there anything else I should know about this situation?

Thanks a lot. I hope never to have to deal with PEO's again after this!

Hi all,

Has anyone amended their plans for the final 401(k) regulations (including the Safe Harbor for hardship distributions) that are effective for plan years that begin on or after January 1, 2006?

Also, has anyone amended to remove Safe-Harbor language from plan documents from plans that do not actually use the 401(k) Safe Harbor?

Is anyone doing an amendment that includes both final 401(k) and removal of “safe-harbor “plan provisions.

Corporation X purchases corporation Y in May 2005. X has a 401(k) plan and Y has no qualified retirement plan. It is my understanding that there is a transition period which the controlled group is deemed to pas coverage until the plan year starting January 1, 2007.

Under the Corbel document Y is excluded until they are an adopting employer. It is my understanding this would exclude Y's employees from the ADP testing for 2006.

In 2007 if Y adopts a separate plan would X and Y both have to pass the ADP test separately? Can it be aggregated or does it have to be aggregated?

Any advice would be appreciated. Thanks!