Date of birth = 8/1/29

Age 70 1/2 = 2/1/00

Date of hire = 8/1/00

Vested at 7/31/05

MRD payable by 4/1/06

What is MRD calculation start date?

Can a terminated employee request a hardship? If so, can this be used to pay for medical insurance?

Here's a twist on a regular theme here: plan thought it had been paying a surviving spouse her entire QJSA during a number of prior tax years, but actually was paying only a portion, say 90%. However, the plan reported the amounts on 1099-R as though entire QJSA amounts were properly paid. In later tax year, plan discovers mistake and issues a check for amounts previously reported on 1099-R, but which weren't actually paid (the 10%). Must this lump sum "retro" amount be reported on 1099-R for the year in which it is made?

My thought is no -- the make-up amount relates to distributions that although never paid, presumably were previously taken into income by the spouse based on 1099-R reporting. I think Rev. Rul. 2002-84 supports this approach in indicating that if a participant is having his benefits offset to recoup an overpayment made in a prior tax year, the recouped amount is not income to the extent the participant reported the overpayment in income in such prior year.

Any dissent?

Successfully pursuing a reimbursement/subrogation agreement is dead in many circuits. Could we include an offset provision in a health plan that would reduce future benefits by the benefit paid out when the participant collectes from a third party and refuses to honor the reimbursement agreement? It seems like we could argue that this is equitable relief since we are reducing benefits rather than seeking monetary relief. Any thoughts?

There are bugs in the 5500 software! For example, on Schedule R, the ratio test/average benefits test doesn't print correctly even though it looks correct on screen. Also, the Schedule D Spread Import isn't bringing in extra pages.

Does anyone have any idea when this is going to be fixed?

A client has an existing 401(k) plan (3% Safe Harbor Nonelective). The corporate year ends January 31 and so does the plan year. In December 2005, they gave a maybe notice because they might change their retirement plan structure.

We are about to propose that they adopt a defined benefit plan to cover 2 HCEs, leaving the 2 other HCEs in the 401(k) plan. 3 NHCEs will be covered in the DB plan and 3 other NHCEs will remain eligible for the 401(k) plan. This makes two plans that do not actively cover any of the same employees. We plan to have the amendment to this effect executed by January 31, 2006.

We are concerned by what is considered as being a beneficiary in both plans for deduction limitation purposes - if they can no longer defer or receive any allocation in the 401(k) plan, we are hoping this means that they are not considered to be 'covered' by the 401(k) plan after 01-31-2006.

If we set up the DB plan (executed by 1-31-2006) with an effective date of 12-1-2005, a small portion of the 2005 DB plan year would cover some of the same cross-section of participants, so the deduction limit for the corporate year ending 01-31-2006 be equal to 25% of the overall eligible payroll.

Now how about the next year, for their deductions for their 01/31/2007 corporate year, will the deduction limit be the DB minimum required contribution plus 25% of the covered payroll for the 401(k) eligible participants plus the 401(k) deferrals (think yes)? Or are we limited to 25% of both plans payroll overall (think no)? If no, how do we get out of the 25% limit?

Note: Sal Tripodi's ERISA Outline indicates that the IRS has stated two opposite positions on this, but that they have not ever reiterated their original position (from PLR 8743096) in any later PLRs.

A client has an existing 401(k) plan (3% Safe Harbor Nonelective). The corporate year ends January 31 and so does the plan year. In December 2005, they gave a maybe notice because they might change their retirement plan structure.

We are about to propose that they adopt a defined benefit plan to cover 2 HCEs, leaving the 2 other HCEs in the 401(k) plan. 3 NHCEs will be covered in the DB plan and 3 other NHCEs will remain eligible for the 401(k) plan. This makes two plans that do not actively cover any of the same employees. We plan to have the amendment to this effect executed by January 31, 2006.

We are concerned by what is considered as being a beneficiary in both plans for deduction limitation purposes - if they can no longer defer or receive any allocation in the 401(k) plan, we are hoping this means that they are not considered to be 'covered' by the 401(k) plan after 01-31-2006.

If we set up the DB plan (executed by 1-31-2006) with an effective date of 12-1-2005, a small portion of the 2005 DB plan year would cover some of the same cross-section of participants, so the deduction limit for the corporate year ending 01-31-2006 be equal to 25% of the overall eligible payroll.

Now how about the next year, for their deductions for their 01/31/2007 corporate year, will the deduction limit be the DB minimum required contribution plus 25% of the covered payroll for the 401(k) eligible participants plus the 401(k) deferrals (think yes)? Or are we limited to 25% of both plans payroll overall (think no)? If no, how do we get out of the 25% limit?

Note: Sal Tripodi's ERISA Outline indicates that the IRS has stated two opposite positions on this, but that they have not ever reiterated their original position (from PLR 8743096) in any later PLRs.

OK - so in order for an employer to avoid a 10% tax, ADP/ACP refunds need to be made within 2 1/2 months after the plan year end.

So for a 1/1/05 to 12/31/05 plan year, refunds need to be made by 3/15/06.

I have a few questions about the 2 1/2 months that I'm hoping someone can help me out - or point me to some regulations or guidance that verfies this...

First of all - is it technically 75 days after plan year end? Or is it 2 1/2 months?

If an employer has an 11/1 to 12/30 plan year, the deadline will be in February. Since there are 28 days in February, is the deadline 2/14? Or is it still 2/15? What about leap years when there are 29 days in February? Does that change the deadline?

I've tried my best to find information on this, but haven't had much luck. The examples in the ERISA outline book always reference 2 1/2 months and always use the 15th of the month in their examples. They have an 11/1 plan year example and they use 2/15 as the deadline.

What about plan anniversaries that don't start on the first of the month? For instance, a 9/10/04 to 9/9/05 plan year would have a deadline of what? Is this when you would use the 75 days?

HELP!

this is a sample of the correction report for a failed ADP test.

to verify testing results, I have added the numbers to show plan passes under the old rules.

also added the numbers to show that after the actual refund the 'top down' method has method has been achieved.

since you cant run this report out of custom, it would have to replace the existing Relius report, but if you want such a report, send me an e-mail. granted I have only tested it on a few plans, but it appears to be working fine.

I have a plan that utilizes profit sharing and after tax only.

First question: are the post tax contribs required to be tested via ACP every year?

Plan is considering going adding a 401k component and adding safe harbor. If safe harbor is added, will post tax contribs be exempt from testing or will they need to be tested?

I've finally decided to open a Roth IRA, but now I come to the question of which mutual fund I want to start with. I intially want to go with a managed approach to my Roth, but will want to take a more personal and active approach once my time frees up and I gain more experience.

A little info about myself. I am 26, married and plan on only opening 1 account at this time. We qualify for the Roth, and plan on investing the cap each year. My wife is currently pregnant, and I plan on opening a 529 plan within the next month as well, with small intial investments by us and large investments from family and friends. I know that it is smart to be more aggresive now, and conservative later.

The fund that I've came across lately that interest me is the Fidelity Advisor New Insights (FNIAX) Fund. The only problem I've found is that I have to go directly through an individual broker or bank to invest into this fund. I'm wary of doing this because of the increased "fees." Before I found this fund, I was almost sure I was going to start my Roth through Fidelity (for now), but I am unsure now because I really do like this fund. If I was to go with Fidelity, I'll probably start initially with the Fidelity Contrafund, even though this seems to be getting to large.

So, basically my question is.....Should I seek an individual broker because of that one fund, or should I find a nice alternative and just start saving/investing.

On a side note, I don't believe that fees are a major problem. I'm more of the believer that if I have to pay more for a better fund in order to get higher returns, then I will.

Thanks for any help.

If you have an ongoing transaction (such as a lease or a loan with multiple payments) that is not a prohibited transaction at the time it is entered into, but an individual involved in the deal later becomes a party in interest, is the entire transaction a PT? I suppose there are two alternatives and those are: (1) that it is not a PT because the individual was not a PII at the time the transaction was entered into; or (2) that only those transactions that occur after the individual becomes a PII are considered PTs. Any thoughts?

The final 401(k) regulations are pretty clear but I wanted to ensure that we were calculating earnings correctly for refunds attributed to the 2005 year. Our document (Corbel) indicates that for 402g refunds gap earnings are not required and for ADP/ACP refunds gap earnings are optional.

In reading the final regs. it appears that gap earnings for 402g refunds will not be required unless the document mandates it.

For ADP/ACP refunds attributed to the 2005 plan year gap earnings are still optional but for plan years beginning in 2006 & refunds processed in 2007 gap earnings will be required.

Correct on both items?

Thank you!

This one's sort of ugly. The short version is, "When does an employer maintain a plan" for purposes of the § 1.410(b)-9 definition of "employer" (which applies under the regs at issue here). Here's the long version.

Employer is in the process of winding down its operations. It sponsors two large DC plans (401(k) and 403(b)). Employer also has four subsidiaries that will continue to operate separately after it winds down. It wants to spin off to the subs the portions of the plans covering active employees of those subs. In doing so, Employer wants to give the subs the option of taking directly-spun pieces of the current plan or asset-transfers into their own new plans. Specifically, it wants participants in the spun-off subs to have the option of taking cash (relying on the plan termination as a distributable event) or rolling their balances into the new plan. In the latter case, Employer is concerned about creating successor plan issues for the subs. That is, if the subs decide to go with new plans, Employer doesn't want those plans to end up being disqualified as successor plans.

According to the 401(k) regs, an "employer" can't use plan termination as a distributable event if it maintains an "alternative DC plan" (the new term for successor plan). "Alternative DC plan" means any DC plan maintained by the "employer." "Employer" means the employer maintaining the plan, and any other employer within its controlled group, as of the date the plan is terminated. [This is all in, or cited in, § 1.401(k)-1(d)(4).]

A simple reading of this rule is that, as long as the subs have been spun out of the sponsor's controlled group before the original plan's termination date, they aren't "the employer" and they don't have any successor plan issues. Unfortunately, I think this impermissibly conflates "employer sponsoring the plan" with "employer maintaining the plan." If the subs still maintain the plan on the termination date, they're still the "employer" on that date, and any new plan they gin up is an impermissible successor plan. If having active employees (who are, e.g., still earning vesting service on account balances contributed by the subs to the original plan) constitutes "maintaining" for this purpose, which I'm afraid it might, then the controlled group question is irrelevant, and the subs remain "employers" on the termination date.

So, back to the question, what does it mean to "maintain" a plan?

Thanks for any help!

LJ

Does the deduction limit for terminating PBGC covered plans include deduction of termination liability in excess of the PBGC guaranteed limt? Or only up to the guaranteed benefit limits?

Within a controlled group there are two companies (brother-sister companies) with separate qualifiedplans. Company-one freezes contributions to its plan, and participants are permitted to transfer their balances to Company-two, and participate in that plan.

Mr. Doe is 63 years old. He wants to transfer his account balance from the Co.-one plan to the Co.-two plan and continue to participate.

Can he do this, or would it be considered a distributable event because he is over 59.5?

Client currently sponsors a Profit Sharing with MPP rolled into plan and wants to add a CODA feature. The plan purchased an LP about a year ago as an asset registered to the profit sharing plan. Their current document does not allow for any loans or inservice withdrawals; must be separated or retired in order to receive a distribution. In order to "fit" into a specific box for new administration; the limited partnership can not be part of the plan under the umbrella of services and the advisors is trying to figure out a way to eliminate the limited partnership. Is it possible for one of the owners to purchase the limited partnership from the plan, with his personal funds? Wouldn't this be viewed as a prohibited transaction? Any thoughts would be greatly appreciated.

New plan for 2005, existing company, are there HCE's in 2005?

This is probably a dumb question, but I just need to ask it. If you have a plan doing the basic SH match, can you also do a discretionary match at the end of the year? If so does the plan still qualify for ACP and ADP SH? My understanding is that you can give up to 4% of pay additional as discretionary match and still be SH.

I'm not sure where I think i saw this disccussed already, but does anyone know if the balance left in an HRA

plan (which rolls over to the new year) is "bookable"? i.e., does the employer have to pay taxes on this money? or is there "dispensation" under the new laws?