Takeover DB and DC plans that are top heavy. DC Plan document say top heavy is satisfied by 5% alloc to DC plan. DB plan says same thing. Prior actuary says top heavy provided in DB but offset by pv of dc contributions. Prior actuary produces DB document page that supports such a statement, but this is filled in language that does not provide the specifics. Zero confidence in credibility of past work.

How exactly should this calculation be done? Plan is being terminated and satisfaction of top heavy minimums is in doubt. And plan is very underfunded.

Possible methods

(1) Should the top heavy minimum be calculated each year, and a db supplement added to sustain a minimum 2% accrual for each top heavy year, measured year by year?

Or, (2) can we skip ahead to today and make sure that the cumulative DC contributions projected at some interest rate would exceed 2% x YOTHS?

Or (3) can we take the post-1983 account balance and calculate the equivalent accrual rate of that, which would effectively substitute actual investment performance from any actuarial equivalence definition and mask any years that DC contributions were not made?

Opinions please. Thanks.

How do you correct an error on Form 945 (i.e. too much withholding was initially reported)? We have received conflicting methods from different IRS agents.

Can HIPAA privacy and security be incorporated in the plan/amendment by reference, or do the actual provisions have to be in the document?

Thanks!

We have a plan that had a participating employer using the plan. The participating employer decided to discontinue participation in the sponsoring employer's plan and start up its own plan. The document says that this is permitted. It also states, "The Trustee shall thereafter transfer, deliver and assign Contracts and other Trust Fund assets allocable to the Participants of such Participating Employer to such new trustee or custodian as shall have been designated by such Participating Employer, in the event that it has established a separate qualified retirement plan ..."

Does anyone know if that means the vested account balance of those participants or is it their entire account? If it's the vested balance, then it's treated as a rollover into the new plan? If it's the entire balance, then it's subject to the new plan's vesting schedule or the old plan's?

Thanks!

I searched the boards for this and found something that might help, but I'm hoping to get some further clarification. Plan document says that compensation is only counted from date of plan entry. No problem there. The problem is for the partners w/ K-1. How do I determine K-1 comp for only 6 months or 3 months of a Plan Year? Another post indicated that a partner (actually I think it was referencing a Sole Prop) has only one payroll period, 1/1-12/31. Does this mean that ALL of the compensation was earned on 12/31 so if the partner entered 7/1 or 10/1 his entire K-1 is entry date comp? Any thoughts are appreciated.

Have a 3% Safe Harbor with integrated profit sharing plan.

5/6 NHC participants terminated with greater than 500 hours - profit sharing formula has 1000 hours and last day provision.

Plan fails 401(a)4 in miserable fashion for ps allocation.

When doing a corrective amendment, do all 5 participants have to be brought into the ps allocation or can you select the minimum number of terminated participants to get it to pass (a)4? What is the rationale for selecting participants to bring into the allocation?

I have an hourly plan and a salaried plan with the same sponsor - each had under 500 lives reported on the 2005 PBGC Form 1 - but in total there were over 500.

Do these plans need to file a PBGC Form 1-ES ?

Just a general question. I am retired and i recive a pension. Can I open an IRA? My account said I can't because i collect a pension. I am sorry but I dont understand Can anyone help with this question?

A broker contacted our self insured group about implementing predictive modeling to identify potential future high cost claimants. We have considered this for disease management but his approach is also removing these future high risk claimants from the plan and providing them with alternative coverage. The broker would be paid a percentage of the "savings" and we would benefit with lower reinsurance premiums and claims costs. The trick is that before he would disclose all details of this we would have to sign a confidentiality agreement of which we declined. Evidently, it would involve replacing the participant's group coverage with alternative coverage. He alluded the other coverage may be a type of high risk MERP and that the participant would actually have better coverage than the group plan so they would have no reason to refuse. We certainly thought this would be discriminatory but another group in our state that he called on that we are familiar with is looking further in to this and their attorney said that it passes all DOL and state requirements for not being discriminatory. Of course they signed the confidentiality agreement and are reluctant to share the details with us. Has anyone heard of such an arrangement that would be advantageous to a self insured plan and not discriminatory? Frankly, we don't want to go near this one but are wondering if someone has tapped in to a new cost containment strategy.

Participant elected to defer 18,000 in 2005 (14,000+4,000 catchup). Payroll stopped deferrals at $14,000. Participant got W2 and is not happy. What is recommended course of action?

Plan has 51 NHCEs and 8 HCEs. A DB plan is proposed to primarily benefit 2 HCEs (other HCEs excluded) and the required minimum number of NHCEs needed to pass discrimination testing. I think my NHCEs coverage on a 410(b) ratio/percentage basis is 17.5% (2/8 * .70) which is about 9 NHCEs. However, 401(a)(26) will require 24 employees (.40 * (51 + 8)).

Since my 410(b) coverage requirements is much less than 401(a)(26), can I give the 9 NHCEs required for 410(b) the same accrual level as the two (2) benefiting NHCEs to pass 410(b), but give the remaining NHCEs only a 0.5% accrual rate (or something like that) sufficient to have a meaningful accrual for 401(a)(26). Do I then have to general test it or is this a component plan (restructuring) opportunity where each accrual rate can be tested as a separate plan and presumably the lower 0.5% passes since no HCEs are in that component plan. Any issues ?

This is more of a grievance. I have plans in which the HCEs would be able to contribute more to a Traditional IRA than they can to the 401k plan. I think the rules need to change such that an HCE should at least be able to contribute the IRA maximum limit to their 401k without concern that a portion of it is going to be refunded. Thus, lets assume the IRA limit is 4k for 2005. I have an HCE who contributed 5k and the test results indicate a refund of 3k - all EE. I say, let the HCE keep at least 4k in the plan and refund only the 1k (5k - 4k). Does anyone see a problem with that?

I'm an international student at a US business school and plan on working in the states for a while after graduation. Am I eligible to open an IRA (either Roth or Traditional)? Depending on how long I work in the states and what my rate of return is on my investments, paying the 10% penalty may be worth it to enjoy tax-free compounding. Thoughts?

If an employer decides mid year that they want to offer an employer contribution to their Health FSA plan, how can they do this at this point. If employees were eligible during open enrollment (calander year basis), and elected, lets say $1500.00, can the employer add $500 to each participant at this point and make their new annual election $2000.00? What about the employees that were eligible during open enrollment and declined enrollment at that point, shouldn't they be able to receive the ER Contribution? Does this have to be prospective? Is this a qualifying event to enroll?

I am running a cross-tested 401(k) calculation for 2005. One HCE owner, 3 NHCEs. Top heavy plan, SH Matching with 500 hours/last day rule. If 2 of the NHCEs termed in early 2005 with less than 500 hours, although they deferred a small amount and will receive a match they should not be getting a profit sharing contribution from the employer. I am having difficulty with coverage testing. Any suggestions on how to pass testing?

What (if any) testing issues can a plan run into if it uses the 415 definition of compensation but excludes bonuses, overtime and commissions?

I am 25 and finally a little late deciding to start investing. I have done alot of reading and will be investing this year in a traditional IRA. My question is if I invest 4,000 for myself and 4,000 for my wife in a traditional IRA I will get an additional $2,000 back on my refund, 25% of 8,000.

So my question is can I mark that I am putting money into an IRA, and then wait for my refund to come in, then contribute to an IRA before April 15th. If so how does the IRS get confirmation that I actually contributed and does it matter if I file my taxes before putting money into an IRA as long as the money gets put in by April 15h?

Thanks in advance for any advice.

I seem to recollect the general vesting requirements in the event of a standard plan termination as follows:

(1) All participants required to be deemed vested if the sponsor receives or expects to receive a reversion.

(2) Vesting not required otherwise (except that the normal vesting rules would still apply, of course).

Question: Is this accurate? Or, must all participants be vested no matter the other facts of the case? (i.e., standard with reversion and standard without)

Corporation A purchases Corporation B, now a wholly owned subsidiary of A. Both A and B sponsor defined contribution profit sharing plans. Corp A disolves Corp B. Ideally, we would like to merge the plans. Are there any considerations that would make freezing plan B the better option? We are not aware of any plan B problems that would taint A, but there's always that possibility.

I spend alot of time looking at 5500's on Freeerisa.com. Can anyone give me any tips as to what to look for on these plans. I am new to marketing 401K and other qualified plans and would appreciate any insight to looking at the filed 5500's. For instance, someone told me to look at the code on the 5500 and make sure that they had a 2A and a 2F. They really didn't tell me why.

I see alot of plans that distributed all assets during a year, but didn't check the termination box. What's up with that.

On schedule I, what is the other income usually comprised of. Is it rollovers or what?

I thank you in advance for any help and insights.

Mike