Self employed doctor in city A sells his clients and moves his practice to another city. Dr. sponsors a 401k plan. Can the dr simply terminate the employees in city A (creates a partial plan termination) and when he moves to city B and sets up practice use this same plan with provisions for employees he hires?

I have a client that is being purchased as part of a stock sale. The sale is set to close several weeks before the end of the plan year and the plan has a last day requirement to receive an allocation of the match. Client wants an amendment providing an exception to the last day rule for participants employed on the sale/merger date but involuntarily terminated before the end of the plan year. Client has asked that the amendment only be effective from a short time before the proposed sale date to the end of the plan year. It appears that if the sale takes place during the 2006 plan year, no exception will apply for the match allocation.

The more I think about this, the more it bothers me - but I am unable to pinpoint why. I keep thinking that it is a discrimination issue, but the amendment would be tied to when the sale occurs and not when any particular group is terminated. However, an amendment that says "Effective from 11/1/2005 to 12/31/05, participants who ... are excepted from the last day rule" just seems to "smell".

Any thoughts?

a husband divorced and received a order. the wife elected to receive the payments in monthly installments effect. jan06. amount is appx $950 per month. husbands plan is governmental and ex wife is 401(k). she wants to rollover payments into her plan, but what if she died a year from now? would they continue to her beneficiary or would she have been better served taking a lump sum rollover into her plan? thanks.

There do not appear to be many restrictions on what type of compensation can be deferred into a 401(k) plan. Based on informal comments by the IRS (and prior to the new 415 regs), it seems as though the only significant restriction is that the compensation must be payable to an employee. So here is the question: can an individual elect to defer nonqualified deferred compensation distributions into a 401(k) plan and have those contributions made on a pre-tax basis?

Assume: (1) that the elections to have those distributions contributed to the 401(k) plan are made prior to participating in the NQDC plan (no control over those assets at the time of election); (2) the 401(k) plan's definition of compensation for deferral purposes includes distributions from a NQDC plan; and (3) the individual is an employee when the distributions/contributions are made.

Would this be okay under the 401(k) rules? Would this be considered a second deferral under 409A that could potentially trigger the penalty? Please help. Thanks.

Can a doctor release PHI of a deceased patient (who passed away while under the doctor's care) to that individual's adult daughter? The daughter is not the executor of the estate nor is she an authorized representative. However, it seems ridiculous that HIPAA would prevent the doctor from explaining to the daughter what happened to her mother.

For plans subject to 419(e) deduction limits, it is understood that the deduction is limited to the "qualified cost", where such cost is computed as the level premium for the death benefit coverage of a life insurance policy.

The question is when determining the qualified cost, is it necessary to compute the death benefit based on the guaranteed policy rates or the assumed policy rates?

With the assumed rates the death benefit is higher or the coverage extends to an older age, due to the greater return on the investment.

The guaranteed v. assumed rates are shown in the policy illustrations.

Thanks.

I've heard some thoughts about this in the past and am resigned to the fact a Form 5500 needs to be filed for the first plan year, even if the only contributions are accruals deposited in the following plan year.

For example, effective date of 401(k) plan is 12/1/2004. No contributions in 2004, however, there is a PS contribution deposited in early 2005.

Would a Form 5500 need to be filed for 2004? My guess is "yes" so that you could report the coverage results on the Schedule T, even though there will be no financial data because of cash basis reporting.

Any thoughts?

An S-Corp has income of $100,000 and the owner pays himself $90,000 in wages. The required DB contribution for the year is $100,000.

Based on previous posts it appears that a loss created by the DB plan is allowable and that the loss can be carried forward or even possibly backward to offset income from the S-Corp.

Is it possible to use the loss to offset income (not from S-Corp) from the spouse of the owner of the S-Corp?

We had a retiree pass away on 5/27 and we were not notified until 7/20 when her 7/1 pension check was returned to us. We were, of course, able to recover the 7/1 check since it was returned, but we have been unable to recover the 6/1 pension check.

I sent a letter to the retiree's sister, who sent me to her neice, who sent me to her daughter, who sent me to the greatneice of the woman who lived with our retiree. Apparently, the woman who lived with our retiree (they had a joint bank account) is now in a nursing home with Alzheimers. The greatneice just called and said she doesn't know what happened to the 6/1 check. And, everyone else I've dealt with is refusing to repay the 6/1 benefit.

The pension check has cleared our bank account and we're in the process of getting a copy of the endorsed check. But, I'm not sure that will even do us any good.

Not sure what to do at this point. Will our plan be in violation of any ERISA rules/regs if that benefit is never returned to the pension fund?

Help!!

I utilize an off-the-shelf volume submitter software package with an IRS opinion letter on the pre-approved language. One of the design options is to make each participant their own allocation group with the allocation rate defined as a "pro rata" amount of the compensation of each participant in the group. I recently submitted this document to the IRS in the context of a proposed correction under audit and was told by the EB Manager that the plan was not qualified and did not contain a definitely determinable benefit. I was informed that an amendment to the plan would have to have been made each year to define the actual allocation?!? I am not interested in challenging this or becoming a "test case" for the service. Any thoughts on this unusual outcome??

What is the current state of the PBO = ABO = sum of cash balance accounts issue? Any chance this is going to be effective for FAS132 disclosure at 12/31/05?

It is my understanding that if the employer contributes to an HSA for anyone who enrolls in the HDHP, it needs to make a contribution to an HSA for all the employees who enroll in the HDHP. What do you about employees who fail or refuse to sign the documents required by the trustee to set up the HSA?

I found an error on withholding on a distribution from 2004. THe 1099R is OK but taxes were withheld and sent to the IRS and state in error. Now that we are in a the tax year 2005, I know there is a way to recliam the withholding errors from previous years,

Does any of the knowledgeable folk on this board know how to petition the government (what form?) to reclaim back taxes? Help! and Thanks!

The plan has 3 months eligibility for deferrals and 1 year for the safe harbor match. The plan consists soley of deferrals and safe harbor match. The plan is top heavy, is it deemed not to be top heavy since it has the safe harbor match, or would top heavy minimums be required for the new hires that aren't eligible for the match?

What about the ADP testing. would you have to test the new hires ie the otherwise excludables. Not a big issue since HCE's are rarely in theis group.

Thanks!

Is a TPA required to prepare a Form 5498 for a traditional IRA Rollover into a 401k plan? I ask this because I am becoming aware that we have participants who make this request with their IRA Custodian but the Custodian will only issue the check directly to the participant - unless a TOA request is made in advance (in this case it was not). I gather that the participant will have a taxable event and no 5498 to offset the timely rollover into the 401k.

Thanks for your response.

I am trying to determine whether a clause in a change in control severance agreement is a common one for publicly-traded companies. The agreement provides that an executive will be considered to have terminated employment and be eligible for the severance benefit if he/she is reassigned to substantial duties that are materially inconsistent with his/her duties, responsibilities and status prior to a change in control. OK so far. In the same paragraph, the agreement further provides that the "reassignment" provision will not apply if the company is no longer publicly-traded and the executive no longer has duties and responsibilities associated exclusively with a publicly-traded company, such as SEC reporting, stock exchange reporting, etc. I'm being asked whether this exception is a common provision.

My sense is that such a provision is not unusual, but I don't have much hands-on experience with this type of agreement. What is your experience?

Thanks!

Does severance pay generate hours of service in a DB plan?

Subtly sarcastic example.

Basically bland example.

Candidly critical example.

A client maintains a self-funded plan that covers independent directors. As I read the definition at 3(40) of ERISA, this makes them a MEWA. I realize that the DOL does not require a Form M-1 in this instance. However, nothing I have found so far takes them out of the definition of a MEWA.

My impression is that many companies cover their independent directors without considering their plan to be a MEWA - and just do not worry about this issue. Does anyone have any thoughts/comments? Am I missing something?

I am looking for some independent thoughts on a feature of an existing long-term incentive plan that has resulted in many 409A group discussions.

This award has a performance-based stock option component where the number of options that will eventually vest can range from none to 140% of a target number detailed in the agreement. The determining performance achievement levels will be measured at the end of a 3-year period.

The feature that is causing robust debate is the provision that sets the ultimate exercise price at the fair market value (fmv) of the underlying stock at the time the award was granted.

As an example: In 2004, 100 performance options were awarded with an exercise price of $4.00 which equaled the fmv of the stock on the grant date. Based on a 140% performance achievement level, the employee received 140 vested options at the end of the 3-year performance period with the grant date exercise price of $4.00. The employee will have 7 years to exercise the options.

Question: At the end of the period, the stock value is $10.00. How do you think the provisions of 409A would look at the spread between the vest date fair market value of $10.00 and the grant date based exercise price of $4.00?

Would the spread be immediately recognized as income or would the income be recognized when the employee chose to exercise? This is a performance based plan and these are non-qualified options.

I would provide my guess, but I would rather read the feedback.