Existing employee first becomes eligible to defer amounts under company's NQDC plan in February. 409A(a)(4)(B)(ii) allows new participants to defer amounts related to services performed subsequent to the election provided election is made within 30 days of participant first becoming eligible. Thus, newly eligible participant is presumably only able to defer that portion of his 2005 bonus attributable to services following eligibility. The bonus qualifies as a performance-based bonus so participants generally have until June 30, 2005 to make bonus deferral elections. First, I assume the June 30th performance-based deadline would trump the 30 day first year eligibility deadline? Second, assuming he has until June 30th, is there any argument that he can defer ALL of his 2005 bonus since everyone got until June 30th to make deferral elections or is he limited to deferring just that portion of the bonus prorated to account for services after becoming eligible for the deferred comp plan?

Is there specific guidance written on how to calculate the "gap period" earnings on a corrective distribution?

I'm wondering if anyone might have been at the present at the IRS meeting for comments on the proposed changes in the 403(b) regs and what they heard.

Can anyone tell me if there is an easy suggestions for calculating gains on the amount of excess deferral that is returned to a participant.

With regard to a pension investments in a non-guaranteed group annuity contract that is a pooled separate account, my understanding is that the amounts invested are ERISA plan assets. Why is it then that pension plans generally do not require insurance companies to acknowledge their fiduciary status in such contracts, which thereby would make the insurance companies investment managers under ERISA so as to limit fiduciary liability? Does this have to do with the fact that the insurance industry is heavily regulated?

Can any of you wonderful folks point to some research or survey results on this topic. Looking for views -pros and cons - of stable value vs. balanced vs s&p500.

Many thanks!

The compensation ratio test is required when total compensation is not used. A client has questioned whether this test is to be performed on an annual basis (for example looking at 2004 compensation) OR be performed on the testing compensation (for example the 3 year average compensation).

My reading is that it is only an annual basis number. Anyone disagree??

An additional question on imputing permitted disparity. A DB and DC plan are being combined for testing purposes. Permitted disparity may only be imputed once. I can not find any rules outlining which plan must be primary (if any) or whether the maximum under either plan can be used, etc. Any comments???

I would think that using the maximum permitted disparity under either plan would be OK.

If a participant is not suspended "timely" after receipt of a harship distribution (plan uses safe harbor standards), are the deferrals and match, which are allocated during the suspension period, included in the adp/acp tests? Client is correcting this by refunding the deferrals and forfeiting the match, but this will not take place until after the plan year end being tested.

We have an employee who went out April 2004 for dependency due to a vascular problem, then August 2004 for vascular problem surgery. Upon his return, his work responsibilities have been lessened to accomodate his vascular problems (janitor), without HR knowing.

Now his condition is getting progressively worse, and he expects more aspects of his job to be "lessened - or accomodate to his ailment. How can I suggest that this ee go out on STD in the hopes his doctor and the plan will ok him to LTD.

He already depleted his FMLA last year from Aug - Nov. and it has not replenished yet.

Help - I am aware that the full amount to be deferred over a year under a Flexible Spending Arrangement (FSA) "must be available to the employee at all times." Treas. Reg. section 1.125-3, Q&A 6(b)(1).

Great. But what I need to know is:

When an employee is on track to make payroll deductions to the FSA for $2,000 over a one-year period (from January to December), withdraws $1,000 of the amount by March, and then terminates in March,

1. Does the employer have any right to collect the difference between the payroll deductions as of March and the excess, withdrawn amount?

2. Are there income tax implications to the terminated employee, such that the employer would be required, e.g. to issue a form 1099?

A contact at a plan administrator company tells me that the answers are:

1. No employer right to collect (but the employer may gently ask); and

2. None of the withdrawn amount is taxable to the terminated employee, and no tax reporting is required.

Can anyone verify the correctness of these answers, AND, BETTER YET - earn my eternal gratitute and trust by providing citation to authority on these issues?

Thank you very much!!!!!!

the latest information I have on the subject is from some TNT articles back in 2003, and I've had trouble finding anything on it since then. My specific issue is where the issue now stands on whether the separate line of business exception may be used to allow catch up contributions for one member in a controlled group if the other members of a controlled group don't allow them. I don't think the exception applies but I haven't seen much out there in way of guidance from the Treasury.

Any suggestions?

thanks

Does anyone know if the IRS posts on its website the comments that it receives on proposed regs, notices, etc? BenefitsLink does a great job of posting comments from ASPPA and others, but I suspect that Dave isn't able to "capture" everything that's sent to the IRS. For the moment, I'm especially interested in seeing comments being submitted in response to Notice 2005-1.

Thanks for any info or leads.

I have a client that is a law firm. The plan is a New Comparability w/Safe-Harbor. The formula is discretionary, based on class. (Class 1 is the 2 partners.) I ran the allocations/testing and the partners can max out for 2004.

The client called me and asked if they can give one partner $41,000 and the other partner $20,000. They have worked something out where the partner who is getting $20,000 will receive the difference as a bonus.

Can this be done?

I would think as long as the "other" groups are still getting what they should get, what's the big deal?

Please help! I need to get back to this client ASAP.

Thanks so much!

Company X maintains a 125 plan with a medical flexible spending account. Company X acquires the stock of Company Y-8, a subsidiary of Company Y. If the employees of Y-8 participate in Y's 125 with medical flexible spending account, may the Y-8 employees have their FSAs begin on X's 125 plan as of the closing date, as was the case in situation (2) of Rev. Proc. 2002-32? I know the facts of Rev. Rul. 2002-32 applied to a sale of assets. Is there any reason why they can't apply to a sale of stock?

IRS Notice 2005-1, Q&A-19© provides that "with respect to amounts subject to § 409A, the plan may be amended to provide for new payment elections with respect to amounts deferred prior to the election and the election will not be treated as a change in the form and timing of a payment under 409A(a)(4) provided that the plan is so amended and the participant makes the election on or before December 31, 2005."

I am curious if others interpret this provision as broadly as it appears on its face. I have seen little discussion of this particular provision but read it to give plans that must be amended for 409A broad flexibility in adding new payment distribution options governing prior deferrals. Take for example, a plan that previously paid out in 10-year installments but gave participants the option to elect a lump-sum distribution provided the lump sum election was made at least a year before the 10-year installment began. If this plan is amended for 409A to eliminate this subsequent payment election, could the plan be amended to allow participants to make a new election up front governing prior deferrals subject to 409A with a choice amoung: (i) a lump-sum distribution, (ii) installment payments over a 5 year period; or (iii) simply sticking with installment payments over the old 10-year period?

In search of a new career path, I would like to use my 401K for a Master's degree.

To which of the 11 types of IRA's do I want to rollover my 401K? Does it matter since I won't be penalized the 10% because it is going towards higher education? Also, how do I get to this money? Does it just go to a bank and I just withdraw like any other checking account?

Thanks in advance for any advice you guys have!

Plan year ending 12/31/04 - Participant leaves 5/1/04 for active duty. Scheduled to return on 2/1/05.

Employer discovers in 2005 participant took another job - never went back to work for the original employer.

How is the 410(b) testing handled for the 12/31/04 plan year end? Is this person now considered terminated as of 05/01/04 and never included in the 2004 410(b) test?

Can a DB plan's vesting schedule for top-heavy plan years be a five year graded? 2yrs (20%), 3 yrs (40%), 4 yrs (60%), 5 yrs (100%).

I know that in NJ you can take 12 wks fmla and an additional 12 wks njfla for the birth etc of a child, are any other states like that? Does disability (std) have to run concurrent to and fmla/njfla?

In a DB plan that pays out monthly annuities to its retirees, I know that withholding tax is not mandatory. However, often the retirees will request withholding. If the plan does not want to be bothered with withholding, can the Plan document be written, and the Plan administered so that it does not do any withholding for monthly annuity payments, even when the participant requests it?