A defined benefit plan, subject to PBGC, was adopted on December 22, 2004 effective retroactively to January 1, 2004. The contribution is based on a full year's cost for 2004. The plan credits past service for vesting and benefit service, and has an unfunded vested current liability. Does the client pay PBGC premium based on a full year or partial year for 2004? I.e. can we prorate the premium based on a December adoption date? Or do we base the premium on a full year based on the January effective date?

Company has a plan begun in 2004 that they have decided will not be grandfathered. Q19© of 2005-1 seems to say that, if elected before 12/31/05, a participant can change his payment election from installments to lump sum before 12/31/05 without triggering a violation under 409A. Am I reading that correct?

Joe

IRS published a model amendment for d/c and d/b plans in Rev. Proc. 2002-29. The final 401(a)(9) regs. as applicable to d/b plans were issued in June, 2004. I haven't found anything regarding whether that model amendment, which was published before the final regs., is still appropriate for use. Individually designed d/b plans must be amended (generally) this year for the final 401(a)(9) regs.....Anyone have any information on the status of the model amendment? Thanks.

Does anyone know if it is legal for an ERISA governed, tax-qualified, multiemployer, fully insured health plan to go ahead and send the monthly premium to the insurance company even though self-pay amounts for retirees and other self-payors are not due until a later date? Would such a practice be considered a prohibited transaction? Our plan is switching from self-insured to fully-insured. Under the self-insured plan, in order to get coverage for January 2005, a retiree or other self-payor (unemployed participants for example) are not required to pay the self-pay amount until 2/15/05. Therefore, coverage is actually given even though the contribution for that month of coverage is not collected until the next month.

Now that we are going fully insured, the insurance company requires the monthly premium to be paid by the first day of the month in which coverage is provided. In other words, the self-payors would have to pay their contribution by Jan. 1 (instead of 2/15) in order to get coverage. The plan has enough money to go ahead and pay the premium for everyone. Can it do this based on the assumption that they will receive the self-pay amount from the self-payors at later date?

This would only be necessary for the first few months because the plan is going to be amended to require payment at the same time the premium is due.

I read some old posts... am I reading this correct?...

There can be an immediate entry date for participants to defer but to receive the 3% SH NEC there can be a 1 year 1000 hour requirement... and still pass ADP?

Soooo... basically everyone can defer, sponsor can max out... and the 3% given to eligibles who pass the 1 year 1000 hr... and ADP is passed.

did I say the same thing twice?

Client has "satisfied" top-heavy contribution for past 3 years via 3% nonelective safe harbor contrib. However, it has been using a definition of compensation that excludes OT and bonuses (not a 415 definition). What is the appropriate correction?

Plan also has a discretionary profit sharing contribution after 2 YOS--can we look to that to make up the "deficiency"? (then we would only have folks with less than 2 YOS with an improper calculation)

New DB plan effective 1/1/04. I have been advised that the proprietor owns 98% of the business and a trust for daughter 1 owns 1% and a trust for daughter 2 owns 1%. I have also been advised the the business is a Limited Liability Company (LLC) elected to be taxed as a sole proprietorship (the 98% owner files a Schedule C).

Can I file a 5500-EZ in this situation? Does it depend on whether the daughters are minors in which case I think he would be deemed to own their shares? If he is not deemed to own their shares I think a full 5500 is needed.

Any help/experience/opinions are appreciated.

Any reason why I can not amend a MP into a SH 401k midyear? (The current plan year is an October year) I dont want to establish a whole new plan and have 2 plans for the current year. I have more than 60 days till the end of the year so giving notice is easy.

If fine then .... will I be required to calculate a contribution for the short year based on income earned till the time the plan is amended... say November -> January 31? And, if it is less expensive for the sponsor to amend the existing MP to a 0% contribution... can I do that at this point in the year?

Thanks!

Participant of 403(b) annuity had already begun taking minimum distributions. Her date of death was 6/2004. No RMD was taken by decedent in 2004. Should her beneficiaries have taken an RMD in 2004? It is my understanding that the benes can wait to take in calendar year following dod. Insurance company said that there should have been an RMD in 2004 and that penalties will apply since one was not taken. Is this correct? If so, can someone provide citation? Thank you.

I have a plan with two active participants. They are both non-owners and one participant is HCE and the other is NHCE.

Essentially the plan provides a benefit of 100% of compensation at normal retirement and the accrued benefit is based on the projected normal retirement benefit multiplied by the ratio of credited service at determination over credited service at normal retirement.

Since it does not require at least 25 years to be fully accrued, it does not meet the safe harbor.

And since the HCE has only 23 years of CS at NRD and the NHCE has 45 years of CS at normal retirement, the rate of accrual (and the accrued benefit as a percentage of pay after 3 years of participation) for the NHCE is less than 70% of that for the HCE.

At the end of the 3rd year of plan participation for each participant the NHCE terminates.

At first blush, it seems a remedy of this would include providing a pension that is (as a percentage of average compensation) 70% of percentage provided to the HCE to avoid being discriminatory in favor of HCEs. That is, an increase in benefits to the NHCE to avoid discrimination in operation.

Any observations?

Please help -I am trying to determine if this participant can take a second loan

Vested balance in November $55,000

New loan in November $25,000

No loan payments have been made yet.

Balance in January is $30,000 + loan of $25,000

Participant wants to take second loan

We do not use the $10,000 limit, where you can exceed the 50 percent if the loan amount will be $10,000

My calculation says no second loan allowed. I used the following formula

Participant may borrow the lesser of A or B.

A = $50,000 – Highest Outstanding Balance (HOB)

B = (.5 x vested balance(VB) - Outstanding Balance (OB)

A= $50,000- $25,000 + $25,000

B= (.5 x $30,000) - $25,000

$15,000-$25,000 = -$10,000

This suggests that the participant is not allowed to take an additional loan.

Here is my question, should VB be $30,000, or should it be $55,000 (where $55,000 includes the outstanding loan balance).

Please help!!

Thanks

The 1099-R instructions indicate that a permissable additional code for "1" is "L" and for "L" it is "1". It doesn't say that we can combine 7 and L - I don't see why not - what do you think?

For 1/1/04 to 12/31/04 testing,

Participant termed in October of 2003. They received stock options that was paid to them in 2004 - and they were issued a 2004 W2 for that amount.

Does this person need to be included in the Total Participants for coverage?

Thanks for any help.

In December, we sent instructions to the plan sponsor for distributions to terminated participants. Many of those checks were not cashed by December 31st.

The business was sold and the assets were transferred to the acquiring employer's plan except for the cash representing the distribution that were still outstanding as of the end of the year.

One position here is that if the cash was not distributed/rollover by December 31st, it becomes a 2005 distribution and we file the final 5500 for 2005.

The administrator wants to send 2004 1099R's to all the participants and file a final 5500 for 2004.

Any guidance?

Employer X has a sales force that participates in its cafeteria plan and is primarily paid by commission. Certain low-producing salespersons are not receiving paychecks for certain pay periods because their production is non-existent during some portion of the year. X wants to direct bill salespersons in this situation and then terminate coverage if their premiums aren ot paid for a specified period of time. The IRS Proposed Regs. at Section 1.125-2, Q&A-6((e) clearly authorizes the plan to termination coverage upon cessation of required contributions. This poses the following issues: (1) is there a minum amount of time an employer has to give the employee before his/her coverage is terminated during the remainder of the year?; and (2) can the employer require the employee to repay the defaulted premiums prior to the termination of coverage as a condition to being permitted to re-enter the cafeteria plan?

I am doing a true-up match calculation for a plan that changed the match formula mid-year. I have compensation, deferrals, and match for the first 8 months (old formula) and the next four months (new formula). What is the correct way to calculate the true-up for employees that exceeded the compensation limit of $205,000.00 in the first part of the year? For instance, an employee makes $400,000.00 in the first 8 months and contributes $7,000.00. He makes 400,000.00 in the next 4 months and contributes $5,000.00. Can I prorate the cap to $136,673.50 for the first 8 months and $68,326.50 for the next 4?

Or is it correct to prorate the two match formulas for all employees? This is difficult since the formula for the first 8 months was 50% up to the first 6% deferred, while for the next four it is 100% for the first 2% deferred, and 50% on the next 6% deferred.

Thank you.

My father passed away recently. Reading his journals it seems he may have purchased IRAs.

Is there a way to find out if he had any IRAs other than from his old income tax records? Most of his paperwork is missing.

I am 65, single and in good health. I can afford to speculate up to $10,000 in option trading. Does the IRS prohibit me from opening a commodity trading account and contributing up to $3,500/year? If not, where can I obtain the papers to start an account?

I was always told that if a plan required less than one year of service (ie six months of service) then they could place no requirement on the hours worked. I confess I never took the time to do the research.

But I am reading a document that says "An Employee must complete 1000 Hours of Service within the 6 month time period following the Employee's Employment Commencement Date. If the Employee does not complete the stated Hours of Service during the specified period of time, the Employee is subject to the One Year of Service Requirement."

I'm not comfortable with the law firm that drafted the document because a previous MPP document they did reportedly allowed in-service withdrawals.

Is this provision ok?

Is it correct that if a plan is going to either discontinue mandatory distributions or lower the limit so as to avoid the automatic rollover regs, that the plan needs to be amended before 3/28/2005? That is, the amendment deadline relief in Notice 2005-5 only applies to plans that are intending to follow the new regs?

Thanks.