In determining the DB accrual rate for the ABPT do you divide by plan year comp or average comp ?

On pages 60 & 134 of Labombarde's 1991 book entitled " A Guide to Nondiscrimination .................." , he indicates either but the regs seems to say only average.

Does anyone have a cite that would support the use of plan year ??

I thought I had read that a SH Match has to be funded at least every 3 months? Yes or No -- If yes, can the Adoption Agreement use the Plan Year "calculation" method?

what are the requirements of the sponsor to disclose these changes? Also when a plan converts as stated, is the sponsor required to provide a new SPD to the participants? If so what is the timing?

Thanks in advance

WHY

Now that HR4520 will probably be signed, we are getting kinda worried. Can some "haircut" provisions be grandfathered? What do you think?

Do you think any of the key provisions (that have been changed) can be grandfathered in?

Employer is making a SEP contribution for 2 employees who termed. They were sent applications to complete but never returned them. Can employer complete an application on behalf of the termed employees & select a money market option? That would seem to be the most prudent course of action.

We have a plan with a plan year that begins 10/1/2003 and ends 9/30/2004. I know when testing them that I use the compensation for this period, but when telling them what the max. deferral amount, catch-up and compensation can be am I right in using the figures for 2003 since it is technically a 2003 plan year?

Please help me settle an ongoing disagreement that I have with some of my partners. This isn't a critical issue, but it would be nice to have some other opinions.

The Form 5500 instructions say to use a business code that best describes the plan sponsor . This is a certainly a simple decision for any organization that sponsors a single-employer plan for its own employees. Also, the guidelines are clear for a multiple-employer plan: choose a code that best describes the main activity of the participating employers.

A multiemployer plan, however, is sponsored by a joint board of trustees. Neither the labor organization nor the contracting employers sponsors the plan. I believe that the appropriate business code is 525100 (Employee benefit funds).

Example. There's a collectively-bargained plan for electricians. The multiemployer plan should use code 525100. The employers, who contribute to the fund pursuant to collective-bargaining agreements, use code 238210 (Electrical contractors) for plans that they sponsor for their non-union employees. When the union sponsors a plan for its own staff members, the code is 813930 (Labor unions and similar labor organizations).

Obviously, the fate of the free world isn't hinging on the answer to this question. I'm just curious about other people's thoughts.

If a DB plan has a COLA tied to CPI and terminates does the calculation of a lump sum distribution have to reflect the COLA?

My understanding of the definition of leased employee under 414(n) dictates

1. recipient must pay fee for services of indivdual.

2. the individual must provide service on a substantially full time basis for one year

3. receipient must have primary direction over ind. services

4. the leasing org. must be the common law employee

Under #2 above an employee must complete 1500 hours in a 12 month period.

Employee A meets all of these requirments and is classified as a leased employee for the receipient company XYZ.

XYZ does not exclude leased employees from its 401(k) plan.

XYZ has eligibility requirements to enter its plan of age 21 and 6 months of service with monthly entry dates.

When does employee A (who is over age 21) become eligible to be in the XYZ 401(k) plan? Doesn't he have to wait the full 12 month period and work the 1500 hours in that 12 month period before he can be classified as a leased employee thus even allowing him to be an eligible employee for XYZ's plan? Does

How can there be retroactive entry into a 401(k) plan?

Any thoughts would be appreciated.

Would there be any testing issues if a plan has different eligibiltiy for 401k and SH match? In this case, immediate eligibility for 401k and 6 mos for SH match.

(Plan allows for dual eligibility for SH).

A client has asked the following question regarding methodology.

An employer has a plan that is a life only benefit at 65 with actuarial equivalent of 5% and UP1984 (for the sake of argument).

The calculation of the normal accrual EBAR is the increase in the accrued benefit (one method) divided by compensation. This does not recognize the AE assumptions versus testing assumptions (ignore the most valuable issue for the moment).

Is this fair to NOT recognize (through normalizing the life benefit from plan to testing assumptions) the difference in assumptions??

Now, let's say the same employer establishes both DB and DC plans as 'carve' out groups.

The DC EBARs are calculated using 8.5% testing assumptions AND the DB EBARs ignore the assumptions for normal accrual purposes (using the method above).

Is this fair or even legal???

My answer was that the regulations do NOT REQUIRE the normalization when the benefit is a life annuity. The issue of the AE versus testing assumptions will be dealt with in the most valuable EBAR. There is no issue of 'fair' but what the regulations outline as the proper procedures.

Any disagreements??

Does the hurricane relief apply to the failure to correct a June 30, 2004 ADP test by 9/15/04?

Plan sponsor of a Safe Harbor 401(k) failed to remit the Safe Harbor contributions for PYE 12/31/02. They will ultimately deposit the contributions adjusted for earnings. The auditor insists that a schedule G should be included with the 5500 to report prohibited transactions on the use of plan assets.

I arguing that unlike participant deferrals, which become plan assets as soon as the sponsor can segregate them, employer contributions do not become plan assets until actually contributed to the trust and therefore there is no PT for use of plan assets.

Does anyone think we have PTs to report?

If a Plan under contributes their 3% nonelective contributions, can they self correct under SCP? If so, are they within the correction time period if they correct within two years of the plan year in question?

Since the Safe Harbor is an ADP issue, is it a stretch to say that the correction period is the two year period beginning after the 12 month correction period provided for section 401(k)?

Thanks for any insight.

When a plan and its sponsor have the same year-end, and the sponsor extends its income tax return, the plan's Form 5500 automatically gets the same extension.

What about our tax-exempt clients? In your opinion, does the same rule hold true for a Form 990 extension?

The rules clearly refer to an income tax return. Over the years, I've used Form 990 extensions to take care of late Form 5500 filings, and I've never suffered any bad consequences. But, I'd love to get a reliable answer; the fact that I've never been caught hardly counts as substantial authority.

Situation: DB plan for large employer. Plan subject to QPSA and QJSA rules. How should the employer handle an employee's representation of marital status?

May the employer rely upon the representation of the employee?

Is there anything in print on this subject other than common sense? I expected to find something in 1.401(a)(20) but there is nothing on point.

Clearly many plans require evidence of marriage, but what about the reverse?

Question is coming from the sponsor. Any help would be appreciated.

I would appreciate any thoughts or authority on whether an employer-funded plan and trust for retiree health benefits is a deferred compensation plan for purposes of IRC Section 457(e)(11) and (f) or the rules in Section 885 of the American Jobs Creation Act of 2004 for nonqualified deferred compensation. Assume that under the plan document the employer contributes a percentage of each participating employee's compensation for the plan year, to be allocated to an account for the employee to be used for health benefits after retirement.

What are the restrictions to setting up a db plan for a nonprofit?

Client is in her late 50's and has no retirement plan. She has high employee turnover so most of the contributionwould go to her. Anything I have to set up different then a normal db plan?

Thanks,

Andrew

I've seen many defined contribution plan documents that describe the steps in allocating employer contribution when the plan is integrated. All the documents I've seen used " 2.7% " in one of the steps. It seems that " 2.7% " is standardly used.

But lately I've seen a couple of plan documents that use "2.4%". Integration in one of those plans was tied to 80% of the FICA base. So I assumed that the 2.4% came from 80% x 3% = 2.4%. But another plan document used 2.4% and made no metion of 80%.

My Question: Apparently 2.7% is not the standard that must be used all the time. So how is the 2.4% derived? When can 2.4% be used? Are any %'s allowed other than 2.7 and 2.4 ?

I have a client that was the sole owner of an S-corporation. The S-corporation shutdown midyear and became an LLC. The plan continued. The client paid himself $168,000 from the S-corp and had a loss from the LLC. Would his year end compensation be $168,000 or 168,000 less the loss?