I've only been in the pension industry for 7 years and besides knowing that there is such a thing as a SARSEP, I have no knowledge of them. The question is whether or not a company is even able to adopt a DB plan with a SARSEP currently in place.

What is the deadline for a self employed individual ( or partner on partnership ) to deposit his "elective deferrals ". Is it Jan 31st or by the tax return deadline ( April 15 or Aug 15 with extension ) ? The fund companies have numerous answers to this question !!

Thank you !

I’m sure that many other actuaries are dealing with this problem and as a result, may not have the time to answer my questions, but here they are:

My client has 2 DB plans – one union and one non-union. Union minimum contribution is $750k, max is $3.3mil (UCL). Nonunion plan minimum is $0, max is $800k (UCL). Client also sponsors a 401(k) plan in which both union and nonunion participate and there are matching contributions. Total eligible payroll is about $5 million.

To shore up the FAS87 reporting and avoid additional liability, they need to contribute $3 mil to the union plan and $700k to the nonunion plan. They are ready to do this, but these amounts in total are more than 25% of payroll. If the DB plans were the only plans, I don’t think there would be any deduction problem.

Since the DB’s are not the only plans, I think I have a problem in that the 401(k) match would not be deductible though I am wondering if I still have some deductibility “room” since I did not fund up to my full deductible limit in the DB plans.

My questions are: Which 404 limit trumps the other? Is 404(a)(1)(D) an absolute override to determine the deductibility ceiling? Or does it not even apply (God forbid) in an overlapping plan situation? Theoretically, I could put up to $4.1 million in the DB plans, but only need to put in $3.7 million. Is it reasonable to assume that the remaining deductible amount could be used for the 401(k) match?

If we can deduct just the DB max’s (driven by the UCL amounts), my client can live with about $150,000 in nondeductible matching contributions if necessary. I am hoping that we at least retain the 401(a)(1)(D) higher deductible limit even where there is a 401(k) plan into which DB participants contribute.

Revenue Ruling 2003-102 provides that over-the-counter-drugs can be paid for with pre-tax dollars through health care flexible spending accounts. This is old news. But what about HRAs?

Ok here's the situation. I have a 401(k) Safe Harbor Matching Plan. There is a participant that only deferred 1.34% of comp. Therefore, they are not satisified by the Top Heavy Minimum required, b/c the match is 100% up to 3%, and 50% on the next 2%. Can I do a corrective amendment (11g?? What is that amendment called) for that plan year, stating what the participant would receive to pass T.H. ??, so I don't have to give everyone an additional profit sharing contribution?

We represent a C corporation that has two highly-compensated employees, both of whom are shareholders. We are considering setting up either a Flexible Spending Account or a Health Reimbursement Arrangement. Given the ability to roll unused funds from one plan year to the next (and the freedom from the prohibitions of Section 125), I'm inclined to go with an HRA. I am not aware, however, whether there are any limits in terms of compensation or contribution/reimbursement amounts that we will need to take into account, under Sections 105, 105 or elsewhere. Can anyone shed light on this?

With the latest extension of the RAP, is it correct to say that you can amendment a plan, say sometime in January, as long as you pay the "fine" and apply for a determination letter by 1/31/2004? Or do you still have to amend by 12/31/03 and then apply by 1/31/04?

Thanks,

Ronnie

I have a cross-tested plan that is safe harbor. The plan has five participants (two HCE and 3 NHCE). The eligibility for the safe harbor is one month and the profit sharing is 12 months. This is a takeover plan.

One participant was eligible for the safe harbor contribution, but not the profit sharing contribution. The plan gave a profit sharing contribution of 8.75% to the HCE and 5.56% to the NHCE. Is my gateway minimum 2.92% (1/3 of 8.75) or 3.92% (1/3 of 11.75).

I have a plan that allows for catch-up contributions for participants age 50 or older up to the maximum allowed by law ($14,000 for 2003). The payroll vendor caps the participant at the 402(g) limit first ($12,000 for 2003) and then in the NEXT payroll cycle will begin catch-up contributions. This may be okay for a participant who reaches the 402(g) limit early in the year since s/he will have time to contribute the maximum allowed by the end of the year. For participant who reaches the 402(g) limit in December, this could pose a problem.

Example: Participant elects to defer 25% of pay. The individual makes $3,000 gross pay per pay period and his/her deferral is $750. In the November 30 pay check the participantl reaches the $12,000 402(g) limit. The amount deferred in the November paycheck was $200 ($550 not deferred because the payroll system cut off at $12,000). Payroll will defer $750 in the December 15 and December 31 paychecks. Due to this method the participant will only defer $13,500 for the year. If payroll had not cut off the deferrals (i.e., the $550) in November the participant would have deferred $14,000.

I assume that since a participant has an elective deferral agreement in place, the payroll vender must defer the percentage elected. I assume this would be considered an operational defect unless payroll is adjusted in December.

If this payroll vender method of treating deferrals in disclosed so participants have time to adjust their elective deferral election percentages, would it still be considered an operational defect?

How do other payroll venders treat catch-up contributions when the participant reaches the 402(g) limit.

Thanks for your input.

If a client provided proof of coverage for '02 and bond covers three year period, do we need to again ask for proof for the 5500? My thought is no but sometimes my thoughts differ from the DOL's!

Church Group wants to set up a plan to allow for employee deferrals plus "match" 3% to all eligible employees. We first suggested a Safe Harbor 401(k) arrangement using the 3% non-elective, but I now might suggest a 403(b). The problem is that the Church has several parttime employees that work over 1000 hours a year and they want to specifically exclude all of these parttime employees (although the deferral piece would be open to all employees). Can a 403(b) plan make these kind of exclusions? Any recomendations on 403b prototype documents?

I am filing a determination letter (5300) on a plan we sponsor. Can some one point me to a sample cover letter that should accompany the 5300 to the IRS?

Also, we use a prototype document with a well-known vendor, however, the matching frequency could not be accommodated within the vendor's document (we match semi-annually and require the participant be employed at each allocation date in order to receive a match). The vender attached an addendum to the adoption agreement to reflect the method in which we match and said that we need to submit for IRS approval as an individually-designed document. Does this seem correct? To what degree can you modify the language of a prototype without creating an individually-designed document? Any input would be greatly appreciated.

An employee contributes 6% of the salary to a profit sharing or money purchase plan pursuant to a one-time irrevocable election under Treas. Reg. 1.401(k)-1(a)(3)(iv). Am I correct that the contribution is treated as a nonelective employer contribution and, thus, is not subject to FICA?

I heard a rumor from a coworker that the PBGC has over a billion dollar deficit, is this true, or is he/she way off base? If so, any articles on how they plan on resolving the problem?

If a plan administrator neglected to offset a frozen DB annuity from the participants total benefit (all from the same plan), is the participant responsible for paying back the over payments (duplicate payments from trust and annuity company)? If so, is there a limit the plan administrator can request back due to the error? Or a limit on how far back (years) the plan administrator could collect the money?

Also, bird walking sorry, what happens if social security makes an error on a participant calculation. Can social security ask for the money back (if participant was over paid)?

We have an individual who turned age 70-1/2 in 1994. She is a participant in a money purchase pension plan. On 4-1-1995 she began receiving annuity payments from a 10-year certain annuity based on the entire value of her Plan account as of that date.

However, she continued to work and accrue benefits under the plan. She has not taken any further distributions from the Plan. When calculating her MRDs for 1996 and subsequent years, can we count the monthly annuity payments she is receiving from her 4-1-1995 annuity as MRDs?

My client has been told by her IRA custodian that she can create an LLC in which (1) her IRA owns 51% (which would constitute almost all of her IRA account balance) and (2) she personally owns 49%. The LLC's objective would be to purchase a single piece of real property--it happens to be a car wash. Apparently, since she will only personally own 49% of the LLC and there is apparently no attribution from her IRA to her personally, she is not treated as a controlling owner of the LLC and the exchange of cash (from her IRA) for the 51% interest in the LLC is not a prohibited transaction. Assuming her IRA custodian is correct to this point, the idea is then that she will create another entity, lets call it the "operating company." This operating company will lease the car wash (both the real property and the equipment) from the LLC. My client will be an employee of the operating company and draw a salary.

Is this possible? Does this scenario actually get around the prohibited transaction rules? It seems to me that this "suggestion" by her IRA custodian is courting a prohibited transaction. Does anyone else have any thoughts? Thanks.

ER files registration statement for current plan. 10 years later adopts a second top hat plan. Must the ER file a new registration statement?

In a 401(k)/PSP where deferral and rollovers are self-directed and ER contributions are Trustee directed, a terminated participant, whose vested benefit exceeds $5,000, elects not to take her distribution. The PSP account is valued annually. 1) Should the participant's vested benefit be automatically (plan administrator decides) "segregated" (which I interpret as placed in an interest bearing, insured account), or 2) should the participant be allowed to choose segregation vs. keeping benefit in employer investment account? There has never been an occasion where a participant has elected to postpone the distribution, so no accounts have ever been segregated. The document refers to segregated accounts in conjunction with the election of installment payments, and refers to segregated accounts in the allocation of earnings section. Comments on any aspect of this situation are appreciated.

Until now I thought it was received wisdom that a 401(k) automatically passed top-heavy for all contributions if a safe harbor NEC (or also, now, safe harbor match) is made to the plan. But I've read some things recently hinting that such a plan might be top-heavy if contributions other than deferrals and safe harbor contributions are allocated.

Can anyone clarify this? Thanks!