Employer X maintains a cash balance plan. It wants to amend the cash balance plan so that it only has to make a principal credit for a plan year if an employee is employed on the last day of the plan year. Is there any reason they cannot do this? Thanks,

In an attempt to reduce safe harbor contributions for an underperforming subsidiary, it has been proposed that the accounts belonging to employees of that subsidiary be spun off into a new safe harbor plan. The spinoff plan would then be amended to replace the safe harbor match with a discretionary match.

Recognizing that there is little in the way of guidance, what is your gut feeling about whether the spinoff would be considered a mid-year amendment? We don't want to endanger the safe harbor status of the "main" plan.

Please see post in Plan Terminations

http://benefitslink.com/boards/index.php/topic/57695-deduction-on-terminated-one-person-plan/

FACTS

1. Amenment timely adopted to terminate one-person DB Plan 12/31/2014.

2. IRS D-Letter received in July

3. Calendar year plan; BOY valuation.

4. Participant compensation always 100,000 except learned in 2015 that participant 2014 compensation 275,000.

5. 2014 5500EZ/SB NOT YET filed

6. No contributions yet made for 2014

7. 2014 Maximum Deductible determined as of 1/1/2014 = $300,000

8. Lump sum = $2,000,000

9. Plan assets = $1,000,000

Questions

1. Is $1,000,000 the deductible amount even though Plan not a PBGC plan? If not $1,000,000, then what?

2. Regardless of how much deductible, can it all be deducted in 2014 or is $300,000 maximum deductible in 2014 and the rest in 2015?

Does anyone have a current state by state taxation of 457(b) taxation

I know Pennsylvania and I believe NJ tax employee elective 457(b) deferrals

Also FICA taxation applies to fully vested employer matching contribtuions but do any state tax this as well

Much thanks

If a company sells substantially all of its assets to a buyer, but retains less than 50 FTEs for a short period of time to wrap up corporate affairs, are they still an ALE?

ALE is determined on prior year employee count. Seller will have less than 50 full time employees next year and will be terminating their health care plan as they will only be in operation for 6 months or less.

I don't see any transitional relief regarding ALE status in an asset deal. Any thoughts?

An audit client of ours just received notification from their TPA that, due to incorrect compensation provided for the PYE 12/31/2013, the ADP test was re-done and 4 participants who received refunds actually were "over-refunded". The TPA has requested that the 4 participants return the excess refund to the plan, and then a corrected 2013 Form 1099-R will be issued, reporting the correct distribution. The TPA then advises the participants to "seek professional advice when amending their 2013 personal tax return". The TPA has also suggested the auditor be contacted to "correct the 2013 audited financial statements".

I have never seen a TPA ask for participants to return a portion of their ADP refund. Does anybody have experience with this? The amounts are around $300 per participant; therefore, amending their personal returns for 2013 might net them a $50 refund, and cost them hundreds in tax preparation.

DB plan allows for bifurcated distributions, i.e., a partial lump sum with the remainder as an annuity.

How do you calculate the RMD for such a distribution? Participant has reached required beginning date and wants to roll over as much of the lump sum as possible--but any portion that is attributable to the RMD isn't eligible for rollover.

The RMD regs tell you how to calculate the RMD for an annuity or a total lump sum, but not a bifurcated distribution.

Cheers.

I have a plan that has a quarterly rewards program based on the profits of the company. They give the participants the choice of taking it in cash or putting it in the retirement plan.

What testing must be done with this? I believe I have to include it in the adp test? but does it also count towards the annual deferral limit?

any other testing I should do?

I thought this was likely to be relatively straightforward but I am unfortunately not finding much guidance. Large, long-standing tax-exempt with 403(b) establishes a for-profit subsidiary and controls 100% of the for-profit's board so clearly part of the tax exempt's controlled group. All of the for-profit employees are initially coming by way of transfer from the tax-exempt entity and all were participants in 403(b) plan.

I have generally assumed that the for-profit would not be eligible to participate in the 403(b) plan because it is not tax-exempt. General plan was for employees changing employers to take a distribution from 403(b) and roll those into 401(k) plan to be set up by the for-profit. Now accountant is saying they don't think that should be necessary because the for profit is part of the controlled group and employees should be able to stay in and continuing making deferrals to 403(b).

I have found a couple of threads suggesting general consensus that for-profits are not eligible employers for 403(b) even if part of the controlled group but I really haven't found anything squarely addressing the situation. I did find an informal IRS response to a 2010 JCEB Q&A where the IRS seemed to clearly say all employers within a 403(b) needed to be tax-exempt to participate in the 403(b) but that was fairly informal and I'm just surprised there isn't anything more direct addressing what must be a fairly common situation.

Appreciate any assistance or referrals to useful guidance.

Has anyone seen any written guidance confirming that the correction methods authorized by this rev proc can be used for defects that occurred before the effective date of this rev proc.

For example, this rev proc is effective April 2, 2015. Is there any guidance confirming that the new correction methods can be used for 2014 plan defects?

Rev. Proc. 2015-28 says it is effective April 2, 2015.

Has Irs issued anything confirming that the correction methods outlined in this procedure can be used for defects that first arose before April 2, 2015 (like a 2014 defect)?

(as opposed to defects that first arose after April 2, 2015)

Are there regulations covering the timely deposit of funds for non-electing church 403(b) plans?

Plan has automatic enrollment (3% of pay).

Payroll date: 7/2/1015 (includes wages for service provided through June 27)
Payroll provider's cutoff for paycheck changes: June 28.

Four new employees might enter on July 1.
One of these 4 quits June 30 and gets a paycheck on July 2 and another on July 17. No deferrals withheld from either. No problem.

The other 3 did not return any deferral elections. They get paychecks on July 2. No deferrals withheld. Automatic deferrals withheld on July 17. Problem?

Document says

• "An Eligible Employee shall be deemed to have made an elective deferral election upon satisfaction of the eligibility requirements..."

• " ... provided however that in a reasonable time before the deemed election takes place the Eligible Employee shall receive a notice that explains the ... right to elect to ... alter the amount, ... including the procedure for ... the timing for implementing such election."

• "The Eligible Employee must have reasonable opportunity to file an election to receive cash in lieu ... before such deemed election..."

• "The Company shall contribute to the Plan with respect to each pay period an amount equal to the Elective Deferrals . . . for such pay period"

The Plan Administrator intends to implement this uniformly and consistently. Do they have a valid legal basis for not withholding on July 2 for these other 3 employees?

Does anyone know if there is a way to do this in a 412i?: The participant is age 66 and still full time employed. NRA is 65. The participant (an owner) would like a withdrawal of a portion of his account.

I'm not asking about the document, I'm asking about whether 412i regs permit it.

-investment manager/broker for bank screws up by executing a trade twice

-gets the administrative people at the bank to fix the loss by carrying out transaction on his own personal IRA

-is this a prohibited transaction? has he "dealt with the assets of a plan for his own account"?

Also, where is the best place to find examples of prohibited transactions in self-directed IRAs? ERISA cases, DOL Advisory Opinions, Private Letter rulings? I'm having trouble finding official sources that give examples.

Thanks in advance for any responses.

We have several small 401(k) plans whose investments are with Sterne Agee; each participant gets a monthly statement. Yet we do quarterly summaries and participant statements for them as well. Is this necessary since they do get their own statements with detail information on gains/contributions/fees?

Doesn't the plan sponsor just have to disclose annually (or possibly every 14 months now) what fees could be charged for things like distributions, loans, brokerage acct fees, etc?

I am a little confused on all the fee disclosure requirements now.

A participant in a nonqualified (409A) plan is going through a divorce. Plan doc clearly states that benefits are not transferable, cannot be assigned, etc. Participant is wondering if he can draft a separate agreement with his soon-to-be ex-wife where his Deferred Comp Account would be divided into two, both still in his name, but essentially one for him and one for his wife. (1) I'm pretty sure that doing so would be a violation of the Plan and (2) he will be taxed for all of it upon distribution. So, has anyone seen this done before or do you have any other creative alternatives for the divorce settlement in this scenario?

New one for me.....Someone wants to roll a Roth into her 401(k) Plan. Plan does allow Roth deferrals and in Plan conversions. Do I remember right in thinking that there is a problem with this? or something to watch out for?

We have a participant who took loan 1 out and then went on a leave of absence which has continued beyond 12 months. Before the first loan defaulted, she took a second loan during her same leave. Does the 12 month loan suspension for leave of absence start as of the date of the original leave, or can it start as of the date she took the second loan because she has not returned from the leave? I assume it is one bona fide leave, but just wanted to check!

Thanks!