I have a new calendar year plan with an effective date of 02/01/2015. Corbel PPA Prototype. Eligibility Requirements are Age 18 and 6 Months of service, quarterly entry. All employees employed on the effective date were eligible as of 02/01/2015.

Question is we have a employee who was rehired after 02/01/2015 and had previously met the Age 18 and 6 month service requirement. When do they enter? On date of rehire, next quarterly entry date or do they have to meet the 6 month service requirement again.

Assume no rule of parity or no 1 year holdout apply.

Any input would be appreciated.

Thanks

SIMPLE IRA terminated effective 1/1/15. Sponsor starts a Safe Harbor 401(k) effective June 1, 2015, it would be considered "newly established" correct?

Have a client where plan defines compensation for plan purposes as W-2. A client is insisting that opposite sex health insurance premium, while taxable, shouldn't be considered as compensation for plan purposes, based upon their "research."

I can find no basis for this whatsoever, and I'd just like to see if anyone knows of something I'm missing? They could amend the plan to exclude such compensation for plan purposes, but that is a separate issue - plan does not currently contain such an exclusion...

Thanks.

Have a new client that owned 50% of an insurance agency (S Corporation), his brother the other 50%. He was paid as an independent contractor his commissions from insurance sales to a separate LLP (single member LLP tax as a sole proprietor).

The agency has a CEO and CFO separate from either brother.

Client has been max funding a SEP for as long as he can remember only on his independent contractor income - no other participants. The insurance agency has a separate retirement plan that she (Client) did not participate in.

Do not meet the controlled group rules as do not own more that 50%.

A-Org - 1st impression is FSO is the insurance agency, A-Org is my client. Since agency is a corporation appears that it would not be a FSO.

B-Org - appears likely

Having second thoughts on whether related - sure seems that it should.

Conversation greatly appreciated.

I have a small NQ plan (10 actives) that assumes 100% lump sums. The rate used for lump sums varies month-to-month. In prior years, the discount rate for fiscal year-end has been modeled using the assumed lump sum payouts. However, the plan has a new auditor this year and we are getting push-back on the development of our rate. Since the lump sum rates is not a constant, they believe the discount rate should be developed assuming annuity payments - this would be for the discount rate only. Plan liability would be valued using the assumed LS payments and this discount rate. The auditor made it seem as though this is the method that most pension actuaries use.

The number of plans that our office has exposure to that assume lump sums is pretty limited and the few plans we do have do not use the method suggested by this auditor. Has anyone developed the discount rate using this method and what was the reasoning behind it? I would be interested to hear some other opinions on this.

Thanks.

Does anyone have a good template or article on BR&F testing for a match formula based on YOS that has a 1,000 hour/last day rule?

Specifically, my question is, do I need to treat people who termed as not benefitting in the higher match rates solely because they terminated (with more than 500 hours).

So in my case, the match increases after 5 YOS from 50% of 6% to 100% of 6%. If someone with 7 years terminates, do I need to treat them as not benefitting in the higher rate of match?

Since it's coverage testing, I presume the answer is yes.

New client has been excluding pre-1/1/09 contracts for participant counts, but NOT the assets. This is a plan where the pre 1/1/09 contracts will push them over the audit requirement.

Is amending the 5500's for the past 5 years the only option available? And presumably if we amend the past 5 years of 5500's to remove 40% of the plans assets that might be a red flag...

Good afternoon,

As a former Trustee and Participant in a governmental DB plan in Michigan, I ran into a question regarding how the plan administrator determines Final Average Compensation.

The applicable Collective Bargaining Agreements indicate FAC "shall be calculated by multiplying the FAC (the employee's highest consecutive 5 year income average) by the number of eligible years of service by the pension multiplier (2.8%)."

However, in the case I am concerned about, the Plan Administrator went back 5 years and 10 months and determined an average monthly income for year #1. Following is the manner in which he calculated this FAC:

Year #1 - Determined an average monthly income and multiplied that by 1.4 months.

Year #2 - used actual income.

Year #3 - used actual income.

Year #4 - used actual income.

Year #5 - Although the retiree severed employment in good standing on October 31, he was credited as if he received 10.6 months of compensation (prorated based on the number of pay periods in that year. The remaining 1.4 months was credited to year #1).

The net effect of using this methodology was to reduce the retiree's pension payment by $100 per month.

According to my research, consecutive five year income is usually limited to actual income over a 60 month period. In fact, the Plan Administrator used that precise method in the past FAC calculations. I might add, the Plan Administrator is also the Plan Sponsors Chief Financial Officer.

Any thoughts on this?

Can someone point me to the reg that was added to the final 401k regulations that essentially said "hey, no funny stuff--even if a literal interpretation of the regs says its ok, you can't monkey with stuff in such a way that it impacts the testing."

I know in practice it can essentially be ignored, but I'm running an ADP test on net op and we have someone clocking in at 1,000 percent (they're deferring 90%, so 90/10 = 900% (she has 125 pre-tax premiums to boot pushing her over 1,000%). I'm just concerned this might be a situation where the IRS might employ this vague rule.

I believe it was the IRS response to the bottom up QNEC, which smells like what I have here.

I have a case where a 100% owner of a corporation is a director of a 501(a) nonprofit he founded in an unrelated field. There are 2 other directors of the nonprofit. Let's say he controls the other directors, so he has at least 80% control over the nonprofit (including the appointment/removal of directors).

Is this a controlled group, or does the corporation (as an entity) need to be directly controlling the nonprofit (e.g. the owner's personal decisions over the nonprofits would have to be in his capacity as a representative of corporation - not as a separate individual)? I.e., the "parent-subsidiary" rules apply, not the "brother-sister" rules.

From Reg section 1.414 ( c )-5:

"For this purpose, common control exists between an exempt organization and another organization if at least 80% of the directors or trustees of one organization are either representatives of, or directly or indirectly controlled by, the other organization [does "organization" include the individuals with a controlling interest in that organization, e.g. a 100% owner?]. A trustee or director is treated as a representative of another exempt organization if he or she is also a trustee, director, agent, or employee of the other exempt organization."

Thanks.

After Anthem's security breach, they've become fodder for phishing attacks ("Members who may have been impacted by the cyber attack against us should be aware of scam email campaigns targeting current and former members. These scams, designed to capture personal information (known as “phishing”) are designed to appear as if they are from a health plan and the emails include a “click here” link for credit monitoring. These emails are NOT from us.").

My day isn't looking to be turning out so bad, in comparison

Have a plan, each employee in their own group ... NHCE employees receiving from 3% of comp to 15% of comp (only one employee receiving 15%)

There are 5 HCES and only two are receiving contributions ... one at 3% and one at 15%.

Can I bypass the gateway test by testing the average of the contribution percentages? Do I have to use broadly available allocation rates? If using broadly, can I count the HCEs that are getting nothing? For example, if I average the HCE group (including HCEs) getting nothing, it is a 3.60% average. If I average the NHCE group (and also include those getting nothing because they were not employed on the last day of the plan year), the average is 3.92%.

From what I read about broadly available allocation rates you count only those getting a contribution, my HCE group would be 50% (only 1 of the 2 who are getting a contribution is getting 15%), but for my NHCE group is 1 out of 22 getting the 15% for 4.55%. My NHCE concentration percentage is 84.85% and the midpoint is 27%; I believe this would definitely fail the broadly available allocation rate.

They would pass cross testing; but fail the gateway because of the group of employees getting only 3%. I need to tell them either to lower the one HCE to 9% or to raise the 3% contributions to 5%. Or let them know it can pass testing another way. Any help greatly appreciated and I hope I have adequately explained everything.

We have a DC plan that allowed terminated participants to take partial withdrawals (separate from installments). They may want to eliminate that, allowing for only installments and lump sums (and the QJSA already there).

Can they? I thought you could eliminate all other forms of distribution if a lump sum was available.

Quick question regarding RMDs. I have a person that just turned 70.5 and needs a RMD in 2015, she has both pre-tax and roth. I look at the 12/31/2014 balance, and I come up with the RMD amount. Question is, do I have to take a certain portion from Roth, or can I take it all from pre-tax, or is it up to the participant.

I appreciate all your help. Apologies for the likely elementary question.

In today's BenefitsLink Retirement Plans Newsletter, there is an article on the assertions being made by the Verizon retirees who have been fighting against the de-risking transaction under which annuities were purchased for their benefits from a large, secure insurance company, to reduce the size of the Verizon plan. If I understand it correctly, there were two areas in which the assertion of harm is being made:

1. The annuities are not considered as secure as continued coverage by the PBGC.

2. The annuities, no longer being paid from an ERISA plan, do not provide the same degree of protection from creditors in the event of personal bankruptcy.

In thinking that both are entirely wrong, am I missing something? I just don't understand why the lawsuit is not considered frivolous. As I understand it, the plaintiffs are the people for whom annuities were purchased, not those left behind.

1. Considering especially the self-declared tenuousness of the PBGC's finances, wouldn't proper fiduciary care have resulted in the selection of an unquestionably strong insurer at least as capable of standing behind the benefit promise as the PBGC, and even if things were to turn sour in the future for that insurer, wouldn't the state guaranty associations substantially reduce the risk to the retirees (or are we contemplating some sort of asteroid-strike-sized economic calamity, in which case would the PBGC survive)?

2. I am not a lawyer, but surely any annuity purchased to settle benefit rights under an ERISA pension plan would have to provide the same iron-clad protection against creditors as would arise were the benefit obligation still under the pension plan, wouldn't it? Despite the assertions in the article, wouldn't the purchased annuities still be covered by ERISA?

If the plan sponsor decided to terminate the plan outright (an act by the sponsor which presumably cannot be legitimately challenged by the participants if not covered as a result of collective bargaining), when considering just those for whom annuities were purchased in the de-risking transaction, when the termination was completed and annuities were purchased for the retirees, how would they be any better off than they are under the de-risking transaction? Certainly, if annuities are to be purchased for retirees in pay status as part of a full plan termination, the retirees have no right to demand a lump sum payment instead! In nearly every plan termination of a defined benefit plan, the current retirees are given no choices. An insurer is selected and those in pay status are taken care of by an annuity purchased from that insurer.

Client established a new plan effective for 2014 with deferrals effective 10/1/2014. All paperwork provided by client indicated that the company name was XYZ, LLC.

We generated the Adoption Agreement with that name.

Now, client sends us the w-2 for 2014 to reconcile compensation and company name listed on w-2 is NOT XYZ, LLC but rather ABC, LLC.

Tax ID given by client at setup matches the tax ID on the w-2, just not the company name.

Is this a problem?

A company in Denmark owns an American corporation and pays them commissions for sales in the US. If they have a 401-k Plan for US employees does the name and address of the US company have to be the plan administrator? Can the trustee be the controller in the Denmark company or would it have to be someone in the US as well? Any guidance is appreciated.

Imagine a business that's big enough to be exposed to the excise taxes for a failure to offer sufficient health coverage but small enough that it chooses not to self-insure its group health plan.

This employer wants to know that, assuming the employer's plan provides sufficient eligibility and makes every employee's contribution low enough that all offers are affordable, the group health insurance contract it might buy would meet all other conditions so that the employer is not exposed to play-or-pay excise tax.

How will this employer know whether a group health insurance contract provides "minimum essential coverage" and "minimum value"?

Does the contract itself state that it meets those conditions?

If not, will an insurer furnish some other written assurance that the contract offered meets the conditions?

If an insurer offers a group health insurance contract that does not meet "minimum essential coverage" or "minimum value", does some Federal or State law require an insurer to furnish an affirmative warning of that fact?

403(b) allows rollovers. The participant is over the age of 701/2 and still employed, so she is not taking RMDs from the 403(b) Plan. However, she does take RMDs from her IRA.

Is there any restriction preventing the participant from transferring the IRA to the 403(b). Going forward (2016) the participant would not be required to take any RMD from the Plan as long as she is employed. Thereby eliminating the IRA RMD.

Thoughts

QACA Safe Harbor plan is switching eligibility, from 1 year of service, to 90 days of service, with quarterly entry dates.

The company has 15-20 student interns who may work one semester, take off the next, then return later in the year. How would you go about counting the 90 days for employees who work sporadically?

If an employee works 75 days during the course of the 2015 plan year but isn't employed on 12/31, do those days of service that were worked in 2015 roll over to 2016 or do we begin the count again, since the person termed prior to the plan year end without meeting the requirements?