I have a potential client who's plan document is written as such that the cash benefit is accrued as of the last day of the year (12/31). I was under the impression it could not be accrued on the last day, but had to be before then. (I normally see accrued after 1000 hours, or accrued monthly).

Are you permited to accrue a benefit on the last day of the year for a defined benefit plan?

In the most recent model 402(f) notice published by the IRS in Notice 2009-68, the IRS took the position that if a participant elects a direct rollover of only a portion of an amount paid from a plan, with the rest paid to the participant, each payment has to include an allocable portion of taxable and nontaxable amounts. This interpretation created quite a stir, as it was different from what many practitioners were doing, and several groups asked the IRS to modify its interpretation on this point.

As best I can tell, the IRS has not addressed these concerns. Have I missed something? If not, have folks changed their rollover procedures to reflect the new IRS position, or are they still permitting participants to designate direct rollover of taxable portions only and/or distribution of nontaxable portions?

An IRA owner dies without a beneficiary but lives in a community property state. Don't the IRA proceeds go to his spouse (as if the spouse was listed as the beneficiary on the beneficiary form)? Thanks in advance!

A governmental 457(b) plan permits participant loans and unforeseeable emergency withdrawals. Must a participant take a loan from the 457(b) plan first before they can request an unforeseeable emergency withdrawal (assuming the loan does not cause a hardship).

Company A Company B

Owner A 99 % Owner A 69%

Owner B 1% Owner B 1%

Owner C 30%

Owner A and C are cousins. Owner A does not receive income or from Company B and Owner C does not receive income from Company A.

I believe it's controlled based on 50% identical ownership correct?

Wife notifies Plan of pending divorce.

Plan puts hold on account and notifies both parties they need QDRO to divide.

Participant separates service before QDRO is drafted and has under $5K vested and is eligible to cashed out under Plan provisions.

I assume because of the potential pending QDRO the Plan can't auto cash out. Is this assumption correct?

Also if parties decide cost of drafting DRO from divorce lawyers and cost to review DRO for QDRO status by Plan is too much given the small size of the account then the plan can release the hold and distribute the account only if spouse consents but that distribution could only be to participant and not alternate payee?

Is an insurance payment that identifies the family members covered "individually identifiable health information" as defined by HIPAA? I appreciate any thoughts!

For a nonprofit high school; should coaches and long term substitutes teachers be included in the participant count. They're eligible to contribute to the plan but few do. Coaches are contracted for the academic year; however they get paid half of their contract at the beginning of the season and then the rest when equipment is turned in. So if your a football coach (and not also a teacher), once the seasons done are you no longer a participant for the participant count? Long term sub's could be used weekly, monthly or some a few times a year.

Hi,

IRS Revenue Ruling 2006-43 does not permit a participating employee, from and after the date of the “pick-up”, to have a cash or deferred election right with respect to designated employee contributions. Participating employees must not be permitted to opt out of the “pick-up”, or to receive the contributed amounts directly instead of having them paid by the employing unit to the plan.

A collectively bargaining agreement originally said that 3% will be picked up from union employees pay. After several years went by a new collectively bargained agreement raised this to 5% for existing and new employees. Athough participants can't change or opt out of the pick-up contributions can a collectively bargaining agreement or employment contract renewal raise it for existing employees who are having pick-up contributions taken out of pay? My gut tells me no, but I can't find a cite or ruling where the IRS specifies they can't.

Thanks

a 3 member controlled group operates under a 401(k) plan that provides uniform benefits and provisions to all 3. One member brought up the suggestion of having their own plan due to the fact they had a Standard Industrial Classification (SIC) code. I have never heard this.

This is a takeover New-Comp Plan. We looked back at the 2012 and 2013 years and while the client made a gateway contribution, in each year, the rate-group test prepared by Relius showed a required contribution of around 9% of nHCE pay in each year. The CPA says that is OK because the pass the 410(b) Ratio Percentage test.My response was that the Plan is cross tested,hence it must pass BOTH the rate group tests and the average benefits test...he adamantly states "No way". I'd like a second opinion.

Here's some background and a few questions.

The Plan defines 2 Classifications [Rate groups] –Principals and all others. The Plan Document states the allocation method for non-elective contributions uses the “Participant Group Allocation Method”.

There are 2 principals and 6 nHCEs, one of whom was hired 5/1/2013. The Plan permits deferrals for employees with 6 months of service[entry date is monthly]. A Safe Harbor NE contribution is required for all employees meeting that same requirement. Class based Non elective contributions are also allocated to the same employees.

Each year the maximum 415 contribution is calculated for the Principal with the lowest compensation. That percentage is then applied to both Principals’ compensation. If a Principal with higher compensation receives a prospective allocation greater than the 415 limit, such Principal’s allocated contribution is capped at the 415 limit.

A gateway contribution is then calculated for the nHCEs equal to the lesser of 5% of compensation or 1/3 the highest Principal’s allocation percentage.

The Plan is a Non-elective Safe Harbor Plan so the 5% gateway is satisfied through the combination of 3% Safe Harbor + a 2% Non-elective contribution.

The Plan is then subjected to Rate-group testing under 401(a)(4).

Question 1

Must this Plan be tested under IRC 401(a)(4), The General Nondiscrimination Test?

If so, must the General Nondiscrimination Test include “Rate Group testing”?

Question 2

Are there any options available to pass general non-discrimination not using rate group testing?

Question 3

What does it mean for an otherwise excludable employee to be “separately tested”? If the Plan required only 6 months of svc for a Safe Harbor Non-elective, would that same Otherwise Excludable Employee be entitled to a gateway contribution?

Question 4

Is a Gateway contribution required for employees that have been employed less than one year/age 21 when the Plan requires a Safe Harbor Contribution for such employee? May those less than one year/age 21 employees be excluded from the 401(a)(4) General Test?

Question 5

The General test shows that approximately 9% of payroll must be contributed for nHCEs in order to pass the rate group test. The employer , in 2013 and 2012 contributed less than the required 9%. The 2013 tax return has been filed. Can one make self corrective contributions for employees in 2014 to correct that error or must some other correction procedure be used.

I'm helping a very small charity with an underfunded db plan. They can't afford to make their final contribution for 2013 (due 9/15). As far as I can see, the user fee for a waiver request is $14,500--which is more than the contribution. In other words, they can't afford the user fee.

Is there any ability to request a hardship waiver of the fee? I'm also thinking it may be too late to request a funding waiver for the 2013 contribution....True?

Thanks for any help.

Distribution from a NQDC plan for active employee. The document states that an employee can take a distribution from the plan upon emergency if approved by the employer's committee.

How are distributions taxed from a NQDC plan?

Do we withhold 20%? I know that there's no 10% withholding even if under 59 1/2.

There's some places that state it's done via W-2 if the person is an employee? Not 1099.

What if they are terminated is it true that we have to report it on the

1099 Misc. (Is there 20% wh though?)

If a 403(b) plan allows for a matching and non elective contribution, I understand these contributions will make the 403(b) plan an ERISA plan subject to all the rules of compliance testing and form 5500.

Question, doesn't the plan document need to name a Trustee for the employer portion of the contribution? I am reviewing a document prepared by TransAmercia - Tax Deferred Annuity Retirement Plan Adoption Agreement, and it contains employers contributions.

Thanks

We (TPA) have taken over a DB plan for 2013. It turns out that the 2012 contribution was funded late, and the 2012 Schedule SB reflects a funding deficiency. However, the sponsor never paid the excise tax.

They are now asking whether there is any particular advantage to coming forward and paying the tax at this time, vs. waiting until the IRS asks about it. Can anyone think of anything? Keep in mind that the funding deficiency goes away in 2013.

Dog

Would costs related to Continuing Education count for hardship distributions? For whatever reason the employer is not paying for the training, probably she is a per diem employee or something.

Let's suppose you have a company that was acquired in July 2013. In July 2014, the plans actually merge together and now you have 1 plan. (A is the surviving plan- Plan B merged in on 7/1)

Testing:

For Coverage, you would perform it as/of the end of the plan year.

For ADP/ACP, you have the option of testing each one separately from 1/1-6/30/14 then together for 7/1-12/31.(option1) You can test plan B from 1/1-6/30 separately, Plan A's test runs from 1/1-12/31 but only includes Plan B from 7/1. (option 2) Or, you can test them together from 1/1-12/31/14. (option 3)

Let's just say you go with option 3:

From 1/1-6/30, participants in plan b received a match of 50% up to 4%. Then effective 7/1, they moved to Plan A's match of 100% to 5%. Would BRF testing be required? I believe yes. What happens if plan B does/would not pass BRF (high concentration of HCEs & very few NHCEs)?

Now let's say they have other provisions that were different between the 2 plans, but as of 7/1 they all will follow Plan A's provisions-they were all more generous. Would other features need testing as well? Vesting, Distributions options, after-tax availability, etc. What if Plan A did not have a match at all during...what testing would be requried?

Any help would be greatly appreciated!

We have a situation where a client's recordkeeper is offering to backdate a fee reduction for them as of march 1st; however, in that case they obviously wouldn't be able to get a fee disclosure out to participants 30 days prior. I'm thinking that because it's a reduction in fees that will benefit participants, they can send just send the disclosure asap without getting in trouble. Any thoughts?

Imagine that your client is an individual who is a vested participant in a multiemployer defined-benefit pension plan. He is entitled to a pension, which the plan estimates as $1,958 per month, beginning at his age 65. But he also is entitled to claim his pension as early as age 55, with a plan-specified early-retirement reduction. He is 56 now. His employer is no longer a participating employer, and does not maintain any retirement plan.

Although the individual does not need the pension money now, he is considering claiming his (reduced) pension now. Why? He believes the plan will become insolvent. He has seen his employer and several others withdraw from the plan; much of the industry's business goes to non-US providers; most of the US business does not require union labor. We have read the pension plan's Form 5500 reports for the past few years. The plan, although not reported as "critical", has not obtained (even with PPA surcharges) the contributions needed to fund the plan. Asking for contribution rate increases when a collective-bargaining agreement expires has resulted in yet more participating employers withdrawing from the plan.

What professional methods should one use to help this individual evaluate his choices?

I consider the early-retirement reduction of the pension as a kind of "premium" that buys some insurance against the risk that the individual's pension would be cut (or eliminated) in the plan's insolvency. Is this a logical way to think about it?

If one assumes that the plan becomes insolvent before the individual turns 65, how does one estimate how deeply his normal pension would be cut?

What other risks and trade-offs should a professional consider?

I am newly involved with a CB/DC combo plan that has the following problem: The 2011 and 2012 PS contributions required to pass nondiscrimination testing were not deposited until December 2013. I am wondering about compliance / disqualification, deductibility, etc. This was an issue of communication/disorganization rather than financial issues. The plan sponsor is getting back on track and for 2013 all CB and PS contributions for 2013 will be depsoited timely - in an amount that is just slightly less than the 404(a)(7) limit for 2013.

I have limited experience with this sort of problem but it seems like this is an issue for VCP since plan contributions were not made in a timely manner. In addition, I would think that investment gains may have to be restored. Since the contributions were not made in a timely manner I'm not sure that a tax deduction is available even with a VCP submission(?). If that's the case is there an excise tax on nondeductible contributions? The contributions made in December 2013 was only the amount necessary to pass nondiscrimination testing for 2011 and 2012, does that change the the excise tax situation?

For now, I just want to advise the plan sponsor that they have some issues we have to follow up on, without being too specific or too open-ended. Any input would be appreciated.