Hi,

I know that we must count our interns and fellows in terms of determing large employer status. What's unclear to me is whether we are required under PPACA to offer them coverage. Interns typically work 3 months but that may be extended in some cases. Fellows typically work 6 months. Both types of employees work 40 hours per week while on board. Currently, they are considered ineligible for our benefits.

May we continue to exclude them under PPACA? If we do continue to exclude them and they receive a subsidy on the exchange, are we liable for the 3k penalty? Or, does the penalty not apply since they were not eligible for our plans to begin with?

Thanks!

The employer wants to make a safe harbor match of 100% of the first 3% and 100% of the next 2% - this would be an enhanced match of 100% of the first 5%.

Since the match formula is not less than the contribution determined under the basis match this is a good enhanced match.

Now the employer wants to cap the match at $10,000.

The accountant says this is ok, since the "level" in the enhanced match is better than the basic match. He claims even though the particpant receives less of a contribution under the enhanced match than the basic match, the fact the level is better, will allow his client to implement this match.

When I read the ERISA Outline book it states, ... A matching contribution will satisfy the ADP safe harbor contribution requirement if it is no less than the contribution determined under the "basic" formula.

I am looking for some quidance regarding the "cap". My thought is you cannot cap the safe habor. Need some help in understanding the rule.

Thanks

I am looking at a valuation report created by another firm and the 417(e) mortality table listed is "Male-modified RP2000 combined healthy male projected 23 & 15 years, Female-modified RP2000 combined healthy female projected 23 & 15 years." Is this just the Applicable Mortality Table? Also, what does "projected 23 & 15 years" mean - projected 38 years?

Any help would be appreciated. Thanks!!

Just before Line 3, Schedule R says "Profit Sharing Plans, ESOPS and Stock Bonus Plans, skip Line 3"

I just can't see why this information is relevant for a 403b Plan. It seems to me they meant to say "non-pension plans, skip Line 3." Has anyone been filling this line out for the audited 403b's?

Employer's 100% owner purchased 100% of another corporation 10 years ago without telling Tpa. so, employer and other corporation have been part of a brother sister controlled group since then. both companies have 401k plans but, the plans are different. one is safeharbor 401k , the other is regular 401k.

employer A has matched contributions to plan A. Employer B has matched-at a different level-contributions to plan B. neither employer has affirmatively agreed to participate in the other's plan.

the two companies clearly have to test to make sure that they have passed and will pass testing on a group basis. However, plan A has the following language from sungard volume submitter. Would 1.30© below require that the employees of B should be considered participating employees of the A plan after the 410(b)(6)© grace period runs out?

1.30 "Eligible Employee" means any Employee, except as provided below, and except as provided in any other particular

provision for the limited purposes of that provision (e.g., ADP test). The following Employees shall not be eligible to partiCipate in this

Plan:

(a) Employees of Affiliated Employers, unless such Affiliated Employers have specifically adopted this Plan in writing.

(b) An individual shall not be an Eligible Employee if such individual is not reported on the payroll records of the Employer as a

common law employee. In particular, it is expressly intended that individuals not treated as common law employees by the

Employer on its payroll records and out-sourced workers, are neither Employees nor Eligible Employees, and are excluded from

Plan participation even if a court or administrative agency determines that such individuals are common law employees and not

independent contractors. However, this paragraph shall not apply to partners or other Self-Employed Individuals unless the

Employer treats them as independent contractors.

© Unless or until otherwise provided, Employees who became Employees as the result of a "Code Section 410(b)(6)©

transaction" will not be Eligible Employees until the expiration of the transition period beginning on the date of the transaction and

ending on the last day of the first Plan Year beginning after the date of the transaction. A Code Section 410(b)(6)© transaction

is an asset Of stock acquisition, merger, or similar transaction involving a change in the Employer of the Employees of a trade or

business that is subject to the special rules set forth in Code Section 410(b)(6)©.

Employer's 100% owner purchased 100% of another corporation 10 years ago without telling Tpa. so, employer and other corporation have been part of a brother sister controlled group since then. both companies have 401k plans but, the plans are different. one is safeharbor 401k , the other is regular 401k.

employer A has matched contributions to plan A. Employer B has matched-at a different level-contributions to plan B. neither employer has affirmatively agreed to participate in the other's plan.

the two companies clearly have to test to make sure that they have passed and will pass testing on a group basis. However, plan A has the following language from sungard volume submitter. Would 1.30© below require that the employees of B should be considered participating employees of the A plan after the 410(b)(6)© grace period runs out?

1.30 "Eligible Employee" means any Employee, except as provided below, and except as provided in any other particular

provision for the limited purposes of that provision (e.g., ADP test). The following Employees shall not be eligible to partiCipate in this

Plan:

1. Employees of Affiliated Employers, unless such Affiliated Employers have specifically adopted this Plan in writing.

(b) An individual shall not be an Eligible Employee if such individual is not reported on the payroll records of the Employer as a

common law employee. In particular, it is expressly intended that individuals not treated as common law employees by the

Employer on its payroll records and out-sourced workers, are neither Employees nor Eligible Employees, and are excluded from

Plan participation even if a court or administrative agency determines that such individuals are common law employees and not

independent contractors. However, this paragraph shall not apply to partners or other Self-Employed Individuals unless the

Employer treats them as independent contractors.

© Unless or until otherwise provided, Employees who became Employees as the result of a "Code Section 410(b)(6)©

transaction" will not be Eligible Employees until the expiration of the transition period beginning on the date of the transaction and

ending on the last day of the first Plan Year beginning after the date of the transaction. A Code Section 410(b)(6)© transaction

is an asset Of stock acquisition, merger, or similar transaction involving a change in the Employer of the Employees of a trade or

business that is subject to the special rules set forth in Code Section 410(b)(6)©.

From the EOB:

With a deemed distribution, the participant is taxed as if he received a distribution, but he still owes the plan the borrowed proceeds because the transaction was a loan, not an actual distribution.

No withholding (which is obvious since we are not sending any money)

A deemed distribution under §72(p) is reported on Form 1099-R, as if the plan actually made a distribution. The distribution is coded in Box 7 as either a regular distribution, or a distribution that is a premature distribution, depending on whether the participant is under age 59½. The 1997 Form 1099-R introduced code “L” which is also included in Box 7 to identify the distribution as a deemed distribution under §72(p).

The distribution is reported to the IRS like other distributions (see 2. above), and any later offset of the defaulted loan (including accrued interest) is not reported again at the time of the offset.

When the offset later occurs, the account balance will be reduced at that time, and the rules in 3.b. above are applied by treating the offset as an actual distribution.

Since the deemed distribution treatment under §72(p) is solely a tax rule, and is not treated as an actual distribution for other purposes (see 3. above), the deemed distribution does not affect the participant's continued obligation to repay the loan. The loan obligation is not extinguished until the loan is repaid, either by the participant through a resumption of loan payments, or by offset against the participant's accrued benefit.

From Relius:

If a participant defaults on a loan when the participant does not have a distributable event, the plan may not offset the loan but must report the defaulted loan as a deemed distribution. The plan reports the deemed distribution on a Form 1099-R with a code “L” in box 7 and a code “1” if the participant is subject to the 10% premature distribution tax. For purposes of the Form 5500, the plan will report the deemed distribution on line 2g of Schedule H or I, and will reduce the plan assets as of the end of the year by the amount of the deemed distribution (Sch. H, line 1c(8); Sch. I, lines 1a and 3(e)). Even though the deemed distribution no longer is part of the plan assets for Form 5500 reporting purposes, the defaulted loan continues to be a plan asset for purposes of vesting, top heavy and qualification for future loans. Accordingly, the plan must continue to accrue interest (“phantom” interest) on the loan until the plan offsets the loan. The additional interest, however, is not reported on a Form 1099-R or on the Form 5500.

Later, when the participant incurs a distributable event, the plan will offset the loan. However, when the deemed distribution precedes the loan offset, the plan does not report the later offset on a Form 1099-R nor on the Form 5500. The plan merely reduces the account balance paid to the participant by the amount of the loan.

Does this mean that, until the loan is offset, our 5500 assets and loan balance will not match the trust reports from the custodian? That could be years of irregularity. I understand the above reasoning that the 5500 should match the 1099s. So, if a 1099 was issued in 2012 (for example) the 5500 should reflect the deemed distribution then. But the fact that it is staying as a loan balance on the recordkeeping system is going to cause enormous confusion for future years.

Does anyone have any advice? Thanks.

Employer has maintained a PSP for many years. Appears that prior TPA had misread plan document and used forfeitures to reduce the employer contribution instead of allocating forfeitures together with the employer contribution. Thus, employer has underfunded PSP each year. I have not scoured EPCRS, but it would seem the following in a nutshell would need to happen:

1. Calculate contribution missed for each year plus interest;

2. Allocate missed contribution for each year to participants in Plan in that year;

3. Track down all terminated participants due a contribution and provide them with the $$$....

All years for which contribution miscalculated would need to be addressed.

Am about to jump into EPCRS Rev Proc.... Thanks in advance for any additional guidance....

does anyone have experience with this concept

Her IRA is called a “checkbook IRA,” an investment vehicle created nearly 20 years ago in a landmark court ruling that essentially said: It’s your money, so you can run the show – as long as you follow the rules.

Let’s step back a moment: Not many people even know you can invest your retirement savings in real estate. But under Section 408 of the Internal Revenue Code, as long as you don’t benefit directly, you are allowed to put some or even all the funds you set aside in a tax-sheltered IRA into real estate.

They’re called self-directed IRAs because you can move your funds around. But until a 1996 court case, every step you wanted to make had to be carried out through a costly custodian. You could not take direct control. Every time you wanted to mow the grass or pay the bills, you had to pay a trustee to do it.

In the 1996 case of Swanson vs. Commissioner, the tax court gave its blessing to a new type of self-directed IRA structure – the checkbook IRA – that is much simpler than investing through a regular custodial account.

Under the checkbook format, the IRA is set up as a self-directed account that’s capitalized by funds rolled over from your current retirement account. Then, a limited liability company is created in which your new IRA purchases all the membership units. Now, your money is held in an LLC and you are ready to invest at your discretion.

“I love real estate,” she said. “I feel much more comfortable investing in tangible real estate than stock and bonds and that sort of thing. And this puts me absolutely in full control.”

Under the rules, savvy real estate investors can buy, sell and manage domestic, foreign, commercial, residential and rental properties using money invested in their tax-deferred retirement account. The funds are held in a normal business account, and as the account’s manager, you can sign contracts and write checks on the account, just as with any other business.

The speed at which you can move opens up a slew of investment opportunities, such as snapping up foreclosures or tax liens – or even a house that has just come on the market in a prime spot near the ocean or in the mountains. And, “it’s a great way for people to finance their retirement homes long before they are ready to use them.”

There still are restrictions, of course. You can’t use the property as your own residence or vacation home, and that applies not only to you but also to anyone in your family. And you can’t take money out of your IRA until you are 59 1/2 without incurring a big tax bite, just as with a regular IRA.

Otherwise, rental income is tax-deferred because it is held in a tax-deferred IRA. And there is no capital gains tax when you sell an IRA-owned property.

A few other ground rules:

• You can sell a house and purchase another one, and you can buy more than one property at a time. But any property purchased by your IRA is owned by your IRA, not you individually.

• You can invest in raw land, real estate contracts or the trust deeds that back mortgages. And if you don’t have enough money to invest on your own, you can pool your resources with others in the same boat.

• Any money used to buy a property with your IRA has to come directly from your IRA, not you personally, and you can’t be reimbursed by your IRA. This includes earnest money and closing costs, who use their retirement accounts to buy investment properties in southwest Florida.

• Similarly, costs associated with remodeling and carrying real estate need to be paid directly from your account. And any income from your properties has to flow back to your IRA.

• You cannot do business with family members, including spouses, parents, children, grandparents, grandchildren and great-grandchildren.

There are fees too. There’s a charge to set up the LLC, and you still must have a custodian. But you don’t have to pay the custodian to execute each and every move you want to make, or to collect the rent and pay the bills. Consequently, the fees are far less than investing in real estate via a typical self-directed IRA.

Here's a new one, to me anyway.

Plan has basic safe harbor match. For purposes of DEFERRALS, the participant may make a separate election to defer up to 100% of any bonus. However, for purposes of the MATCH, bonuses are excluded.

Aside from the issue that this doesn't necessarily make sense to me, I'm wrestling with the question of whether this automatically violates the safe harbor provisions.I believe that if a compensation definition satisfies 414(s) it is permitted under 1.401(k)-3(b)(2). Since excluding bonuses is not a "safe harbor" but IS a "reasonable" definition for 414(s) compensation ratio testing, it seems like as long as the compensation ratio testing is passed, that this definition would be permissible.

However, I'm wondering if the fact that this definition applies only to the match, and not to the deferrals, changes that answer, if indeed it is correct in the first place?

Any thoughts on this would be appreciated!

Can the cost of the plan document be paid from Plan Assets? What if the plan is restated for law changes?

We also charge an annual document maintenance fee to our clients. Can this fee be paid from plan assets?

Thanks for your replies.

Participant has life insurance. Participant terminates and ownership is transferred to him. (There were probably better ways to handle the insurance, but it is done & we can't revisit that decision at this point.) He has elected to rollover the rest of his money. Generally tax is withheld on based on the value of the insurance. Since he has elected to rollover his other investment money is there a legitimate argument to forgo the 20% withholding that is based on the life insurance? I know that it is a taxable distribution, but many vendors will not withhold on outstanding loan balances when the other assets are rolled over. This is somewhat akin.

Thank in advance for any guidance.

So my x-testing skills are a little rusty. In a 401k plan, Is it possible for the ebar for the ABPT to be lower than the ebar for only the employer base contribution? Maybe if there is no service requirement for the 041k portion and a year of service requirement for the base portion and the base is allocated on comp from entry date? Maybe for someone who entered during the year? Any help would be appreciated. Thanks.

I am doing a 1/1/2012 valuation for a calendar year plan that terminated 12/31/2012. There is a small minimum required contribution. Is it permissible for the plan sponsor to elect to apply the prefunding balance toward the minimum if, at this point, all the distributions have been made and there are no assets left?

Thanks!

Any insight/anecdotal knowledge of enforcement activity for operational plan failure?

I realize this may be a bit "Benefits 101" for you, but appreciate your time . . .

Thanks

Simples aren't my expertise. Company wants to switch from a Simple to a traditional K Safe Harbor Plan. Can they do this during the same year or does the 12 month wait apply for a new K Plan? Also, assume the Simple funds can roll in? I assume there are methods of terminating a Simple K Plan similar to traditional?

Thanks

We have a plan where the owner has over 80% of the assets. Without consulting with us first, during 2012 he took out the majority of the money in the trust (nearly $473k), which was much more than his vested balance, leaving himself with a negative balance and insufficient money at the end of the year to cover all the other participants' balances. The trust now has about $50k and all other participant balances total about $97k.

Has anyone encountered this before and what suggestions do you have?

We have a situation where a participant died without completing a beneficiary designation form. In this event, the plan document says pay proceeds to the person's estate. The problem is that the person does not have an estate since the person had pretty much nothing. The cost to setup an estate would eat up the $800 or so due as a death benefit. Without an estate, we can't make the payment to the estate as the check could not be cashed except by the estate (or representyative thereof). Basically, create an estate for nothing, or have a check issued that can't be cashed!

What we do have is called the "Durable Power of Attorney" which names his mother to have Power of Attorney. Powers granted include "authorization to manage and conduct all of my affairs", which also allows for opening and closing of accounts, including "retirement accounts". While this seems to be the answer, does this not violate the "nonalienation clause" where a person can not assign his or her rights?

I suspect I amy be making too big of an issue, but I do believe that caution is merited. Should we just make payment to the Mom, who paid for his funeral, as beneficiary in light of the Durable Power of Attorney?

Any and all comments are appreciated! Thanks!

Place this just behind the prohibition of using forfeitures for safe harbor contributions, which holds the number 1 spot on the list of most ridiculous policy positions ever. This one is a close second, though.

http://www.mhco.com/BreakingNews/APartialTermRev_082213.html

Please tell me someone has something to contradict this, or that ASPPA will be writing a letter??

I'm sure this question has come up before but I can't find it. We have a participant who was unmarried pass away and name her mother as beneficiary, and her sister as contingent beneficiary. The mother died after the participant, but not before the deathh benefit of the participant was distributed. Does the benefit go to the mother or the sister as contingent beneficary.

My thought is this passes like any other inherritence. The mother was the rightful beneficiary and at the date of her death, the participant's account was among her assets even though it hadn't been distributed. Therefore, it should pass to the mother's estate and no longer be beholden to the beneficiary form.

Any thoughts or cites?