Hi all,

I have a CB plan that wants to terminate. If they were to terminate today, there would be $53,000 in excess assets (approximately) above accrued benefits.

The FA suggested that we use the excess assets to pay plan expenses which were previously paid by and deducted by the plan sponsor.

I was certain that there were problems with this, but I am not finding anything that suggests this is a problem.

Am I off base here? Is this a legitimate way to absorb the excess assets or are there problems with this plan?

Thanks in advance for any and all insight.

This relates to a frozen DB plan. Assume that for the first 3 years all 10 employees accrue .5% a year except for 1 owner accruing a higher benefit such as 5% of pay.

The plan is frozen at the end of year 3 (2010, in this example). It is now 2012. Assume the same 10 employees are in the plan all 5 years, and no one else has become eligible.

The plan must pass 401a26 on its prior benefit structure.

Does this test fail at 1/1/2012? For 10 employees, their average accrual per year of participation is .15% / 4 if 2011, the frozen plan year, counts as a year of participation. On the other hand, if it is reasonable from the regulations to interpret the test as not requiring one to count Years of Participation after the freeze date, then the 10 employees' accrual would all average .5% per year.

Another words, plans using new comparability with employees generally at .5% will not be able to be frozen for more than one year if there is a < 40% owner to eligible employee ratio.

Other possible interpretations:

a): At the time of the freeze, the population of current & former employees is also frozen for purpose of the 40% test.

b): Years of participation don't count years after the freeze, but you do factor in newly eligible employees as a < 40% person in the test.

c): Same as "a", except when plan is re-activiated, you have to make up missing years of participation unless plan is terminated and not reactivated.

Has the IRS made any statements about how they enforce this?

Thanks for any opinions.

Craig Schiller, CPC

I am reviewing a KSOP Form 5500. The 401(k) portion of the plan is invested at John Hancock via their platform. The person who prepared the form used J.H. tool to download the Sch D information into F.T. William our 5500 software. It appears all the funds they are invested in are Pooled Separated Accounts (PSA) and need to be reported on a Sch D.

When they do that we get the same EIN for all the funds. Here is the odd part the plan number is 000 for all of them.

1) I really am thinking the 3 digit plan number can't be 000

2) I would expect the 3 digit plan number to be different for each fund

Those of you who use J.H. for their clients is the EIN with a plan number 000 sound right? If not, do you have any idea what we could be doing wrong to get this resutl?

Thanks.

A participant in a 401(k) plan is receiving disability from his/her employer (paid for by his/her employer). Since this income is considered taxable, can a portion of these payments be contributed to the plan (assuming they do not violate the 415 limits) as employee deferrals?

We have a few clients who after leaving us, saw the error of their ways and came back, with plans in distress asking us to help them bring their plans current. The most extreme is one case of a client with two plans needing 9 years worth of amended or DFVC filings (about 4 or 5 are DFVC).

Rather than preparing the 8955-SSA (or SSA) for each year that one would have been required, our inclination is to just prepare the 8955-SSA forms for the final year's filings (which will be 2012). If we do it this way, we also would report only those people remaining to be reported (in other words, if someone would have been added (code A) and paid out (code D) within the years we have worked on we would just omit them, leaving only those newly reported participants (code A), or participants who were paid out and had been previously reported (code D).

Opinions?

I am preparing a VCP submission for a defaulted loan. Participant and sponsor "forgot" to continue payroll deductions and we discovered non-payment when working on 2012 trust accounting.

The participant took out a second loan which was sufficient to pay off the first prior to the original maturity date of the first loan. She is now making payments on the second loan.

Technically, it seems the second loan is irrelevant; it shouldn't matter where she got the money to pay off the first. What I want to know from those of you how have some experience with submissions on defaulted loans is should I include mention of the new loan to payoff the first or should I omit those details? I don't know if it would be helpful or harmful to the client's position with the IRS.

I understand that my plan, I'm a trustee, can "force" distributions for terminated participants that have under $5,000. It is my understanding that if they have less than $1,000 the only option I may have is to put them into an IRA with a Guaranteed Fund. What are my requirements for those with more than $1,000 but less than $5,000. I'm in the process of developing mailings to a handful of people that fall into both categories. Does anyone know of any providers that could set up the accounts for those under $1,000.

Employer fails to withhold on bonus. Employer is making the corrective contribution at 1/2 the rate of each employee's election percentage. The question is in regards to the match. The plan has a basic safe harbor match determined over the plan year. Should the match be calculated as if the employees had made the full missed 401(k) or just calculated using the corrective contribution as deferral? It seems to me that in this instance the proper correction would be to calculates as if the employees had been made the full deferral, but really can't fnd anything directly on point.

Thanks in advance for any guidance.

If a penalty is paid under ERISA Section 511, does the participant get any of that money? Or does all of it go to the DOL?

Thanks

I was curious on thoughts as to how to correctly complete the Schedule H, line 4a attachment-“Schedule of Delinquent Participant Contributions”. There is surprisingly very little instructions on how this attachment should be correctly completed and auditors opinions of how to complete seem to vary.

Should the schedule reflect the status as of plan year end or the filing date?

For example: 5500 filing for 12/31/12 is audited by IQPA and late contributions are discovered for 2012 in 2013. Plan sponsor elects to file VFCP so in June 2013, lost earnings are deposited and VFCP is filed. The 5500 for 12/31/12 is filed in July 2013.

For 2012 attachment, would the late contributions go under “Contributions Not Corrected” or “Contributions Pending Correction in VFCP”?

As of 12/31/12 they technically were “Contributions Not Corrected” but as of filing date they are now pending correction in VFCP. I suppose it does not matter that much, the latter gives greater clarification as to what is going on. If I use the former, I usually add a footnote to the schedule that VFCP was filed.

Would you agree that “Total Fully Corrected under VFCP” should not be used until the letter of “No Action” is received from the DOL?

As lost earnings were not deposited until 2013 the late contributions would have to be reported again on line 41 for 2013 and that attachment if “no action” letter is received then it seems “Total Fully Corrected under VFCP” would be used.

Thanks!

I am working on 2012 valuation of a 1-person DB plan. Looking back at the 2011 valuation, which was done by someone else, I see that the accrued benefit is based upon an old high three average, from 2001 to 2003. However, the only way I can match the benefit is if the 2001 compensation limit was $200,000, as it was in 2002. The chart that I have shows the 2001 compensation limit as $170,000. I think I remember reading that one could consider the comp limit prior to 2002 to be $200,000. Does anyone know a source for this?

Thank you.

An accountant called asking if sub s profit can be used as compensation in any pension calculations. I don't believe it can, but someone else is claiming that it can.

I believe that only w2 income from a sub s corporation is compensation.

Is that correct?

Can you change entry dates for matching contributions from first day of month to semi-annual? The plan has one-year of service/age 21 eligibility.

Plan has annuities as its investment vehicle.

The statement from the Insurance Company lists:

1. A Contract Value

2. Minimum Guaranteed Surrender Value

3. A Cash Surrender Value

4. Income Account Value

Which of these numbers should be used when determining the account balance at the end of the year?

What limits need to be prorated for a short plan year? I know the SSWB, 415, and Comp, but how about covered comp? Anything else?

Non-pubic company has employee stock options outstanding, all expire at 10-year anniversary very soon. The options are all exempt from 409A under the take-out provisions for stock options. Options are all well in-the-money, and will likely remain so through the end of the exercise period. For good reasons (which I won't bother to mention here), employer wants to offer the employees an incentive NOT TO EXERCISE. Essentially, if they allow the options to lapse at the 10-year point, they would receive restricted shares having a value equal to the in-the-money value (or perhaps as a further incentive shares worth something more than the in-the-money value). Those shares will be transferred to the employees subject to a 2-year vesting requirement, subject to accelerated vesting if terminated without cause, change in control or death. Thus, viewed in isolation, the transfer of those resricted shares would be a transfer of property subject to Section 83 and not a deferral of compensation subject to Section 409A. Nonetheless, if this offer is made, will it be an "extension" that causes the option to be treated as deferred compensation from the original grant date (resulting in a 409A violation)?

Good evening, everyone!

We have a client that sponsors an ERISA executive life insurance and executive disability plan. Each plan is fully insured, and has fewer than 100 participants. A few years ago, the client set up a wrap document that included all company benefits under one ERISA plan number (with separate SPDs for these two component small plans), several plans under which have more than 100 participants. There is little doubt that each executive plan standing alone would not need to file a Form 5500. However, what if it is part of the wrap? Should the details be included in the form of a Schedule A, or be named if self-funded and no Schedule A is available?

Can anyone point to any IRS or DOL authority on the subject? I can't seem to find anything conclusive.

Finally, is there any reason to think that a severance plan with more than 100 participants wouldn't need to file a Form 5500? I think ERISA covers these under Section 3(1)...

Thanks so much for the insight!

Hello,

Can the max loan (50% of vested acct balance) take into account rollover amounts?

ex. --vested balance in the plan is $10000 and the participant has a rollover amount of $10000 and wants to take a $10,000 loan.

I'm ignoring the ability to w/d rollover funds before age 59.5 in the plan doc. I fthe plan doc had a age limit for in-service dist even for rollovers would that change the answer?

Thanks

If a 55 year-old participant is eligible for an early retirement, normal retirement is age 65, there are subsidized early retirement factors, and you are calculating his immediate lump sum, it seems to me that the participant should receive the greater of four lump sums:

1) The age 55 present value of the age 65 normal retirement benefit, based on the plan's actuarial equivalence,

2) The age 55 present value of the age 65 normal retirement benefit, using 417(e) assumptions,

3) The age 55 present value of the immediate subsidized early retirement benefit, based upon the plan's assumptions, and

4) The age 55 present value of the immediate subsidized early retirement benefit, based upon the 417(e) assumptions.

Does anyone agree/disagree?

Thanks!

Hello. We have been approached by a client who has an employee who worked in Ireland and participated in and received a retirement benefit while employed there. The employee has returned to the US and wants to rollover his foreign retirement benefit to his current employer's plan. We have contacted Relius, our document provider, and were told that if the law allows for this kind of rollover, the document language covers the rollover.

Are there any ERISA attorneys out there who can tell if foreign pension funds are rollover eligible?

Thanks