We have a client that currently has a 401(k) plan with a 3% safe harbor with us.

They are interested in setting up a separate ESOP Plan. Unfortunately we do not administer ESOP plans so they will be setting up the ESOP plan with a different TPA effective 1/1/2014 and leaving the 401k with us.

Here's the question, they want to fund the 3% safe harbor non-elective contribution to the ESOP plan instead of the 401(k) (starting 2014 and going forward). Is this permissible?? and if so will this still exclude the 401(k) from non-discrimination testing and count towards a top heavy contribution for the 401k if applicable?

Is there a deadline for starting a 401(k) plan other than a safe harbor plan?

This ERISA Money Purchase Pension Plan is funded solely by the participating employer and has for decades invested solely in treasuries. Is this investment policy a breach of the Fiduciary Standard/Prudent Man Rule?

Upon retirement the participant may not take a lump-sum settlement but is limited to a maximum monthly withdrawal of $2,500 until the account is depleted. There are no other options. Can this be successfully challenged in Court?

Plan has recently been terminated. Forfeiture allows for the payment of expenses. If 2014 expenses are currently billed, can the trust pay these expenses in advance of the performance of these services?

We have a governmental 401(a) plan with a pick-up feature, and an employer nonelective contribution subject to a vesting schedule. The plan states that service with the employer will not be counted during the time the employee failed or refused to make a contribution to the plan.

Can the plan exclude service while a participant failed or refused to make a contribution required under the terms of the plan?

I have a 403b document ("widely" used by a lot of 403b's) that states in black and white - "Forfeitures shall revert to the Employer."

Thoughts? When I saw this, the first thing that occurred to me is that the following is in 401(a)(2) (OK, I had to look for the exact reference!) which would not apply to a 403b plan--hence, it WOULD be possible.

(2) if under the trust instrument it is impossible, at any time prior to the satisfaction of all liabilities with respect to employees and their beneficiaries under the trust, for any part of the corpus or income to be (within the taxable year or thereafter) used for, or diverted to, purposes other than for the exclusive benefit of his employees or their beneficiaries

Just curious to know if anyone has seen this.

SH Match plan has an initial auto deferral of 0%. The autoescalation is 2% each year. Other than defying the logic of having an ACA in the first year of participation, can the autodefrral rate be 0%? Thanks.

The profit sharing plan I'm working on has forfeitures. The plan document states that forfeitures are to be used in the year following to reduce the employer contribution. If the sponsor is not making a contribution what should be done with the forfeitures. Should they be reallocated using the contribution formula? The plan is top-heavy and the contribution formula is non-integrated.

Thanks for the help.

Hi all,

I have a situation where company is owned 100% by A. A's mother worked at the company, terminated 3 years ago, has not take a distribution. Is mom's account balance included with A's in determining whether plan is top heavy?

Thanks much for any help with this issue!

Other than paying taxes, I do not provide actuarial services in behalf of any government entity. Nevertheless, I'm curious how actuaries might approach the "13th check" that Detroit General Retirement System paid its retirees. As I understand (and please correct if off-base), liabilities were valued assuming say an 8% r.o.i. target. In years when investments outperformed the target, some portion of the "excess" earnings were distributed to retirees. Thus, because good year's investment performance was not there to offset bad year's investment performance, the investment target % could not be met. In short, there was a failure to understand or pay attention to what long-term rate of return meant.

Clearly, what was done in practice would be acceptable if the excess earnings were determined by comparing plan assets with the liabilities evaluated at a conservatively lower target rate, such as 3% and then distributing part of the excess, if any.

Has anyone out there seen this approach used or in addition to Detroit, does the rest of the world not behave so rationally either?

Hi - my first post.

I apologize if this isn't the right forum.

I've had a long day of internet research & phone calls after discovering $2000 of new medical charges today that I wasn't expecting for 2013.

Background:

I work as a professional engineer for a small company with 11 employees.

Our HR department & medical plans are through some other company.

Our health plans are Aetna.

In late-August every year, we have an "opt-in" to one of about eight medical benefit plans including:

*6 PPO plans (which operate Oct 1 - Sept 30)

*2 HDHP plans (which operate Jan 1 - Dec 31)

Regardless of the plan selected, it becomes effective on October 1st.

Myself & a few others have switched plans a few times... and it seems we get penalized for the switch:

Case 1: A person has a PPO plan and decides to switch to a HDHP plan.

On October 1st, the new HDHP plan starts with a deductible at $0. A person may pay $400 towards their $1000 deductible.

On January 1st, the HDHP plan year re-starts with the deductible back at $0.

Essentially, it appears that the employee had to incur a "mini-year" of three months.

This does not seem fair as the first months of most plan years will be full pay into the deductible.

Case 2: A person has a HDHP plan and decides to switch to a PPO.

On October 1st, the new PPO plan starts with a deductible at $0.

Thus, the HDHP plan only lasted 9 months... not 12.

In Case 1, a person could seemingly be paying into three plans over two calendar years. PPO for 9 months, HDHP for 3 months, HDHP for 12 months.

In Case 2, a person could seemingly be paying into two plans over one calendar year. HDHP for 9 months, PPO for 3 months.

If this logic is correct, an employee loses out every time they wish to switch between plans.

Additionally, the set-up seems to usher people towards the PPO plans (which have much higher premiums).

Questions:

1. Do these conditions actually exist? Are my cases possible?

2. Does this seem fair that an employee should have 9-month and 3-month "mini-years" where they are paying straight into deductibles, every time they switch plans?

3. Is there anything I can do about this? (My pregnant wife is a stay-at-a-home mom and is partially-paralyzed... we've had a rough year and $2000 more in charges is not something we want right now.)

Thanks to anybody that could move this to the right forum and/or answer questions.

Mike in Atlanta, Georgia

Just for the 100% of average annual comp limit, under 1.415(b)-1(a)(5).

Say you have an employer (1-person corporation) that hs been in business for 3 years. Further suppose that W-2 income has been exactly $100,000 each year.

For 2014 and onward, employer anticipates large increase in compensation - far above maximum comp level.

When calculating a 415 maximum benefit, I read the regs as requiring use of pre-participation income when determining the high 3-year average. So in the first year, (2014) average comp would be (100,000 + 100,000 + 260,000 = 460,000/3 = 153,333) rather than simply using the higher 260,000 figure. Have I got that right?

The QACA regulations in 1.401(k)-3(j)(2)(iii) lists 4 "exceptions" to the uniformity rule. I know that these exceptions also apply to EACA plans - because it says as much in 1.414(w)-1(b)(2)(ii).

But the QACA regulations also address the "treatement of periods without default contributions" in 1.401(k)-(j)(2)(iv) and allows the plan to "reset" the intial period if default contributions have not been made for 1 plan year.

Can the reset option in 1.401(k)-(j)(2)(iv) also apply to EACA plans? Or is it just 1.401(k)-3(j)(2)(iii) that applies to EACA?

Company's DB Plan currently uses a traditional final-average-pay formula. Company is switching to a cash-balance formula for new hires and rehires only (i.e., no conversion of prior traditional accruals and no switch for continuously employed participants). Vested terminated employees with traditional benefits who are rehired after the switch will have a frozen traditional benefit and a new cash-balance benefit. Is there any need for the plan to provide that compensation from the period reemployment will be taken into account when calculating payment of the frozen traditional benefit? The regs suggest that this would be necessary if the traditional benefit were converted to an opening account balance, but I don't see any requirement that later comp be counted if you don't convert.

Any thoughts appreciated. Cheers.

i know there are quite a few threads but we have some confusion in my office. in the case of a family plan. 4 employees, two parents and two adult kids. the kids have no ownership interest. would there be attribution of the parents stock to them or not? they clearly do not meet the 10% substantial owner test without attribution.

is this a pbgc plan? my answer is yes but some around me do not agree.

403b plan covers only HCE's, and 401k plan excludes HCE's. Both plans have uniform match. I assume I can aggregate the ACP Test? Both plans provide for same nonelective contribution, which I assume would still be able for the design based safe harbor (or at least aggregation is permitted for testing, which will pass because everyone has same allocation rate)?

403b Plan effective 12/1/2013, with a pye of 12/31/2013. My concern is that the 415 limit would have to be prorated down to $4,250 plus catch-ups of $5,500. OK, I can generally avoid by making the plan effective 1/1/2013, but is that possible in a 403b plan (i.e., a retroactive effective date)?

I have a plan (actually two) where the prior actuary designed the plan so that the interest crediting rate was initially equal to one of the safe harbor indices (plus margin where applicable).

In the case of those Plans, as interest rates dropped, the prior actuary put in a fixed floor rate in the plans so that no violation of the 133 1/3rd rule would occur if the interest rates dropped.

Fast forward to today, the regulations for rates provide a similar or same list of safe harbor rates, and under 1.411(b)(5)-1(d)(6) describes that a plan violates the safe harbor if it uses any combination of the greater of rates in the safe harbor (which are those bond indices, 3rd segment rate, and a fixed rate that has the comment [RESERVED] after it).

The rules about acceptable combinations of interest rates in 1.411(b)(5)-1(d)(6)(ii) describe acceptable combinations of bond rates with an annual floor, and the comment after it is again [RESERVED], and no guidance is provided.

The past couple of years, the fixed rate specified due to the 133 1/3rd rule is higher than the t-bill and short t-bond rates plus their margins (it is about 2% - the floor in each case for the interest credit rate).

Does anyone know when the powers that be are going to specify an acceptable annual floor, or if they will, under 1.411(b)(5)-1(d)(6)(ii)?

Plan has brokerage account setup where each participant works with his / her own broker (approx. 30 some different brokers working with about 50 participants) -

Non-terminated participant (a 30-something) - requested directly from his broker a distribution from his 4 plan - no distribution election forms were made, no other forms of distribution can be taken (hardship, loans, etc.) - so the participant was ineligible altogether from taking the distribution - never let the TPA or his company's HR know he was taking the distribution which was discovered on receipt of monthly brokerage statement cc'd to the TPA -

how do you correct under EPCRS - it's 1 person, $200k account in a $15MM plan - so relatively speaking it's insignificant... SCP and just get the money back? VCP and just get the money back? - and then if the money can't be returned (if it was used to buy a fancy speed boat) - does the sponsor just show they made reasonable effort to get the money back?

Thanks

In the process of preparing a loan form for one of our platform 401k providers, it appears they deduct the loan processing fees from the loan check, thereby netting out the amount a participant will receive. ie a person requests a loan for $5000 but receives a net check of $4900 after fees are deducted for processing. however the platform deducts their loan maintenance fee quarterly directly from the participant's account on the 401k platform.

How is this correct when it was my understanding that fees are not taken into account for tax purposes when receiving a distribution from a plan but a participant is somehow obligated to repay the administrative fee to the plan when taking a loan. The platform is also including any express mail delivery fees to be deducted from the loan check amount as well. If the participant has no ability to receive this $ in the actual loan, why are they obligated to repay it as part of their outstanding loan ??