What is the correction when a sponsor signs a 401(k) plan document (after the stated effective date in the document), but then never sets up accounts or arranges deferrals?

Is it simply the missed opportunity to defer under EPCRS?

What if the plan also happens to be a SH (3%) plan?

I am taking over a case in which the old TPA says the plan failed ADP and that Excess Deferrals were refunded more than 12 months after the year in which the test failed. They recommend client file VCP to correct late refund with a QNEC (or One-to-One). Here's the interesting part - The ADP test actually passed! (They omitted several HCEs who were not deferring.) The upshot; however, is that participants under age 59.5 received impermissible in-service distributions of deferrals.

1. Would you agree that this an operational violation which requires a VCP filing?

2. What correction should we propose? I'd like to allow employees to re-defer the distributions, but can I get a waiver of 402(g) limit and ADP test? (I doubt it.)

Thanks.

The annual limit to DC plans for 2013 is $51,000, can a Church[Non-electing] give different amounts to specific employee’s?

I know they formerly could but have there been any changes??

Thanks in advance for your help

I've been searching high and low to determine what the penalty would be if a health plan kept an annual limit in place after this year. I haven't yet found anything. Anyone have any thoughts or comments?

New client has a DB plan that is in the process of being terminated. It has a large ($100K interpolated terminal reserve) insurance policy on the owner that he wants to keep, but wants to get out of the plan.

I suggested the plan borrow, say, $90K out of the policy, and then he personally buy the remaining $10K value. Someone from the home office says...

"I have heard of taking a loan then buying for a reduced cost from the plan...only in a PS plan and has to be paid back within a certain amount of time or its deemed income."

I could be wrong; having less and less to do with DBs all the time. But I kinda figured upon plan termination, just about anything would be fair game. And the second sentence makes me think the guy doesn't really know anything.

Any thoughts/comments? We are setting up a 401(k) plan and could roll over the policy along with other assets, but really don't want to do that and delay the inevitable and make it worse. (I suppose if there is some restriction on doing this within a DB we could do the rollover and then borrow once it is in the 401(k)).

ADP tested what we later learned was incorrect comp and incomplete census data, failed test, and refunds were done. After obtaining full and correct data, the test passed. What do we do about the ADP refund made unnecessarily?

My understadning is that health insurance agents/brokers will be compensated for policies they sell through the individual marketplace/exchange.

Does anybody know:

Will the rate of compensation be set by the individual insurers or by the marketplace overseers (so that comp is uniform and no bias towards particular products)?

And whether the comp will be a % of premium or fixed, flat dollar amount per insured?

Thanks

I am checking a 2011 valuation of a one-man DB plan that was effective 1/1/2011. The assumed form of payment is a single life annuity. Since there is no accrued benefit, at 1/1/2011, the funding target is zero. I would have expected the target normal cost to be the greater of 1) the present value of the 2011 increase in the accrued benefit using plan assumptions and 2) the present value of the 2011 increase in the accrued benefit using the IRS mandated assumptions. However, my valuation software is ignoring the option using plan assumptions (which would have been greater). Does anyone have an idea of why the valuation software would be doing this?

Thanks!

A new customer is the sole owner of a business with about 100 employees. The owner is very sensitive to the possibility of his staff employees finding out what the owner's financial worth is. I've known him for years, in other contexts, and this has been, even before considering a plan, something of paramount concern to him. He outsources all bookkeeping, billing and accounting chores for the purpose of firewalling financial information from his employees.

He wants to set up a 401k plan and is willing to put in 5% of pay for all plan-eligible employees, so that he himself can cross-test his way into $55,500 a year. Given the rate of turnover of staff, we have determined that within 3 years the plan would likely be top-heavy, i.e., he would have more than 60% of the accumulated benefits in the plan. He is very concerned that this would cause discord by several employees if they figured out he had the lion's share of the accumulated benefits.

We are considering setting up two plans. One just for "owner-employees", but permissively aggregating it with the other, generally available plan.

The general plan will not be permitting employee direction of investment. The owner is insistent about this as well. All investment decisions will be made by a 5-person committee the owner will appoint. The owner will be the trustee.

For the owner's plan, the owner will be the trustee as well. No employee direction of investment either. The trustee, rather than an investment committee, will make the investment decisions over the owner's plan.

Effectively, this gives the owner individual direction over his benefits, but not the other employees over their benefits. Due to the permissive aggregation for nondiscrimination and coverage testing, the two plans will be but one 'plan' (Treas Reg section 1.401(a)(4)-12, definition of Plan) for purposes of the Treas Reg section 1.401(a)(4)-4 rules against discrimination regarding benefits, rights or features, of which participant direction of investment is clearly identified as one.

Facially and technically, employee direction of investments will not be permitted under either plan. On the surface, the difference is merely that in the staff plan, an investment committee will be directing the trustee on what investments to make, while in the owner's plan, the trustee makes those decisions without a committee. The owner will only be directing the investment of his own benefits in his role as trustee of the owner's plan, not in his role as an employee. But because he 'wears both hats', the practical effect is that this highly compensated employee chooses how his benefits are invested, but the others (nonHCEs) do not.

The ERISA attorney cautions against this because of Treas Reg section 1.401(a)(4)-4© effective availability of BRFs, but also noted that, on the other hand, federal courts have applied differently rules to multiple hat wearer's actions, depending on what hat applies to the specific action being taken. She said it in any plan where the trustee makes investment decisions the trustee is also a benefiting employee, the effect is that the trustee/employee gets to decide investment of his or her benefits while the other benefiting employees do not. She was not aware of any ruling that basically had the effect of saying that a non-directed trustee must not be a benefiting employee him/herself. She suggested that if this two plan approach is implemented, the trust documents ought to be drafted to give the trustee authority to either direct the investments or delegate to a committee of 1 to 7 benefiting employees to decide and give investment directives to the trustee. Then, as trustee of the staff plan, the owner would delegate to a committee made up of 5 benefiting employees for the staff plan and to a committee of 1, himself as the only employee benefiting under the owner's plan.

I am wondering what you think, what other approaches might be taken to accomplish these objectives, etc.

Section 4204(a)(2) provides that if a buyer defaults on its withdrawal liability obligations, the Seller (or the bond if a bond is used) shall pay to the plan an amount equal to the withdrawal liability that would have been due but for Section 4204. This seems to suggest that no matter the amount of withdrawal liability owed by the buyer (i.e., even if that amount is less than the bond amount), the fund may collect the entire bond amount. This seems rather unfair in light of the fact that the buyer's withdrawal liability is based, in part, on the seller's contribution history. Has there been any guidance with respect to this point? PBGC Opinion Letter 83-10 touches on some of the fairness issues, but it is not directly on point.

Have a small client that terminated their DB plan and 401(k) plan effective 1/31/12. The plans just covered husband and wife (no employees).

We have been reminding them of the one year distribution rule. However, they are going through a very bitter divorce and assets (including plan assets and benefits) are part of it. They have not been able to finalize the financial aspects regarding plan assets.

I dont believe there is any relief (other than non-liquid assets) in terms of the one year distribution requirement.

Has anyone been through this? Is there any solution?

Thanks.

We were asked by the auditors of a client for an SSAE 16 letter

Does anyone have experience with this? Is it requested often? A search of the forums comes up empty.

I am working on a 401k plan with several missing participants. I have not tried locator services yet, but I made a note of the private options mentioned in today's previous topic.

Getting to my question...the document says that account balances over $1,000 can't be forfeited until age 65. Does state law ever trump the document? Otherwise, when does turning money over to the state come into play...only if the plan is terminating?

I have a PLLC that file Form 1120S (for S corp).

How is pension compensation determined:

(a) salary or

(b) salary + ordinary business income (less contribution)

I have a ASC Basic DB plan document.

Thanks for all responses.

Client changes the match calucation by removing the true-up option for calculating match.

Nowhere in the SPD is true-up mentioned. Is an SMM required?

A plan has several loans that have been long since defaulted. Some participants have never made a payment. Needless to say the plan has been a bit lax in their administration of these with no direction for deem distributions. Would there be an issue if they deemed these loans now? What tax year should they use? Any other reg issues that come to mind?

Hi. What type of participant disclosure or account statement is required at termination of employment? We provide annual individual account statements to our plan participants. We distribute these statements at the beginning of July. My question is this: if a participant terminates employment, say in September, do we need to provide an updated account statement to the participant? Or can we rely on the annual account statement that we provided to the employee a few months prior? Does the answer change if the plan is a DB plan versus a DC plan?

Thanks for any guidance on this.

participant incorrectly deferred too much. payroll was processed in accordance with the participant's instructions. can you refund the money once it is in the plan?

Plan makes matching contributions each payroll and then does a true up at the end of the plan year. The 2011 true up deposit was not made. They are going to make the deposit now, but is there a penalty due for this missed deposit? Do I file form 5330? I guess i'm asking is what all needs to be done to properly correct this? I'm guessing it's not as easy as just making the deposit now.

Can someone provide me with the Regulations/Cite that allows plan sponsors to cashout terminated participants balances that are less than $1,000?

Also, is there a requirement by either the IRS or DOL relating to the under $1,000 cash out process? Please provide the regulation or Code. Thanks.