kgr12

Back in '05, a 401(k) plan adopted its 401(a)(31)(B) automatic distribution amendment to provide that on a pre-retirement termination of employment a benefit of $1,000 or less resulted in immediate distribution and anything above $1,000 could stay in the plan unless the participant elected otherwise. The plan sponsor is now thinking it wants to instead have anything over $1,000 and up to $5,000 paid out to an individual retirement plan if the participant doesn't elect distribution of the account. My question is, wouldn't the ability to remain in the plan with an account above $1,000 be a protected benefit, right or feature under 411(d)(6)? Thanks for your input.

Employer fails to perform ADP test in 2001-2006. Once discovered in 2007, the ADP test is performed and it turns out the ADP test was failed in 5 of those 6 years. For now I'm considering the failure to be significant under the EPCRS Rev. Proc., so that leads us to a VCP correction since we're too far out time-wise on several of the years to use self-correction. The 1-to-1 correction method is quite costly, and the straight QNEC method is doubly so. Two questions: 1. Anyone have any success in getting the IRS to accept any alternative correction methods for ADP failures aside from the two sanctioned methods? 2. Does either one of the two sanctioned correction methods or an alternative method have to be specifically authorized under the plan document in order to be used? Thanks in advance for your input!

Anyone have any thoughts on there being a substantial risk of forfeiture (for 457(f) purposes) resulting from a requirement in a 457(f) plan that a pre-condition to getting the benefit is that a participant must give the employer a waiver of all rights to sue the employer? To make it interesting, let's say that there's no service requirement, just the notion that you forfeit the benefit if you're not willing to execute the waiver at the time that you are otherwise entitled (in a 409A compliant way) to the benefit. Seems to have a lot more substance, particularly in the tax-exempt context, than the use of a non-compete as a means of preserving a SRF. Also, because such waivers typically apply to claims known and unknown to the employee, it seems harder to attack on a facts and circumstances basis than the non-compete scenario.

I'm trying to get a handle on any deadlines that exist for making 125 plan election changes. Plan document says that participant must make new election within 30 days after an event that allows them to make an election change. Employer is interested in making this a little more liberal where possible (so if it is possible, it is recognized that a plan amendment would be required). Here is how I'm interpreting Sec 125-4 of the regulations: 1. If the change comes from a special enrollment right, then Section 9801(f) of the Code requires that the change be made within 30 days of when the right arises (i.e can't be made more liberal). 2. If the change comes from a "Status Change," the consistency rule requires that the change be "on account of and CORRESPONDS WITH" the change in status. What "corresponds with" means isn't discussed and no specific deadline is identified. So it looks like a participant could change an election within some reasonable period after the event, such as 30 days, 31 days (maybe even by the end of the month following the month in which the status change occurs?). 3. If the change comes from anything else authorized (Court Order, entitlement to Medicare/Medicaid, significant cost or coverage changes, FMLA), there's no deadline and the consistency rule doesn't apply, so there's no apparent deadline at all, although as a practical matter an employer would probably want to impose one. Any comments, insights, remarks would be appreciated. Thanks!

A retailer has multiple locations around the country. The headquarters office established an arrangement allowing transit passes to be purchased pursuant to a compensation reduction agreement, as permitted by the Code and Regs. This arrangement is available to any employee anywhere in the country. At the same time, some of the satellite locations have been handing out transit pass vouchers to employees in their local office. Anything preventing an employee from receiving a voucher directly from the employer and also being eligible to purchase vouchers through compensation reduction? The only issue that I see as a direct problem is that having both increases the possibility that the $100 per month limit will be exceeded, resulting in some taxable income to an employee. Anyone see any problems in addition to that?

Does anyone have familiarity with a tax exempt employer operating a 457(B) and 457(f) plan in tandem with each other under the same or separate documents? The basic concept is to allow contributions to the tandem arrangement which are in excess of the 457(B) limits for a single year, credit and vest the amount equal to the 457(B) limit for the year to the 457(B) plan with the balance credited (but unvested) to the 457(f) plan. In a future year, to the extent that the individual has not exceeded the 457(B) limit for the year, amounts previously credited to the 457(f) plan would be credited to the 457(B) plan. The proposed regulations seem to suggest (1.457-4(e)(1)) that this would be permissible (even under a single plan document) so long as the excess remains subject to a substantial risk of forfeiture (i.e. the standard for remaining tax deferred under 457(f)). Thanks for any insight anyone has to offer.

I'd like to pose a slightly different set of facts, where the employer sponsor made no certification by 2/28/02 but had a pre-GUST prototype in place prior to that date. Specifically, Employer A adopts the standardized prototype plan of XYZ Co. in 1994 (let's assume that plan had all TRA '86, etc. approvals at the time of adoption by Employer A). The plan year ends 12/31 each year. 2/28/02 comes and goes and Employer A has neither restated for GUST nor executed a certification with any prototype or VS sponsor (including XYZ Co.) that it will adopt their plan by the end of the extended remedial amendment period. If I understand the IRS guidance and the discussion in this thread correctly, I would conclude: 1. The fact that Employer A had a pre-GUST prototype in place prior to 2/28/02 results in an extended remedial amendment period that ends no earlier than 12/31/02 (in other words, a certification by 2/28/02 wasn't necessary to have an extended remedial amendment period); 2. Employer A can adopt a GUST restatement within the extended remedial amendment period using any form of document it wishes: XYZ Co.'s prototype, any other sponsor's prototype, any other sponsor's Volume Submitter plan, or an individually designed plan; 3. The actual remedial amendment period end date that applies to Employer A is driven off of when XYZ Co. obtains a favorable opinion from the IRS (assuming timely submission by XYZ Co.), even if Employer A does not adopt XYZ Co.'s GUST-compliant prototype (namely, the later of 12/31/02 or the end of the month that is 12 months after the date the last letter is issued to XYZ Co. by the IRS). Am I on track with each of these conclusions? Thanks for your input!

Is there any reason an individual holding restricted stock (before the restriction lapses) couldn't rework the restricted stock agreement to either (1) extend the restriction (i.e. keep it nontaxable); or (2) trade it for some other form of benefit (nontaxable, taxable, or otherwise)?