wsp

It would still be on the trust records...everything from that checking account that acts as a payroll holding / distribution clearing account to the individual brokerage accounts. For those accounts that don't have a custodian the TIN is on the 1099-R's, 1096's, and 945's. Without it there is no real separation of assets.... Should be part of basic plan documentation files...

We are the accountants for the entity (and TPA of the salaried DC plan). However, the entity is part of a multi-employer Union DB Plan for at least 20 different companies (each with multiple locations). Owner of client company isn't part of the board of trustees of the plan nor does he really have much involvement other than sending his assigned portion of the liability to the plan. The letter was sent from the board of trustees to the various Local's Presidents. As a participating employer he was cc'd on it and simply wanted a plain-speak explanation of it. Your explanation filled in most of the holes that I had....My understanding of it was about what you described...just got thrown a bit with this application. Figured that I must not have got it because this application wouldn't have been filed "just because". Was the old 412(3) filing typically an annual thing for some plans? Or was it reserved for only when the unfunded liability got too large for the respective sponsors to pay? Seems to me that the sponsors would be pushing for this application every year, the participants want full funding, and the actuary is right in the middle. Also, for my own personal knowledge...to keep the plans funding status within reasonable distance of being fully funded...I would think that the deficiency would be addressed earlier rather than later as the market growth is starting to slow and it's quite possible that they turn and the deficiency actually increases....thus placing a larger burden on the membership...correct? btw thanks Effen for taking the time. It is much appreciated.

Can't link to the PLR but here's the gist. Plan is multiemployer DB plan, jointly sponsored by union and employers. New funding agreeemennt negotiated provides for a funding policy that states that if, as of a valuation date, there is a projected minimum funding deficiency within five years of said date, future accruals will be reduced to push off the expected date for such deficiency for at least eigh years after said valuation date. Seems pretty clear to me on that point. But, the last valuation showed a projected funding deficiency in 2016. Still outside the that 5 year window specified above, but evidently soon enough that the Trust filed for an extension of the amortization period for unfunded liabilities. Of course it was denied, but with the caveat that if the funding deficiency was within that five year period and future accruals will be curtailed, the service would consider a request for an extension of the amortization period in an expedited manner. We could talk to actuary but better to do so with more of an understanding of what the components are... I know that the period of time to amortize the unfunded liability can be increased to not more than 10 years....but increased from what? 5 years? And, assuming that the unfunded liability is 10%...what is the portion of the liability that is required to be funded in years 1 and 2? And, in your opinion, did the plan request this extension simply to lower their required funding for the year or are their other reasons they might do this? Seems odd to even request it given that the policy was pretty clear about that 5 year window and their options after that. Is this a typical request?

Not necessarily applicable....If separation from service is voluntary on part of employee then it doesn't apply, does it? Of course appropriate due diligence (signed letter of resignation etc) will need to be followed to avoid litigation. But, yes...I agree that the participant can't be forced out.

I've got a PLR that I'm trying to interpret for one of our accountants and I think I understand what's going on but would like some confirmation.... Can someone give me a brief laymans explanation of the unfunded liabiliities described in 412(b), their required amortization periods and the connection to the reduction of future accruals and actual cash dollar outlays so that I can correctly explain this to them...

But wouldn't those contributions be effective only for contributions made after the effective date? Thus leaving 2006 contributions at the old vest rate? I was under the impression that we would be able to grandfather in older contributions.

client wants to start a 401(k)/ps plan and encourage LT employment. Anything wrong with essentially front loading the contribution in year 1 with a 20% contribution and then having a 5 year cliff vesting on the money. Following years would have deferrals and possibly a match so continuing ER contributions are going to occur. But there likely won't be additionally PS contributions. In talking with the owner I quickly saw his thoughts on this...Reality says that these employees are not going to stay for the 5 years (construction industry and very young employees) and so the contribution essentially is going to the owner anyways as a forfeiture. He doesn't anticipate growing so any new employee wouldn't be eligible for the forfeiture. Basically raises his CY contribution to about 70k. Not to mention the tax savings of 25k. Problems? If the people stay they get the dough...no different than any other plan. Owner claims he has no intent of running them off but even that seems like it's employment law isn't it?

Mike, I can understand your worry. You're taking the right steps in monitoring your account and I would continue to do so but it's all very likely going to work itself out over the next 2 weeks. But, in answer to your question, there is a time frame that the money has to be segregated from the corporate accounts into the account of the plan. That doesn't mean that it has to be in an account that is accessible by you or even in an account in your name. Essentially, all that plan account has to be is a checking account that has been set up with the plan's tax id number and the plan name. This is done to segregate the assets of the plan (which can't be attached by crediters of the company) from the assets of the company. That separation is a good thing for you. Hopefully that's exactly what has happened in your case. The money is sitting in a checking account somewhere waiting for the right person to be able to make the transfer. That money may or may not be actually earning income. But, if it is, it should be allocated to your account as well. Legally it's not supposed to go back to the company. But they can use it to offset any fees that would have otherwise been charged to your account. The fact that it's not being invested where you directed it to is a different issue entirely and is a facts and circumstances issue rather than a specific deadline issue. While I wouldn't say that your situation is normal. It does happen. Typically when the owner of a company decides at the very last minute to make the change to a 401(k) and wants it done yesterday. It takes time to set these up and it sounds like your company didn't take into consideration that people take leaves, get sick, take vacations and such so only one person was authorized on that checking account.

In the past where this has occurred with me I've always chosen route #1; the lesser of three evils type of thing.

So the vendors are probably mad at me for not taking any of their stuff....After spending a week in Vegas, the last thing I wanted to do was haul more stuff back than I left with. The binder is bad enough! I have to admit that bag would have been nice though...I got in late on Monday though and already felt like the last guy chosen in kickball...the shame of being told that there were no more bags would have been too much for my fragile ego.

In the scenario above would the effective date of the amendment be July 1, 2006 or is it retro to January 1? Or does it matter?

Does it make sense for a company to offer a NQDC plan to it's "core key" (their term not mine) employees if they are not likely to take full advantage of the 401(k) deferrals? The "core key" employees are those that are in management positions that they hope to use this plan to retain and/or attract. Plan in question is a Profit Sharing plan that they are modifying to a SH with a match. They anticipate only about 50%-60% participation even with the match. Only 2 of those "core key" employees are true HCE/KEY employees. All the rest fall into NHCE category. Likely that all of the "core key" will hit the 15k limit but only because of the quarterly bonuses that are provided. Otherwise they would fall short. I just can't see the benefit of the second plan....but I've no experience in the arena either. Certainly an employer contribution funded plan makes sense but not employee deferral. Also, am I correct in saying that the distributions are funnelled through payroll? And thus aren't eligible for rollover or anything of that ilk? Thanks in advance...

This one will be interesting to follow.... Unfortunately for the client (well, since it's their fault I guess it's not such a bad thing) the cost, in terms of time and expense, of this correction will dwarf match differential. Assuming of course that the SPD provides a formula. I'm putting my money on 'discretionary'.

I did exactly this earlier this year and found that if the SARSEP was established using 5305A-SEP then you had to terminate in year 1 and establish the new plan in year 2. But, if it was originally established using a different document than 5305A-SEP then you could (depending on the terms of the document) terminate and establish a new 401(k) in the same year. As far as testing goes...402(g) is combined but ADP/ACP is separate so take that into consideration when looking at the data and determining the best time to terminate. Quite possibly might make sense to wait and terminate effective 12/31 if the 401(k) isn't going to be safe harbor.

Wasn't planning on doing the legwork other than telling the participant that the cost in terms of time and money would be less by going to an attorney and having it done right the first time. Trying to get an answer to the questions that I know will come up (why can't I do this myself and how much will this cost me?). Plan's procedures are to provide required changes for various missing components. Gotta be cheaper and easier for me if there aren't any to make, doesn't it?

Can I get some input as to the range of fees that are being charged by attorneys for drafting a basic QDRO after having already been supplied a sample? QDRO involves a relatively simple 50-50 split of contributions made between period A and period B. Obvious from supplied divorce decree that they divorced without counsel and are attempting to split the assets in the manner. I'd like to tell them that they would save money by retaining counsel rather than submitting it to me over and over until it's correct, but really have no clue as to the time and expense involved in a manner such as this.

PiP's right...Show it as a PT. Hopefully, it will force him to address the issue in the correct manner; including making sure that participant is found and paid. Besides the audit would be the result of his own misconduct. Better that then have it found on random audit and it be noted that you failed to produce accurate filings for him. Why allow your hand to be in the cookie jar with him....

It's a tax on the dividends. So any of the above plus foreign stocks. Another motive for netting them with the dividends is that on occasion a portion of the dividend is credited back to the account. Not sure why it is in some cases but not in others. But that credit is also netted against dividends on the brokers statements.

I used to run them through as Janet had said; showing them as a fee (expense). But, the dreaded auditors on an account didn't like it that they couldn't match the dividends I was showing with those being shown on the brokerage statements (broker netted the expense against dividends). They continued to complain even after I provided them with the expense shown as it's own line item on the income statement. So, I gave up and netted them against the earnings. So, either way works fine as no one really cared either way except the auditor.

Tom, are you sure you're not going to answer any "what if's" in your presentation? I've been spending hours preparing the most difficult and convoluted case I could, just to try to throw you. It was my hope that you'd simply panic and break out in song. That would be a sight to behold.

Got it. Irrelevent in this case as there's never been a year where more than 70 people have been employed at the company during a year and rare has there been more than 55 at any one time. No counting necessary and no filing required. Not going to have the client provide the document if it's not necessary. Thanks, jpod!

Not questioning the response as I agree with your conclusion but why would the meidcal reimbursement component be treated separately from the dependent care component? Or was that not what you were alluding to?

Retirement plan client called and asked about filing a 5500 for their cafeteria plan. I wasn't sure so figured I'd solicit help from the experts. Plan has three components: Medical Premium payment, Dependent Care Reimbursement FSA, and Unreimbursed Medical Care FSA. Up until this last year all were funded with employee dollars. The last 5500 was filed in 2001. It was filed along with only a Schedule F. Plan has (and always has had) under 100 participants. The medical premium is paid every pay period. But, obviously, the FSA's have assets that need to be tracked. I don't believe a filing is required, but should they have been filing? If so, what Forms should have been included? This year the plan also has a matching feature where the company will match 25% of all employee dollars contributed to the medical FSA up to a max match of $455. Does that change the answer? No HCE's participate so discrimination testing issues. Any help provided will be much appreciated.

One would think that the IRS would recognize that said son-in-law has taken the family aggravation load from the owner on the day that he said "I do" and thus should be rewarded with HCE status.

#6 The Road to Wellville?