Kevin C

Also note that the timing of the amendment can cause it to be discriminatory. See 1.401(a)(4)-5. You will want to make sure the amendment brings in NHCE's along with the HCE's.

Masteff, You got my point. Payroll by payroll match or PS without true-up is one of those situations where the document effectively limits you to the first compensation earned up to the $ limit. Sieve, There was a second part to my last "hypo". What if the person deferring 2% for the first 6 months and 6% for the second 6 months only made $23,000 per half year? Wouldn't it concern you if the only ones who don't have to worry about the timing of their deferrals reducing their match are those who make over $230,000? I also think your method is not following the terms of the hypothetical plan. The match is determined separately for each payroll based on compensation and deferrals only for that pay period, with NO true-up. What compensation amount is used? Every document I've seen determines the match amount using its definition of Plan Compensation. Plan Comp is also limited to the 401(a)(17) limit. If you have already counted $230,000 of Plan Compensation for prior payrolls, I would say that you have no Plan Compensation for those later payrolls. With zero Plan Comp for later payrolls, there can not be a match. In your scenario, you are allocating the match based on compensation in excess of $230,000 and then imposing a formula limit on the total match for the year using $230,000 of comp. Your example of the HCE starting and stopping deferrals is a good one. What you do is follow the terms of the plan. If they are not clear, then the ERISA plan administrator has to interpret them. Have I mentioned that I really like true-ups?

Sieve, It only works the way you describe if the plan document says it works that way. The preamble to the regulations says you are not REQUIRED to treat the 401(a)(17) limit at the first $230,000 of compensation. It does not say that the plan can not be set up that way. You are applying a true-up to the match calculation. What if the plan doesn't say there is a true-up? Lets change the situation around somewhat. The plan matches 100% of the first 4% of comp deferred. Match is determined separately for each payroll with NO true-up. Catch-ups are matched. A catchup eligible participant defers 2% of pay for 1/1 - 6/30 and earns $230,000 in those 6 months. He defers 6% of pay for the remainder of the year and earns another $230,000 in the last 6 months. Total deferrals for the year are $18,400 and his total unlimited comp is $460,000. What do you say his match will be for the year?

It can. There is language in the preamble to the 404© regs addressing compliance for brokerage windows. My opinion is that having a brokerage window does not completely remove all fiduciary liability. Others here will disagree. I think the fiduciary who decides that a brokerage window is an appropriate investment option for the plan has some liability for that decision and the fiduciary duty to monitor the use of the brokerage window to ensure that it remains an appropriate investment option for the plan. The DOL has repeatedly made it clear that 404© protection does not apply to the selection and monitoring of investment options. There was an article that addresses a DOL Q&A question about prohibited transactions in brokerage accounts posted in the Benefits in the News section on 8/8/2008. 8/8/2008: DOL Staff Members Provide Informal Views on ERISA 404© Plans, Fiduciary Liability, and Plan Expenses (Employee Benefits Institute of America (EBIA)) http://www.ebia.com/WeeklyArchives/401k/Statutes/19475 If the link doesn't work, you can access the article in the older benefits in the news area.

If the match is payroll by payroll, with no true-up, this doesn't work in all cases. If the deferrals each pay period are enough to receive the maximum match for that pay period, like in your example, then it does work. If deferrals are such that less than maximum match is received for at least one pay period, then I don't think this method works. For example, 100% match on deferrals up to 4% of pay on a payroll by payroll basis with NO true-up. Participant making $310,000 defers 3% of pay each pay period. When he reaches $230,000 in Comp for the year, he has deferred $6,900 and received a $6,900 match. What match does he get for the next pay period? The match for that pay period is based on comp only for that pay period. But, he already had $230,000 in comp previously counted for the year. How do you give him more match without basing his match on comp in excess of $230,000? To me, the solution is to have the plan provisions true-up the match. Otherwise, the HCE's have to be careful with their deferral rates so they can maximize their match.

It looks like he is combining two different definitions of HCE that are used for different purposes. Section 105 is titled Amounts Received Under Accident and Health Plans. His items 3) and 4) come from 105(h)(5). Although 105(h)(5)© is the highest paid 25%, not 35%. As jpod said, the definition of HCE for a 401(k) plan is in section 414(q). PPA did not change it. 414(q) HIGHLY COMPENSATED EMPLOYEE. -- 414(q)(1) IN GENERAL. --The term "highly compensated employee" means any employee who -- 414(q)(1)(A) was a 5-percent owner at any time during the year or the preceding year, or 414(q)(1)(B) for the preceding year -- 414(q)(1)(B)(i) had compensation from the employer in excess of $80,000, and 414(q)(1)(B)(ii) if the employer elects the application of this clause for such preceding year, was in the top-paid group of employees for such preceding year. The Secretary shall adjust the $80,000 amount under subparagraph (B) at the same time and in the same manner as under section 415(d), except that the base period shall be the calendar quarter ending September 30, 1996.

If you are happy with the auditors you are using, you can ask them if they will recommend any TPA's. We get most of our new business from referrals by existing clients. If you have contacts at other firms, they might be able to recommend someone, or suggest someone to avoid.

If the participant is going to be charged the fee, it has to be disclosed ahead of time. It appears to me that the SPD is the proper place for that disclosure. We haven't convinced ourselves that $X per hour is sufficient disclosure for this type of fee. So, unfortunately, at this point, we don't have proper fee disclosure to charge the additional amounts to the participant. The increased fee argument only works if they are the ones who have to pay the increased fees. If anyone has wording suggestions, I'd love to see them.

The problem is that it is not impossible for us to go back that far with an assignment date. It just can't be done within the valuation system and it can not be done without spending a lot of time working on it.

Sieve, I hope you didn't think I was being snippy. That certainly wasn't my intent. On second thought, I probably should have edited out Mike's joke from the paragraph I copied. But, hey, I liked the comment. Our daily system doesn't work well with retroactive assignment dates outside the current plan year. We usually take the approach you describe in those cases. But, sometimes the attorneys don't care if they create extra work for us. I was hoping Mike had an arguement I could use to reject the DRO the next time the attorney doesn't want to be reasonable.

Mike, How would your view apply to, for example, a daily valued plan that receives a DRO today assigning a benefit as of a date two years ago? We seem to get these at least a couple of times a year. Usually, the lawyers will cooperate and change the assignment date, but not always.

I recall hearing informal IRS statements about not being able to defer after the employment relationship ends. But, those comments predate the final 401(k) regs. If that was the IRS’s intent, they had ample opportunity to include it in their final regulations. Instead, they specify that only an employee can make a deferral election and that the election only applies to compensation that is not currently available at the time of the election. None of that prohibits deferrals from the final paycheck as long as the election was made while still employed. If the plan document says that deferral elections do not apply to a paycheck paid after termination of employment, that would be different. Then, look at 1.401(k)-1(e)(8) that was added by the final 415 regs. It specifically mentions deferrals from post-severance amounts. Some items of compensation paid after termination of employment are required to be counted as 415 comp, others are optional. A final paycheck would normally be required to be counted as 415 compensation. Accrued vacation is one of the optional items.

ERISAnut, I see you haven't changed. Where have you been hiding the last two years? http://benefitslink.com/boards/index.php?s...mp;#entry133128

Yes, you can pair a SH match with a discretionary match of up to 4%. Both matches would use the same comp. For simplicity you might want to make both matches on a the same level of deferrals. For example, with a SH match of 100% of the first 3% and 50% of the next 2%, pair it with a discretionary match on deferrals up to 5% of pay, with the discretionary match limited to 4% of comp. That would make the maximum match 180% of the first 3% plus 130% of the next 2%. Or, you could go really simple and do a SH match of 100% of the first 4% and a discretionary match on the first 4%, with the discretionary match limited to 4% of pay.

Sieve, You can roll after tax amounts from a qualified plan to another qualified plan if the receiving plan separately accounts for the after-tax portion. As Masteff mentioned, you cannot rollover after-tax amounts from an IRA into a qualified plan. See IRC 408(d)(3)(A)(ii).

Take a look at Section 3 of Rev. Proc 2006-27. It lists the acceptable methods for allocating income on corrective allocations. Basically, you can go back and allocate income as it would have been done if the corrective amounts had been deposited timely, or allocate the gains attributable to the corrective allocation only to those receiving the correction. There are two other methods that are a combination of the first two. I would still allocate it only to those receiving the correction. Besides being a logical way to do it, it is the easiest method to explain. Also, you wouldn't have to explain why someone who terminated, received a distribution and was not part of the correction got an additional allocation as a part of the correction.

It could be a DC plan with a 7 year vesting schedule. The faster vesting provisions in PPA had delayed effective dates for collectively bargained plans and leveraged ESOP's with outstanding loans that were in existence on 9/26/2005.

Check the plan document for the repayment provisions. If there were deferrals included in the distribution, he may not have to repay the entire distribution. Our GUST prototypes require repayment of the portion of the distribution attributable to employer contributions to get the employer accounts restored.

There were no changes to the death benefit provisions between the 1992 waiver and the participant's death in 1997. I found in 1.401(a)-20, Q&A 31 where after a QPSA waiver, the participant can change the form of preretirement benefit without obtaining spouse's consent. But, it also says that the beneficiary can not be changed without the spouse's consent, except for changing back to a QPSA. The 1992 spousal consent says it applies to the beneficiary listed on the form.

I think you are OK with the change. There still seems to be some disagreement about what kind of changes can be made in safe harbor plans during the plan year. Personally, I think the 401(k) regs are pretty clear that the amendment restriction applies only to safe harbor provisions. It would be nice if the IRS would let us know how literally they interpret that provision, but I won't hold my breath. Our GUST prototypes tie the safe harbor contribution to deferral eligibility so that is what I'm used to seeing.

A participant who terminated in 1984 provided at least 3 different dates of birth while she was employed. The month and day were the same, but the years were 1921, 1928 and 1933. When she claimed benefits in 1998, the plan sponsor sent her a letter explaining that she needed to provide some kind of proof of her date of birth, so the correct distribution amounts could be calculated. She sent a birth certificate with the first name of the child whited out and her first name written over it. They called the county that issued the birth certificate and confirmed that it was not the participant’s birth certificate. They sent another letter explaining that the altered birth certificate was not sufficient unless she could show her name had been changed from the one listed on the birth certificate. If her name was not changed, they still needed some sort of proof of her date of birth. Participant’s grandchildren also called and were told the same thing. Nothing further has been heard from either the participant or her family. We were discussing this person the other day. I did an internet search and found an obituary. I also looked her up on the social security death index. The date of birth listed with social security is the one from the altered birth certificate. Then, our client tells me they are suspicious that the person who contacted them in 1998 may not have been the same person who worked there. After 10 years, it seems very unlikely that anyone will ever provide verification of her date of birth. If the participant died, there is a death benefit payable, but we still have no way to determine how much it is. How long would you continue to carry a liability for this person’s benefit?

Participant terminated July 1994. Participant made a benefit election in November 1994 to receive a J&S benefit with her spouse as beneficiary, starting April 2008. The plan provisions in effect in 1994 reduce the accrued benefit for terminated vested participants by the value of the QPSA unless they elect to waive the pre-retirement death benefit. Participant elected to waive death benefit coverage. Spouse signed the form, but his signature was not properly witnessed. Participant died in 1997 about the time we took over the plan. Based on the information provided at the time, we advised that the attempted QPSA waiver was invalid and prepared distribution paperwork for the surviving spouse. Our client could not locate him. Now fast forward to today. Our client was going through old personel records looking for information that might help them locate the surviving spouse. They found a beneficiary designation form dated February 1992 where the spouse waived the QPSA and consented to participant naming her grandkids as beneficiaries. Spouse's signature on this form was witnessed by a notary. The plan provision allowing a waiver of the pre-retirement death benefit does not mention a witness requirement for the consent. Does anyone have an opinion about whether the 1992 beneficiary designation affects the need to have the spouse's signature properly witnessed on the 1994 election?

The foreign plan would have to meet the requirements of the applicable IRC section before the distribution would be eligible for rollover into a 401(k) plan. 401(a) requires that the Trust be created or organized in the US. With pension laws varying by country, I doubt you will find any foreign plans that satisfy US law unless they were specifically designed to do so.

Do the safe harbor provisions currently say age 21, 1 yr and semi annual entry? Or, does it say that those eligible to defer receive the safe harbor contribution? If it is the latter and you change deferral eligibility, then you would have to amend the safe harbor provisions to keep age 21, 1 yr and semi annual entry for the safe harbor contribution. Is it considered an amendment to the safe harbor provisions under the regs if it changes the plan language, but keeps the safe harbor eligibility requirements the same?

Will you need to amend the plan's safe harbor provisions so that the otherwise excludables don't receive the safe harbor contribution? If so, I would want an ERISA attorney's opinion before amending. We don't know how literally the 1.401(k)-3(e)(1) prohibition on amending safe harbor provisions during the year will be enforced.