mariemonroe

I mean Corporation #2 would be the one funding the plan and would accrue the contributions on its books. I am not sure whether they file a consolidated return but will check this out.

Corporation #1 wants to incentivize Employee #1 by offering him a non-qualified deferred comp (NQDC) plan which will be funded solely by the Corporation - there will be no employee deferrals. Corporation #1 is a part of a brother-sister controlled group with Corporation #2. Employee #1 is employed by Corporation #1 and is not an employee of Corporation #2. Is it possible for Corporation #2 to be the sponsor of a NQDC plan for Employee #1 which Corporation #2 would also fund?

Thanks!

I have read through the rules regarding the application of COBRA to FSAs and just want to make sure I understand how they apply in my situation. I have a FSA that is exempted from HIPAA. I have an employee who elected to reduce his salary by $300/ month for 2008. This employee was terminated on May 31 after having his salary reduced by $1500. Let's assume that the employee had not yet had any claims reimbursed. Am I correct that the employee can elect COBRA coverage, pay the premium for June 2008 of $300 + 2% administrative charge, and then submit a claim for $3600 ($300 times 12 months)? In other words, the employee would have paid approximately $1800 for $3600 worth of coverage? Thanks

Can an employer which fully insures a short term disability plan only offer the plan to certain employees (for example, physicians) or is there some nondiscrimination rule which would require it to offer the plan to all employees? I see that Labor Reg. § 2510.3-1(b)(2) provides that “employee welfare benefit plan” and “welfare plan” shall not include— ...Payment of an employee's normal compensation, out of the employer's general assets, on account of periods of time during which the employee is physically or mentally unable to perform his or her duties, or is otherwise absent for medical reasons (such as pregnancy, a physical examination or psychiatric treatment)... Does this mean that such a plan is not subject to ERISA? What if the short term disability plan in my example doesn't pay the employee's "normal compensation" but a % of such employee's compensation?

Plan permits loans (max of 2) and hardship withdrawals. Participant has 2 loans outstanding and needs more money but doesn't fit within hardship safe harbor. One of participant's loans has a balance of $200. Can participant simply repay the $200 loan and take out a new loan in the larger amount he needs (subject to the limit on loan amounts)? Or (assuming the plan permits this) can participant refinance one of his loans to add the larger amount to the current loan balance? Is there any practical difference in these two options?

Can I get your thoughts on how to handle this? As I said, the employer currently requires all employees to participate in the plan and contribute 5%. My understanding is that these are not considered elective contributions (1.402(g)(3)-1(b)). However, the employer has recently hired some employees who do not want to participate in the plan. These are retired public school employees who have already saved for retirement . The employer wants to retain these employees (the retired former public school employees). However, based on our earlier exchanges, it sounds like if the employer decides to no longer mandate participation in the plan as a condition of employment, the employer will be forced to comply with the elective deferral rules and thus permit all employees to either opt out of the plan or defer at a different % of compensation. Can you think of any way to accomplish the goal of letting former public school employees opt out of the plan while forcing the other employees to continue to defer at the 5% level?

I see the distinction now. Actually, as the plan is currently operated, mandatory contributions to the plan ARE a condition of employment. However, the employer would like to eliminate this provision and make employee contributions optional. So it sounds like if they go this route, they cannot require employees who chose to participate to contribute 5%. Correct?

I thought mandatory employee contributions were OK? See http://benefitslink.com/boards/index.php?s...mp;hl=mandatory

I am new to the 403(b) area so pardon my ignorance. I have a client (a school) with a 403(b) plan that has been around since the 60s. They do not have a plan document and have asked me to help them in putting one together. They have given me their pertinent plan provisions and several written descriptions of the plan to assist me. Basically, the plan requires participants to defer 5% of their compensation (that is, participation is not required, but if you choose to participate, you must defer 5%). The employer then contributes 5% of your compensation for a total annual contribution of 10% of compensation. They have asked me to make sure their definition of compensation includes only contract salary (as opposed to W-2 wages). For example: a teacher has a contract to teach for one year for $30,000. If that teacher also coaches a sport for $1,500, that $1,500 is NOT considered compensation for purposes of the 403(b) plan. In the qualified plan context I am always very cautious when it comes to modifying definitions of compensation but I am unsure whether this seemingly innocent request should raise any red flags when it comes to the 403(b) plan context. I appreciate any guidance.

Rev Proc 2006-27, Appendix B.3.01(1)(a) states, in part: If an earnings adjustment method in this section 3 is used to adjust a corrective contribution or allocation, that adjustment is treated as satisfying the earnings adjustment requirement of section 6.02(4)(a) of this revenue procedure. Other earnings adjustment methods, different from those illustrated in this section 3, may also be appropriate for adjusting corrective contributions or allocations to reflect earnings. The earnings method you propose is not set forth in EPCRS. However, if you can get the IRS to sign off on it, it may be "appropriate for adjusting corrective contributions or allocations." Good luck!

Safe Harbor 401(k) Plan defines "Compensation" to be W-2 wages and to include salary and bonus deferrals made by employees pursuant to employer's nonqualified deferred comp plan. Plan defines "Code Section 415 Compensation" using a safe harbor definition which excludes employees' salary and bonus deferrals in the nonqualified plan. Plan uses "Compensation" definition for purposes of computing matching contributions. Therefore if employee A makes $100,000 salary, defers $10,000 of it into the nonqualified plan, his entire $100,000 salary is used for purposes of computing his match. However, his salary for 415 purposes is $90,000. Is this improper? Is it improper to include salary/bonus deferrals in a nonqualified plan as part of "Compensation"?

I have a plan that says all employees enter on 1/1 or 7/1 next following date of hire. There is no one year of service requirement. "Employee" is defined as anyone rendering services to employer other than leased employees. Come to find out, the employer has been categorically excluding all part-time employees as well as several other categories of employees. When questioned about this, the employer says this is their "policy" and indeed this policy is found in several written materials which are periodically distributed to employees. Therefore, part-time employees and the other "excluded" employees are told from day one that they are not eligible to enter the plan. This has been going on for at least 10 years and probably longer Of course the policy conflicts with the plan document. Has anyone ever had any luck wtih an argument that a written policy as I have described somehow overrides the plan document or even acts as some sort of plan amendment?

Oops. Not sure how I missed that. Thanks!

Plan improperly excluded several employees from participating in a DB plan since the Plan's inception. EPCRS addresses how to handle this situation in a DC plan context, but not in a DB plan context? Has anyone ever dealt with this situation before in a DB plan? Any suggestions?

Temporary staffing agency sponsors 401(k) plan beginning in 1994. 401(k) Plan provides that employees with 1000 hours are eligible to participate in plan. Agency hires lots of "Temps". Sometimes Temps have more than 1000 hours in a single year. Agency ignores Temps for purposes of the Plan (i.e. Temps never enter Plan and Temps are ignored for minimum coverage testing purposes). New recordkeeper discovers that Temps should be entering plan and should be included in minimum coverage testing. Also discovers that plan fails minimum coverage if Temps are included in the calculation. My question: If this one problem or two problems? I know how to fix the problem of excluding otherwise eligible employees under EPCRS (make up to them with QNEC). But I am unsure whether I also need to correct for what is likely several years of minimum coverage testing failures. Do we retest for minimum coverage after we make a QNEC to exlcuded Temps? Any advice?

Purchaser is buying assets of Seller. Purchaser will also employ many (but not all) of Seller's employees. I am being told that Purchaser would like to "adopt" Seller's qualified plan. I was not aware that this can be done. In asset acquisitions I have dealt with in the past, Seller's plan terminates and the plan participants either get a distribution or roll their plan money either to an IRA or to Purchaser's plan (assuming such participant becomes an employee of purchaser). I don't know how Purchaser can just adopt another entity's plan; yet I am being told that this can be done. What happens to the plan participants who do not become employees of Purchaser? Has anyone ever seen this before?

I have a safe harbor 401(k) Plan (3% non-elective contribution). The employer also makes a hefty profit-sharing contribution each year equal to about 9.5% of participants' compensation. The eligibility requirements are the usual: a year of service plus age 21, then enter on January 1 or July 1 next following completion of the service and age requirements. The profit-sharing contribution is 100% vested from day 1. My question: can I amend the plan to change the eligibility requirements for purposes of receiving the profit-sharing contribution to 2 years of service? In other words, employees need only work 1 year to enter the plan for purposes of making deferrals and receiving the safe harbor contribution, but must work another year before being eligible to receive the profit-sharing contribution. Any comments are welcome.

My client failed to sign an amendment to their 401(k) plan updating their plan for the final 401(k) regulations by the end of their 2006 plan year. Any idea on how to fix this?

I am using EPCRS to fix this same problem (employer applied a more narrow definition of compensation than that provided in the plan document). I used the "lost opportunity" correction method (50% of ADP) in my VCP filing and the agent seemed fine with it. I stated in my submission that I was using it because it was analagous to my situation. My principal fight with the agent has to do with calculation of earnings. There was recently something on the IRS website about most common operational errors and how to fix them and this error was actually one of them. However, there wasn't any useful information for my particular situation, but you might want to check it out. Hope this helps.

Does the Internal Revenue Code (or ERISA) require a 457 plan participant to obtain his spouse's consent to name someone other than the spouse as beneficiary? I have seen in other topics that spousal consent may be required by the plan document or by state law, but I have been unable to determine whether it is also a Code requirement.

Employer wants to merge its money purchase pension plan into its 401(k) Plan. The money purchase pension plan contains several life insurance policies. Is there any reason these can't be transferred to the 401(k) plan when the plans merge?

A plan offers the following distribution options: lump sum and installments. The plan wants to get rid of the installment option. Currently, there are no installment payments being made to any participants/beneficiaries. Can the plan jettison the installment option pursuant to 411(d)(6)(E)?

I know it is possible to exit a safe harbor matching 401(k) plan mid-year by complying with 1.401(m)-3(h). Does anyone know if it is possible to exit a safe harbor 401(k) plan with a 3% nonelective contribution duirng a plan year?

Is there a way to correct an operational error in which a distribution was made to someone who was not eligible to receive the distribution? I have a situation in which a participant received distribution from a 401(k) plan but there was no distribution event under the plan. The participant has since rolled the distribution to an IRA. The participant is willing to roll the money back to the plan but I have my doubts whether this will "fix" the problem or something else must be done. Any ideas?