AlbanyConsultant

Just completing my personal first gov't plan year-end. I know there's no 5500 required, but what about an SAR? Since that's a summary of the information on the 5500, my gut says to not prepare one, but the overly-sensitive-to-ten-million-disclosure-notices side of me shudders at the thought that these participants aren't getting anything that summarizes the plan in whole (and worse, it's a pooled profit sharing plan). Who is right - my gut or my paranoia? Thanks.

I'm taking over a plan for a new client, and the prior TPA said that the plan has a class-based allocation, but they make monthly deposits and don't require cross testing. This is new to me. I would have thought that you'd have to test each deposit. The goal of the class-based allocation is to give a standard allocation but only to certain groups of people; is it because the allocation is standard (but it isn't) that we don't have to actually cross-test? Or could I have just heard him wrong? Thanks.

Is anyone still doing anything on this? I remember back when PPA first came out (you know, when we thought we'd actually get real guidance within 12 months), many TPAs took the position that as a good faith statement, we'd provide the asset listing of a pooled account (or a copy of the account statement), and my firm did, too. Now it's five years later, and we're still attaching asset lists, and clients are starting to question it (because they have short memories). A quick survey of TPAs today revealed that almost none were still doing this. In fact, one mentioned that it was brought up at a recent conference, and Steve Forbes thought it was unnecessary. Thoughts?

Can't get this straight - when is the first annual notice due for a plan that would start effective 8/20/12? And is that different than having the plan start on 9/1/12? Thanks!

Maybe because it's Friday, but I can't nail this down: I've got a plan that we have just determined failed the 2010 ADP test. I know that they have to refund and then allocate a QNEC for the same amount. How do the earnings fit into this? 1. Are earnings on the refunds calculated through the end of the 2011 plan year, or throught a reasonable estimate of the date of distribution? 2. Is the allocation equivalent to the base amount, or are the earnings also counted? Thanks!

The plan sponsor of a plan with a safe harbor match has gone out of business suddenly, and only after the fact called to tell me that he needs to terminate his plan. He understands that he has to fund the safe harbor match through the final payroll, but will fail ADP if he has to test. "Going out of business" isn't technically one of the reasons to have a short plan year for a safe harbor match so far as I can see... but it has to sort of fall under there, doesn't it?

What kind of disclosures need to be provided for whole life insurance policies? I've not been able to find anything concrete. Thanks.

It's a Vermont entity, and they say this all checks out.

I'm taking over a governmental 401(k) plan where the former TPA was a bank who also served as trustee. Now they need a new trustee, and they want the document to read that the "Board of Commissioners" is the trustee. Is that specific enough? Especially as it would related to information on the SPD an an SS-4 application (well, I know it's not specific enough for that!). Thx.

Our client was purchased by a Canadian company ("CC") who re-incorporated the US company ("USC") as a subsidiary and terminated USC's PS plan. Now they are starting a 401(k) plan for USC. Is there an issue with the owners of CC wanting to be Trustees of the plan? Do they not count as falling under US jurisdiction, even if the plan assets are with a platform such as American Funds Recordkeeper Direct?

I've got a client who is currently matching at 50% of the first 15% deferred, and he's tired of failing the ADP test. He'd like to put in a safe harbor match... but not change his match formula. The idea: 100% on the first 4%, then on top of that match so that it would be at the level the old match was. Examples: Defer 3%, get 3%. Defer 7%, get 4 (because the "old match" would be 3.5%, which is under the safe harbor 4%). Defer 11%, get 5.5% (4% safe harbor + 1.5% additional match). In effect, this would be an increase in match for anyone who deferred less than 8%. Can this be done? I presume that if it can, then you'd... test the "additional match" piece under ACP, but the deferrals would still get the SH benefit?

Here's the situation I was presented: HR Manager ("D") wants to use his self-directed brokerage account in the 401(k)/profit sharing plan to purchase "between 5% and 10%" of his company's stock. Company is an S-Corp, and the company president (and plan trustee) is currently the 100% owner. Owner is making this available to D because he needs to generate cash to put back into the business, but he does not want to make this available to all participants. I've read a bunch of the threads here about the problems of S-Corps doing this kind of thing; it sounds like this would be a prohibited transaction. Is there any way it wouldn't be? I mentioned that if they're so cash-strapped, how are they going to pay for a valuation of the company to determine fair-market value? That didn't thrill them. Even if we get past that (and that's a big "if", I know), then it looks like we run into a discrimination issue, as D is getting the opportunity to make an investment that the other participants are not, and because he's buying more than 5%, it's an HCE/NHCE issue. Would limiting D to purchaing only 5.00000% take the sting out of it? Are there any other issues I'm not addressing? I'm not looking to give them an iron-clad legal response - I'm willing to refer them to an ERISA attorney for a final answer, but I'd like to prepare them for what the issues are and what they can expect. Thanks.

I know this can't be a unique situation, but I've (luckily) never had to get involved in it before... Small private school has a 6/30 plan year end for their 403(b) and profit sharing plans. The eligible teachers are under contracts that run from 7/1 - 6/30 (matching the plan year), but pay doesn't start until they start "work" ~9/1. The teachers have the option of taking their contractual pay over 10 months (9/1 - 6/30) or 12 months (9/1 - 8/31). The school has used this contracted compensation amount as compensation for the plan year all along, claiming that because they accrue the pay back to 6/30 for those who elect to receive it in July and August, this is OK. Hmmm. I'm concerned about things like "constructive receipt" and timing of deferral deposits and when partcipants can make elections on their compensation. If we count this compensation in the previous plan year, do we just end up carrying the deferral deposits made in July and August as receivables? Can a participant elect to stop deferring on August 1? This must all work out somehow, because I'm sure most schools do this kind of thing. Right?

Sure, it's obvious when you put it that way... Thanks, rcline46.

A follow-up: I've just taken over a profit sharing plan for a 501©(3) entity, and they'd like me to show them the regulation about when they have to make their deposit. I know 404(a)(6), but technically, don't they not file a "corporate return"? Is there language specfic to this somewhere? Thanks.

Whenever we prepare a distribution package for a participant who has QJ&S (usually merged MP plans these days), we run a calculation to give all the options specifically calculated for that participant's balance. However, someone recently asked me why I bothered with that, and that I could just give an example. This had never ocurred to me. Any thoughts on how legit this is?

Funny how the IRS had a phone forum that covered this on the exact day I asked... thanks, Matthew, I checked out that link. It's a one-person plan with a discretionary profit sharing, so I'm not worried about benefits accruing. Sieve, I agree with your assessment, and I think I'll use 2010-6 to hang my hat on. Thanks!

A broker called because he thinks his client is getting bad advice regarding a plan termination, and I don't find an easy answer anywhere... Client is a one-person plan, under $250K, and wants to terminate his plan. For whatever reason, the prior (well, technically, "current" since I'm just consulting at this point!) TPA didn't do the EGTRRA restatement, I think because the goal was to terminate the plan effective 1/1/10. Other TPA is only now getting their act together about the plan termination and saying that it's OK to sign the plan termination resolution with a current date, still effective 1/1/10. Broker has read about the 4/30 EGTRRA restatement deadline and is concerned that not having anything signed by 4/30 is a problem. The broker's position sounds right to me, but I'm not seeing anything concrete to back it up. Is there something out there? Thanks.

My immediate concern was force-outs; the participant isn't handing back forms, so they're certainly not going to hand over a check!

A certain fund platform does not allow deductions from the participant accounts to pay for transactions such as loans or in-service withdrawals or distributions. A client on this platform does not want to pay our (very modest) fees for these transactions, feeling they should be borne by the participants. Fund company suggests that the client ask the participants to hand in a personal check with the completed distribution forms. Logically, this doesn't seem very different than deducting the fee on the way out of the plan, but has anyone been doing this? Is there any formal or informal regulatory guidance? What kind of up-front noticing do you give to the participants? I was thinking just an additional line on the Expense Policy. And, yes, I suggested that the client might want to change fund platforms if they feel this strongly about it... Thanks!

Sorry to exhume this thread, but something the OP said caught my attention, and I wanted to make sure I was understanding the process. For DC plans with QJ&SA, we provide them with an estimated annuity calculation based on their age and account balance. If a participant were to ever select this, I'd presume we'd have the broker and plan sponsor select annuity firm AF, and then send AF the check and let AF determine the exact benefit based on rates and circumstances (note that I have never actually seen this happen in 16 years!). At what point is the plan's (more specifically, the plan fiducary's) responsibility over? Do they need to compare insurance companies, review the calculations, etc.? Thanks.

Sorry for the zombie-thread, but... Are the automatic rollovers at plan termination allowed even if the plan doesn't allow them normally? The language in 1.411(a)-11(e)(1) seems to indicate so... thanks.

What kind of time frame do you usually allow to go through the FAB 2004-02 steps during a plan termination? Let's say the initial forms go out certified mail, so that doesn't have to be repeated. And the plan sponsor also attempts to contact the participants using beneficiaries to no avail. What's a "reasonable" time before sending something to the IRS or SSA letter-forwarding services? And, more importantly, what's "reasonable" before just sending the money to a Penchecks or Millennium Trust or someplace like that? I would think you'd want to have that decided up-front so you can put it in the initial letter: "If you don't respond by X, your money will be sent to Y." Thanks!

The plan has an alternate payee who elected to not take his distribution out of the plan at the time of the QDRO. Since then, the plan has increased the cashout limit to $5,000 (with automatic rollovers from $1,001 - $5,000). The AP's balance is <$5,000, so the Trustee wants to pay him out. Everything I see says that the automatic rollover is triggered by the termination of a Participant (with a capital "P"), but does AP fall under that umbrella for this purpose? Thanks.

We got a call from a client whose profit sharing plan has NRA of 60. They now want to increase it to age 65. Ignoring the fact that they want to do it because the owners are now 65 and they want to make everyone else wait for vesting (or maybe we can't ignore that?), is there anything inherently against anti-cutback rules on this? Pretty much everything we've found on the topic refers to "pension plans" (like 2007-69), so I'm not sure if that is meant to cover profit sharing plans as well. Thanks!