John Feldt ERPA CPC QPA

So if the plan sponsor/fiduciary decides to allow an investment option in the plan knowing that the outside vendor only allows it for participant balances over $300,000, are you saying that perhaps the decision by the sponsor/fiduciary is not discriminatory, as long as the 300k requirement is a vendor requirement, not a requirement in the plan's written requirements?

Find out who really wants to do this and perhaps those folks are already eligible for an in-service distribution and they should exercise that option to move their money out of the plan. No problem there. Otherwise, if the HCE that wants this is willing to pay a modest extra TPA fee, then set up a new trustee-directed plan that only covers that HCE and that HCE is named as the trustee of that new plan. Everyone else stays in the existing plan which is participant-directed. Combine them for coverage testing. No problem with the right to direct investments, because the only one not allowed to self-direct is the HCE (their account is trustee-directed). Downside is 2 plans, but upside is no BRF issues.

Question 17i of the Form 5310 asks if any issue is pending with the IRS. I would answer "yes" and attach an explanation that the D letter (Form 5300) request is still in process and refer them to and provide a copy of the acknowledgement letter that the 5300 application received.

The Normal Retirement Age is merely for 100% vesting purposes then, since you say no in-service provisions are currently tied to it. If the early retirement date also applies 100% vesting, then I see no issues.

ASPPA wrote a letter to Monika Templeman on May 31 asking for mercy on the due date for the SSA. http://www.asppa.org/Document-Vault/pdfs/G...11-comment.aspx

http://benefitslink.com/boards/index.php?s...st&p=157856 Some excerpts, with revisions and to make it relevant for DB: During the life of a qualified plan, the plan has enjoyed the benefits of tax-free earnings and tax-deductible contributions. These have been allowed by complying with the qualification requirements imposed by the Internal Revenue Code, the treasury regulations, and other guidance. Thus, in order to keep the IRS happy, the plan has been required to maintain compliance both in operation and in form. That means two things: The plan must operate in accordance with the terms of its written plan document and under any requirements under the law and guidance, and The plan must have a written document which is qualified (meaning its language meets IRS approval). Of course, the above two items are only at risk if the plan is examined by the IRS. Item number 2 can have its risk eliminated by having the IRS approve the plan’s language. If the plan gets such approval and has also operated by that plan language, then the whole plan’s risk is virtually eliminated. That approval would be in the form of a favorable IRS Determination letter. So, how do plan documents get that favorable letter? Under a prototype, the IRS provides an opinion letter (or an advisory letter for a volume submitter) which approves the document's basic language. This is not exactly the same as a Determination Letter (even though the IRS sometimes says it is), but it provides assurance to the Employer that the basic portion of the document has IRS approval. If the DB plan has not been restated yet for EGTRRA, then the last time the IRS provided prototype document approval was generally in 2002 for the GUST prototype documents. Plan language changes have been required by law since that time, such as amendments for: EGTRRA (generaly due in 2002) Minimum Distributions (generally due when the plan terminates or is restated for EGTRRA) Mandatory Distributions (generally due with the company 2005 tax return deadline) Final 415 Regulations (generally due in 2007 / 2008) PPA of 2006 (generally due in 2009) Final 436 Regulations (generally due in 2009 / 2010) Pension Funding Equity Act Final Normal Retirement Age Regulations (generally due in 2009 / 2010) HEART Act (generally due in 2010) WRERA (generally due in 2011) And so on… Most of the above amendments are not IRS-approved model amendments (meaning the IRS did not issue model language). Therefore, the only sure method to guarantee that it meets the IRS's qualification requirements upon plan termination is to submit a favorable determination letter request using IRS Form 5310. If you elect not to request an IRS review of the plan’s language, you may need to agree to hold your document provider harmless from any errors or deficiencies that could have been corrected if the plan were to request and obtain a determination letter when the plan terminated. If the plan has been restated for EGTRRA, only a small portion of the language for the above amendments are included in the IRS-reviewed EGTRRA document - yes, the EGTRRA DB prototype documents already have a few tack-on interim amendments added. When the IRS reviews the Form 5310, the normal result is a favorable determination letter (an IRS stamp of approval for the plan’s language). Usually during the review they indicate where language changes are necessary, and this can vary by plan type and by IRS region. These required changes are allowed after the plan termination date only because the plan submitted under Form 5310. Plans terminating right now should have already have done the amendments for all of the amendments listed above. The language for a portion of this list is not in the EGTRRA restated document and is only under good faith compliance. That language will all be wrapped into the next prototype (or volume submitter) plan document (the PPA restatement?), thereby giving full approval by the IRS at that time. However, if the plan terminates now, before adopting a PPA restated document in 2016, then that language has no IRS approval. The only way to get approval is to file a Form 5310. It’s important to understand also that a lot of the guidance for the recent laws, including portions of PPA of 2006, have not been issued, so writing perfectly compliant amendments now may not be possible. But a plan that terminates now MUST be amended to add the required language for these laws - depending on the plan year and the actual plan termination date. Again, the only way to get an approval stamp on any of that language is to file a Form 5310. Any plan that terminates without filing a Form 5310 will be considered open game if they get audited. When the guidance is issued for each new law, will the IRS auditors look for language that complied with that guidance? If the plan obtained a favorable determination letter via form 5310, then the IRS cannot audit such language. So, a client that does not submit a form 5310 to the IRS upon termination risks having to negotiate a sanction with the IRS upon audit. That sanction will not be less than any fee the plan could have otherwise paid by submitting Form 5310 for ask for a Determination Letter or any fee that would have applied by submitting under EPCRS. Perhaps a terminating plan that does not file for a Determination letter is seen as potential revenue for the IRS (we hope that's not how they view these things). With the knowledge from the above explanation, why would a terminating plan not submit a Form 5310? Okay, suppose the client refuses to sign amendments timely and will not submit under EPCRS or they have some other clear violations that they refuse to fix. These things would stick out like red flags in the Form 5310 application. If that is the case, then it’s advisable to have them fix these things, but if they will not, then have them steer clear of the Form 5310 filing, assuming they have first been advised of the risk they are taking by not fixing their plan problems and the risk they are taking by not filing a Form 5310. Another reason may be cost, but really, that cost is a small price to pay for protection against the IRS. I hope you find this helpful. If you read the whole thing, my apologies for the length!

Exactly. Unless that is also one of the employer's objectives.

See Treasury Regulation 1.411(a)-5(b)(3)(v)(B). A Predecessor Plan is a qualified plan that the Employer terminated within the five-year period beginning before or after the Employer establishes this DB Plan. So, if the 401(k) plan is terminated within 5 years of the date the DB plan is established, then this DB plan is required to count service before its effective date for vesting. So if the DC plan terminates in 2014, then you go back and fix any partially vested participants in the DB plan who had vesting service excluded before the plan started. edit: typo

http://benefitslink.com/boards/index.php?s...l=buy++business

The SPD for a plan spells a distribution fee as a fixed amount (no mention that it is subject to change). The plan sponsor increased the distribution fee on April 1 of this year, but they are still in the process of updating that fee disclosure page for the SPD. A participant was recently paid out and the higher fee was charged to their account. Must the change of a participant fee be disclosed before the new fee can be in effect or does a reasonable time period exist, such as 210 days like the SPD, for disclosing such changes?

In order to properly exit the safe harbor mid-year, you are required to adopt current year testing for the year in which the safe harbor exit occurs - you cannot use prior-year for testing.

No, it is not required to apply a nondiscriminatory definition of compensation under 414(s) - unlike a qualified plan.

We just received a fax from a government agency today -- the deadline to respond is May 10, 2011. Great Scott! Now I just need a nuclear reaction to generate the 1.21 gigawatts of electricity.... Too bad one of the adminstrators is already out with the DeLorean. Maybe they think plutonium is available in every corner drugstore . . . Marty!

QDROphile, Thanks for the reply. It's similar to the "know your audience" basics - those are definitely good points to consider. I am a plan compliance/plan design geek working for a service provider (sometimes called a TPA). I appreciate the response. -John

Right, I'm a sheriff. No, we brought up the issue when we were asked to propose a new plan design for one of the businesses. Our questions revealed that a potential problem existed, one that the employer was not aware of. The problem (to me) is that they are asking for opinions only from the same people that put them into this situation to begin with, and the response has basically been "it's not a problem, you can retroactively renounce the community property, and minor kids are not an issue once you renounce that property." Obviously they can choose the same counsel that put them into this arrangement, but due to our relationship with this prospect, they want our advice as well, knowing it does not carry the weight of a legal opinion.

We agree. The business owners are receiving counsel otherwise, so we will ask for their citations/support to that opinion. I have only disgreed with Derrin one time, this is not that time.

And the minor child issue? §1563(e)(5) lists spousal exceptions. §1563(e)(6) does not list exceptions for the kids.

For about a decade, a husband (100% owner) sponsored a qualified 401(k) for his office, covering his employees. For the last 8 years, the wife (100% owner) offered a SIMPLE for her business, covering her employees. 1. They have a minor child 2. They live in a community property state Under §1.414©-3(d)(6)(i), they have a problem. Can this be fixed by just renouncing community ownership in these two assets (the businesses)?

Anyone have a recommendation for a multiple employer document provider? Assuming 100 to 200 employers, with the option for employers to have a few provisions that vary from each other. The software we're looking at now can do this for only up to 20 employers, and it is a lot of manual work if one overall plan provision is changed affecting all employers.

We saw a case where the employer adopted PPA before the plan termination date, but since the official plan termination date was a few months before the start of the 2008 plan year, the PBGC (on audit) required the plan sponsor to ignore the language in that amendment even though the plan had a D letter. Since the employer had really messed up the plan in a much worse way than just that, they contributed the amount needed and they hope the IRS won't audit them as well.

I think there was a case sometime ago involving some airline plan where sham divorces occurred just to get the money out of the plan when no in-service option was available. I think the court ruled that they took impermissible distributions. That's probably not your situation, just FYI FWIW.

What if the plan is a cash balance plan?

What if goldilocks starts earning enough again to change back from NHCE to HCE? Assume the accrual rate is double for the HCE vs. the NHCE. Will the wolf declare that the plan has a 133 1/3 violation if she jumps up to that higher accrual formula?

Yep, the explanation is right there in the storybook - I mean, in the SPD. I am not sure the SPD defines clearly enough who/what an HCE is though - it has a reference to owners of the Employer and employees "whose compensation is in excess of of a level set by law".

I am looking at a document that defined a big accrual rate for the owner-employees, a middle-size accrual rate for each non-owner employee who meets the definition of a highly compensated employee for the determination year, and a wee little accrual rate for everyone else. When goldilocks receives lower compensation and thus changes from a non-owner HCE to a reguler NHCE, must she receive a 204(h) notice before her accrual formula can truly drop down to the wee little rate?