John Feldt ERPA CPC QPA

That's the thing, maybe I am wrong about -11(g), but I don't see that a 414(s) compensation failure for a safe harbor plan can be allowed to fall under that section. If it was not a safe harbor plan, I see no problem of doing a -11(g) amendment (if it's even needed) when 414(s) fails. The allocations must adhere to the terms of the plan. Safe Harbor provisions must be in place and remain unchanged for the plan year. Wouldn't a -11(g) amendment (as a fix) be making a change to the safe harbor allocations after the plan year started, and thus not allowable for a safe harbor plan?

It can be dangerous to have these kinds of exclusions in a safe harbor 401(k) plan unless additional language in the document exists to automatically limit the HCE compensation. Because 414(s) has failed, the plan is now disqualified and no correction with reliance exists (that I know of) outside of a VCP application under EPCRS (Rev Proc 2008-50). I would recommend filing a VCP application. For new and takeover plans, I recommend to try pointing these issues out during the design process so either language can be included to automatically limit the compensation for the HCEs such that a 414(s) failure could never occur, or just leave out the exclusion entirely.

Does the plan document have any specific language that addresses this? I've seen a few that favor the written election as long as it was within the 180-day election period that ends on the annuity starting date, even though the death occurred before the actual annuity starting date.

I think Rollover Solutions might do something like this, but I think they rely on you to provide the initial sets of accurate payout forms when it gets set up. After that, they use those forms until you send modified forms to them. I'm gueesing from memory of a conversation we had with one of their folks.

I have an example where it was not a coverage failure, but it was an inability to contribute a top heavy minimum issue. The plan sponsor was bankrupt, not the kind where they are reorganizing, but the kind where they will no longer do business anymore. There were no plan sponsor assets available to fund the top heavy minimum for the prior year nor for the current year (up to the date of plan termination). The owner had deferrals in both years, so top heavy minimums applied. Under a Form 5310 filing, the IRS was told tha the top heavy contribution was to be funded by having the HCE-owner forfeit a portion of their account. This is also what the bankruptcy court had suggested (actually it was a court order). That forfeited amount then was allocated to the NHCEs for their top heavy contribution allocations. We had some doubts going in, and we certainly wouldn't have suggested that the client try it without submitting to the IRS. Bankruptcy must move your application to the top. Only 19 days after the application was sent certified mail, the IRS replied with a request for additional information. The D letter was issued only 70 days after the application was submitted to the IRS.

And as always, the plan document should spell out what must happen. If the plan document provides actuarial increases, then that must occur. If the plan document has the employer providing suspension of benefits notice, then that must occur instead.

A prospect wants to their SPD for their cash balance formula to state something like the text below (instead of naming the individuals or the specific officer titles with their specific accrual formulas like the plan document does): "Group A will consist of senior executive officers. For each Participant of Group A, the cash balance credit will vary by officer. For details, see your Plan Administrator if this affects you." We're thinking that this may not satisfy the disclosure requirements for a summary plan description. Could the SPD be this vague and be alright? If not, what methods are others out there using to disclose accrual formulas in a not-so-revealing fashion?

We recently proposed this for a prospect to save them the audit fee. The increased cost for having 2 plans was minimal compared to the increased cost for having to do an audit. The prospect has about half of the employees in a 'home office' and everyone else works at varying other locations. All other features of the plan would be the same.

You may want to look at Derrin Watson's book "Who's the Employer". Chapters 2 and 3 talk about self-employed individuals and common law employees, including how and why it matters for plan purposes. Chapter 4 covers uncommon employees.

Yes. It's probably in section 5.1(b)(2), the second-to-last sentence, and it probably says something like "a participant will be credited with a pro-rata interest credit up to the date distributions commence" or something like that.

1.403(b)-6©: Distributions from custodial accounts that are not attributable to section 403(b) elective deferrals. --Except as provided in §1.403(b)-4(f) (relating to correction of excess deferrals) or §1.403(b)-10(a) (relating to plan termination), distributions from a custodial account, as defined in §1.403(b)-8(d)(2), may not be paid to a participant before the participant has a severance from employment, dies, becomes disabled (within the meaning of section 72(m)(7)), or attains age 591/2. Any amounts transferred out of a custodial account to an annuity contract or retirement income account, including earnings thereon, continue to be subject to this paragraph ©. This paragraph © does not apply to distributions that are attributable to section 403(b) elective deferrals.

See Treasury Regulation §§1.403(b)-8(d)(2)(ii) and/or 1.403(b)-6©.

1. Not have the current doc language? The system language for plans established last year (and later) now gives a pro-rata interest credit to the date of payment. That does not mean your language is not current, it might mean the IRS has required that in some of the plans that submitted D letter applications. 2. Ignore the doc and credit interest to the distribution date? If that document has a favorable determination letter, then ignoring the document loses your reliance on that D letter and you end up operating against the terms of the plan. The document likely allows for the Plan Administrator to interpret provisions of the plan, so anything that needs to be interpreted should be handled by the Plan Administrator. Since they have no idea what this is about, your assistance would be needed. 3. Apply the document and apply interest only to the preceding 12/31. You will need to adopt an amendment for any recent laws or regulations or other guidance through August 1, such as Notice 2010-15. A suggestion could be made that when this final amendment is drafted, perhaps the amendment could include provisions to clearly handle this situation. 4. Credit interest to the pay data because this is a plan termination and different rules apply (and that is kind of what is right anyways)? Same as number 3 above. As always, please practice safe docs and wear a D Letter (file Form 5310).

When completing the 5310, we have put the prototype D letter date in the "most recent D letter" question and supplied a copy of that letter. But we've not done that for any Vol Sub plans. Our experience was that a GUST prototype was sometimes considered as having a D letter, but not a GUST volume submitter. If the sponsor was on a GUST prototype, the reviewer rarely asked for the TRA'86 document (and subsequent amendments). It seems to depend on the reviewer and/or office. If the sponsor used a GUST Vol Sub, the reviewer almost always asks for a copy of the TRA86 document (and amendments through GUST). Several years ago we decided to always include the pre-GUST document anyway (for Vol Sub plans) as long as it was easily available, so we rarely get requests for the older documents. We've not (yet) had a Form 5310 reviewer ask for a document older than TRA86.

They don't expect to have enough deductions to itemize. Thanks for the info!

A friend of ours turns 70.5 next year. They want to know if they will be able to make a direct payment from their IRA to a religious charity. Was that rule extended? If so, was it only temporary? How does it work or benefit the IRA holder?

If they failed to adopt a restated/amended written 403(b) plan that covers the Final 403(b) regulations, before you submit under VCP, is the new written plan, as signed now, adopted with a retroactive effective date of 1-1-2009 or do you adopt the restated plan with a prospective date or 1-1-2010 date instead?

Look at 1.401(a)(4)-8(b)(1)(vi)(A) and (B) - note the difference where in (B), the 5% allocation, it refers to 415 compensation.

A fair number of deferral-only plans that cover 120+ participants will benefit by being non-ERISA plans since they avoid the expensive accountant's opinion required by the Form 5500. For example, if the opinion (audit) is $9,000 divided by 125 participants, that's a cost of over $70 per person, more if it's charged only to those with balances in the plan.

Other than cash balance plans...

Each participant could be considered as a separate and distinct allocation group. And if all the employees are NHCEs, then it's a buffet for the employer. edited for a typo.

I think they're called a solicitor there, instead of a notary.

Excellent, thanks!

Can a 403(b) plan be established for a non-profit corporation under 501©(3), but only allow employer contributions (nonelectives) - thus allowing no salary deferrals? The employer has no other plan (no 457 etc). Is this a universal availability problem? The reason for the question is because 415 compensation continues 5 years after separation and the director (a NHCE) would like to set up a plan to provide nonelective ER contributions (which would continue after separation), but they are not interested in allowing salary deferrals.

We saw something like this last year, but they did not sign the two plans and had us take a look because they were confused by the documents and because TIAA was really impressing upon them to have a independent consultant review it for them. It was rather puzzling reviewing the contracts/plan documents - the language really did not spell it out as you described, but that is what the employer was thinking it said, but we gave deference to that interpretation, but after reviewing everything they could provide on it, they really only had one 403(b) plan overall.