John Feldt ERPA CPC QPA

Is the annual amount typically determined as a % of the plan's assets or is it somehow based on life expectancy? The amount that is considered under constructive receipt will be determined under the terms of the 457(b) plan language. For example, suppose the document states something like "unless the participant makes an irrevocable written election to delay their distribution within 6 months following the date they separate from service with the Employer, the benefit is fully payable as a lump sum amount upon expiration of such 6-month period" - this example would have the entire amount taxable after six months following separation (unless the participant otherwise elects to delay). One other question: like QRP's, are annual contributions to a NP 457(b) subject to employment tax (FICA)? If the employer is subject to FICA on the wages paid to employees, then yes, any amount contributed/paid into the 457(b) plan is also subject to FICA at the time 'contributed' to the plan (regardless of whether it was an employee salary deferral election or a straight employer contribution).

1. Are these plans exempt from Sec.409(A)? Yes. 2. Must the plan document specify what constitutes 'Substantial Risk of Forfeiture' once the EE separates from service, or do the assets simply sit in the account awaiting a request for distribution from the former EE? Mostly no, I think, if I understand the question. After the employee terminates, in a governmental 457(b) plan, the assets sit in a trust waiting for a distribution event (like age 70.5) or for a signed set of distribution forms. A 457(b) sponsored by a tax-exempt entity is much different - the assets are employer assets, not in a trust, and the plan defines when "constructive receipt" occurs and what the employee must do, and when, in order to delay that constructive receipt. 3. Are account balances subject to Minimum Required Distributions at 70.5? Yes. 4. If so, can these MRD's be delayed while the EE or contractor continues to work for the ER? Yes. 5. May the plan allow for 'unforeseen' hardship in-service withdrawals? Yes, sort of. It's referred to as "unforeseeable emergency", so the reasons are not the same as hardship. It includes sudden and unexpected illness of participant, spouse, or dependent, & now under PPA: beneficiary; loss of property due to casualty; other similar extraordinary / unforeseeable emergency outside participant’s control - that might include eviction / foreclosure, likely includes funeral expenses, but I think it would not include home purchase or tuition. 6. If so, would there be a 10% premature withdrawal penalty if the EE is <59.5? No. 457(b) distributions are not subject to the 10% penalty. If a non-457(b) amount was rolled into a gov 457(b), and that amount was from a plan where the 10% penalty would normally apply, then when that rollover later gets paid out of the 457(b), then it will still be subject to the 10% penalty rules (a rollover into the 457(b) cannot get you out of the 10% penalty rule). 7. May the plan allow for loans? Yes and No. A govermental 457(b) plan may, but a tax-exempt sponsored 457(b) plan cannot.

Did the doctor own more than 50% of his practice? If he was a 50% owner or less, then the 415 limits are not aggregated. He is considered a 100% owner of his 403(b) for 415 limit purposes.

For example, the SunGard PPD documents require the EGTRRA restatement date to go back as far as 1-1-2002. However, the SunGard Corbel documents have the retroactive effective dates already hard-coded regardless of your 'restatement' date overall, so those documents can have a restatement effective date that is a 'current' date.

You have a prototype that avoids ERISA, or do you have them apply those rules to their plan anyway? We are submitting a Native American tribal government 401(k) plan next month for a D letter - cycle C.

Aw. If you could bill some pre-2014 restatement fee quarterly or annually, ahead of the next six year restatement cycle, perhaps you could justify more staff during the entire 6-year period due to the increased revenue... That might help to level out the revenue and the costs? During the off cycle they'll do DB restatements, SPD updates required every 5 years under ERISA 104(b), and then prepare for the next restatement cycle. Of course, the time machine would be grreat!

Okay, I'm just pointing out that an amendment to freeze the DB plan does not really stop TH accruals if the terms of the plan(s) still require them to be provided due to the two plan (DB/DC) language issue, so please follow the terms of the plan and be careful to amend the DC plan too when you need to. Two, too, to, as well.

If the DB is part of a two plan combination and the plans state that the top heavy minimum is provided in the DB plan, then you probably still have a problem until something is done to change the language regarding which plan provides a TH minimum.

If you do have such a machine, of course please share with the rest of us. I'd like some extra time to restate about 850 DC plans by 4/30/2010, and it would be nice to have a little extra time to finish up about a dozen remaining 403(b) documents by 12/31/2008.

Or if later, within a reasonable time period after the Form 5310 application receives its favorable determination letter (which may take a year or more just to get that letter sometimes) - assuming the 5310 application was filed within a year of the plan termination date.

The date of plan termination is generally the last date you need to look at for law changes that need to be considered for amendments to the plan (although a rare exception could apply). I would not be concerned about trying to add language to a plan for law changes that occur AFTER the date of plan termination, even if the law has a retroactive effect. Just my opinion.

Yes, sorry Mike, the previous post should have read: The 402(g) excess is not ignored for runnning ADP testing, but it should be considered when the refunds are determined due to the failed ADP. Agree? If so, then (assuming this is the only HCE) a full deferral into Stone was okay and a full refund from Glass is okay.

The 402(g) excess is ignored for runnning ADP testing, but it should be considered when the refunds are determined due to the failed ADP. Agree? If so, then (assuming this is the only HCE) a full deferral into Stone was okay and a full refund from Glass is okay.

Yes, the plan allows the 402(g) excess refund to be made from the Glass plan.

The language in the plans allow a choice to be made regarding which plan refunds the 402(g) excess. However, to illustrate a point and purpose of the OP, let's suppose this is the first year for both plans, and the HCE is the only HCE in the plan. Deferral $15,500 to Glass plan - all is refunded (402(g) excess). Deferral $15,500 to Stone plan - none is refunded. So far okay, but: ADP fails for Glass plan. Is the Glass plan now required to do a QNEC to pass (since no more $$ are left to do a deferral refund for the HCE?) Or is the refund that has been done for 402(g) excess purposes also count toward making the failed ADP test's refund?

1/3 owner (Guy) of Glass Company. Defers max ($15,500) in Glass 401(k) Plan. No related other owners. Same guy: 100% owner of Stone Company. Defers max ($15,500) in Stone 401(k). Guy wants to pick which plan will return the 402(g) excess. Looks like Glass plan will fail ADP (breaks), but the Stone plan will pass (solidly). Can Guy have the 402(g) excess refunded entirely from the Glass Plan? If so, will any of that deferral count in Glass plan's ADP test?

You can stay at 6% - that is as high as you are required to go for automatic enrollment. The plan sponsor could adopt provisions to apply higher automatic amounts (above 6%), but only as long as these automatic amounts are not more than 10% of pay. We also have one client who either wants employees to really be sure to save enough, or the client wants to discourage deferrals (you pick) - they automatically enroll everyone at 10%.

This is the only amendment to the DB plan formula (so far). My concern is in the middle of 1.401(a)(4)-5(a)(3): "... the service credit (or benefit increase) is granted on a reasonably uniform basis to all employees, ..." -- if only an HCE has a benefit increased by the amendment, how does this satisfy "uniformity". Can a DB plan amendment be made that only increases a benefit to an HCE (assuming the plan has NHCEs)?

The amendment would be done in 2008 to take the 12/31/2006 accrued benefit and add on higher accrual formula using a fresh-start date of 12-31-2006. In effect, granting one year of past service for 2007 under the formula.

Even if the amendment were done a year ago, suppose it would have used no prior service at that time, and suppose it would have only increased accruals for one HCE. Any problem with that?

Suppose a plan amendment is done that provides a year of past service (prior to the effective date of the amendment). Also, suppose the amendment is written to only affect the benefit accrual (upward) for a one HCE - it does not change the benefits for any other participants. Overall, even with this higher benefit accrual, the general test under 401(a)(4) passes. Is the amendment deemed to be nondiscriminatory? The past service provided did not exceed 5 years and the accruals do not appear to fail under 401(a)(4) testing.

A church plan, as defined in ERISA Section 3(33) is not subject to Title I of ERISA. A church plan is a plan established/maintained by a church or a convention or association of churches (and it is exempt from tax under Code Section 501). A church plan definition includes some fairly specific requirements for identifying church employees and for identifying any employees under an unrelated business. Sometimes church-controlled organizations might be able to qualify for the church exemption. See ERISA sections 3(33) and 4(b)(2). If a church or convention or association of churches that maintains any church plan makes an election under Code Section 410(d), then various Code requirements, including participation, vesting, and funding requirements, would apply. Such an election, if made, is irrevocable. Church plans are generally exempt from ERISA unless an election is made to have ERISA apply. That election cannot be revoked. Now, would a church ever elect to have ERISA apply, and why? - that may be an interesting discussion.

No increase in the IRA limits (5,000 and 1,000) for 2009, confirmed?

You can make a 410(d) election and attach it with your 5500 - that would be an affirmative election (the coverage is not triggered by merely the 5500 filing, until we hear otherwise from the IRS/DOL). Another method would be to include such a 410(d) election with the plan's determination letter filing.

SunGard (Corbel) has done some cash balance plan seminars where they specifically state that a cash balance plan cannot have a last day requirement for receiving a benefit accrual. Perhaps the provision being used is not completely understood by the document drafter?