Trekker

Thank you, Spock. I sent you an e-mail. Live long and...well, you know.

We have Company A (Plan Sponsor and Employer) and Company B (a participating employer). Both make up an Affiliated Service Group. Company B has zero ownership in Company A, but Company B is owned 100% by an individual who is participating in the Plan. This individual does not earn enough to be an HCE based on comp, but is he a 5% owner for plan purposes (HCE and Key Employee determination)? Reg. 1.414(q)-1T, Q&A-8 seems to say, yes, the individual is considered a 5% owner. But there is just enough ambiguity in the regs to make me doubt myself. Can someone confirm? Thanks.

As Trekker, I must weigh in and confirm Tom's information. The Borg are descendents of the IRS. Thus, resistance is futile.

It's my understanding that spousal consent is not required to change from a 50% QJSA to the QOSA, since it, too, is a "qualified" survivor annuity.

We have always followed the rule of thumb that if the account is in the plan at any time during the year of termination, it is fully vested.

We included the 8905 with all of our submissions, except those who were in their correct cycle based on EIN. For example, an Employer with an EIN ending in "2" should have been submitted by Jan 31, 2008. But if the Plan went under our volume submitter and was submitted after Jan 31, 2008, we included the 8905. An Employer with an EIN ending in "5" must submit by Jan 31, 2011. We did not prepare 8905's for any Cycle E filings.

FACTS: Stock Acquisition occurred 12/31/08. Buyer continued Acquired Entity's plan for the first 3 months of 2009, then the Plan was terminated. (We know they should have terminated the Plan prior to acquisiton.) Acquired Entity remains, now as a controlled group member, and it adopted Buyer's plan as a participating employer effective April 1, 2009. All of Acquired Entity's employees now participate in Buyer's Plan. There are no termination of employment issues. The HCE's (as well as non-HCEs) of Acquired Entity participated in their old plan for three months and then the Buyer's plan for the remaining nine months of 2009. QUESTIONS: Do the mandatory aggregation rules of IRC 401(k)(3)(A) apply in this situation, which state that if an HCE participates in more than one CODA of the Employer, the deferral amounts in all such arrangements are added together in computing the HCE's ADP under each arrangement. Of course, the desired answer is that this statute refers to ongoing plans and does not contemplate terminating plans of an acquired entity who happens to now be part of the controlled group. The affected HCEs were only eligible to participate in one plan at a time and never in both at the same time. We've looked at the 410(b)(6) transition rule but can not conclude that we get a pass on the aggregation. Any thougts and cites are much appreciated!

The handy chart you may be looking for is from McKay Hochman. I'm sure if you went on their website you can find it. The chart I have was updated in February 2009. Another question about short years: The final 415 regs provide that when a plan terminates during the year, the Limitation Year becomes a short year and related limits must be prorated. It seems logical that the Plan Year would also have the various limits prorated in a terminated plan (e.g.,401(a)(17) comp). Can anyone confirm? Thanks.

We have submitted several EGTRRA restatements for Cash Balance Plans. Most have an initial effective date in 2002 and have GUST letters. If they meet the other criteria (less than 100 employees and at least one NHCE benefits), we have not sent in a user fee and have had none of the apps returned. We submitted a Cycle D today and, but for the fact that there were more than 100 employees, the plan would be exempt from the fee. Original effective date was 2002.

In response to your question if anyone knows a firm who can produce an individually designed 401(k) updated through Cycle D, I first checked with my contact and have been given permission to provide this info: Sirote & Permutt, P.C. (Law Firm) in Birmingham, Alabama, has an employee benefits department and drafts IDP 401(k) documents, updated for Cycle D and PPA. Address is: Attn: Joseph S. Bluestein, Esq. P.O. Box 55727 Birmingham, AL 35255-5727 I hope this helps.

LLC, which is treated as a partnership, maintains a Cash Balance Plan and a PSP/401(k). Chief Executive Officer employee works full time for LLC and receives compensation of at least $245,000. LLC expects a partnership operating loss for 2009, a portion of which will be allocated to the CEO. For qualified plan purposes, is the CEO's compensation $245,000 or is it $245,000 less her share of the LLC losses for 2009? Thanks.

IRC 401(k)(2)(B) was amended to add (v) qualified reservist as a distributable event for elective deferrals. Sections of the Code dealing with QNECs, QMACs and Safe Harbor Contributions require that these contributions meet the requirements (distribution restrictions) of Paragraph (2)(B), with no exception listed. Portions of the HEART Act seem to specify that only elective deferrals may be distributed as a Qualified Reservist Distribution. Does anyone know if QNECs, QMACs and Safe Harbor Contributions may also be distributed as part of a Qualified Reservist Distribution? Thanks.

When we raised Normal Retirement Age, we found nothing that would give us relief from the anti-cutback rules under Section 411(a)(10) - changing vesting rules. So we drafted something like this to preserve full vesting under the prior NRA: "A Participant's Accrued Benefit derived from Employer contributions shall be fully Vested upon the earlier of: (1) attainment of his Normal Retirement Age, (2) the later of age 65 or the 5th anniversary of the time the Participant commenced participation in the Plan, (3) total and permanent disability of the Participant, or (4) death of the Participant. Due to final Treasury Regulations under Code Section 401(a), any Participant employed on or before December 31, 2008, and who terminates employment on or after attaining age 59-1/2 (the pre-2009 Normal Retirement Age), shall be fully Vested in his Accrued Benefit." Hope this helps.

Section 409(h)(3) states that the put option requirements do not apply in the case of a "plan established and maintained by a bank (as defined in section 581) which is prohibited by law from redeeming or purchasing its own securities." What type of bank would be prohibited by law from redeeming or purchasing its own securities? Thanks.

Regs. 1.411(d)-4, Q&A-2, subparagraph (d)(1) provides an ESOP exception to the protected benefit rules. "The employer eliminates, or retains the discretion to eliminate, with respect to all participants, a single sum optional form or installment optional form...." QUESTION: Does this also allow the employer to change the commencement date of payments in the event of termination of employment from the end of the plan year in which the separation occurred to the year after the close of the plan year which is the fifth plan year following the plan year during which the participant separated from service? Any thoughts on this and on (d)(2)(ii) of this same Q&A-2 (which seems to impose quite an administrative burden) would be appreciated.

I'm not an attorney or TPA, but it is my understanding that you are permitted to amend, before the end of the 2009 plan year, to provide for nonspouse rollovers going back to the time when they were optional, which was January 1, 2007. These provisions are required for distributions on and after January 1, 2010. Some of the PPA amendments I've seen offer this option.

I am adding to an old string. The participant who gets the 3% top-heavy on full year's 415 comp is in the cross-tested allocation group consisting of the proverbial "others." Now her allocation rate is higher than the others in her group. Calendar year plan, quarterly entry dates. The PSP contribution is counted from date of entry; she entered 10/1/08 after completing a year of service, so her top heavy contribution is greater than her PSP allocation would have been. The plan does not have a catch-all group since there is no 1000 hour/last requirement, and everyone who is benefitting under the Plan gets the PSP contribution in the percentage allocated to his group. Even though she gets a slightly higher allocation rate than the others in the group, can she still be in that group (defined as non-physicians)? In other words, can participants in a Participant Group receive different allocations soley because of statutory rules (i.e., top heavy)? There are no HCE's in this Participant Group. The Plan does contain the gateway minimum language, just no catch-all group. Make sense? If not, I'll try to clarify. Thanks.

All points well taken. Thanks!

We are freezing benefit accruals in several cash balance plans. Notices and amendments will be timely, but the question regards the language for the amendment. We have used the following: "Notwithstanding anything herein to the contrary and unless further amended, no benefits shall accrue under the Plan after _________." Should we elaborate and provide that for purposes of benefit accrual, the counting of Hours of Service shall cease? What has been your experience with the wording of the amendment? Thanks.

I am looking at the same question. The failure was only in 2008. Section 4.05(2) of the Rve. Proc.2008-50 provides the amendment correction method in the Self-Correction program, but only for Operational Failures listed in Section 2.07 of App. B. Moving along to App. B, I find the exact scenario in Section 2.07(3) as an example. Circling back to Section 4.10, a determination letter may be required, then it refers you to Section 6.05. Following the bread crumbs to Section 6.05(b), we get back to your question about the next on-cycle year. Our plan in question happens to be in the midst of its on-cycle year (Year D), so we will include the corrective amendment with the restatement and will provide the required statements in the cover letter as listed in 6.05(b). You are working with a volume submitter plan that already has a favorable D.L. I think your next on-cycle year would be the two-year window for the next Volume Submitter remedial amendment period. I'm not 100% on this, though. Hope this helps.

Since the 3% safe harbor is part of the profit sharing contribution, could you have a 2-year wait but run the ADP on deferrals of participants who have not met the 2-year requirement? Most would be Non-HCEs, anyway.

If the rules on Form 5308, Request for Change in Plan/Trust Year, are current, if the plan year has been changed for any of the 4 preceding years, you may not be able to change it back quite yet. All actions necessary to change the plan year, including a plan amendment and board resolutions, must be taken on or before the last day of the short period, so this could not be effective until 12/31/09, with a one month short plan year. We had a plan year ending 12/30 that changed to 12/31. It had a short, very short, one-day plan year.

Ah, "in the form of a QNEC" seems to be the fine-print answer. Thanks for sharing the secret file. I burned after reading.

If I may s-t-r-e-t-c-h this, what if I'm correcting an ADP failure under VCP with QNEC's, may a QNEC contributed in 2008 for an ADP failure in 2004 be considered part of the 12/31/04 "account balance" and thereby render a previously top-heavy 2005 Plan Year non-top heavy. The top-heavy requirements were also failed in 2005, but if the QNECs in 2004 bring the top heavy ratio down from 60% to 58%, does that make the top-heavy failure go away? I know I'm stretching an interpretion and don't expect any cites or, for that matter, any one to venture forth with an opinion. Always trying to keep the creative juices flowing! Thanks for the replies.

Employer is correcting 2003 and 2004 failed ADP test using VCP. This can be corrected either with QNECs or with the "one-to-one" method (distribute then contribute). Are the corrective contributions in the one-to-one method treated as QNECs, in which case they could go toward satisfying the top-heavy minimum contribution (also failed in 2003 and 2004)? The Rev Proc does not use the term "QNEC" in its description of the one-to-one method, but I've seen commentaries that refer to the "one-to-one contribution" as a QNEC. Any thoughts or cites? Thanks.