PensionPro

http://www.gpo.gov/fdsys/pkg/USCOURTS-ca10-10-05123/pdf/USCOURTS-ca10-10-05123-0.pdf

For those covered by the employer's health insurance, the employer pays the employee $600/month in cash. For those not covered by the employer's health insurance, the employer pays the employee $200/month in cash. The amount is reported on box 1 of W-2. Would this be considered fringe benefits or regular compensation? Thanks!!!

No he can not set up a plan for himself.

Retirement Savings Contributions Credit (Saver’s Credit) An individual may be able to take a tax credit of up to $1,000 ($2,000 if filing jointly) for making eligible contributions to an IRA or employer-sponsored retirement plan. Who is eligible for the credit? The individual claiming the credit must be: Age 18 or older; Not a full-time student; Not claimed as a dependent on another person’s return; and With an adjusted gross income not more than: $57,500 if your filing status is married filing jointly (for 2012; $59,000 for 2013), $43,125 if your filing status is head of household (for 2012; $44,250 for 2013), or $28,750 if your filing status is single, married filing separately, or qualifying widow(er) (for 2012; $29,500 for 2013). Retirement plan contributions eligible for the credit Eligible contributions include: Contributions to a traditional or Roth IRA, Elective deferrals (including after-tax Roth contributions, if available) to a: 401(k) plan (including a SIMPLE 401(k) and the federal Thrift Savings Plan), SIMPLE IRA plan SARSEP 403(b) annuity governmental 457(b) plan Contributions to a §501©(18) plan, and Voluntary after-tax employee contributions to a qualified retirement plan or 403(b) annuity. For purposes of the credit, employee contributions will be voluntary as long as they aren’t required as a condition of employment. Rollover contributions aren’t eligible for the Saver’s Credit. Also, your eligible contributions may be reduced by any recent distributions you received from a retirement plan or IRA. Amount of the credit The amount of the credit you can get is based on the contributions you make and your credit rate. Your credit rate can be as low as 10% or as high as 50%. Your credit rate depends on your income and your filing status. See Form 8880 to determine your credit rate. Example: Jill, who works at a retail store, is married and earned $30,000 in 2012. Jill’s husband was unemployed in 2012 and did not have any earnings. Jill contributed $1,000 to her IRA in 2012. After deducting her IRA contribution, the adjusted gross income shown on her joint return is $29,000. Jill may claim a 50% credit, $500, for her $1,000 IRA contribution. http://www.irs.gov/Retirement-Plans/Plan-Participant,-Employee/Retirement-Topics-Retirement-Savings-Contributions-Credit-(Saver%E2%80%99s-Credit) http://www.irs.gov/pub/irs-pdf/p4703.pdf

Per §72(m)(7) "an individual shall be considered to be disabled if he is unable to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment which can be expected to result in death or to be of long-continued and indefinite duration." Goes back to the question, how does the plan define disability. One thing is clear that if it is a hardship distribution, it is not allowed.

You are correct to the extent that safe harbor contributions have for the most part the same restrictions as deferrals. However see IRC §401(k)(2)(B)(i)(I).

yes if provided in document and disability meets plan's definition

From experience liquidity is a critical issue. Death, disability, plan termination, employment termination, depreciation of assets, etc. are all factors to be considered. Volatility of the investment portfolio and how it affects the management of benefit liabilities is worth thinking about. Increase in the plan's liabilities during a period of declining asset values may not be a desirable outcome in a DB plan. As you point out these issues exist when investing in equities, etc., however the issues are magnified when investing a majority of the plan's portfolio in a single illiquid asset with high risk/reward characteristic.

Is the investment in the best interests of the plan? A fiduciary is required to examine the level of diversification, degree of liquidity, and the potential risk/return in comparison with available alternative investments. Potential investments should be compared to other investments that would fill a similar role in the portfolio with regard to diversification, liquidity, and risk/return. In light of the rigorous requirements established by ERISA, the Department of Labor believes that fiduciaries who rely on factors outside the economic interests of the plan in making investment choices and subsequently find their decision challenged will rarely be able to demonstrate compliance with ERISA absent a written record demonstrating that a contemporaneous economic analysis showed that the investment alternatives were of equal value. ERISA makes no direct distinction between fiduciary standards for DB and DC plans. There is no magic number but the plan should be in a position to withstand the DOL's close scrutinty. Does an analysis of the plan's liquidity needs take into account the possibility of benefit payments to the owners?

My recollection is: 401k to HSA: no transfers allowed. Individual can take distribution, pay taxes/penalties, and use the funds to contribute to HSA. HSA to 401k: no transfers allowed. Amts can be rolled over to another HSA however.

I believe disability payments would be excluded as fringe benefits because they are irregular and/or additional under 3rd exclusion in the plan's definition.

Yes as long as there is no discrimination in favor of officers, shareholders or highly compensated employees.

Thanks for the reminder%

May be corrected by retroactive plan amendment under EPCRS. Rev Proc 2003-12.

Thanks everyone for the responses. Special thanks to Kevin C for the cite. The plan is using those provisions in the 415 regs.

Good point, Tom! ABPT is about 47%, so if either plan can make contributions to (some of the 67) NHCEs to get ABPT to 70%, we should be in the clear. Maybe a large enough contribution requirement will wake them up to the need for better coordinated plan design!

Having a hard time understanding the mechanics of a rider in the insurance contract since the only contributions/premiums going into the plan/contract are employer contributions according to the formula in the plan document. Maybe you are saying the employer is paying additional premiums outside of plan contributions for the rider and the insurance company (not the plan) is going to make the disability payments? Interesting.

I was specifying taxable as wages as opposed to taxable as pension payments.

10% of the compensation at the time the participant terminates employment. Contributions are made each pay period.

MPP sponsored by a non-profit and administered by large insurance co. Forms of benefit allowable are annuities and lumpsum. Formula is straight 10% across the board. Here is the unusual part. If a participant terminates due to disability before NRA they receive a disability annuity credit of 10% of compensation until they reach NRA. Seems like a feature you would normally have in a DB plan. Are there any issues with making contributions based on past compensation in a DC plan, assuming that is what is going on here? Does it create additional testing issues? Is the employer actually making the addl contribution into the plan and paying them out as disability pension benefits taxable as wages and reportable on 1099-R? Thanks for any insight!

There was an acquisition in 2010 that created this scenario. Due to personality issues the companies do not want to share information with each other. The plans have different TPAs. After much negotiation the companies are willing to have the different TPAs share information as long as they do not share information with the company itself. Employer A is not a safe harbor, has a match formula of 100% to 4%, and does not pass 410b in the aggregate (5 HCEs and 12 NHCEs, ratio 28.66%). This is the plan we administer and has the issue. Employer B is safe harbor (basic match) and does pass 410b (3 HCEs and 55 NHCEs, ratio 218.91%). We do not have the 410b6 transition relief for 2012. Obviously there are design issues and timing issues, which are being discussed separately. Just looking for some ideas before we recommend legal counsel or EPCRS. Thank you!

Anybody wants to take a shot? Thanks.

You mean other than the IRS?

Yes, too late for 2012. It is a discretionary amendment.

We have a takeover situation where for 2012 Employer A of controlled group had a safe harbor plan, and Employer B of controlled group had a regular plan with ADP/ACP testing. They do not pass coverage separately under RPT or ABT. What are out options if the plans can not be aggregated for testing? Thanks.