PensionPro

Suspend deferrals now.

The instructions under the Voluntary Alternative Reporting Option state that you should file the schedules that are applicable. Schedule R itself says Part II should be skipped if the plan is not subject to IRC Sec. 412 of ERISA Sec. 302. So if the plan can skip Part II then the way I see it Schedule R is not required to be filed. However, it is not going to be a huge effort if 5500 software is used to file Schedule R with only the identifying information.

According to a DOL agent we spoke with, the burden of proof is on the employer to show they paid the participant. Based on the SSA filing the participant has proof that the plan owed a benefit at a certain point in time. Now it is up to the employer to prove that between the SSA filing and the current claim the benefits were paid. Or at least another Schedule SSA with code D was filed. Just because there are no current benefits due the participant does not mean the participant's benefits were not forfeited by the plan. That's the perspective of one DOL agent. I have not heard how the courts see it.

So if a participant is eligible to receive the matching contribution, they are considered benefitting even if the employer decides not to make a matching contribution. This is different from nonelective contributions, where you actually have to receive an allocation to be considered benefitting. It raises a question. In a 401(k) plan, an employer makes a discretionary match at the end of the year for those participants who deferred, worked 1,000 hours and were employed on the last day of the plan year. In a year when the employer decides not to make a matching contribution, the 410(b) ratio percentage test would be 60% because 40% of the NHCEs terminated during the year after working more than 500 hours. So this plan fails the 410(b) RPT for the match? How do we correct this?

Not really an opinion, just quoting the relevant section with emphasis added. Such information shall also be displayed on any Intranet website maintained by the plan sponsor (or by the plan administrator on behalf of the plan sponsor) for the purpose of communicating with employees ... in accordance with regulations which shall be prescribed by the Secretary.

§1.413-2. Special rules for plans maintained by more than one employer (a) Application of section 413© (3) Additional rules (iii) The special rules of section 413(b)(2) and §1.413-1© (relating to (A) section 401(a)(4) and prohibited discrimination, and (B) 411(d)(3) and vesting required on termination, partial termination, or discontinuance of contributions) do not apply to a section 413© plan. Thus, for example, the determination of whether or not there is a termination, within the meaning of section 411(d)(3), of a section 413© plan is made solely by reference to the rules of sections 411(d)(3) and 413©(3).

1.411(d)-4, Q & A 3

My understanding is the 80/120 exception is available if "a Form 5500 was filed for the prior plan year." This is from the 5500 instructions.

The plan would lose its top heavy exemption.

Announcement 2005-70 pertaining to Hurricane Katrina Relief states that Plan administrators may rely upon representations from the employee or former employee as to the need for and amount of a hardship distribution, unless the plan administrator has actual knowledge to the contrary, and such distribution is treated as a hardship distribution for all purposes under the Code and regulations.

Maybe this will help a little. Rev. Rul. 81-114. The purpose of this revenue ruling is to restate the position in Rev. Rul. 57-419, 1957-2 C.B. 264, in view of the enactment of the Employee Retirement Income Security Act of 1974, Pub. L. 93-406, 1974-3 C.B. 1. The issue is whether deductions are allowable under section 404(a) of the Internal Revenue Code for contributions made to an employees’ trust that is valid in all respects under local law except for the existence of a corpus at the close of the taxable year. Such contributions were made after the close of the taxable year, but during the time prescribed for filing the employer’s income tax return. In order to be an allowable deduction under section 404(a) of the Code, a contribution to an employees’ trust must be made pursuant to a plan in effect and to a valid trust which is recognized under local law. Section 404(a)(6) of the Code provides that a contribution to an employees’ trust is deemed made on the last day of the preceding taxable year if the payment is made on account of such taxable year and is paid not later than the time prescribed by law for filing the return for such taxable year (including extensions). This rule applies to cash basis as well as accrual basis taxpayers. Rev. Rul. 76-28, 1976-1 C.B. 106, provides rules with respect to the application of section 404(a)(6) of the Code. These rules do not, however, change the requirement that a plan must be in existence as of the last day of the employer’s taxable year with respect to which a contribution is made. In Dejay Stores, Inc. v. Ryan, 229 F.2d 867 (2d Cir. 1956), and Tallman Tool & Machine Corp. v. Commissioner, 27 T.C. 372 (1956), acquiescence 1957-2 C.B. 7, it was held that where trust corpus was lacking at the close of a taxable year because of the employer-taxpayer’s failure to make the initial contribution to an otherwise valid trust, such corpus was considered furnished and the trust was deemed to have been in existence for that year if the contribution was made within the time prescribed for filing the incme tax return for that year. Accordingly, deductions are allowable under section 404(a) of the Code for contributions paid after the close of the taxable year, but within the time prescribed for filing the employer’s income tax return for the preceding year, even though the employees’ trust did not have a corpus at the close of the preceding taxable year. Rev. Rul. 57-419 is superseded because the position stated therein is restated under current law in this revenue ruling.

See Section 1107 of PPA. An amendment will not be required prior to 2009. However, SMMs and other participant notice requirements will apply in 2008.

Ok, as long as the plan covers only employees of the adopting employer. See Rev Proc 2005-16: Areas Not Covered by Opinion Letters - Opinion letters will not be issued for: (1) Multiemployer plans and multiple employer plans; (2) Union plans (This does not preclude an M&P plan from covering employees of the employer who are included in a unit covered by a collective bargaining agreement or the adoption of an M&P plan pursuant to such agreement as a single employer plan that covers only employees of the employer.);

In-service withdrawals of the safe harbor contributions (whether match or nonelective) may only be permitted on or after age 59 1/2. See IRC Section 401(k)(12)(E).

A distribution to an employee from a qualified plan will be treated as within section 72(t)(2)(A)(v) if (i) it is made after the employee has separated from service for the employer maintaining the plan and (ii) such separation from service occurred during or after the calendar year in which the employee attained age 55. (IRS Notice 87-13). This is not a plan document driven provision.

The 90 day withdrawal provision is optional in an EACA/QACA, not a required provision.

Under the final regs the notice would be considered timely as long as it is provided prior to the first pay date and the employee has reasonable time make an election.

A calendar year 401(k) plan failed the ADP tests and refunds were made to the HCEs by 03/15. After 03/15 it was determined the census information was misreported, and the plan actually passes the ADP test based on the new accurate information. Can we reverse the refund transactions and have the HCEs send back their refunds? What is the recommended course of action in this situation? Thanks very much!

Under Section 4972, the excise tax on nondeductible contributions to qualified employer plans is 10%. I seem to vaguely recall that there is an exception stating nondeductible contributions may be returned to the employer within a year. The references I have are Revenue Ruling 91-4 and ERISA Sec. 403©(2)©, but have not had an opportunity to look through the details.

29 CFR 2530.204-2

He can rollover funds from the traditional IRA into the SEP.

Yes, you can use catch-up in the 401(k) plan if you hit the 415 limit for the participant in the 2 separate plans as long as you do not use the catch up limit twice. Special rules for an employer that sponsors multiple plans -- (1) General rule. For purposes of paragraph © of this section, all applicable employer plans, other than section 457 eligible governmental plans, maintained by the same employer are treated as one plan and all section 457 eligible governmental plans maintained by the same employer are treated as one plan. Thus, the total amount of catch-up contributions under all applicable employer plans of an employer (other than section 457 eligible governmental plans) is limited to the applicable dollar catch-up limit for the taxable year, and the total amount of catch-up contributions for all section 457 eligible governmental plans of an employer is limited to the applicable dollar catch-up limit for the taxable year. §1.414(v)-1(f).

Every TPA firm that I have known has this question about related employers as part of their initial questionnaire to prospective clients, along with questions about leased employees, prior plans, etc. If these questions were not asked, then the design process was faulty, and the consultant not the client is the guilty party. In my opinion. Anyway, going back to the original poster: I am assuming a VCP filing is intended, not a VFCP filing. I would think the IRS is more agreeable to reallocation of the contributions, rather than withdrawal or distribution.

It seems that it is rare for the DOL to file a lawsuit simply because of a lack of fidelity bond, but there is a case from about 8 years ago: PWBA Field Office Press Release PENSION AND WELFARE BENEFITS ADMINISTRATION V-301 Issued By The Chicago Office Of Public Affairs CONTACT: OFFICE: Sharon Morrissey (202) 219-8921 FOR RELEASE: IMMEDIATE December 4, 2000 LACK OF FIDELITY BOND PRECIPITATES LABOR DEPARTMENT LAWSUIT WITH SNYDER FARM SUPPLY AND PENSION PLAN TRUSTEE The U.S. Department of Labor has sued Alto, Mich.-based Snyder Farm Supply and its majority owner Thomas E. Snyder, who also administered the Snyder Farm Supply 401(k) pension plan, for their failure to bond the pension plan offered to the company’s employees. The lawsuit, filed today in federal district court in Grand Rapids, cites the defendants’ continuing fiduciary violation of the Employee Retirement Income Security Act of 1974 (ERISA) for failing to maintaining a fidelity bond. ERISA Section 412 requires that fiduciaries of private sector pension plans obtain a bond in the minimum amount of 10 percent of the amount of plan funds handled, to protect employee benefit plans against loss caused by acts of fraud or dishonesty. The department is seeking to have the federal court (1) order to defendants to obtain and maintain a fidelity bond to meet the requirements of ERISA Section 412; and (2) remove Thomas Snyder as the plan administrator and be replaced by an independent trustee, who will subsequently administer and/or terminate the plan. At various times during the plan’s five-year existence, there have been as many as 44 plan participants and assets of $241,651. Most recently, the plan had 14 plan participants and $44,535 in assets as of Nov. 28, 2000. The complaint is a result of an investigation by the Cincinnati Regional Office of the department’s Pension and Welfare Benefits Administration, which oversees federal pension law. # # # (Herman v. Thomas E. Snyder and Snyder Farm Supply Inc. 401(k) Plan Civil Action # 1:00CV 887

There is no need to scratch out the calendar year on the top right corner of the 5500. The plan year information needs to be entered under Part I, "fiscal year beginning ---- and ending ----." We have not had any returns rejected doing this.