Gudgergirl

Employer wants to offer a self insured medical reimbusement plan only to employees who participate in an employer offered/paid health risk assessment. Any problems with this?

Profit-sharing plan has cross tested allocation formula in which groups consist of: HCE NHCE with less than 5 years of service NHCE with 5-14 years of service NHCE with 15-24 years of service NHCE with more than 24 years of service. One participant with 20 years of service terminated employment, incurred a break in service and was reemployed. Employer insists she be put in the allocation group of NHCE with less than 5 years of service. Has anyone ever heard of ingnoring years of service for the purpose of putting an employee in an allocation group? The plan defines years of service for eligibility, allocation of benefits and vesting but does not address this particular situation. Thanks for any insights.

Have several clients with IRAs. Their IRA custodian has just been indicted for operating a ponzi scheme. Government is searching for assets. Would clients' IRAs be subject to government forfeiture?

Employee executed an "Election Not to Participate" form for a 401(k) Plan. The form states it is effective for a minimum of 5 plan years. I was always under the impression that if you elected not to participate in a plan it was irrevocable and lasted for the duration of your employment. Any thoughts?

So I just concluded a VCP in which the Plan Sponsor failed to include several employees in its DB Plan. We received a compliance statement and the Plan Sponsor has made a contribution on behalf of the omitted participants. One of the omitted participants is 77. Had the contribution made on time, the participant would have been receiving RMDs for a couple of years now. I have never run across this issue before. Has anyone else ever dealt with it? I know EPCRS offers a mechanism to fix RMDs that are not processed in a timely manner. Does anyone think I need to do another filing to correct late RMDs?

I just completed a VCP filing on this same issue. You have to correct for all plan Years you omitted the otherwise eligible employees.

Many thanks!

I have read lots of guidance regarding amending cafeteria plans for the health care reform act. The amendments I have seen all have to do with amending the definition of dependent in the cafeteria plan to include children under the age of 27 and adding such an adult child's change in status as an event allowing for an election change. My question is: are the changes predicated upon the underlying health insurance plan not being grandfathered? In other words, if an employer's plan is grandfathered must these changes be made to their cafeteria plan?

Plan has always provided for a 50% match on elective deferrals and capped the match at $1,000. In the EGTRRA restatement, the document preparer omitted to check the box capping the match. Error has now been discovered a year later. Matches are still being made according to the old plan document that caps match at $1,000. Error was caught by document prepaper (who admitted that similar errors were made in other plans). Matches are made on a payroll basis. I was hoping to correct this by retroactive amendment under VCP. Section 4.05(1) of Rev Proc 2008-50 states: A Plan Sponsor may use VCP and Audit CAP for a Qualified Plan to correct Plan Document, Demographic, and Operational Failures by a plan amendment, including correcting an Operational Failure by plan amendment to conform the terms of the plan to the plan's prior operations, provided that the amendment complies with the requirements of § 401(a), including the requirements of §§ 401(a)(4), 410(b), and 411(d)(6). A retroactive amendment of this nature seems to obviously be a violation of the anti-cutback rule. The other alternative is to amend prospectively and make uncapped matching contributions for participants for the time period between the effective date of the EGTRRA Restatement and the date of the prospective amendment. However, this is an extremely large amount of money and would cause the sponsor a financial hardship. Does anyone have any insight/ advice on how to correct this error?

Anyone encountered this situation? DB Plan participant retires and startes receiving a joint and survivor annuity. He gets divorced. He wants to name a new person to receive the survivor portion of the annuity but is told by the Plan "No way." Any assistance is appreciated.

Client is majority owner/employee of business. He is planning to retire soon and would like to begin making gifts of his business interest to family members. It has been suggested that he lower the value of the business (and thus lower the value of his planned gifts) by adding a NQDC Plan and/or severance agreement for his benefit before he retires. Any problems with this plan from a 409A perspective?

Employer sends out notice telling employees: effective DATE the employer contribution is reduced to X%. The timing and delivery of the notice comply with Code section 4980F. The notice fails to state what the employer contribution was before the change. See 54.4980F-1 Q&A 11(a)(3)(i). So the notice is technically deficient. Assuming a technically deficient notice is no notice at all... 54.4980B-1 Q&A 14 & 15 address the failure to provide a 204(h) notice Q&A - 14 states that for egregious failures all applicable individuals are entitled to the greater of the benefit to which they would have been entitled without regard to the amendment. Egregious failures are either intentional (which this was not) or result in a failure to provide most of the individuals with most of the info they are entitled to receive. I believe we are safe here because everyone got most of the info and the info they didn't get in the notice (info regarding the employer contribution prior to the change) they already had in their SPD. Q&A - 15(b) says the excise tax doesn't apply in two situations: 1. no excise tax is imposed on a failure for any period during which it is established to the satisfaction of the Commissioner that the employer exercised reasonable diligence, but did not know the failure existed. (This is also in 4980F©(1)) - I have no idea how you do this. Do you? 2. no excise tax applies to a failure to provide a Section 204(h) notice if the employer exercised reasonable diligence and corrects the failure within 30 days after the employer first knew or exercising reasonable diligence would have known that such failure existed. (See also 2980F©(2)) - This has potential. Has anyone ever "cured" a defective 204(h) notice in this way? There is an example in the regs but it assumes the 204(h) notice contains the proper information, it was just misdelieverd to a group of participants. I am wondering how this works in my case because the notice relates to a change that took place over a year ago. It seems like participants would be confused if the employer handed out a new notice saying essentially - effective last year we changed the employer contribution from Y% to X%.

No and no. It says the employer has decided to reduce the employer contribution as of DATE as follows: BLAH BLAH BLAH It says nothing about amending the plan or authorizing officers/directors to accomplish this resolution.

I have a MPP Plan in which the employer wanted to reduce the employer contribution. TPA firm prepared a 204(h) notice and board resolution, but no amendment. Regarding Plan amendments, the Plan states: Any amendment to this Plan shall be made pursuant to a resolution adopted by the Board of Directors. So, has the plan been amended?

I have a client with a SIMPLE 401(k) Plan. They would like to start a safe harbor 401(k) plan next year. I know one of the requirements for sponsoring a SIMPLE plan is that the "eligible employer" can not maintain any other plan which means my client will no longer be an employer eligible to sponsor a SIMPLE 401(k) Plan after it commences its safe harbor 401(k) plan in 2011. Is there any way to convert a SIMPLE 401(k) plan into a safe harbor 401(k) plan or merge the SIMPLE plan into the safe harbor 401(k) plan or must the client terminate the SIMPLE Plan? My client would like to avoid triggering distributions under the SIMPLE 401(k) Plan. Is there another way to accomplish this besides merging or converting? Any advice is appreciated.

Participants owns home but wants to sell it to buy another. The new home will be her principal residence. Participant wants a hardship distribution for the down payment on the new home. The plan only allows hardship distributions for safe harbor reasons. Any reason this couldn't qualify?

FYI - if you do certain corrections under the DOL's Voluntary Fiduciary COrrection program you ARE required to amend previously filed Form 5500s. See EBSA Notice, 4/19/06. I hope this next version of EPCRS addresses this.

Well I managed to talk her out of it. She also wanted to charge another $375 since 2 amendments were missed but I actually found the section of EPCRS that says you only need one filing fee. It is really frustrating that the people who review EPCRS submissions seem to have so little knowledge of the EPCRS requirements.

Profit-sharing plan provides forfeitures are used to reduce the employer discretionary profit-sharing contribution. Employer says - we want to provide that forfeitures are going to be allocated in same manner as profit-sharing contribution as an additional contribution and not used to reduce the employer contribution. My question - do we really need to amend to provide this? For example, employer has $150,000 set aside to make a contribution and also has $20,000 of forfeitures. If the plan document is not amended, can't employer declare a $170,000 profit-sharing contribution and then reduce it by the amount of forfeitures to $150,000. A total contribution of $170,000 is made - $20k from forfeitures and $150k from the employer - achieving the same result without amending the plan?

If only you had posted sooner! For that is exactly what happened today.

One of my plans was not timely amended for 415 regs or PPA. I prepared an amendment that covered both of these. It was signed 2/16/10. (EGTRRA Restatement was signed timely). I submitted to IRS using streamlined VCP with Appendix F Schedule 1 and check the box for "Final regs under 415" and check the "other" box and write in PPA. The IRS tells me with regards to the 415 amendment - I need to submit Appendix F, Schedule 2 because "the amendment was signed outside of the remedial amendment period of 1/31/10." For all I know she is correct but I can't for the life of me figure this out. DOes nayone know if this is a rule and if so where it comes from?

yes, they were excluded because of faulty operation.

Does anyone know of any guidance or has anyone ever experienced a situation in which : 1. a plan improperly excluded employees 2. Plan qualifies for small plan waiver of audit requirement 3. Plan corrects under EPCRS to make imprerly excluded employee whole 4. by adding the improperly excluded employees the plan no longer qualifies for the small plan audit requirement? For example: Plan has 92 participants at the end of 2008 and terminates. 36 employees who were improperly excluded at the time of the plan termination become 100% vested in a benefit. Plan files under EPCRS to correct this defect. Does Plan need to file a Schedule H for 2008?

Employer established a 401(k) Plan on 1/1/05. Plan's eligibility provisions provide: you may defer as of your date of hire but must have a year of service and be 21 to receive employer contributions. Plan entry date for purposes of employer contributions is next following 1/1 or 7/1. One 10/1/05 Employer hires several employees from local hospital and wished to grant them credit for prior service with hospital for purposes of eligibility and vesting and to allow the new employees who met the yesr of service requirement immediate entry into the plan on 10/1/05. Plan was amended to provide this. 2010 rolls around and EGTRRA restatement is signed which includes language stating the years of service with local hospital count as years fo service for eligibility and vesting. Employer gets around to reviewing SPD which also contains this language and says: wait! we only did this when we hired a gaggle of employees on 10/1/05. We don't do this anymore. As it turns out Employer has only hired one employee from local hospital since 10/1/05 and it was recently enough that they can comply with the plan provisions. My question is: is there any problem with amending the plan to delete this provision? Have other experienced this issue when prior service grants are made with a particular organization and the employer continues to hire employees from such organization? ANy thoughts/comments are helpful.

The change in control definition in the final regs doesn't depend on the value of the company, so this suggestion doesn;t seem to work. Looked at another way, what it sounds like more is that they want to create two different payment methods triggered upon change in control - above the threshold participant is paid one way, and below participant is paid another way. That sort of toggle doesn't seem available. There isn't a toggle in the sense that there is opportunity for further deferral. The sole distribution event in this plan is change in control. The change in control definition one found in the regs. There is just another sentence that says "Notwithstanding the foregoing, a change in control will not be deemed to have occured if the business is valued at less than $X at the time the change in control otherwise would have taken place." So there is payment if there is change in control and the business is valued at at least $x. If the business is valued at less than $x then there is not deemed to be a change in control and there is no payment and the plan terminates.