Saiai

Also, I should add that the plan sponsor is not part of a controlled group -- there are no other corporate entities to look to for the plan liabilities.

The excise tax is also a concern due the failure to make the required contributions. The company has no assets and the owners cannot afford the excise taxes due. Should they file the 5330 but not submit payment?

Agreed....aggressive and slow! That's a good question and I'm not sure of the answer. We provided the PBGC with all the financials regarding the owners and the company and I didn't see anything along those lines. I partly expect the PBGC to try and go after the new owners despite the transaction structure; however, that approach hasn't panned out for the PBGC in court.

We have a client that sold substantially all of its assets (everything but the pension plan) in an asset sale to an unrelated buyer. Company is no longer an ongoing concern but the prior owners are trying to wrap up the pension plan and terminate it. The plan is underfunded and there were zero proceeds from the sale to fund the pension (the owners also got nothing from the sale, the sale proceeds were only sufficient to pay off bank loans). The PBGC is involved and we are trying to get direction as to whether they will take over the plan and wrap it up but they have been "examining the case" for months with not direction. In the meantime, the company continues to file Form 5500s and obtain plan audits....further eroding the plan assets and excise taxes are accruing due to funding shortfalls, etc. Any recommendations on how to terminate this plan and wrap it up?

Is it possible for a large controlled group to offer different (self-funded) health plans at its different locations or to diffirent branches of the company without violating the nondiscrimation rules? Similary, can they vary benefits based upon salaried or hourly status at the locations? Seems like many employers do this but I can put my finger on how they make it work. If testing is done on a controlled group basis, how does this work?

Is there any reason an employer participating in a multiemployer pension plan couldn't convert its contribution structure to a defined contribution (money purchase) arrangement?

That makes sense. Thanks!

A client asked me if they could start a HRSA or HSRA (I can't remember which) and wanted to know if I had ever heard of it. Basically this "HRSA" is a HSA and HDHP coupled with a deductible reimbursement from the employer. 1) I don't think this is permitted. Wouldn't this really just be an HRA coupled with an HSA/HDHP which would make the participants ineligible for the HSA? 2) Has anyone ever heard of this? Am I completely missing something?

Have a client whose 401(k) plan is currently being terminated as part of a bankruptcy proceeding. I was brought into the mix a bit late. The plan began the process to formally terminate using Form 5310 but has now opted not to formally terminate. Instead, they notified all participants and are moving to distribute the assets. This is where I enter the scene. I've now realized that the plan is currently under some sort of an audit by the DOL and the DOL seems to be aware that we are terminating the plan. Due to the furlough I'm not quite sure the extent of the audit and where it is at because obviously can't discuss this with the investigator (it appears to have been limited in scope but I don't believe it has formally closed so I expect that it could be expanded at any time). I've also noticed that the plan is delinquent in filing last year's Form 5500. My plan is to file the delinquent 5500 ASAP and stop all plan termination distributions until I get a chance to discuss things with the investigator. My guess is that she's going to strongly suggest against an informal termination and urge us to pursue a FDL. Any thoughts on whether the plan has any chance of pursuing an informal termination process?

If an employer agrees to provide employees a flat % of their sales revenue as a commission to be paid in the following year, is that arrangement subject to 409A?

This is the first time I’ve encountered a 401(k) plan with “segregated accounts” whereby individuals can elect to have their assets placed into a separate trust that (i) is managed by the plan trustee's advisors or (ii) are managed by the participant's appointed investment advisor. Any particular issues the plan sponsor should be aware of when dealing with these types of accounts?

Agreed. I believe the only way around it is to establish QSLOBs which, given your description, it sounds doubtful that these two groups constitute legitimate separate lines of business.

Our client is a controlled group of corporations with each controlled group member maintaining its own 401(k) plan. With the expiration of Code Section 410(b) transitional relief for 2009, some of the plans failed the coverage test. We have looked at multiple testing methods. The most viable is applying the average benefits test and converting the allocation rate to a benefits rate through cross testing. However, the contribution required to correct the failure is extremely significant even though it is the least expensive of the alternatives. Has anyone had experience or heard of the IRS, through VCP or otherwise, permitting the correction of a coverage failure by reducing and forfeiting contributions made for the highly compensated rather than making additional contributions for the non-highly compensated or adding eligible participants? Will the IRS consider alternatives to the traditional correction approach in light of financial or business hardship that would result from the traditional correction method? We understand there may be anti cut-back issues with our alternative approach. Please let us know your thoughts or any ideas.

Our client is a controlled group of corporations with each controlled group member maintaining its own 401(k) plan. With the expiration of Code Section 410(b) transitional relief for 2009, some of the plans failed the coverage test. We have looked at multiple testing methods. The most viable is applying the average benefits test and converting the allocation rate to a benefits rate through cross testing. However, the contribution required to correct the failure is extremely significant even though it is the least expensive of the alternatives. Has anyone had experience or heard of the IRS, through VCP or otherwise, permitting the correction of a coverage failure by reducing and forfeiting contributions made for the highly compensated rather than making additional contributions for the non-highly compensated or adding eligible participants? Will the IRS consider alternatives to the traditional correction approach in light of financial or business hardship that would result from the traditional correction method? We understand there may be anti cut-back issues with our alternative approach. Please let us know your thoughts or any ideas.

We have a client who failed the ADP test in 2008. The correction distribution was calculated at the end of 2009 and, as we understand it, the amounts were taken out of the trust in 2009 and the checks are dated in 2009. However, the checks were not mailed to the recipients until 2010. My question then is, has the plan satisfied the requirement that distributions be made within 12 months of the ADP failure? Any guidance you could give on this matter would be much appreciated. Thanks.