30Rock

A 401k plan terminates 3/31/2011. Question on testing for this short period - it appears that for 415 purposes, you have to pro-rate comp i.e. 3/12 x $49,000 = $12,250. Is this right? And then for ADP purposes, can you use any compensation after the termination date when running the test, or is this also pro-rated? Can you look at comp beyond the 3/31 termination date for ADP? Thanks!!!

Does the plan document allow you to specify that the compensation period for the fixed match will be based on compensation accrued through a certain date? I have seen plans where this language could be added to stop the compensation accrual at the time the fixed match is suspended.

We have a sponosr that wants to cease automatic enrollment mid plan year, and the plan was structured as an EACA with the 90 day permissive withdrawal feature and an annual escalator. It appears that an EACA is supposed to be based on a 12 month plan year unless the plan allows mid year entry for new hires, and then the 6 month extension on testing is lost, but the 90 day withdrawal can still be used for the new hires. But can the feature cease mid-year, provided the client does not use the 6 month extension? Thanks!

We have a 401k plan and last year the money purchase plan merged in. Participants in the MPPP as of 3/31 have a grandfathered nonelective contribution based on years of service. However, the employer announces that if the participant terminates employment and is rehired after 90 days, then the participant is no longer eligible for the grandfathered benefit, and instead gets the current discretionary match under the plan, which is not as generous. I am wondering if this can be written in under the eligibility exclusion provisions of the plan document, so that it is an eligibility provision. Would it then just be a matter of 410(b) coverage testing each year? Does anyone have any thoughts?

Can anyone share their opinion on whether salary deferrals under a 403b plan are included in the average benefits test, both when testing for coverage and nondiscrimination. If I use a cross tested allocation formula in a 403(b) plan and I need to use ABT, do I include the deferrals? I have attached a prior link on this subject. It appears it was unclear at this time. Has anything changed? How is it being done in the real world?! Thanks! http://benefitslink.com/boards/index.php?s...+403b+deferrals

A consulting firm claims they made an error in the contract with the plan and charged too many basis points for their fees. I believe this affected 3 plans in the controlled group and during one or two prior plan years. Is this a prohibited transaction? If they claim administrative error or oversight does that ondo any prohibited transaction liability for the plan sponsor, as the fiduciary, that allowed plan assets to be used to pay excessive fees? Remedy is to disgorge the excess and return to the plan, plus lost earnings I would think. Should it be recommended that the sponsor file under DOL Voluntary Fiduciary Correction Program? Thanks for any comments you may have!!

Thank you all!!!

Hi - employer has a 401k plan and has Davis Bacon contractors. Employer wants these workers to be subject to 1 Year of Service and age 18 eligibility requirements for the prevailing wage contribution. Is this possible? Are some state laws able to override federal? Can the employer pay them prevailing wage outside the plan for the year they are holding them out?

Is it acceptable for a tax exempt employer with a frozen 403b plan with multiple prior vendors to limit loans and hardships to only a few vendors, so in essence turn off loans and hardships from some vendors, esp in order to save on cost and prevent compliance problems? It appears FAB 2010-01 does allow a sponsor to do so and still maintain non ERISA status. Any thoughts would be very welcome!

Thank you both!!

Once a plan termination date has been set and the plan has been filed with the IRS for a determination letter, is there a requirement that all assets remain in the plan until the IRS issues the D letter? What is the suggested course of action, esp given that it could be 6+ months until the letter is issued, and participants have no access to their accounts. What are sponsors generally doing these days? Thanks for any feedback!

Does anyone know if this question was ever asked during any of the ASPPA IRS Q&A sessions?

Did the IRS make you submit under EPCRS?

Does anyone have any creative suggestions for an employer that cannot afford to fund the 3% nonelective for 2010? They are going out of business in 2011 and terminating the plan. They state they cannot afford to fund it for all participants for 2010, and want to know can they just not fund for the owners? I have suggested they file with the IRS under EPCRS and have IRS review their corrections. Has anyone found any other options? What will the IRS do if the employer fails to fund, or fails to fully fund? Thanks!

He is still employed. The 415 amendment deals with compensation after termination of employment. In a 457f plan, once the compensation no longer has a risk of forfeiture, it becomes taxable and you can take a distribution. But often you are still employed.

A participant in the 403b plan is going to receive a payout under the 457f plan this year, which is included as W2 income. Can he make a Roth 403b deferrals on the deferred compensation payout? The plan uses the 3401 definition of compensation, and there are no other exclusions. Thanks!

Any suggestions on how to correct a top hat plan where RMD's were missed? A couple participants are now age 80 and did not receive the first payout. If we payout entire account this year should it be 2011 income? I think there is a limit to how far back corrected W2's can go. Technically plan is disqualifed, I suppose one option is to terminate it? Any thoughts? There is no EPCRS program for top hat plans.

We have a non-resident alien beneficiary, living in Mexico. What is the procedure for paying out a distribution? Does the administrator send the distribution form along with a W-9 and if beneficiary does not produce a SSN or TIN, or W-8BEN then withhold 30%? Thanks

I have a plan to plan transfer question. EIther an employer based transfer or a participant elected transfer, as permitted under the final 403bn regs. I understand, I think, the rules regarding a custodial account funded plan transfer, in that you have to restrict the employer contributions upon transfer so no in service are allowed prior to age 59 1/2. But what happens when an ERISA plan funded with an annuity contract under 403(b)(1) is transfered to a plan funded with 403(b)(7) custodial accounts and the annuity has more liberal in service w/d's of employer contributions - i.e. age 40 and the 5 year/2 year distributions? Do they have to be preserved, or can the funds fold into the custodial account and become subject to these more restrictive withdrawal rules? WHat about a vesting schedule - assume more generous vesting must be grandfathered? Thanks!

The rule does not apply to 457(b) contributions. However, it would apply to rollovers made to the 457b plan from plans other than another 457b plan - i.e. rollovers from a 401k, 403b, 401a plan.

IS there an issue in offering annuities as a payout option in a 457b tophat plan? The employer owns the assets and the assets are subject to creditors. It may be difficult to pay an irrevocable annuity to a participant while the assets are subject to creditors. Can anyone add some light to this? Thanks!

What is consequence if employer switches to an off calendar year fiscal year, but maintains calendar year plan? I see deduction timeframe will change since employer tax return deadline is different and 415 deadline is changed. Any other issues? Thanks!!

You know that your deferral may not be even, so an employee, normally an HCE, could max out deferrals early in the year, and then not get any further match. So in essence if you could receive a 4% match based on full plan year comp, you now get much less since you reached the 402g limit early. My dilemma is can an employer decide to make a true up on a discretionary basis, or does it have to be required? Then they lose flexibility year to year.

Great point on the BRF issue. But is it a BRF if it is required in the plan? My main issue is whether you can make it discretionary and still meet the requirement of being a determinable formula - can a plan document even allow a discretionary true up?

If a 401k plan has a discretionary match formula, and it is being calculated on a payroll basis, can there be an election to make a discretionary true up match at the end of the year? Does this violate a definite determinable allocation formula? It gives the employer flexibility, rather than being locked into a true up each year. thanks!