ETA Consulting LLC

I think the major determinant is the fact that the individual would have not received these payments had he not terminated. Also, they are not tied (at least directly) to services actually being performed by the employee. There is (arguably) a chinese wall between pay for services rendered and pay pursuant to a contractual obligation. Just some additional thoughts. Good Luck!

I would look at the SPD and safe harbor notice to see if the inconsistency in the language in reflected there. This is merely 'defining the entire problem'. Should be problem exist only in the plan's document, then you can take one of two basic approaches: 1) The conservative approach, would be a VCP filing to explain the typo and allow for a retroactive amendment to eliminate the erroneous language; 2) would be to argue that your interpretation is that the SH match is calculated on full year compensation in all instances and draft a 'clarifying amendment' to that extent. There is actually legal precedent for a plan sponsor to amend a plan to change the language for purposes of better clarifying their intent (with the argument that you are not actually changing a plan provision). There was a court case many years ago when an employer did this and was sued by participants for a cut-back issue. The courts rules that the a) The employer (as plan administrator) as the sole authority to interpret the provisions of the plan; and b) The employer's interpretation of the original language was 'reasonable'. c) Therefore, the plan's provisions were not amended, but the language was merely re-written to better clarify the way the provisions are interpreted by the employer. Good Luck!

Me too! The plan document should adequately adhere to the Regulations on vesting; which provides for very limited periods of employment which may be excluded for vesting purposes (i.e. Service before age 18 or Service before the establishment of the plan). Good Luck!

I think there is a semantics issue. The Average Benefits Test is when you include "ALL PLANS" sponsored by the employer. The concept of "Permissive Aggregation" is to combine two or more plans under one test so you do not have to test all plans together. Technically, there is no such thing as an Average Benefit Rate for only one plan when the employer sponsors two or more. More detail on whether each plan provides the same allocation rate to each employee or whether the same rate is provided to all plans (and the ratio percentages merely fall below 70%). Did you consider restructuring the plan in component plans? Not sure if all HCE benefited (or at the higher rates). Too many questions with no answers. Good Luck!

Off the bat, severance compensation is not included within 415 Compensation. In your instance, it appears as if this represents an amount (or amounts) that would not have been received had the participant continued employment with the employer. If that is the case, and the only reason the individual received those amounts was because he severed employment, then they should not be included in the analysis. That's the best I could surmise with the fact pattern. Good Luck!

That is a rule in 401(a)(9) that suggests payments may not be made to extent beyond the life or life expectancy. Arguably, when you are (let's say) 60, you may elect period payments to be made over the next 100 years. However, when you get age 70 1/2, you must meet the calculated amount based on your "life expectancy". Many plans are written to ensure any elected payout will automatically meet the RMD by ensuring the initial period does not extend beyond life expectancy of the participant. This is done because the period payment remains a fixed period (i.e.25 years) while the life expectancy tables do not always reduce your life expectancy by a full year. Even under the period payments, you may still have to distribution an additional amount when the amount distributed does not meet the required amount for the year. When there is an actual (annuitization) or (payment of actual life), then no such calculation is necessary each year because you're not longer using an account balance calculation. You can also use life and period certain, but the concept of "life" gives you the exemption from RMD. A bit long winded, but this concept is all derived from the RMD rules. Good Luck!

Typically, a payroll period match means that you are applying the formula to only those deferrals (and compensation) made (and paid) during that payroll period. There is no true. When the period is "plan year", then you "may" make the calculation on each payroll, but a true-up at year end would be necessary. So, you either have an annual calculation or you do not. You should not impose one when the document isn't written to provide for it. Good Luck!

Not necessary. The form already reads 2011 Calendar Year "OR". When you key in dates that contradict that 2011 calendar year, then that is reflective of the reporting cycle. Good Luck!

I've seen the arguments on that, but there is nothing written in the statute to support that. The concept of "incidental limit" is not a tax issue, but a qualification issue; the plan may not exist for the purpose of purchasing insurance. Instead, the plan is established for providing a retirement benefit for participants (and beneficiaries); the existence of insurance must be "incidental" to that purposes of the plan. There is no change in taxation from whether the benefit is incidental (or not). This is merely a limit to preclude someone from establishing a plan in order to purchase the life policy they want. BTW, there is really no requirement that you issue a 1099-R each year on the economic benefit of the insurance. However, if you don't, then the participant's beneficiary will not receive the death benefit (calculated at the net amount at risk portion) on a tax-free basis. Life insurance in a qualified plan is potential complex. We have components in the industry that will argue you should never let this happen and search for rules to support this. This severe case of confirmation bias often overreach on the way the rules are written. At the same time, many life insurance agents will say "always" do it. My suggestion is to do the math and apply the rules as written in each instance; and make a fully informed decision on whether it works for that individual in question. Good Luck!

Remember, there is no one size fits all. Many of these comments are valid; especially when the insurance issuer's employees aren't versed in any of the qualified plan rules. As a line employee, it's troubling when you can easily complete a report (i.e. 5500) but have trouble ascertaining the information allowing you to do so. This should generally be reflected in a premium for having insurance in the plan; and typically is. The issue is that you, as a line employee, generally do not receive extra pay for dealing with this stress. Very valid points. However, there are still some instances where insurance in the plan is beneficial to the participants from that liquidity and tax perspective. In some situations, especially when the insured is a high-risk, purchasing the policy within the plan (mathematically) provides greater leverage. This leverage should be enough to pay the increased administration costs for having the insurance in the plan. Good Luck!

I did. I merely keyed January 1, 2012 and December 31, 2012 in the date boxes since it wasn't for the 2011 calendar year. You shouldn't have a problem as long as you use the correct dates. Good Luck!

The concept of 'seasoned' money is amounts that may be used to purchase life insurance for which the incidental limits do not apply. There are, actually, situations where it would be very beneficial for a participant (i.e. small business owner) to purchase a life insurance policy within a plan as opposed to purchasing it outside the plan. It is true that such an advantage may be available in limited instances, but there are instances. With that said, there are too many instances where an agent or advisor makes a suggestion to a client to purchase a policy within a plan without considering pros or cons against the approach. At the same time, there are those that say 'never' purchase a policy inside a plan; which they may be often right, but not alway right. You must know what you're attempting to accomplish from an insurance need and income tax strategy. Good Luck!

And, you also account for 'seasoned', or in some instances (arguably) 'seeded' money to provide more purchasing power. Good Luck!

Correct! Good Luck!

I'm going to beat David Rigby to the punch and recommend you read the document for your plan in question. When studying for the ERPA (or any other test), your being tested on your understanding of what the rules permit a plan to do. However, in many instances, it is up to the actual plan to adopt those rules. When it comes to 'not being able to locate a participant' who is not required to take a distribution from the plan, no problem exists with respect to a distribution. A plan "may be written" for force a participant out at the later of age 62 or NRA. Unless your plan actually forces those individuals how, then they really are not missing. Your date for a mandatory distribution would, then, become their RBD under the plan (typically at age 70 1/2). Good Luck!

You're going to have to read your plan (perhaps the basic plan document) on this one. First, you'd want to see how they treat a rehired employee who has never met eligibility in the plan. If there is a reference to the break in service rules, you'd have to see how those apply. Typically, when a plan has eligibility requirements, you will lose all service prior to meeting those eligibility requirements when you incur a one-year break in service. For instance, a plan requires two years of service to enter (you get one year but not another). As long as you don't incur a one-year break in service, you keep your 1st year until you get your 2nd. The plan "may be written" to restart the clock in all instances where 1) you fail to meet initial eligibility and 2) you incur a one-year break in service. You should trace this language within your plan to see how it is written. Good Luck!

You have identified the major anomaly for these plans with respect to ERISA status. Since ERISA status applies to the individual accounts as opposed to "the plan", you're not required to report the accounts that are not subject to ERISA. However, the actual "participant count" on the Form 5500 applies an IRS rule where you count anyone who is actually "eligible to defer" in the count. This is regardless of whether their account is deferral only and not subject to ERISA. This, in your instances, induces an audit requirement. Good Luck!

It appears (from your post) that BofA dropped the ball, and they are attempting to fix it by dropping the ball again. Why would they make a decision to fund $50 to your checking account, and not just directly roll it over to the other Roth Account. At any rate, You should be able to directly roll it over to your Roth IRA as it would be a distribution. The issue would be whether they would produce a 1099R at year end showing you received a distribution. Also, this would disallow any additional (indirect rollovers) from your new account during the next 12 months. An (indirect rollover) is where you receive the cash prior to depositing into a new account. Good Luck!

CPC!!! So, do you think that would be an acceptable answer on the essay part? Absolutely. It's one thing to provide the correct answer, but communicating an understanding is a different level. There is no issue. Why? We have a percentage of the industry would say "because my supervisor or someone else told me". Your answer says they are still age 70 1/2 during the year. You "could" elaborate further and say the criteria is that you are age 70 1/2 during the year and terminated employment. If those two are met, then any amount distributed during that calendar year would satisfy the RMD for that year; regardless of how many checks were paid. It says the same thing; here's my answer and here is why

CPC!!!

You are correct. You know, you can program a computer to say 2 plus 2 equals 5. The key here is to ensure the rules are adhered to despite the programming deficiencies. From a programming perspective, it's difficult to apply one set of parameters (loan availabiltity) accross more than one plan. It will likely require manual intervention to ensure this is administered properly. 403(b) and 401(a) plans are treated as separate for some purposes (i.e. 415 limits), but that doesn't extend to loans. Good Luck!

Remember, the IRS does not determine ERISA status. The DOL has Title I enforcement authority. Currently, as inconsistent as it may appear to many, the DOL applies this to the contract; not the entire plan. Good Luck!

There is a prohibited transaction exemption for a plan purchasing a life insurance policy from a participant who is the insured. The plan would write a check to the participant for the fair market value of the policy. The insurance policy would be re-titled with the plan as the owner and beneficiary. Good Luck!

Many, many, many years ago (probably prior to 2001), after-tax amounts were not eligible for rollover. For the past 10-plus years, they were. You should reference the current rules. It does become confusing sometimes when you read a rule from an old book. I failed the ASPPA C-2 DB exam back in 2002 by failing to realize the full 415 limit payout was available at age 62 (where prior to EGTRRA, the limit was required to be reduced for payouts prior to age 65). The entire exam was loaded with that question, but I studied from an old book. So, I appreciate your confusion, but you'd be better off referencing the current rules. Good Luck!

I researched this many, many, many years ago. At that time, my research concluded that they may defer from the draw despite the fact that they receive income only one day of the year (and that is the last day of their fiscal year). I cannot imagine that has changed. Good Luck!