Nate X

An employer contribution that is made on an annual basis is due the employer’s tax return due date if it is to be deducible for the prior year [iRC 404(a)(6)]. Otherwise, it is due 30 days later [Tres Reg 1.415-6(b)(7)(ii)]. See my response on this discussion regarding how to correct it: http://benefitslink.com/boards/index.php?s...c=32765&hl= The amount does not have to be allocated to a participant if it would cause the participant to receive a corrective distribution of $50 or less if the administrative cost of correction is greater than the corrective distribution [Rev Proc 2002-47]. However, the corrective amount must still be deposited into the plan.

Thanks Jean! Would you agree, in this senerio, that I would check box B(1) on Form 5500 to indicate it is the first report filed for the plan? Thank you.

I'd like to follow-up with a question recently asked since I have a similar situation as this one: http://benefitslink.com/boards/index.php?showtopic=32782 ------------------------------------ A large calendar year plan was part of an ME plan with Paychecks. The client stops participation in the ME plan in April 2006 and assets are moved to another provider in May 2006. The document is restated effective 3/1/06. 1. Do you agree that this is a continuation of the plan and not a New or Successor plan? Assuming it is a continuation, 2. On Form 5500, would the Beginning of the Year assets be shown on the form, or would they be listed under “Transfers of Assets”? 3. What is my beginning date for filing Form 5500? (1) The document restatement date, (2) the date the client starts participation with the new provider, or (3) the plan year beginning date? 4. Would participants that had been previously reported on Sch SSA under the ME plan needed to be added using code C? Thanks!

If you can pass the ratio percentage test, then you do not need to cross-test the plan. If you need to cross-test the plan, keep in mind that you’ll have to meet the gateway requirement. Andy, what are you referring to when you say 1.401(a)(4)-2(b)(2)? Tres Reg? Tres. Reg. 1.401(a)-4 is Optional forms of benefit (before 1994).

If the employees were allowed defer on their final paycheck, then they would NOT be excluded from the 2005 tests. If they were NOT allowed to defer on their final paycheck, then they can be excluded from the 2005 test. -------------------------------------------------- From Notice 2004-84 (December 27, 2004): "Guidance regarding the ability to make deferrals with respect to post severance compensation is expected to be issued soon. "

I would think that you could not do this because it appears that employees would be excluded based on service. The only way to exclude employees who would otherwise meet the age and service requirements of a plan (i.e. age 21 & 1 year of service) is by establishing conditions unrelated to age or service. One could probably argue that this division is not service related, but I would suggest obtaining an LOD first. Since the plans would offer different benefits, you would always have the potential problem of failing the BRFs test.

I would think that the IRS would treat this as a successor plan for Safe Harbor purposes. This would be consistent with IRS Notice 98-1. From IRS Notice 98-1: For purposes of this notice, a plan is a "successor plan" if 50% or more of the eligible employees for the first plan year were eligible employees under another section 401(k) plan (or section 401(m) plan, as applicable) maintained by the employer in the prior year.

1 Do they have to put earnings in as well? Yes, this can be corrected under EPCRS. www.irs.gov/pub/irs-drop/rp-06-27.pdf 2 How are the earnings calculated - is it the plan average or a rate determined by the IRS? You have a few options. See Section 3 of EPCRS. 3 Do they have to file a 5330? No. Profit Sharing Plans are not subject to IRC 412. 4 What about deductibility - they lose it for the plan year it was intended for, does it count for the year that it is actually deposited? Yes & Yes. They will lose it for the plan year it was intended for and it does count for the year that it is actually deposited. See Section 6(4)(b) of EPCRS. 5 What about the earnings they are depositing - are they deductible? No. Restorative payments are not deductible. Thank you for any feedback! You’re welcome.

Sorry I meant to say “the classification ratio percentage test (vs. average benefit ratio).” In order to pass average benefits you must pass both the average benefit ratio test and the nondiscrimination classification test. One could not use the classification test if unless the benefit formula used a “reasonable classification established by the employer.” So instead, one would have to use the classification ratio percentage test. If you pass the classification ratio percentage test, then you do not need to run the average benefit ratio. (Sorry- started to edit wrong post by mistake-now I can can't clear my trail)-AH

I'm in agreement with everyone on this one, but would like to add that if it is determined that defining rate groups by compensation is not a reasonable business classification, then one would have to pass coverage using the Ratio Percentage Test (vs. Average Benefits).

It appears that Citistreet is arguing that no Schedule P was filed with Form 5500 for the plan above because the money is in vested in a group annuity at an insurance company (as opposed to holding the money in a qualified trust). I’m assuming that Citistreet is actually preparing Form 5500 for the client. Under IRC 401(f), assets in a retirement plan held at an insurance company are treated as if they were held in a qualified trust. So this invalidates the argument that plan assets held at an insurance company are treated differently than assets held at an insurance company. Now this is not to say that the Schedule P should be in the name of the insurance company, but that the plan itself should file it in order to protect itself under the statute of limitations. The plan is not required to have a named trustee since the assets are held at an insurance company.

Before moving the money to the State, you should first try to find IRA provider who will hold the balance as required by DOL's Field Assistance Bulletin 2004-02. I've used a provider called PenChecks before: www.penchecks.com If you do move the money to the state, then the mandatory federal withholding applies.

As stated in my first response: IRC 401(f) Certain custodial accounts and contracts For purposes of this title, a custodial account, an annuity contract, or a contract (other than a life, health or accident, property, casualty, or liability insurance contract) issued by an insurance company qualified to do business in a State shall be treated as a qualified trust under this section if - (1) the custodial account or contract would, except for the fact that it is not a trust, constitute a qualified trust under this section, and (2) in the case of a custodial account the assets thereof are held by a bank (as defined in section 408(n)) or another person who demonstrates, to the satisfaction of the Secretary, that the manner in which he will hold the assets will be consistent with the requirements of this section. For purposes of this title, in the case of a custodial account or contract treated as a qualified trust under this section by reason of this subsection, the person holding the assets of such account or holding such contract shall be treated as the trustee thereof. ----- A fiduciary of the plan should sign the Schedule P.

Even though he is joining a larger medical practice, I would think he would have some say in possibly getting Self-Directed Accounts added to their plan. I’m not aware of any exceptions that will allow him Title 1 protection in any qualified plan he would establish for just himself. Depending on the circumstances of his old plan, he may want to keep that plan alive as an alternative.

Regardless if the the termination is a sham or not, the participant in this case has already been rehired. So he/she can not take a distribution by reason of termination of service.

It's definitely a distributable event (General Counsel Memorandum 39824 of 1990).

This is kind of the exception to the rule. Since the plan was the “AB Plan” and NOT the “A Plan”, it would create a distributable event at the point when Company A stopped participating in the AB Plan. I believe since the resolution to stop participation in the AB Plan was already completed, that a trustee to trustee transfer could NOT be done. Participants would have the choice whether to roll their balance into the new plan or not.

An excellent question. Remember that disaggregation for ADP/ACP should be consistent with the 410(b) test. This is true even if it is a Safe Harbor plan. So if you are using the end of the plan year for your 410(b) determination date, then the HCEs would NOT be otherwise excludable employees and their contributions would NOT be subject to ADP/ACP testing.

As R. Bultler stated, Sch P is not mandory, but it would be required to be filed to start the 3 year statute of limitations. The fact that the contract is backed by a guaranteed insurance contract has nothing to do with this. Sorry I shouldn't have been clearer earlier.

They are required to file a Schedule P. See IRC 401(f).

Ignore the Participant definition in regards to the Alternate Payee. The Alternate Payee has some of the same rights as a Participant but not all. I tend to believe what the attorney is telling you. Assigning a beneficiary to an Alternate Employee is one of the unwritten rules of retirement plans. It’s subject to interpretation and whether you want to take an aggressive or conservative approach. Here’s my take on the conservative view: If the Alternate Payee dies, the Alternate Payee does not have the right to survivor benefits unless it is specifically granted in the QDRO.

As mentioned under EPCRS: whenever you are correcting plan defect, the plan should be put into the same position as if the error did not occur. Correcting plan defects does not apply exclusively to NHCEs. If this is the only correction, it appears that you may be able to correct this using Self-Correction (SCP).

I think your 401(k) admin maybe thinking that you want to terminate the employer contribution as oppose to a Plan Termination (i.e the plan has a non-discretionary employer contribution, no accrual requirements, and you do not terminate the plan). If they are referring to a Plan Termination, then they're probably on crack.

I've seen all sorts of stuff try to pass as a QDRO including a divorce decree, but I've never seen one that had all the language required. In most cases, the lawyer (and sometimes the judge) does not understand the anti-assignment laws for qualified plans. I agree with Effen, unless the divorce decree has a "dual purpose" (A DRO inside of the divorce decree), you should not use the divorce decree as a replacement for a DRO. The fact that you admit that the document is a "non-QDRO" should tell you right there. I've also seen the divorce decree used as a "pre-notice" to the plan administrator where the spouse is making sure that none of the benefits due to him/her are paid out to the participant until a DRO is obtained.

Here's your triple play: 1. Matching Safe harbor. (i.e 100% match on the first 4%) 2. Additional nondiscretionary match: Must be limited to the first 6% of comp. 3. Additional discretionary match: Must be limited to the first 6% of comp. & the match itself can not exceed 4% of comp. (i.e. 66.66% match on the first 6%) Follow these rules and you have no testing issues regarding the formula.