Dougsbpc

We just had a case where we sent the EGTRRA restatement in March, followed up with a reminder phone call in early April, then sent an email around April 15 reminding them again. The client sent us the signature pages dated after April 30. When we mentioned the consequences and the related fees, they had a sudden case of amnesia and wanted us to pay. That is until we forwarded the reminder email that was sent.

Sieve is right about this. You always want to make sure you have everything in place before applying for the DL. Then if you discover something missing, VCP is the way to go as he mentioned. When I was read the question, I thought about the few times over the many years when the IRS did allow correction. At the time, we thought we were in big trouble but then were allowed to correct. I remember speaking with an IRS agent who explained that they were in no way condoning the practice of missed amendments, but would allow current correction because we were voluntarily applying for a FDL. However, those cases were more than a few years ago and with EPCRS so well established now, they are likely much less forgiving as Sieve explained.

Generally, they tend to allow you to execute the missed amendment now. This because you are voluntarily asking for approval. I have found them to also allow for correction of minor operational errors. Never had a major one. That might be a little scary. We actually have a small terminated DB that we will be submitting that kept their normal retirement age at 58. It will be interesting to see the fire that will draw. In their case, the average retirement age in their industry is below age 58. This according to several independent online sources. Even so, it might be challenged. All we can do is provide copies of the independent sources and remind them that this should be considered a good faith interpretation of the typical retirement age in their industry.

We struggle with this as well. It seems that for every restatement/compliance amendment requirement, we have a few clients who never return executed signature pages. Although it ultimately may be the plan sponsor's responsibility to maintain copies of everything, we see it as our responsibility. We provide the document/amendment, follow up with a phone call then follow up with an email. We think the email is important as we can prove to the client that we reminded them. Then they are on the hook for any expenses related to a non-amender filing if they did not execute timely.

Would you not restate because of the extra time/work or because of the single life normal form in the new document?

Have a small DB plan with about 30 participants that we took over about 5 years ago. The plan will terminate soon. If we submit for a DL, must we restate the document for EGTRRA first? Usually, we would have no problem restating with our volume document. The problem is the plan has a 100% J&S normal form of benefit. Our EGTRRA volume document only allows for a single life normal form but many optional forms and the ability to modify the QJSA to 100%. The EGTRRA document has a provision that allows us to designate protected benefits other than those described in the plan. If we must restate for EGTRRA, perhaps we can designate the 100% J&S normal form as a protected benefit under the plan. Anyone see any problems with this? Thanks a million!

Thanks all for your insight. I cannot imagine that simply using the corporate account as a mechanism to distribute benefits should be a problem. Especially if checks are made payable and sent the same day the deposit to the account is made. I don't believe their corporate account credits interest, so how would the employer be benefiting from this transaction? It seems like a lot of work and hassle to set up a separate account in the name of the plan just to distribute benefits.

In the old days (5, 6 years ago) when a participant terminated employment, a plan trustee could simply send an instruction letter to the investment provider and it was honored. We now have a small DB plan termination with all benefit elections properly executed. We would like to prepare an instruction letter for the trustee to sign and forward to the investment provider. The letter would say please make a check payable to XXXXX Trust company FBO Mary Smith etc. However, the investment provider is telling us they can only make checks payable to the trustee. They then recommend these checks be deposited into the corporation checking account and then disbursed to participant's or their IRA's. We even offered to have a signature guarantee on the trustee instruction letter, but the investment provider will not accept that. Anyone run into this situation? Seems not right to deposit plan money in a corporation account and then make distributions.

We are a TPA firm who has been asked if we could recommend an administrator for a 403(b) plan. We do not administer 403(b)'s as they are a little different from 401(a) plans and we already have too much to do with what we have. Apparently they are a local college and have been administering it themselves. If there is anyone in the Southern California area who would be interested in this? If so, let me know. Although I haven't done it before, I guess you can send me a private message.

Good letter I also sent one to our congressperson. I localized mine by reminding her that in addition to the idle rich, our area is comprised almost entirely of small businesses, many of which will terminate their plan if this legislation goes through. I kept it concise but felt like rambling on about the increased pressure down the road to reduce or eliminate public employee retirement benefits when so few private sector employees will have any retirement benefits. I know she is very close with public employees.

We just received a letter from our document provider that the DB letters are being sent to us. I am sure we will receive them next week.

We filed for a determination letter with IRS on a DB termination in September 2008 and have not heard anything from the IRS yet, other than their initial letter indicating they received our termination package.

Have a profit sharing plan with a two year eligibility period and 100% vested immediately. The plan is cross-tested and a 5% gateway is provided to all non owner employees. Suppose they want to change the plan to a safe harbor 401k with a 3% SH employer contribution. They want to keep the two year eligibility for profit sharing. They must provide the 3% SH to all employees with one year of service. Must those employees also be provided a 5% minimum gateway as those with two years of service do? Thanks

Generally, we complete the beginning of year valuation and communicate the minimum and maximum contribution. In that correspondence, we also describe the possibilities (increased minimum, elections etc). Then we send the client the valuation along with the bill. We think it helps to provide a B/S and I/S as of the beginning of the year, reflecting the values one day earlier. This way we don't have to mess with any current year contribution accrual in the annual report. Along with the B/S and I/S is the beginning of year valuation unadjusted by the timing of contributions or elections. Also, the report contains a copy of the prior year 5500 and schedules. Follow up is sometimes needed for elections and notices to participants. So far, this has worked for us. Our biggest problem is too much work which keeps us from completing next year's valuation as early as we would like.

Have a small DB plan that will be terminating in the next few months. Is there any problem amending act eqiv interest from 6.5% pre and post to 5.5%? There should not be any cut-back issues as everyone will be getting more not less. I know timing for the minimum present value cannot be utilized if changed within 12 months, but not aware of anything for actuarial equivalence.

A 401(k) plan has terminated in 2009. The 100% owner of the corporation sponsoring the plan will turn age 70 1/2 October 1, 2010. Her required beginning date is 4/1/2011 but she does not want to take two RMD's in 2011 so she wishes to start in 2010. Our understanding was that the RMD (if taken in calendar year 2010) must be distributed from the plan prior to distributing remaining benefits to the participant. The fund company will not make the distribution until the participant actually turns age 70 1/2. They claim IRS regulations do not allow for the RMD unless taken after actually reaching age 70 1/2. I asked if they could give me the cite they were referring to and they replied that we must instead prove to them that a greater than 5% owner could paid an RMD on termination prior to actually attaining age 70 1/2. They could be correct, but 401(a)(9) does not seem to specifically address the age issue. Has anyone run into this?

Thanks everyone for the replies on this. It is interesting, the adoption agreement has the following provisions: 5-5 Benefit limits (i) Maximum benefit limit. A Participant's Accrued Benefit shall not exceed $5,000. 7-4 Late Retirement Benefit (b) The following rules apply with respect to determining a Participant’s Accrued Benefit that commences after Normal Retirement Age: Unless a maximum benefit is designated under 5-5(i), the Participant’s Accrued Benefit as of the end of each Plan Year beginning after the Participant’s Normal Retirement Date is the greater of (1) the Participant’s Normal Retirement Benefit, calculated taking into account the Participant’s compensation and Years of Credited Service as of the end of such Plan Year or (2) the Participant’s Accrued Benefit determined as of the end of the prior Plan Year, expressed as an Actuarial Equivalent benefit as of the end of the current Plan Year. In calculating the Participant’s Normal Retirement Benefit under (1), such amount is offset by the actuarial value of any distributions received from the Plan prior to the close of the Plan Year. The document has the following provision: Late Retirement Benefit. (a) Amount of Late Retirement Benefit. Unless designated otherwise under 7-4(b), if the payment of a Participant’s Accrued Benefit commences after his/her Normal Retirement Date, the Participant’s Accrued Benefit as of the end of each Plan Year beginning after the Participant’s Normal Retirement Date is the greater of (1) the Participant’s Normal Retirement Benefit, calculated taking into account the Participant’s compensation and Years of Credited Service as of the end of such Plan Year or (2) the Participant’s Accrued Benefit determined as of the end of the prior Plan Year, expressed as an Actuarial Equivalent benefit as of the end of the current Plan Year. In calculating the Participant’s Normal Retirement Benefit under (1), such amount is offset by the actuarial value of any distributions received from the Plan prior to the close of the Plan Year.

Have a small take-over DB plan with a volume submitter document. The plan has a provision that places a maximum on accrued benefits of $5,000 per month. The prior administrator limited accrued benefits of the two owner employees to $5,000. However, one of the owners is two years past NRA and it appears no actuarial adjustment was made. In this case the owner who is past NRA does not care. Is it permissible to limit accrued benefits and not provide an actuarial adjustment?

Seems right that OP would not have a TNC. If a 412(d)(2) election were made, would there be any shortfall amortization payment to consider (assuming there was one)?

Small DB plan with unusual situation of 3 NHCEs leaving employment (not employer initiated). They have 2 employees already excluded by class. To pass 401(a)(4) for 2010, they will need to provide benefits to 2 of the 3 with an 11(g) amendment as neither will work enough to accrue a benefit. The employer will be replacing the 3 employees. The plan has a 1 yr eligibility period. This is not likely to happen, but suppose the new employees (all of whom would enter 7/1/11) terminated employment before that date. Could they be brought into the plan and provided a benefit with an 11(g) amendment? I know this can be done in a DC plan. Thanks.

You will need to pay attention to all those David mentioned. Over the years, we have had a few takeover plans where prior plan DB accruals were not taken into account when a second DB plan was adopted by the same employer. This is a very important consideration, especially with small plans where the company owner(s) is getting maximum benefits.

Or amend the 401(k) plan to permit loans then adopt a very restrictive loan policy effective from now on. That way you do not open the flood gates, which is why many employers do not want to offer them. You should be ok as long as the loan policy is enforced on a non-discriminatory basis.

A profit sharing plan participant was mistakenly paid her benefit of $4,800 from the corporation account rather than the plan account. Benefit elections were signed, the employer just mistakenly paid the roll-over benefit from the company account. We are thinking about just having the plan reimburse the company for the amount. Has anyone else run into this problem?

Agreed since the plan has not existed more than 5 years. In general, it is unfortunate that there is not an exception for a corrective amendment.

Can the full yield curve with October 2008 segment rates be used for a 2/1/2009 beg of year valuation? I think this is available for plan years beginning in 2009 correct? In this plan there would not be any material change issues. Thanks.