COLLECTED WISDOM^TM On Plan Technical Tips

We have put together this page of technical tips to help you administer and run your plan. They come from a wide varity of reliable sources, but as always, reliance on them should only be undertaken after an independent review of accuracy, completeness, efficacy, and timeliness.

Pre-Tax Rollovers to Roth IRAs - Summary: Beginning January 1, 2008, a plan participant may roll over directly from an “eligible retirement plan” account to a Roth IRA, subject to the existing limitation on Roth IRA rollovers. Located at: Sungard/Relius, January 2008. Click on headline for full article.

Post-Severance Compensation Under 415 Regulations - Summary: One of the most important issues in the proposed 415 regulations is their treatment of post-severance compensation. This is a situation that has been unclear for many years. The proposal refines the Code's base definition of compensation to address this important matter. Located at: Sungard/Corbel, July 2005. Click on headline for full article.

Calculating the Excise Tax on Prohibited Transactions - Summary: A calendar year 401k plan has not been remitting deferrals timely. The plan sponsor would now like to make the plan whole and send in all outstanding deferrals. Is the amount that must be shown on the 5330 (and hence, subject to the 15% excise tax penalty) the TOTAL amount of all late deferrals or is it only the trust income lost due to the deferrals not being deposited timely? Located at: Reish Luftman Reicher & Cohen, May 2005. Click on headline for full article.

Reporting of Late Deposit of Deferrals - Summary: What disclosure is required if the independent qualified public accountant ("IQPA") determines that information on Line 4a of Schedule H (large plans) or Schedule I (small plans) of the Form 5500 concerning the timing of transmittal of elective contributions is not presented in accordance with DOL’s regulatory requirements? Located at: Reish Luftman Reicher & Cohen, April 2005. Click on headline for full article.

Correcting Ineligible Participant Deferrals - Summary: What is the best method for correcting early entry into 401k (i.e., deferring prior to date of eligibility)? Located at: Reish Luftman Reicher & Cohen, April 2005. Click on headline for full article.

Earnings on Delinquent Contributions - Summary: How do I determine what is the restoration of profits amount for purposes of determining earnings on delinquent contributions? Located at: Reish Luftman Reicher & Cohen, December 2004. Click on headline for full article.

Common Control Might Not Require Coverage - Summary: "I have an sole proprietor who owns 100% to two different companies, set up different tax IDs and operated completely seperate from each other. I am being told that if he offers a 401(k) to company A, he legally has to offer it to company B, and that if he does not want to offer the benefits to company B then each and every employee of company B would have to sign a waiver form. Is that right?" Located at: Benefitslink.com, September 2004. Click on headline for full article.

Impact of QDROs on Top Heavy Determinations - Summary: A question on QDROs and top-heavy testing for DC plans. Could you provide your opinion on how distributions to, and accounts established for, Alternate Payees are treated for top-heavy testing? Located at: Reish Luftman Reicher & Cohen, August 2004. Click on headline for full article.

Update On The Use Of IRS Form 2848 (Power of Attorney) - Summary: Earlier this year the IRS made changes to Form 2848 (Power of Attorney) to clarify who is authorized to represent taxpayers before the IRS. Under the IRS Restructuring and Reform Act of 1998, the IRS is obligated to protect taxpayer information by ensuring that IRS agents only deal with individuals who are authorized to represent a taxpayer. The specific change to the Form was to the instructions relating to individuals who may be listed as "unenrolled preparers." Located at: Sungard/Corbel, August 2004. Click on headline for full article.

Money Purchase Taint on Conversion to PS Plan - Summary: Regarding Revenue Ruling 2002-42, if you don't have to fully vest money purchase accounts at conversion to profit sharing plan, are the forfeitures from the money purchase accounts, when reallocated in later years, subject to the money purchase restrictions because they were part of "the assets and liabilities that originated" in the money purchase plan? Located at: Reish Luftman Reicher & Cohen, July 2004. Click on headline for full article.

Application of "Early Participation" Rule to Cross-Tested Plans - Summary: In applying the average benefit percentage test to demonstrate compliance with the general nondiscrimination test (e.g., for cross-tested plans) must an employer take into consideration benefits disregarded under the early participation rule? Located at: Sungard/Corbel, July 2004. Click on headline for full article.

Restoration Payment for Redemption Fee - Summary: What are the consequences of a securities broker making a restorative payment to a plan because of concern over a suit for failing to give adequate notice to the sponsor and the participants that a mutual fund has a short-term redemption fee? Located at: Reish Luftman Reicher & Cohen, June 2004. Click on headline for full article.

Testing Treatment of "Terminees" for Compensation Paid in the Following Year - Summary: A 401k plan participant terminates 12/30/01. The plan is a calendar year plan. The participant receives pay through 1/15/02. 401k deferrals are withheld from 2002 compensation. How is this person treated in the 401k testing? Located at: Reish Luftman Reicher & Cohen, June 2004. Click on headline for full article.

Mutual Fund Trading Restrictions - Summary: Recently, the rise in short-term trading of mutual funds has attracted scrutiny from federal regulators at the Securities and Exchange Commission and from the Department of Labor. While only a small percentage of trading in retirement plans is done for "market timing," some fund providers are changing practices in advance of the issuance of new rules from the SEC. Located at: Sungard/Corbel, May 2004. Click on headline for full article.

May A Related Employer Maintain Separate Qualified Plans For Each Participating Employer? - Summary: The answer to the question is "yes." In fact, the same answer would apply to an employer that is not part of a related employer group that wishes to maintain two plans for different groups of employees (e.g., divisions). Generally, the real question practitioners are asking when they ask such a question is how do we test the separate plans for coverage and nondiscrimination purposes. Located at: Sungard/Corbel, May 2004. Click on headline for full article.

Who Is Responsible For The Employer's Failure To Withhold Loan Payments? - Summary: A recent Tax Court case addresses this issue. Since nearly all employers require the use of payroll deduction to repay participant loans, most practitioners have or will confront this issue. The employer's failure to withhold loan payments raises two issues. Located at: Sungard/Corbel, May 2004. Click on headline for full article.

Using VFC to Correct Late Loan Payment Remittances - Summary: Can I use the VFCP [the DOL's Voluntary Fiduciary Correction Program] to correct a failure to forward participant loan repayments to a plan in a timely fashion? Located at: Reish Luftman Reicher & Cohen, April 2004. Click on headline for full article.

Determining HCEs of Acquired Businesses - Summary: A client maintains a 401k plan. In 2002, they acquire a company through a stock purchase and brought new people into the plan. For the new people who just came in as a result of the acquisition, how do we determine if they are HCEs? Do we look at their compensation from the prior year even though they worked for someone else? Located at: Reish Luftman Reicher & Cohen, April 2004. Click on headline for full article.

Determining When Deposits Are Late - Summary: How do I determine when participant contributions to pension plans are late? Comments from the U.S. Department of Labor. Located at: Reish Luftman Reicher & Cohen, March 2004. Click on headline for full article.

Partial Terminations: A Facts and Circumstances Test - Summary: Regarding partial plan terminations, in a plan with a two-year vesting (50% per year of service), what are the facts and circumstances that the IRS would take into account if the reduction in the work force was between 20% to 30% of employees during a one-year period? Located at: Reish Luftman Reicher & Cohen, January 2004. Click on headline for full article.

Notifying the DOL of a Fiduciary Breach Will Not Cause Fiduciary Status - Summary: In cases where the client committed a fiduciary breach, the participants often call the TPA. What is wrong with informing the participant to call the DOL? If a TPA informs the DOL that a fiduciary breach has occurred, is the TPA then deemed to be a fiduciary? In other words, are you damned if you do, damned if you don't? Located on: Reish Luftman Reicher & Cohen, December, 2003. Click on headline for full article.

Limiting Compensation for HCEs in 401k Safe Harbor Plans - Summary: Can a safe harbor match 401k plan limit the compensation only for HCE salespersons? Located at: Reish Luftman & Reicher, October 2003. Click on headline for full article.

No Exception for Deposit of Deferrals for Small Amounts - Summary: Is there a de minimis amount with regard to make up of earning for late 401k deferral deposits, i.e., make up amount could be a couple of hundred dollars...such that no VFC application should be submitted? Located at: Reish Luftman & Reicher, October 2003. Click on headline for full article.

Correcting the Failure to Make a Safe Harbor Contribution - Summary: A safe harbor 401k plan fails to make 3% nonelective contribution by the end of the subsequent plan year. It would appear that plan is no longer a safe harbor and must perform ADP (and possibly ACP) testing. Additionally, safe harbor contribution still must be made. Contribution is made (with earnings) 18 months after year-end. In performing testing, can the safe harbor contribution be considered a "corrective" QNEC per Rev. Proc. 2002-47? Located at: Reish Luftman McDaniel & Reicher, August 2003. Click on headline for full article.

Correcting Fiduciary Breaches That Are Not Covered By The VFC Program - Summary: If you discover a VFC eligible breach and others that are not eligible, is there a way to voluntarily correct the non eligible breach in conjunction with DOL-- and avoid 502(l) penalties? Located at: Reish Luftman McDaniel & Reicher, August 2003. Click on headline for full article.

Top Heavy Contributions for Deferral Only Participants - Summary: If a plan allows immediate entry for 401k deferral purposes only, and requires a year of service and last day of the plan year for match and profit sharing, must these early entrants (i.e., before one year of service and entry date) receive a top-heavy contribution even though participants only for 401k deferral purposes? Located at: Reish Luftman McDaniel & Reicher, August 2003. Click on headline for full article.

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