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Domestic Relations Order

Category:

What are the duties of a plan administrator upon receipt of a domestic relations order by the plan?

Otherwise Excludable and Terminees

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Can you separately test terminated employees who are eligible to defer into a 401(k) plan, if they have less than 500 hours, under the otherwise excludable rule in 410(b)?

Household and Business Employees 401(k)

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What are the laws concerning household employees and business employees in the same 401(k) plan?

A household cannot be a member of a controlled group subject to 414(b) or 414(c), since it is not a trade or business.

ERISA Deadlines

Category:

What are the deposit deadlines for ERISA and non-ERISA 403(b) plans?

NHCE

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A plan uses prior year ADP testing. Last year, all eligible employees were highly compensated. There are both highly and nonhighly for the current plan year. What do I use for the prior year NHCE ADP when running my ADP test?

The plan has an automatic pass. The Final 401(k) regulations provide that, if a plan is using prior year testing, and there were no eligible NHCEs in the prior year (referred to as the applicable year in the final regulations), the plan is deemed to pass the ADP test for the current year.

From the 2004 final regs:

ADP Safe Harbor and Shifting

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ADP safe harbor and shifting - Plan is a ADP SH only. The match still has to be ACP tested. The plan normally fails the ACP test. Could the plan use the shifting testing method from the deferral percentages and add them to the ACP test to help it pass or decrease the failure?

ADP safe harbor and shifting - the plan is a ADP SH only. The match still has to be ACP tested. The plan normally fails the ACP test.

PBGC Premium Payment

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Is a DB plan covering the owner's (adult) children subject to a PBGC premium payment? I am looking at taking over a 412(i) fully insured plan. The plan, in my opinion, is subject to the PBGC flat premium rate since the employer is not a professional service corporation and has employees. However, his employees are his children who have no direct ownership.The current TPA states they are not subject to PBGC premiums. Is there any exception here that I am missing?

Employer's Fiduciary Liability

Category:

A prospective client has a 401(k) plan. The investment of the plan's assets is directed by the participants with the exception of the employer profit sharing contribution. That is invested at the discretion of the employer. What is the employer's potential fiduciary liability with regard to the profit sharing source?

A plan fiduciary who breaches any of the fiduciary responsibilities, obligations or duties imposed by ERISA is personally liable to the plan for any losses the plan suffers because of such breach (ERISA Sec. 409(a)).

Seasoned Money

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If we have seasoned profit sharing money in the plan, to avoid the incidental death benefit restrictions, must we have a provision allowing distribution of seasoned assets, or is simply having seasoned money in the plan enough to get around the limitation?

The plan would have to include a provision allowing for the in-service distribution of seasoned money. Note that the entire premium would be taxable to the participant if paid from seasoned money, if the premium exceeds the ancillary benefit limit.

Ratio Percentage Test

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Shouldn't the Ratio Percentage Test for the Match be limited only to those Participants who are deferring? Our system is testing match against all eligible Participants, including those who did not defer.

Ratio percentage includes any participant who has met the plan's eligibility provisions for the match. A participant who does not defer but is otherwise eligible for the match is benefiting under 410(b).

§1.410(b)-3. Employees and former employees who benefit under a plan

(a) Employees benefiting under a plan

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Testimonials

As always, thank you very much for going the extra mile!

Glen Archinal, EA, MSPA
Pension Actuary
Summit Retirement Plan Services Inc.