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News from, August 8, 2012
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The Latest Q&As for TPAs

Q: Fee disclosure - For purposes of the quarterly statements that participants receive, do the statements have to itemize the expenses paid out of the account?  Can the expenses be summarized or do you have to itemize a list showing each time a fee was paid?

A: The requirement is to provide "The dollar amount of the fees and expenses...that are actually charged...during the preceding quarter to the participant's...account for such services; (and)....A description of the services to which the charges relate (e.g., plan administration, including record-keeping, legal, accounting services); and...".

403(b) special catch-up  -  Under 402(g)(7)(A), the 402(g) limit is increased for employees of qualified organizations.  This calculation can be quite complex. The regulations are clear that the age 50 catch-up is optional and the plan does not have to allow.  However, it is not clear on the 15 year of service catch-up contributions.

Can a sponsor of a 403(b) plan not allow employees to make this additional contribution without violating universal availability?

A: Yes. A 403(b) plan document can provide that the maximum deferral allowed is the limit under 402(g), without regard to 402(g)(7). This is not a universal availability issue.

Q: I have a situation where the profit sharing contribution required to meet 401(a)(4) testing would cause the 415 limit to be exceeded for an NHCE participant. I believe the regulations state that if 415 limit is reached, then the 401(a)(4) testing will be met even though the required contribution is not made. As I looked for this in the regulations, I am not finding a reference to this concept.  Am I correct in my understanding of the regulations and where can I find this?

A: Not quite. Here is how it works: A PS contribution is made to the plan. Once the PS contribution is made to the plan, the amount contributed is allocated to participant accounts in accordance with the plan document's allocation formula. The plan document should have a provision regarding an excess annual addition under section 415(c). The plan document's provision should be followed. In the event that the plan document does not include such provision, the excess annual addition is corrected pursuant to Rev Proc 2008-50. Generally that means either reallocation to other participants or holding in a suspense account for the affected participant and allocating the excess in the next following plan year. Under a 401(k) plan, the full PS amount would be allocated to the participant, and the excess annual addition would be corrected by distribution of elective deferrals (and forfeiture of any related matching contribution). In no event can the amount that would cause the excess annual addition not be contributed, though.

The 401(a)(4) testing is performed after the above adjustments have been completed.  

Q: The date of plan termination was established for a very small DB plan in May of 2011 and all benefits were officially paid out in July of 2011. It's a DB plan on a prototype but not subject to PBGC coverage. The plan was effective in 1999.   The plan sponsor came back to and said he wanted to go ahead and submit to the IRS now. Would the IRS actually accept a Form 5310 application filed more than 12 months after the official date of plan Termination?

A: No. Rev. Proc. 2012-6 provides that, "An application will be deemed to be filed in connection with plan termination if it is filed no later than the later of (i) one year from the effective date of the termination, or (ii) one year from the date on which the action terminating the plan is adopted."

Q:  Can an individual who is receiving a retirement benefit in the form of periodic payments or an annuity assign those payments to someone else?

A: A plan document may provide that, once a participant or beneficiary begins to receive plan benefits, assignments totaling not more than 10% of any benefit payment may be made. However, the assignments or alienations must be voluntary and revocable. An attachment, garnishment, levy, execution or other legal or equitable process is not a voluntary assignment or alienation.  See §1.401(a)-13(d)(1).

Background: Section 415 annual additions limit for employer and employee contributions and forfeitures are currently the lesser of 100% of compensation or the limit.  

Q: If we have a client/physician maxing out in his own retirement plan - but he moonlights (as an independent contractor) at a hospital making another approximate $20k, can he participate in the hospital retirement plan as well as his own plan?

A: If he is not an employee of the hospital, he cannot participate in a hospital-sponsored retirement plan.

Q: Is the 415 limit - individual to the "person" or the "plan"?

A: The 415 limit applies to the individual. However, all plans of the same (or related) employer must be aggregated for this purpose. A plan sponsored by an unrelated employer generally has its own, separate 415 limit.  In limited circumstances, a 403(b) plan of an unrelated employer is aggregated with the first employer's plan under 415.

Q: Would it matter if the hospital had a 457(b) governmental plan? What about a 403b?

A: Yes. 457(b) plans are not subject to 415 (they have their own limits under 457, which is not aggregated with the limit under 415. An independent contractor can be covered under a contracting company's  (the hospital, in this case) 457(b) plan.

If the physician is the owner of the practice, a 403(b) plan sponsored by the hospital would be aggregated with the practice's plan under 415, whether or not the two employers are related.


TAG is a technical support service that offers answers to pension questions via e-mail. TAG subscribers have access to an extensive Web site with a full array of links to primary source materials, a database of over 4,000 FAQs asked by pension professionals, tools and much more. Subscribers also receive daily updates on breaking news in the industry. For more information about TAG, go to: TAG is part of Wolters Kluwer Law & Business, which includes CCH, Aspen Publishers, and

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