Frequently Asked Questions

If you intend to deduct the contributions on your corporate tax return, then the contributions must be deposited no later than the due date of your corporate tax return, including extensions. Certain required contributions, such as top-heavy minimums or safe harbor contributions, have additional deadlines.

Sponsors of pension plans must deposit the required contributions no later than the 15th day of the ninth month following the end of the Plan Year to satisfy the minimum funding requirements set forth in the Internal Revenue Code. For partnerships, sole proprietorships and other entities, consult with your tax advisor.

The plan sponsor must provide participants with Form 1099-R no later than February 1 following the calendar year of the distribution.

Forms 1099-R, 1096 and 945 (which reports withholding payments during the year) must be filed with the IRS no later than March 1 following the calendar year of the distribution.

Important: Defaulted participant loan balances are considered distributions and must be reported for the year of the default. Discuss the reporting of any outstanding plan loans for terminated or deceased participants with your APG administrator or the investment company BEFORE the end of the calendar year.

Any acquisition, disposition or merger should be reported to APG immediately.

There are several actions that may be taken, and much of the flexibility with respect to the available options is lost if not examined before a merger or acquisition takes place.

Not all plans exclude leased employees. If you use the services of a leasing organization, those leased employees may be required to be covered by your qualified retirement plan even though they are not technically your employees.

There are many factors that affect the determination of whether or not leased employees are considered in coverage testing for your plan, even if your plan excludes leased employees.

APG requests leased employee information from you annually. As circumstances change during the year, please be certain to inform us.

Prohibited transactions are direct or indirect economic transactions involving plan assets and a "party-in-interest" or "disqualified person". These "disqualified persons" or "parties-in-interest" include fiduciaries, sponsoring employers, certain owners of the sponsoring employer, and certain family members of the owners.

Prohibited transactions include the sale, exchange, or lease of property, extension of credit, transfer or use of plan assets, and certain investments in employer securities or real estate.

Three common examples of prohibited transactions:

1. Allowing the employer to borrow money from the plan, or withdrawing plan assets for use by the sponsor or a trustee.
2. Failure to deposit participant contributions (and loan repayments) in the timeframe specified by the Department of Labor regulations and guidelines.
3. Failure to properly limit the amount of available loans, obtain promissory notes and follow the terms of participant loan agreements.

Prohibited transactions are subject to an annual 15% excise penalty tax until corrected. The DOL has established the Voluntary Fiduciary Compliance Program ("VFCP") for correcting certain prohibited transactions.

A qualified retirement plan is top-heavy if the account balances (or accrued benefits) of key employees are more than 60% of the total account balances (or accrued benefits) of all participants.

A top-heavy test is performed as of the last day of a Plan Year, at which time the result determines the top-heavy status for the next Plan Year. Usually, all plans of an employer, and all plans of a controlled group of corporations, are tested together.

For Plan Years beginning in 2010, key employees are: (1) any greater than 5% owners; (2) certain family members of greater than 5% owners; (3) greater than 1% owners that earn over $150,000; and (4) officers of the plan sponsor who earn greater than $160,000.

Plans that are determined to be top-heavy must provide a minimum level of contributions (or benefit accruals) for all non-key employees. In a defined contribution plan (401(k), profit sharing, money purchase), the minimum contribution is 3% of total compensation for the Plan Year.

APG performs top-heavy testing each year. The information you supply on the Client Questionnaire is extremely important in making this determination.

If you deposit an amount that exceeds the maximum deductible amount, there is a 10% excise penalty tax.

Additionally, if your plan requires participants to work a certain number of hours or be employed on the last day of the Plan Year to receive a contribution, making contributions on behalf of participants in advance of satisfying those requirements results in failing to operate the plan in accordance with its provisions.

QDROs are subject to specific requirements. APG, or the plan's legal counsel, should review the QDRO, before it is presented for court approval, to be certain it is drafted correctly and can be administered in accordance with the intent of the parties.

The Uniformed Services Employment and Reemployment Rights Act of 1974 ("USERRA"), as amended, establishes certain rights for reemployed service members with respect to 401(k) plans and other retirement plans.

A participant reemployed upon completion of qualified military service is entitled to employer contributions made with respect to his/her period of absence, based on the compensation he/she would have received (either based on the rate of pay during the absence, or an average of the previous 12 months' wages). The participant reemployed upon completion of qualified military service is also entitled to make up any missed pre-tax contributions during a period equal to the lesser of three times his period of absence, or five years. The participant reemployed upon completion of qualified military service is not treated as having had a break-in-service.

Please be certain to inform us when you have reemployed participants returning from qualified military service.

THE HEART ACT: The Heroes Earnings Assistance Relief Tax Act of 2008 (Heart Act) was signed into law on June 17, 2008. Plan amendments to comply with the provisions are not required until the end of the 2010 plan year (2012 for governmental plans). However, some provisions affect plan operation and administration immediately:

I. Salary Continuation (Differential Pay), effective January 1, 2009.

Differential pay (the difference between the employee's civilian compensation and military compensation) is pay an employer has elected to continue paying to an employee who is called to active duty for a period of more than 30 days, in an amount not to exceed the level of compensation the service member otherwise would have received had the individual been employed during the period of active duty.

II. Mandatory Survivor Benefits, effective for deaths occurring on or after January 1, 2007.

The mandatory survivor benefits are effective for all individuals who die while in qualified military service (any service in the uniformed services on a voluntary or involuntary basis, including active duty, active duty for training, inactive duty training, and full-time National Guard) on or after January 1, 2007. This applies to qualified plans, 457(b) and 403(b) plans, and states that when a participant dies while in military service, his or her survivors are entitled to any benefit (other than benefit accruals related to military service) that he or she would have been had the service member become reemployed with the employer and then terminated on account of death.

III. Tax Treatment of Distributions.

The HEART Act makes permanent an exception to the 10 percent early distribution penalty for qualified reservist distributions. Additionally an individual is entitled to repay the distribution to an IRA (on an after tax basis) within two years of the end of active duty without regard to the dollar contribution limits of an IRA.

A qualified reservist distribution is a distribution from 401(k) or 403(b) elective deferrals made to a military reservist called to active duty for a period in excess of 179 days or an indefinite period, that is made during the period beginning on the date of such call to order on or after September 11, 2001 and ending on December 31, 2007. The HEART Act makes this provision permanent by extending the exception to individuals ordered or called to active duty on or after December 31, 2007.

IV. Availability of Distributions, effective for Plan Years beginning after December 31, 2008.

A participant on military leave for at least 30 days is treated as having incurred a severance from employment for purposes of the in-service distribution limitations with respect to elective deferrals under a 401(k), 403(b) and 457(b) plan. As a result, such individuals are not prohibited from receiving distributions. However, the individual must be suspended from making deferrals (and employee contributions) for the six-month period following the date of the distribution.

V. Optional Benefit Accruals, effective for deaths and disabilities occurring on any date after January 1, 2007.

Under USERRA, participants returning to employment from active duty are entitled to employer contributions that they would have received if they had been employed during the period of military service, if certain requirements are met. They are permitted to contribute make-up elective deferral contributions for a period equal to 3 times the period of military service, but no longer than 5 years, and are then entitled to related employer matching contributions.

The HEART Act permits employers to provide employer contributions to a participant who cannot return to active employment due to death or disability as if the individual was rehired as of the day before death or disability and then terminated employment on the date of death or disability, provided the plan does so for all similarly situated participants on reasonably equivalent terms. The benefits are based on compensation calculated under the deemed compensation rules of USERRA. To determine an employer matching contribution, the employee elective deferral contributions for the period of military service are deemed equal to the average deferral percentage for participants for the 12 months (or continuous period if less) preceding military leave.