Compliance December 29, 2010

IRS Releases 2011 Covered Comp Tables

The Internal Revenue Service has issued Revenue Ruling 2011-3 with the table of covered compensation for the 2011 plan year.
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The revenue ruling provides tables of covered compensation under § 401(l)(5)(E) to be used for determining contributions to defined benefit plans and permitted disparity in defined contribution plan contributions.

To determine 2011 plan year covered compensation, the taxable wage base is $106,800, unchanged from 2010. Permitted disparity allows for larger contributions or benefits with respect to compensation in excess of the Social Security wage base. 

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In determining an employee’s covered compensation for a plan year, the taxable wage base for the plan year is the taxable wage base in effect as of the beginning of the period. The IRS document is here.
Compliance December 29, 2010

Lawyer Entitled to 401(k) Distribution

A lawyer accused of financial wrongdoing should receive a 401(k) distribution of his plan savings from his old law firm, but not the employer’s contributions, a federal judge ruled.
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U.S. District Judge Oliver W. Wanger of the U.S. District Court for the Eastern District of California held that plaintiff Thomas Anderson should get his plan benefits, which totaled over $700,000, less the amount of an outstanding loan. The court said the plan’s anti-alienation clauses controlled the distribution of Anderson’s nonemployer contributions from the plan. However Wagner said Anderson was not entitled to the $50,000 to $100,000 in employer contributions from his account.

Wanger also turned aside Anderson’s claim that the plan administrator violated the Employee Retirement Income Security Act (ERISA) in not paying the distribution of Anderson’s contributions as requested.

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According to the opinion, Anderson’s old law firm accused him of a variety of acts of financial wrongdoing and demanded the rescission of a $150,000 bonus and employer contributions to the 401(k) plan.  Douglas Neibauer, who had served as a plan trustee with Anderson, had denied Anderson’s distribution claims until the financial impropriety accusations were resolved.

The case is Anderson v. Strauss Neibauer & Anderson APC Profit Sharing 401(k) Plan, E.D. Calif., No. 1:09-cv-01446 OWW DLB

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