The Department of Labor (“DOL”) regulations require that participant
contributions and loan repayments must be separated from the employer's assets and deposited into the plan as soon as administratively feasible. You should establish written policies and procedures with respect to remitting participant contributions, and these procedures should be followed consistently.

It is extremely important that you deposit participant contributions and loan repayments immediately following EVERY pay date. You should coordinate automation of this process with your payroll provider and investment company.

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 deadline for filing the Form 5500 is the last day of the seventh month following the end of the Plan Year. For example, a calendar year plan has until the July 31 following the end of the calendar year to file the Form 5500.

A one-time 2½-month extension may be requested. The request for the extension must be received at the IRS before the original due date of the Form 5500.

Generally, plans that cover greater than 100 participants at the beginning of the Plan Year are considered a large plan filer, and must obtain an independent accountant’s opinion and attach audited financial statements to the Form 5500 filing. For this purpose, all eligible participants (even if they do not have a current account balance) and any terminated participants with account balances are counted.

The plan sponsor must provide participants with Form 1099-R no later than January 31 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 February 28 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 participants with your APG administrator or investment company BEFORE the end of the calendar year.

There are many reasons. We ask for this information in an attempt to determine if a "controlled group" of entities exists. There are a number of coverage and nondiscrimination tests required by the Internal Revenue Code that must be applied to all of the employees of all members of a controlled group of entities.

In order to determine if a "controlled group" exists, we need to review the ownership information for the company that sponsors your plan and any related entities.

If you provide the information we request on our "Client Questionnaire" at the inception of your plan and annually thereafter, we will be certain to let you know if a change has any impact on the plan. If you do not provide the information, there could be adverse consequences, including disqualification of the plan by the IRS.

Any change in ownership should be reported to APG immediately.

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.

Similar to the rules affecting "controlled groups", there are rules under the Internal Revenue Code that require that all employees of "affiliated service groups" or "affiliated service organizations" be treated as employees of a single employer for coverage and nondiscrimination testing purposes.

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.

Generally, and subject to the terms of the written plan document, under the Internal Revenue Code a hardship withdrawal is a distribution for the following “safe harbor” reasons:

(a) For the purchase of a primary residence (not a vacation home or rental property).
(b) To pay for post-secondary educational expenses for the participant or his/her dependents.
(c) To pay for un-reimbursed medical expenses for the participant or his/her dependents.
(d) To prevent eviction from or foreclosure on the participant's primary residence.
(e) To pay for certain funeral expenses.
(f) To pay for repairs to a primary residence resulting from a casualty loss.

When determining whether or not the conditions for a hardship withdrawal have been met, the participant must present proof, such as medical bills, tuition bills, a purchase and sale agreement for their primary residence, or an eviction or foreclosure notice.

If the plan (or any other plan sponsored by the same employer) permits loans, the participant must first take the maximum amount of available loans.

Hardship withdrawals are taxable, and are subject to the pre-age 59½ early withdrawal penalty (10%). Hardship withdrawals may not be repaid to the plan. Participants must suspend 401(k) elective deferrals for at least six (6) months from the date of the hardship withdrawal.

Except for separation from service or retirement, death or disability, or plan termination (in certain circumstances), participants may not "just withdraw" from a qualified retirement plan.

You should always check with APG before making any distributions from the plan!

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.

Nondiscrimination testing should be completed as soon as possible after the end of the Plan Year to ensure any necessary refunds to Highly Comepensated Employees (“HCEs”) are completed no later than 2½ months following the close of the Plan Year. Refunds made after the 2½ -month deadline subject the plan sponsor to a 10% excise penalty. Nondiscrimination testing determines whether the contributions under the plan disproportionately favor HCEs.

For Plan Years beginning in 2008, an HCE is any participant who either: (1) earned greater than $100,000 in the prior Plan Year (the “look-back year”), or (2) is or was a greater than 5% owner in the current or prior Plan Year. For this purpose, spouses, children and parents of greater than 5% owners who are also employees are also considered HCEs. For 2009, the look-back year compensation is increased to $105,000.

If the level of 401(k) contributions or matching contributions is determined to be discriminatory, refunds to certain HCEs must be made. The timing of the refunds determines the tax year of the inclusion in income for the affected HCEs, and also determines whether or not a penalty is assessed on the plan sponsor.

Failure to make required refunds by the end of the following Plan Year is an operational defect that can result in adverse consequences.

A qualified retirement plan is top-heavy if the account balances (or accrued benefits) of key employees are more than 60% of the total of all 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 2008, 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 $150,000.

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.

Internal Revenue Code Section 415 sets forth limits on the annual additions to a participant's account in a defined contribution plan. Annual additions consist of all pre-tax salary deferrals, employer contributions, after-tax employee voluntary contributions, and reallocated forfeitures under all plans of the sponsoring employer. The annual addition limits for plan years ending in 2008 is the lesser of 100% of total compensation for the year or $46,000.

Internal Revenue Code Section 402(g) sets forth limits on the total pre-tax contributions and Roth after-tax contributions. The 402(g) limit for 2008 is $15,500, with an additional $5,000 catch-up available for participants over age 50.

Internal Revenue Code Section 401(a)(17) limits the amount of total compensation that may be taken into account for determining contributions. The 401(a)(17) compensation limit for 2008 is $230,000.

Failure to correctly apply the limits is a plan operational defect.

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.

A "partial termination" occurs, in general, when there is a decrease of 20% or more in the number of active plan participants as a result of downsizing or a corporate transaction. Accelerated vesting is required for the group of participants affected by the partial termination.

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.

A fidelity bond is an insurance policy that protects the plan from fraud or dishonesty by fiduciaries. Any fiduciary (anyone who has some discretionary authority or control over the plan or its assets), and anyone who handles the plan’s assets, must be bonded.

The bond must be in the amount of 10% of the plan assets, with a minimum of $1,000 and a maximum of $500,000, with a zero deductible. All plans, other than certain one participant plans, must have a fidelity bond. The plan must be the named insured. Higher Fidelity Bond limits apply when there are illiquid plan assets or assets without a readily determinable market value.

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 re-employed upon completion of qualified military service is entitled to employer contributions made with respect to his/her period of absence, based upon 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 re-employed 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 re-employed 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.

Under Section 3(21) of the Employee Retirement Income Security Act of 1974 (“ERISA”) as amended, a fiduciary is a person who exercises any discretionary authority or control with respect to administering or managing a plan, or controlling the plan’s assets. Fiduciary status is based on the functions performed for the plan, not just a person’s title.

Fiduciaries have important responsibilities and are subject to standards of conduct because they act on behalf of plan participants and their beneficiaries. These responsibilities include:

* Acting solely in the interest of plan participants and their beneficiaries, and with the exclusive purpose of providing benefits to them;
* Carrying out their duties prudently;
* Following the plan documents (unless inconsistent with ERISA);
* Diversifying plan investments;
* Paying only reasonable plan expenses.

The duty to act prudently is one of a fiduciary’s central responsibilities under ERISA. It requires expertise in a variety of areas, such as investments. Lacking that expertise, a fiduciary will want to hire someone with that professional knowledge to carry out the investment and other functions. Prudence focuses on the process for making decisions. Therefore, it is wise to document decisions and the basis for those decisions.

Visit www.dol.gov/ebsa to obtain more information about fiduciary roles and responsibilities.