Owner-participant retires from the practice. He leaves his monies in the plan. He dies (younger than 70 1/2). Spouse is a non participant and is the designated beneficiary. Document says immediate payout to the beneficiary on participant's death. Paperwork was sent to surviving spouse and she chooses not to deal with it.

Since she is a non participant, she can not rollover the monies internally. Since the benefit is over $300K I don't think a forced distribution is applicable. Any suggestions?

Hi, I was hoping someone could give me a quick rundown as to who must be 100% vested upon a 403(b) plan termination? Obviously those active employees will get accelerated vesting, but what about recently terminated participants who have no vesting, partial vesting? Any links to IRS publications would be greatly appreciated. Thanks a lot you guys!

Happy Mole Day

from 6.02 am to 6.02 pm on 10^23

Enjoy

A plan has directed brokerage accounts where participants can invest in whatever they prefer.

However, the broker (not the Trustee) give the participant a list of 10-12 suggested funds, and tells them they can invest otherwise.

Would those recommended funds be DIAs?

A farm has certain employees who are required to live in farm-provided housing, as they are essentially "on-call" 24 hours per day. This is NOT included in W-2 wages - and this appears legitimate, based upon a cursory scan of the IRS Publications 15 and 51.

The plan uses W-2 for the definition of compensation. We've got a CPA (who I think is wrong) who is claiming that this housing - valued at "x" dollars, SHOULD be included for plan compensation purposes. CPA is basing this on the fairly standard wording in the prototype definition of W-2 compensation which, in the final sentence, says that "Compensation must be determined without regard to any rules in Code Section 3401(a) that limit the remuneration included in wages based on the nature or location of the employment or the services performed (such as the exception for agricultural labor in Code Section 3401(a)(2))."

While it is an interesting argument, I don't agree with the CPA. I think this is intended only to include wages paid for agricultural labor, and NOT housing which is not included as reportable under IRC 6041, 6051, and 6052. Anyone agree with the CPA?

I think DB plans were created to make sure that work can never be truly enjoyable.

For a plan year 4-1-12 to 3-31-13, what is the deadline to make a MAP election to use MAP-21 rates for just the funding calculations and opt not to use them for determining liabilities? (As I understand it, this is for 2012 plan year only, as 2013 would require MAP regardless, right?) And what, if anything, does this do to any required funding notices? Is there a good source that explains this garbage in English?

Thanks! (P.S. - seems like it is perhaps by the first day of the 10th month, which would be...ugh, math before noon - so by December 31st?)

A defined benefit plan was terminated. The plan sponsor conducted a diligent search for the safest available annuity (actually engaged an expert to assist in the search). The sponsor narrowed the candidates down to 3 finalists and made a selection based on the factors in Interpretive Bulletin 95-1. The entire process was well documented.

Once the assets are out and individual annuity certificates are issued, what ongoing obligations, if any, does the plan sponsor have? Are they completely discharged off all liability going forward or is there a duty to at least monitor the annuity provider to make sure payments are made in accordance with the contract?

If a participant terminates at age say 63 with 60% vested in their account, leaves their account in the plan and does not take a distribution post age 65, are they 100% vested?

Thanks

Takeover plan does not expressly state that benefits that don't start until after age 65 for a vested term are actuarially increased. Plan does have Suspension of Benefits provision for active or reemployed retirees. It says nothing about vested terms.

Plan states that benefits are "available" for a vested term at NRA age 65.

I see this "SOB for actives only" fairly often, and usually there is no retroactive annuity start date language.

I assume that we are required to provide an actuarial increase if no relevant SOB type notices have been provided to vested terms once they approach age 65 - anybody disagree?

Why don't plan documents typically address this? I have seen many from different sources that ignore this issue as it applies to vested terms.

Comments?

For a Defined Benefit Plan distribution, is there a requirement to provide a state withholding election form to the participant with the distribution packet of information? For many states state tax withholding is not mandatory and those who choose to voluntary elect it are few and far between. Just wondering if we can simplify the packet of information and remove this form altogether.

Plan has 3 NHCE's:

1 Is Otherwise excludable and gets only Safe Harbor 3%

1 is a terminated non-highly getting only the gwm

1 is a full-time active NHCE getting enough PS to pass testing.

How do I apply the limitaiton on the number of allocation groups? If 3 NHCE's the limit is 2; if 2 NHCE's, the limit is 1 rate. But should providing the GWM be counted as an allocation rate? Should the Otherwise Excludable participant (whom my document permits disaggregating for testing) be considered an allocation rate?

Is it possible to amend the definition of "change in control" to increase the control % from 50 to 80? If so, would this amendment be subject to 1.409A-2(b)(6) such that the amendment would not be effective for 12 months? Any guidance is appreciated.

A mid-sized plan I'm working on reported its FTAP as 78% using the pre-MAP 21 funding segment rates. It was planning to apply its balances to get the FTAP up to 80%.

In the post MAP 21 era, the FTAP is just about 100%. I am working on a few 2013 plan year projections since the client has indicated its inability/intent to put in the lower 2012 MRC (?). Just wondering if MAP 21 in any way restricts the use of balances to be applied to fill in the MRC deficit (due to its original under-funded status?). Technically since the plan is now fully funded, I see no problem but thought of asking for any other view out there.

Thanks all in advance.

Suppose you have a plan that was not frozen. Instead, the plan was amended to reduce the benefit formula a few years ago.

As a consequence, most full time participants have not accrued additional benefits over and above their grandfathered accrued benefits for the past two years. All will next year as the new benefit will exceed grandfathered benefits.

I would think participants would be entitled to a 415 dollar limit increase for the two years when they did not have an increase in their accrued benefit. This because they would have met all the requirements to accrue a benefit for those years.

Anyone agree / disagree?

Thanks

looking for input or experiences of those that have missed the filing deadline whichever cycle for Individually designed db plans. if the plan has no technical defects that you know about other than being a late filer, can you submit under the VCP program? do you have to come up with a defect? i want to submit the plan but i do not want to lose the ability to retroactively amend if there is a defect.

We have two (2) types of employees, salaried and hourly. Our understanding is that we can exclude hourly employees as a group; i.e., only our salaried employees would be eligible to participate. However, we've read that there is a minimum coverage rule of some sort, and it's unclear if that applies to the creation of a salaried-only group. For example, do the total number of salaried employees have to equal or be greater than a certain percentage of the total number of employess working for us, before we can create this specific group. Please advise, if possible and/or direct us to the IRS provision governing this (we tried looking for it, but only found vague references on IRS.gov Thank you for your time, assistance and attention to this matter.

The plan currently does not exclude any class of employees and has the standard 1 yos/ 21 yoa eligibility requirements. The plan wants to amend to exclude a specific group of employees (Nurses). These are all HCEs, so testing is not an issue. I understand that eligibility is not a protected benefit, but can these people now be excluded if the plan is amended?

I have a participant who would like to receive a lump sum distribution, but the plan's AFTAP is below 80% (it's also below 60%). If, after the participant begin receiving an annuity, the AFTAP increases, can she elect to receive the remainder as a lump sum?

Thanks!

Background: Client had a SEP. Changed to a Profit Sharing Plan effective 8/1/2005. Has not filed a Form 5500 as they were not aware that they needed to do so.

We have been hired to complete all the delinquent Form 5500's. Intend to go through the DFVC Program.

BUT, we have discovered that for 4 of the 6 plan years that are delinquent, the profit sharing contributon was not capped for the HCE's. Client was giving 10% (in all years affected) of compensation (no limit) to all employees. FYI, the profit sharing allocation is discretionary amount - pro-rata/

Since the amount was deducted on the Corporate Tax Returns for all those years, it is my suggestion that the client determine a "new percentage of comp" for profit sharing in the years affected that would generate the same taxable amount and re-allocate the profit sharing contribution (taking money FROM the HCE's and giving TO the NHCEs).

Any thoughts? Any concerns with this method of correction? Are lost earnings required as well?

Thanks

We have a takeover plan whose non-discrim testing over the past 10 years appears to be suspect. In looking at a few years, I have several HCE's whose allocated match (formula is 100% of deferrals up to 3% of eligible compensation) was not capped at the Annual Compensation Limit. This has been the case for the three years I have been reviewing. I am going to assume that it goes back to the 90's. What is the best way to correct? Any suggestions?