My client is requesting information about terminated participants under the age of 59.5 who want to take installment payments and believe that this can be done without a 10% penalty if taken as substantially equal payments.

Plan document allows installment payments.

Please advise what Regulations or Code addresses this information?

A deceased participant's minor child (10) is entitled to an annuity death benefit until age 21. The child lives in Texas. The amount of the benefit is significant, and, in order to commence payout of the benefit, the plan requested documentation of a court-appointed guardian for the property of the child.

The deceased participant was the child's mother, and the child's father does not appear to be in the picture. Instead, an ex-husband of the child's mother (not the father) appears to have been named as executor under her will, which also specifies that the ex-husband/executor is appointed as guardian of the person and estate of the child. However, the death benefit is not being paid/distributed via probate under her will -- it is being paid under the terms of the pension plan (i.e., the will should be irrelevant for these purposes).

The ex-husband/executor does not want to go through the process of setting up guardianship, apparently due to the expense and "best interests of the minor." He wants the benefit to be paid to himself, as trustee of the trust under her will f/b/o the minor child. Alternatively, he proposes the benefit be paid to a custodial account.

Requiring the establishment of a guardianship would appear to be in the best interest of the minor (particularly given that the guardian is not a parent or other relative of the child). Other posts in this forum suggest that requiring payment to a UTMA custodian is an acceptable route, but UTMA accounts do not seem to offer all of the safeguards of guardianship (e.g., no monitoring of how funds are spent -- child or someone else would have to sue the custodian in the event that the funds in the UTMA were spent improperly).

Plan itself is relatively permissive and states as follows: "If the Administrator determines that any person entitled to payments under the Plan is an infant or incompetent by reason of physical or mental disability, it amy cause all payments thereafter becoming due to such person to be made to any other person for his benefit, without responsibility to follow the application of amounts so paid. Payments so made shall completely discharge the Administrator, the Trustee and the Company."

Any thoughts on whether payment of the benefit to the ex-husband/executor (f/b/o the minor child) or to a custodial account would be problematic under the circumstances?

An unscientific sampling of the interest rate used for pension accounting as of 12/31/11 shows this for various companies:

AT+T 5.30%

Wells Fargo 5.25%

J&J 5.22%

3M 4.15%

GE 4.09%

Chevron 3.80%

Are these companies living in parallel but different worlds on opposite sides of the sun? Or what?

The original Titanic -- the largest ship of its type at the time -- sank 100 years ago when it struck an iceberg on the night of April 15, 1912, on its maiden voyage from Southampton to New York. More than 1,500 people perished in the disaster, which captured the popular imagination. The ship had been vaunted as "unsinkable."

Most people don't know that back in 1912, Hellmann's mayonnaise was manufactured in England. In fact, the Titanic was carrying 12,000 jars of the condiment scheduled for delivery in Vera Cruz, Mexico. This was to be the next port of call for the great ship after its stop in New York. This would have been the largest single shipment of mayonnaise ever delivered to Mexico. But as we know, the great ship did not make it to New York. The ship hit an iceberg and sank, and the cargo was forever lost. The people of Mexico, who were crazy about mayonnaise, and were eagerly awaiting its delivery, were disconsolate at the loss. Their anguish was so great, that they declared a National Day of Mourning, which they still observe to this day. The National Day of Mourning occurs each year on May 5th, the day the shipment was to arrive in Vera Cruz, and is known, of course, as Sinko de Mayo.

An ISO plan is required to designate the number of shares available for grant under the plan. If the corporation has a stock split, does the plan have to be amended to reflect a change in the number of shares available? For example, assume a plan is written so that 500,000 shares can be issued under the ISO plan. After adoption and approval, there's a stock split which doubles the shares that can be issued by the corporation. Does the plan have to be amended and do the shareholders need to approve the availability of 1,000,000 shares under the plan? Seems like the answer to that would be yes, but looking for thoughts on that. Thanks.

Can anyone confirm my understanding that a mass withdrawal is the only way a previously withdrawn employer can be held responsible for increased withdrawal liability? Assume no calculation errors were made and that there was no obligation to contribute following the complete withdrawal.

Let's say you have a participant whose benefit is limited by 415. The client wants to reduce future contributions but you want the participant to continue to accrue benefits so that the YOP's count towards 415. So you create a frozen accrued benefit plus future accruals at .5% of compensation. To put some numbers with it lets assume the following:

-at 12/31/2012 the participant has 6 YOP

-the participant has made $300,000 plus in compensation for all years and already has 10+ YOS

-the participants accrued benefit under the plan's formula is $145,000 at 12/31/2012

-plan AE is 5%/94 GAR (no pre-retirement mortality)

So an amendment is done which establishes a frozen AB at 12/31/12 plus a .5% of compensation accrual for 2013 and beyond.

Let's say there is no COLA in the limits for 2013. How would you calculate the PVAB at 12/31/2013? Could you argue that it is:

$120,000 * 5.5%/417(e)(3) mortality table

plus $1,250 * 5%/94 GAR

The arguement for this approach would be that you put in fresh-start / frozen AB language, which states the frozen AB is calculated as if the participant terminated employment. If this participant terminated employment on 12/31/2012 their benefit would have ultimately been limited by 415, thus that portion of their benefit is calculated under the $120,000 * 5.5%/417(e)(3) mortality table.

Was given a last minute document to do and racing a little. I haven't had to prepare the docs before and have a question about the NRA. Their current doc had a retirement age of 58 and 10 on part but no later than 65 and 5 on part. Question is, how do I accomodate that first piece. I don't believe that is allowable any longer is it?

Participant has been told that there will be no actuarial increase if he delays taking his defined benefit pension after NRA (age 65). Participant was fully vested (5 years of service) when he terminated employment at age 57. Early retirement under Plan is age 55 and 5 years of service; participant is age 62 and has not yet taken his pension. Participant was told that there is no actuarial adjustment if he commences pension later than NRA age 65 -- e.g. if he decides to defer until age 66 or later (but not after 70 1/2). Is it permissible for Plan to avoid giving actuarial increase if he delays taking pension -- if so, is it because the Plan "forces" payment at NRA age 65 and doesn't allow deferral beyond age 65 to 70 1/12?

So I passed my tests and received my ERPA designation certificate and card etc... the only problem is that my name is misspelled on everything. Instead of Sheila I am Shelia! Everything else I have including my application have the correct spelling. I've already sent a request (2 weeks ago) to have it fixed but have heard nothing. My question is.... can I use the designation or need I wait until they can spell my name correctly?

If a plan in critical status with an accumulated funding deficiency goes into reorganization, does the temporary relief from the excise tax continue to apply? Or are critical and reorganization statuses exclusive?

Question: A doctor who is a partner in an anesthesiology practice has supposedly terminated and is now an independent contractor. We are being told he is paid on a 1099 and is no longer a W-2 employee. But he is still an owner of the practice. He wants to take a distribution from the plan. I'm not sure where to go with this. This doctor is also a trustee. As a TPA firm, how much should we really question this?

Is there a window of opportunity for an IRA owner to return a distribution to his IRA without incurring any tax?

The plan sponsor of a plan with a safe harbor match has gone out of business suddenly, and only after the fact called to tell me that he needs to terminate his plan. He understands that he has to fund the safe harbor match through the final payroll, but will fail ADP if he has to test.

"Going out of business" isn't technically one of the reasons to have a short plan year for a safe harbor match so far as I can see... but it has to sort of fall under there, doesn't it?

I have a 10 years old corp just one employee ( me ), .

First two years the corp contributed to Money Purchase Keough ( required ).

I stopped contribs due to reduced income and just left the funds in place. I just wrote a letter stating

corp will no longer make contribs ( to freeze plan ).

Am closing company, have to complete Form 5500 which asks how many participants

and minimum required contribs made in this year. I never filed 5500 before because

account is under 250K. it is defined benefit plan,

do I enter 0 participants / 0 minimum required contrib on the 5500-EZ ???

Thanks, Mark

Benefit is 100% of pay, high 3 pay is well under $100,000. Normal form of benefit is Joint and 100% survivor (not life annuity or some such thing).

Question 1 - may the plan pay the value of the J & 100 s benefit since the value of the benefit is way under the value of a life annuity at $195,000/annual at 5.5%?

Question 2 (more difficult) - If the spouse were to waive their right to the J & 100 S in favor of the children, so that the benefit payable would be J & 100 S equally amoung the children, do any adjustments have to be made to the benefit?

For question 2 - some numbers to help - Benefit is $60,000/yr. Instead of a J & 100 S for $60,000 with spouse, we would do a J & 100 S of $20,000 with each of three children (totaling $60,000). Does the $60,000 (or $20,000 each) have to be adjusted, and if so what adjustment is to be made?

The plan does allow non-qualified joint and survivor benefits, so that is not a problem.

Thanks all in advance.

I am reviewing a DB plan.

It has 6 participants.

Two of the participants are family member owners.

The plan was at one time a 412i plan for only the two owners and life insurance purchased on their behalf.

The plan is now treated as a traditional DB plan.

The plan provides a death benefit equal to PVAB for all employees.

Issues:

1. Re: two life policies, one policy has death benefit greater than participant’s PVAB, so I can see this being a case of excess deductions due to a policy above what the plan provides and I don’t see it permissible to have the plan be the beneficiary of such proceeds

2. And if policy proceeds has to go to specified beneficiary then plan is discriminatory re: available benefits, rights, features

3. Even if plan could be beneficiary and only PVAB paid to beneficiary, there still may be a benefits right discrimination issue

What else am I missing?

Solution:

1. Go thru VCP and determine if polices can be sold to participants at FMV, or surrender policies

2. Stay away from plan

Thoughts?

Thanks

Assuming the plan language is not an obstacle, is it feasible for the plan to impose a deferral limit which says something like "for HCE's under 50, the limit is 0%"? Is that an age discrimination concern?

Dog

a profit sharing plan is cross tested.

allocation requirement is last day and 1000 hours.

by providing top heavy and gateway the plan does not pass 401a4.

two employees worked less than 1000 hours but employed on last day so received gateway.

if these two employees receive a higher allocation than plan would pass a4.

under 401a4-11g it appears that the plan can be retroactively amended (before 10/15/2012)

if the plan is amended to provide the specific allocation amounts for the two employees for 2011 it would pass a4.

are there any issues re: above?

i.e. do the two employees need to be provided such allocations for 2012 and 2013?

thanks

I filed a VCP application for a SIMPLE IRA. The main issue was excluded employees for several years. The employer had not read the plan document and had admitted employees based on what it remembered it had been told by the agent who provided the plan document.

The "missed deferral" of the employees actually participating as calculated by the accountant was 2%. Under Rev Proc 2008-50 Appendix A .05(b) the missed deferral opportunity would be 50% of that amount or a 1% contribution. Under the Streamlined procedures of Appendix F, Schedule 4, the "missed deferral" is assumed to be 3% and the contribution is 1.5%. Because the computation under Appendix A .05(b) was lower, I submitted Appendix D rather than Appendix F.

The agent is saying that the computation under Appendix A.05 does not apply to a SIMPLE IRA because a SIMPLE IRA can not have an actual deferral percentage. The only way to correct the problem is to use the 1.5% calculation described in the Streamlined procedures in Appendix F,Schedule 4.

Does anyone have any experience in dealing with this?