Is form 8955-SSA required where vested benefits in a 403b plan are held in a individual or group annuity? P 3 of 8955 instructions provides that reporting is not required if benefits are paid before filing date but there is no definition of "paid". If cash is distributed the benefits are paid. Why should there be a distinction in reporting if the vested benefits are held by a third party outside the control of the plan administrator since the plan does not have beneficial ownership of the vested benefits in either case?

If reporting is required on 8955 then at retirement participant will believe that supplemental benefits are payable from the plan in addition to the benefits held by insurance co.

Is the code 'd' on the 8955-SSA 'optional'? I have seen some information online regarding this but the Instructions for the form do not indicate so. Thanks.

For Lump Sum distributions to residents of Michigan is the MI W4-P required, and is state withholding required based on how the MI W4-P is completed? Is the mandatory withholding only for monthly Pension and Annuity payments?

This seems like a really dumb question, but here goes. Let's say you have a fairly "typical" TPA, and a client has a 401(k) plan on a recordkeeping platform with, (pick anyone - let's say Hancock.) Plan administration fees are billed to the EMPLOYER,not to the plan. Any revenue sharing payments to the TPA are used to directly offset fees otherwise paid by the employer. These fees can also be paid out of plan assets, as provided for in the plan document language, but are usually paid by the employer.

Her's the question on the fee disclosure. Let's say that due to this arrangement, the TPA determines it is a "category 2" CSP, as this recordkeeping platform is offered "in connection with" the service contract. When it comes to the actual detailed disclosure with regard to each "designated investment alternative/investment vehicle" - what actually has to be disclosed by the TPA? Seems like two choices, depending upon how you interpret the regs:

1. TPA would disclose only the revenue sharing, and would not be responsible for all of the other stuff typically found in a prospectus - loads, transactional fees, sales fees, redemption fees, whatever.

2. TPA would be required to disclose all of this "prospectus" garbage, even though the TPA cannot possibly receive any of these amounts.

Option 1 certainly seems more logical. But, if option 2 is required, then it could be covered by providing the same information required for option 1, plus providing a prospectus.

Personally, I'd vote for #1. It seems like the other charges as outlined in the prospectus should be disclosed by the investment provider (Hancock, in this case.)

My wife and I got married 6 months ago and missed the 30 day window to have her dropped form her coverage and added to mine. I want to consolidate her onto the plan I get through work. I just added her to my insurance during the open enrollment period (effective January 1). Can she cancel her coverage because she now has coverage through me, or does she have to wait until her open enrollment period (June) to do so?

What would be the due date for the Form 8955-SSA for a June 30 year end plan? There will be participants reportable for 2009 and 2010. Is the due date for 2009 January 17, 2012 or is it the due date of the 2010 return? I see conflicting information out there.

Thanks for any input.

Employer has 5 ee's who were supposed to be excluded. Plan passes all of the testing. Unfortunately 3 of the excluded employees, were included. What do you do? Do the 3 employees who were included forfeit their benefit? Or do the 2 employees who were excluded now get included?

Thanks.

Please provide regs if you can.

I hope you have the best new year ever!

And thanks for all your posts in 2011.

We administer a calendar year cross-tested 401(k) plan with a prevailing wage component. Everyone is in their own allocation group. To receive an allocation of the PS contribution there is a last day & 1,000 hour requirement. The plan is not safe harbor.

For 2011 the client wants to allocate a 1% profit sharing contribution to everyone (HCE's and NHCE's). The plan document says to offset PS contributions by prevailing wage contributions.

There is one HCE that received a 10% prevailing wage contribution, and the other 8 HCE's did not receive any prevailing wage contributions.

Do I have to cross-test this plan if we allocate the 1% PS contribution (& therefore include the prevailing wage contributions in the test, which would trigger the gateway test) or is there a way we can test the PS separately (since the 1% PS is a uniform allocation) from the prevailing wage?

Thanks in advance for any help.

I have been circling this topic forever and I can't seem to pin down an answer.

Say a small business owner sets up a SIMPLE with the the 3% matching contribution. He has 6 employees, none of whom want to participate in the SIMPLE. The employer says fine, sets up an account only for himself, and contributes the maximum with match. Is this permissible or not? The way I read the IRC and the DOL Notice 98-4, as well as the IRS FAQs below, an employer must enroll the employees so that they have a plan, but if they contribute zero, great, their accounts will reflect that. The employer has a son who passed the bar this year, has been licensed for 8 months, and is saying there's no need to set up any accounts for the employees if they don't want to participate.

Who is correct? If anyone could send me any evidence or authority to their answer, I would be eternally grateful. This simple issue is driving me nuts! Thank you!!

FAQs

Which employees of an employer must be eligible to participate under a SIMPLE IRA plan?

If an employer establishes a SIMPLE IRA plan, all employees of the employer who received at least $5,000 in compensation from the employer during any 2 preceding calendar years (whether or not consecutive) and who are reasonably expected to receive at least $5,000 in compensation during the calendar year, must be eligible to participate in the SIMPLE IRA plan for the calendar year. If an employee meets the conditions described in this paragraph (or such lesser conditions imposed by an employer) and is not excluded, then the employee must be covered by the SIMPLE IRA plan.

--------------------------------------------------------------------------------

May a participant "opt out" of a SIMPLE IRA plan?

An employee may not "opt out" of participation. Of course, any eligible employee may choose not to make salary reduction contributions for a year, in which case such employee would accrue no employer matching contributions for the year, but would receive an employer nonelective contribution for the year if the plan provides for such contributions for the year.

The group has a plan # that contains 2 separate benefits (life and LTD) that are on differing anniversary dates (1/1 and 6/1). Thus the schedule A's come in at different times. I have heard that there is a way this can be done. What is the process for doing this?

Thanks!

If a plan terminates and the loans not paid back are treated as distributions, are these considered involuntary therefore exempt from the early withdrawal penalty? My guess is no but I cannot find this in black and white.

Thanks!

Multiple (not multi) employer calendar year DB plan freezes 12/31/08. One of the employers pulls out of multiple employer and starts their own calendar year plan effective 1/1/10. Benefit Formula allows for some past service. A participant who is 75 years old in 2010 would otherwise be required to take RMD by 12/31/10, but my question is would there be an RMD from this new plan since there was no plan and/or accrued benefit at 12/31/09?? Any cite would also be appreciated. Thank you.

I have been given a plan to administer that excludes everyone except:

a) the shareholder

b) the shareholder's spouse

c) the business manager

d) any employee hired before 1/1/2010

I am okay with a) through c) - the plan is part of a combo arrangement and that testing will pass. I have some concerns about d) though. I have a bad feeling that it may be looked at as a circumvention of the statutory age and service requirements. In other words, I'm not sure that it's a valid business classification. It could be I'm too conservative. It wouldn't be the first time. Any opinions?

Dog

I am looking for general guidance on the sale of an overfunded pension plan to a non-related third party (a third party that is an active business with an underfunded plan - not a financial firm contemplated by Rev Rule 2008-45).

I am aware that TAM 9650002 suggests in some circumstances (e.g. a deemed asset sale) the excess assets (to the extent of deductible contributions) should be included in the seller's income under the tax benefit rule. However, I have not seen any further guidance on this (in case law or IRS guidance). Does anyone know what is currently occurring with respect to strategic sales of overfunded db plans? Is the IRS attempting to enforce this position in the context of strategic sales? I would think I would have seen subsequent case law challenging the IRS's position but I haven't.

What is the going rate for the excess assets in a pension plan?

I am also aware of Rev Rule 2008-45 providing that the sale of an overfunded plan to an unrelated taxpayer where the transfer of the plan is not in connection with a transfer of business operations violates the exclusive benefit rule. I have not seen anything further on this either. In my opinion, selling a defunct entity whose sole asset is an overfunded db plan to an entity with active business operations when the overfunded plan is merged with the underfunded plan following the sale actually furthers compliance with Seciton 401(a)'s exclusive benefit rule - especially when the selling corp no longer has any active participants and the buyer does.

So Im wondering if the IRS is trying to actively enforce these positions with respect to strategic sales or if they are just letting this guidance hang out there to try and discourage the transactions.

Any thoughts?

Thank you.

A formerly terminated participant has been rehired within two years of her termination. She had received a distribution of her vested account balance.

I sent her a notice about repaying her distributed amount within five years of rehire so her forfeitures could be restored. She is asking if she can pay back her distributed amount over time with payroll deduction.

I've been trying to think this through to see if it would be feasible. I realize the deduction should come from her check "after tax". I would not restore her forfeited balance until her entire distributed amount was paid back. What if she were to terminate her employment again before the entire amount was paid back? How would the partially paid back amount be classified? Should her paid back amounts be held in a suspense account until she pays it in full? The more I think about this, the more potential problems I see.

Maybe I should just tell her that payroll deduction is not an option??

I appreciate any input!

DB plan originally effective 1/1/2011. Son is 100% owner. Mother (100% owner by attribution) becomes a participant on 7/1/2011. Servcie prior to effective date of plan is excluded for vesting so at end of 2011 plan year Mother's hypothetical account balance is $800 but her vested hypothetical account balance is $0. Her DOB is 2/12/34. Are there any RMD considerations for 2011? Or does she actually have to have a vested accrued benefit, in ehcih case her first RMD would not be until 2013?

NRA is defined as 65/5 so that would not make her 100% vested.

Somehow I got myself totally confused, so what else is new?

Terminating DB plan covered by PBGC. Act Equiv is set to GUST, fully amended to PPA/EGTRRA.

IRS says to use its rates for PVAB and lump sum distributions.

PBGC says use its rates for lump sum distributions.

Which rates do I use for distributions from on-going plans?

Which rates do I use for distributions from terminating plans?

Why can't they get their acts together and use one set of rates for PBGC premiums, funding and distributions? Never mind answering this one, "Its the government, stupid!".

How does the IRS know if I am filing a Combined 2009 and 2010 filing?

The instructions I am reading doesn't seem to differentiate. What am I missing?

A client terminated their SIMPLE IRA effective 12/31/11. They are starting a 401(k) effective 1/1/12. They have the 2011 matching contribution and last 2011 deferral to deposit yet. Can they deposit this money in January 2012 without violating the exclusive Plan rule?