I represent a state investment board that invests in numerous private equity funds on behalf of the state's various retirement plans. Recently, one of the funds (which is a limited partnership) created an alternative investment vehicle (AIV). The AIV is a limited liability company that is taxed as a partnership. A direct investment in the AIV will produce income that will constitute unrelated business taxabale income (UBTI) for the tax-exempt limited partners. The limited partners may choose to invest directly in the AIV, or may choose to invest through a so-called "blocker structure" that is designed to eliminate or absorb any UBTI.

My question is basically this: does a governmental plan need to be concerned about the unrelated business income tax (UBIT)? The arguments I have seen that say UBIT does not apply to governmental plans include: (i) that governmental plans are exempt from UBIT pursuant to intergovernmental tax immunity doctrine; (ii) that governmental plans are exempt from UBIT pursuant to Internal Revenue Code Section 115 as an alternative basis for exemption to Internal Revenue Code Section 501(a); or (iii) pursuant to News Release IR 1869 (August 10, 1977).

In contrast, some argue that UBIT might apply to governmental plans because (i) Treasury Regulations sections 1.511-2(a)(1)(i) and -2(b) apparently make the UBIT applicable to governmental plans (essentially an execption to intergovernmental tax immunity because of a statutory basis to collect the tax), and (ii) Section 115 applies only to separate entites that do not qualify as integral parts of a state.

Does anyone have any insight on this topic?

If forfeitures are reallocated as additional match or profit share are those funds part of the maximum deductible contribution calculation?

For some plan terminations we do, the investment company does not do the distributions directly to participants. Instead, the investment company will process any rollover distributions, but for anyone requesting a lump sum distribution, the investment company closes the accounts and sends all the funds to the Employer. The Employer then has to issue the distribution checks (and take care of the withholding).

If the Employer is just depositing these funds into a company account (not in the name of the plan), and then issuing all the checks from there, would the "clock" for the due date of the 5500 be the date the last of the funds left the investment company, or the date the last check was issued from the Employer?

(We know it would be best for the Employer to deposit the funds into an account in the name of the plan, but the majority of them don't want to hassle with this since it's a one-time deal.)

Have a client who has clearly met the 70% withdrawal over th 3 year period. Calculation looks correct - amount owed is over 200,000 so no deminimus exception. My question is this is a very small business....they had 7 employed and now down to 3, but not insolvent or looking to file bankruptcy. Is there special method of calculating which would allow a small business that qualifies to pay less than the full amount?

Thank you for your time.

My brain is not functioning today. What is the terminology for the fact that you can't fund a 401(k) contribution on money that hasn't been earned yet? I am trying to give info to a client but cannot remember the terminology for this in order to be able to research it.

Thanks!

A participant in a plan was working on a land deal, and he needed money fast to make a down payment. He took a participant loan of $50,000. One week later, the land deal fell through, so he doesn't need the $50,000 after all.

If he repays the loan early, it is my understanding that he will not be able to take another participant loan in the next 12 months because his highest outstanding balance was $50,000.

Is there any way for him to undo the loan so that he can put the money back without having the 12 month restriction? or is he just better off keeping the funds and making loan payments so that he has some cash available in the event that another deal pops up?

I have a "non-professional" small floor offset plan where only the owner's benefits aren't 100% offset by the defined contribution plan. Do I have to provide the annual funding notice? Do I have to give the "offset" participants the notice and a certificate showing zero accrued benefit for the defined benefit plan?

For purposes of filing a Schedule G, does anyone have any thoughts as to whether the term "fixed-income obligations in default" covers defaulted bonds held in a fund available for investment in a 401(k) plan?

So do we not have to do an extension for the 8955-SSA since the deadline was moved to January 17,2012? I know the 5558 is not out yet that is suppose to include the 8955-SSA on it. Any news on when the new extension will be ready? Thanks

Below are some computations that are intended to apply some fundamentals related to cash balance plans as compared to traditional plan:

NRA is 62

pre ret act equiv is 5.5%

a62 = 12 using 5.5% and app mort

above applies to traditional plan and cash balance plan

cash balance interest credit of 5% per year

cash balance plan AB is life annuity at age 62

cash balance plan provides lump sum equal to account balance (subject to 415)

say we have an HCE who earns 200,000 and is age 45.

say under traditional plan his AB after 1st year of participation is 19,500 (i.e. 415 limit)

therefore 415 lump sum = 19,500 * v^17 * a62

= 19,500 * (1.055)^(-17) * 12

= 94,172

say under cash balance plan they give him a credit of 94,172

so cash bal AB after one year is:

= 94,172 * (1.05)^(17)/a62

= 17,969

so in other words under the cash balance plan the accrued benefit is only 17,969 v. traditional plan of 19,500, however the cash balance account value of 94,172 does not exceed 415 lump sum and could be distributed if he were to terminate at end of first year of participation.

And for non discrimination testing:

under traditional plan his accrual rate is 19,500/200,000 or 9.75%

and under cash balance plan accrual rate is 17,969/200,000 = 8.99%

are the basic principles of cash balance plan 415 limits, accrued benefits and non discrimination testing being applied correctly?

Of course I do not address the funding calculations under 430 in this analysis.

thanks

Can anyone advise as to whether the following tiered match formula requires BRF testing? The rate of match increases as the deferrals increase, which could be discriminatory. But there are no age or service restrictions.

0-3% deferrals = 0% match

4% deferrals = .75 match

5% deferrals = 1.5% match

6% deferrals = 2.25%

Thank you

I have a DB/DC plan this is failing the minimum gateway test for 2010. The level of failure appears to be much worse when testing on an Annual basis (highest allocation rate = 25%) vs. Accrued to Date (highest HCE allocation rate = 13%). However, once I start analyzing the amount of contribution the plan has to make to correct the gateway, I think the contribution required is much higher under ATD due to having to multiply the contribution by total service. For example, in my test all NHCE's must have an allocation rate equal to at least 4.33% (1/3 of 13%). So if I have an NHCE with a current allocation rate of 4.00% (and let's say he has 10 years of service) does that mean the required contribution to satisfy the gateway is 0.33% x comp x SERVICE? So if comp was equal to $100K, instead of just having to put in $333 (0.33% x $100K), I'd have to put in $3,333, since the $333 would not be enough to get the overall allocation rate up to 4.33% once it is added to the total account balance and then divided by 10 years of service.

Am I getting all this correct? If so, should I just stick with the Annual method? The minimum for NHCE's would jump from 4.33% to 5.00%, but if my assumption with service is correct, it would be a much cheaper overall contribution to the plan.

And as a side question, if the highest HCE allocation rate is 26%, does the minimum required allocation for NHCE's jump from 5% to 6%, or is it just 26%/5 = 5.2%?

Much thanks in advance for anyone that can help.

For a profit sharing plan that is not subject to minimum funding rules, is a schedule R required? I believe the answer to this question is maybe... So, with the additional information that a trust company pays the distributions and uses their EIN on 1099Rs, then is the Schedule R required?

I believe it is required because the EIN used does not belong to the plan sponsor or plan administrator( based on the ERISA outline book and the Schedule R instructions). The real question being asked is about the reference to "pension plans" in the instructions. Is "pension plans" intended to include all retirement plans (Pension vs. Welfare) or actual pension plans (defined benefit type plans)?

I would like to know what other pension professionals think on this issue please.

Thanks,

Jodie

Per Rev. Proc. 2008-50, you don't have to make corrective distributions of $75 or less if the cost is more than the distribution. But Rev. Proc. 2008-50 says further that this rule does not apply to corrective contributions.

So if you're corrective contribution for one participant is less than $75, do you have to make it?

If so, what do you do? Allocate it to the other employees' accounts or use it to pay plan expenses (if you can) or something like that?

As of October 1, 2010 I elected a HDHP. Since I was enrolled in the Flex Plan from Jan. 1, 2010 to Dec. 31, 2010, I did not open a Health Savings Account until around January 8th of 2011.

On our flex plan, if there is any money left over from all enrollees at the end of the plan year (Dec. 31, 2010) the money less any terminated employees who used more than they deposited subtracted from it, then the rest of the money is evenly distributed to all employees who participated in the plan on April 27, 2011 (the distribution date). Since I participated in the plan for the 2010 plan year I was eligible for the distribution. So as of April 27, 2011 I now have about $60 available to be reimbursed for any expenses after that date.

My question is would I have to use this extra disbursement for ONLY dental or vision care since I now have a Health Savings Account?

Thank you!

Client just received IRS notice stating they never received the Form 5500 for 2008. Client does not have signed copy in their files. They were not our client then and all HR personnel has changed. However, owner says he remembers signing form.

I am not comfortable with client backdating signature. So is their only option DFVCP? any other thoughts?

Thanks!

Does anyone know where I can purchase a 457(f) plan document. Sungard Corbel is no longer offering a 457(f) document as part of its 457 plan services. And FTWilliam only offers 409A and 457(b) documents (no 457(f) document).

Thanks.

a plan tests on the annual method.

a 2011 db valuation uses projected 2011 pay.

can non discrimination testing use the 2011 estimated pay as used in the val or does the non discrimination have to wait until after 2011 completed and use actual 2011 pay for testing?

thanks

The NRA in the DB plan was amended from 59 to 62, effective 1/1/2009. A participant terminated 3/1/2009. She had previously been given a distribution estimate using Age 59 for the NRA. After she terminated she was given a distribution packet reflecting the NRA to be Age 62, and of course, this amount was significantly less than the estimate using NRA 59. Isn't there a protection of benefit issue here? Would the participant not be due the higher amount that she had accrued through 12/31/2008 based on the NRA of 59?

After a discussion with a prospect, we find that their defined benefit plan was frozen since August of 2003. The plan offers a subsidized early retirement option (2% per year reduction from age 65 to age 55). The plan offers a handful of annuity options, but only the participants employed January 1, 2001 or later are eligible for the lump sum option.

They have not been providing relative value disclosures when they provide distribution options for participants. The plan sponsor is a for-profit corporation.

Are there exemptions or exceptions that could apply here to the relative value disclosure rules?

If this plan has been violating this requirement, what could be the remedy for this?