What is a Qrops pension transfer?

Qualifying Recognised Overseas Pension Schemes - QROPS

It was announced in April 2006 that British ex-patriates would be able to move their pension benefits to a QROPS with the UK revenue’s approval.

QROPS (Qualifying Recognised Overseas Pension Schemes) was launched by the British Government as a way to make ex-patriate retirement easier for Britons. It effectively allows Brits to retire abroad while taking their pensions with them.

In simple terms, this means that anyone who now lives overseas, or is intending to leave the UK long-term, can transfer their existing pension plans into a QROPS. However, the tax-free income and withdrawals allowed within the first 5 years of being a non UK resident will depend on personal circumstances and the jurisdiction of the QROPS. After the 5 years, the pension fund will become subject to the laws of the relevant overseas jurisdiction and the need to purchase an annuity by age 75 no longer applies(age 77 following the Emergency Budget).

Currently, the minimum retirement age of 55 will still normally apply before benefits can be taken. However, the QROPS can offer considerably more flexibility, tax benefits, greater income potential and investment freedom compared to a UK pension.

QROPS may be used to receive transfer values from UK registered pension schemes which can include Protected Rights funds. This may also apply to those already receiving benefits from a UK Self-Invested Personal Pension Scheme (SIPP).

Most of the QROPS schemes are not taxed at source, however the tax applicable to any income will depend upon where you are tax resident at the time.

Comparison Between UK Pensions and QROPS (Qualifying Recognised Overseas Pension Scheme )

CASH LUMP SUM

UK Pension:- This is limited to a maximum of 25% of the value of your pension fund and for occupational pension schemes the tax free amount is based upon a formula involving salary and service.

QROPS:- May offer a much higher tax free cash lump sum which can be upto 100%.

TAXATION

UK Pension:-All income tax derived from a UK pension is taxed at source.

QROPS:- Can significantly reduce the amount of income tax, in some cases to zero.

ANNUITY

UK Pension:- Pension law forces you to purchase an annuity by your 75th birthday (age 77 following the Emergency Budget).

QROPS:- No need to EVER purchase an annuity. This means pension companies do not keep your money when you die.

PENSION INCOME CHOICE

UK Pension:- Income drawdown (until 75th birthday) available but only in Sterling and normally subject to minimum pension pot of £100,000.

QROPS:- May allow flexible ‘income drawdown’ known as ‘unsecured pension income’ to continue after age 75, also allows you to alter amounts and currencies.

BIGGER LEGACY

UK Pension:- If you die with a UK pension scheme your spouse can get up to 2/3rds of the pension you would have received (dependent upon the scheme). If you both die your pension WILL die with you.

QROPS:- All of your pension passes to your nominated beneficiaries in full, TAX FREE, and not a windfall for the pension company or the tax man.

INHERITANCE TAX

UK Pension:- Any asset left upon death to your beneficiaries (except your spouse) will be subject to UK Inheritance Tax currently at 40%.

QROPS:- No UK Inheritance Tax charge upon death.

INVESTMENT FREEDOM

UK Pension:- Can be limited to the insurance companies choice of funds or an outsourcing of fund managers, you have no control of the pension fund.

QROPS:- You have greater investment freedom as you have full control of the investment choices as well as the currencies you wish to invest in. You may invest in onshore / offshore funds, fixed deposit rates, total diversification.

INCOME AND BENEFITS

UK Pension:- You are restricted to the amount of income and the currency received.

QROPS:- You may take an income of your choice, alter your income at any time, take capital amounts at any time and in a currency of your choice (subject to scheme rules).

PROTECTION AGAINST CREDITORS

UK Pension:- You have none!

QROPS:- Protection against possible future creditors. (Dependent on jurisdiction of QROPS).

CONFIDENTIALITY

UK Pension:- You have none!

QROPS:- Protection against ex-spouses, business partners and creditors.

If you are only reporting participants for the 2010 full calendar year, are you able to use the 2009 form? (I know I could put the 2010 dates in Part I)

If yes, do you enter the # of participants reported on line 6a or 6b?

have an existing 401(k) plan with an automatic enrollment feature with no escalator; the plan also provides a safe harbor matching contribution. The plan is now looking change to add a QACA feature for the next plan year and use the 2-year cliff vesting option for the QACA safe harbor match. My question is can the plan sponsor apply the 2-year cliff vesting to existing participants who were receiving a 100% immediate safe harbor matching contribution or would that be a cut back? If it were a cut back, would the plan sponsor have to go through the vesting election process? I would guess no one would elect to be covered under a 2-year cliff if they are currently entitled to a 100% immediate safe harbor match.

The Plan's LOAN PROCEDURES state that The loan will become payable in full on your termination of employment. Does the Cure Period apply here? The cure period is stated on the Plan's LOAN PROCEDURES

Could the terminated participant pay it back with 90 days and not be in default?

Does the cure period apply to both active and terminated employees? Even if the loan pocilty states "will become payable in full on your termination of employment."

Form 8955-SSA and Instructions were released on Saturday. Seems pretty straightforward. Only thing I notice is that there will be a different zip code for mailing in the 5558, whenever that form is released.

If I am missing something, please advise.

Thanks.

DPSRICH

The Big Screw, age 62, owns and operates ScrewYa Corporation (SYC). SYC employees 1,000 NHCEs. Benefits are accrued over the the employee's working life time. And it just so happens that all employees are age 40 and were hired at age 20 when the Big Screw started SYC 20 years ago at his age 42. There has been no turnover or new hires. The Plan provides for lump sums to be determined using a 2 1/2% lump sum interest rate and The Big Screw's accrued benefit is just such so that under all the hoops his 2 1/2% lump sum at age 62 is exactly the maximum 415 benefit. So, The Big Screw retires and immediately the Board of Directors, of which The Big Screw is chairman, amends the Plan to modify the lump sum interest rate to the 417(e) rates with, of course, the accrued benefits at the time of amendment lumped sum on wear away basis to 2 1/2% and let's just assume SYC is such a great place to work that all keep working until the grandfather wears away.

So, The Big Screw -- the only HCE -- has his benefit determined using 2 1/2% and 1,000 NHCEs have their lump sum computed using 417(e).

Any comments (other than I just have too much time on my hands)?

Earlier this year I left a small business after working there for 7 years.

We had a 401k plan there. I once overheard the 401k administrator explaining that it was a safe harbor plan and so there was a mandatory 3% contribution per person. I remember it very clearly because a few days later we had a staff meeting and the company owner explained the 3% contribution as a generous gift by him. I just thought it was hilarious that he tried to make himself out to be Santa Claus.

I only just realized today that the 3% contribution was made only once in the 7 years I was there. Is my former employer in violation of the law?

Some facts that may or may not be relevant:

(1) I usually worked only about 30-35 hours per week at this job - I had children at home at the time and this job allowed me to be with them after school.

(2) There were a few months over the summers in the third and fifth years when I worked less than 20 hours per week.

(3) I never made any contributions myself - my husband makes a lot more money that I did and his employer offers a truly generous match.

(4) While there might have been a handful of weeks during the 7 years that I did work 40 hours, those were rare. For no period of time did I consistently work 40 hours per week.

NOTE: if it had ever been communicated to me that the plan had changed to a match instead of an employer 3% contribution, I definitely would have contributed to get the match.

Is my former employer in violation of the law?

If so, what remedies do I have to receive the funds that I am due?

What kind of legal/IRS consequences would there be for my former employer?

I don't exactly hate my old boss, but he did cheat me in other ways that I have no way to prove. So, if under the black-and-white letter of the law, he owes me money in my 401(k), I'm inclined to press this issue. At the same time, however, if this were to seriously disrupt his own retirement plans or those of the remaining employees, I don't know that I'd go that route over just a few thousand dollars.

I have a DB offset plan that is getting ready to terminate. It looks like there will be excess assets. I would like to do an amendment upon termination to allocate the excess assets. I know that the amendment must pass 401(a)(4) by itself. My question is on 415 limits. Say, for the owner, I take the DB accrued benefit prior to offset, subtract the offset amount, and arrive at $15,250 per month payable at age 62. Can I structure my amendment to provide $1,000 additional accrued benefit to total $16,250 per month at age 62? Or does my DB accrued benefit prior to offset and prior to amendment need to be limited to $16,250?

If a DB plan, long frozen, "ends" after the last participant dies, can the remaining assets revert to the employer? Would the excise tax apply in that case? And would the reversion be subject to corporate income tax as well? Thanks.

A client wants to require their two employees to make pre-tax contributions for medical benefits. They don't want to give them a cash or deferral election, but they would have to take the payroll deduction. I don't believe this would count as a cafeteria plan because they couldn't take the cash, but can they require the pre-tax contribution from the employees?

Thanks

Company just realized that it overpaid an employee a signficant amount over a year ago. Company is now seeking to recoup the overpayment. Elective deferrals were made on the overpayment (and matching contributions on those elective deferrals). If the company simply reduces the employee's base rate of pay to recoup the overpayment, will this issue simply correct itself (i.e., less compensation on which to make deferrals)? Any other thoughts on how to correct?

Thanks.

I have a top heavy psp 401k plan with an ee who has waived participation. The plan has 2 owners and 3 nhces. 1 of the nhces has waived. The plan fails the 70% test but passes the avg benefit test. Does the ee who has waived get a top heavy contribution?

Thanks.

Is there any requirement that top heavy testing be done annually? For a plan that has close to 100 participants, if the ratio was considerably less than 60% last year, can that be relied on for this year? For three years? If so, is there a citation in the regs you can give me. Thanks.

Does anyone know if Prevailing Wage Contributions can be used to satisfy top heavy minimums?

Our firm is seeking the name(s) and contact information for a potential expert to review the Central States withdrawal calculations and the reasonableness of the underlying actuarial assumptions. Does anyone have any recommendations?

I spent nearly an hour searching here and the ERISA Outline Book.

Can anyone point me to the regs that discuss that a participant can cease their elective deferrals at any time during the year and doesn't need to wait until the election change period specified in the Document? I am specifically looking for something that says whether the employer must cease them immediately (next payroll), within 30 days, or as soon as administratively feasible.

Thanks.

I need help with a vesting determination.

We have been asked to help determine vesting for an employee who worked for Company A for 4 years and 3 months and quit. At the time, he was not vested. 3 years and 9 months later, this employee joined firm B.

1 year and 8 months after this, firm A and firm B merged.

The employee is claiming that both the vesting service and benefit from the original company time with Company A must be restored.

Does anyone have any experience with this or know where I can find information relating to guidance?

Thank you.

PPA provides methods for cash balance plans to comply with the age discrimination rules.

It indicates that for two similarly situated participants, the plan will not violate the ADEA rules if the older person has an accrued benefit at least as great as the yonger participant.

Say both earn 50,000 and the credit is 5% of pay. Therefore, each participant would receive a credit of 2,500 for the year.

Say the int credit rate is 4% per year.

One participant is age 30 and the other is age 50.

If the accd ben is defined as the benefit payable at NRA of 62 where the benefit is determined based on increasing the account to age 62 and then converting to an annuity, clearly the younger participant would have a larger accd ben and the ADEA so it seems would be violated.

However, if the AB is defined to be the hypothetical account balance then both would have an AB of 2,500 in this case. And of course that appears to be in compliance with ADEA and is fine. For this example, it is the first year of the plan.

Does this mean that cash balance plans need to be designed where the AB is equal to account bal or am I missing something?

thanks.

I presume that even if AB is account bal for funding it would have to be projected to ARA and then discounted using segment rates to determine FT and TNC.

For a young HCE, the NAR for $1 Profit Sharing Allocation came out to be way higher than the NAR for $1 of Cash Balance Contribution Credit.

That doesn't seem reasonable, but appears to be "correct" - the PS allocation is projected at 8.5%, and the CB contribution credit is projected at a much lower rate.

Do I appear to be "on track" with my understanding of the calculations?

Annual investment disclosures, it would appear, need to be made to eligbile employees who have chosen not to contribute, and tehrefore have no money in the plan. I'm referring to the disclosuries regarding the performance, benchmarks, annual expenses, etc. This is all information that (for example) John Hancock is best to prepare (and I'm sure they will). I'm just hoping I am misreading this requirement, and that it is not necessary to coordinate a separate annual amiling for the eligibles not deferring.