Apparently simple algebra problem posted on another site with very conflicting answers. Any thoughts?

48÷2(9+3)

An employer intended for its deferred compensation plan to be a 457(f) plan, but no substantial risk of forfeiture was built into the plan. Employer and employees believed the plan allowed the taxation to be deferred to a later year, so the amounts were not taken into gross income in the year deferred, even though there was no substantial risk of forfeiture. This error occurred over 5 years, so the 3-year statute of limitations has run with respect to a few affected tax years. When should the amounts be taken into gross income with respect to tax years for which the SOL has already run? Two theories:

1. Include in gross income in the year the money is distributed from the plan; or

2. Include in gross income in the first year for which the period of limitation has not run. In other words, if the period of limitations is still open with respect to Years 3, 4 and 5 of the failure (but is closed for Years 1 and 2), report all amounts deferred under the plan for Years 1, 2 and 3 in Year 3.

Does anyone know how to handle this situation?

Would a client need a new TIN if he changed his company name (they have a PSP)? I wouldn't think so, but don't know for sure (the ENTITY didn't change, just the name).

Is a money purchase plan maintained by a governmental entity subject to the 25% deduction limit under 404(a)(3)(A), even though the governmental entity needs no tax deduction?

Thanks,

Ken Davis

a doctor contributed the following amounts:

2001 plan year $30K 415 limit $35k

2002 $45K 415 limit 40k

2003 $45K 415 limit $40K

2004 $45K 415 limit $41k

2005 $44K 415 limit $42k

2006 $45K 415 limit $44K

Assuming his comp exceeded 401(a) 17 for each plan year, I have calculated he has over contributed by $17,000. Additionally, he never filed a form 5500EZ upon exceeding 100,000 in assets (2001 plan year). I am aware that the 5500 reporting can possibly be resolved by the proverbial tear stained letter. However, exceeding the 415 is a whole nutter matter. I suspect the plan would be disqualified for the plan years it exceeded 415. My question is: Should VCP be the method of correction for this plan and if so, should it be done prior to filing 5500 ez's?

Apparently his CPA told him that he could contribute a "catch up" contribuiton to his pension plan. And now after realizing his error, he is telling him that the statute of limitations has run its course.

A plan sponsor went out of business, and their employees had benefits transferred into a MP plan, including some beneficiary accounts of deceased employees.

The trustee agreed to remain the sponsor of the plan.

But we look back and see that the MP language was drafted to cover only employees. There are none.

Suggestions?

I know this is a broad question, but if you have a DB plan (not a 412(i) plan) partially funded by life insurance policies, what are the issues to be aware of? I know that the employer has to make regular contributions to the plan as well as insurance premiums.

If any material on this topic is available somewhere, that would be helpful too.

Thanks

I have an interesting situation that's causing some decent. This is a leveraged ESOP using the principal and interest release method. The employer made the scheduled payments for 2010 and the share release was calculated using the amortization schedule in effect. However, in March the employer decided to make a partial prepayment on the loan, and wanted the shares that released to be allocated as of 2010. The note allows prepayment and calls for the payment to be applied to the scheduled payment that matures last (presumably this means the final payment on the schedule), interest first and then principal.

Does this automatically result in a re-amortization of the note, and, if so, which amortization schedule applies for the release calculation - the one in effect on December 31, 2010 or the one resulting from the pre-payment made on April 1st? The note itself does not address re-amortization at all, just that accrued interest is recalculated in the event of a prepayment resulting in a complete satisfaction of the loan obligation.

Opinions or direction, anyone?

Plan X is a defined benefit plan. A new trustee is being appointed due to the death of a trustee. The new trustee is retired and is receiving a pension benefit from the plan itself.

Is this a prohibited conflict of interest?

My gut says it is not. So long as the trustee can appropriately put on his "trustee hat" and leave his "participant hat" at the door, I would think his decisions would be ok.

I am trying to find specifically in the regs/guidance where it provides, in essence, that just because a person is "behind the firewall" and works for the plan, it doesn't mean that person has the right to any and all information about individuals. I need to point to the fact that they are only entitled to information they need to do their job.. The best I can come up with is the minimum necessary requirement. Any other ideas and/or suggestions?

The 409A(b)(3) funding restrictions triggered by a qualified plan's at risk status apply to "transfers or other reservations of assets after August 17, 2006." However, do these restrictions apply to the funding of benefits otherwise grandfathered from 409A?

Our client has hired 3 non residents. These employees receive W-2 wages. Two of the three are on OPT Student Visas (and will be sponsored for H1B Visas) and one has an Employment Authorization Card.

The Plan has no eligibility requirements, no exlcusions. Has a safe harbor match formula (graded) but no profit share or other employer contributions.

My feeling at this time is that these employees need to be covered under the Plan with the current Plan options in place.

Agreed?

How broad is the authority of the EBSA in conducting an audit of a pension fund? Can they ask for documents from other funds? Also, if a former trustee is being interviewed, can the investigator deny him/her the right to have representation from fund counsel?

A NQP previously included a provision that gave the employer prohibited discretion to either pay a lump sum or over 5 annual installments following a valid payment event.

If payment was actually made as a lump sum before 2009 (and assume no amount is grandfathered), did an operational violation occur in the year of lump sum? The guidance is clear for periods beginning in 2009 pursuant to 2010-6 (and the operational violation correction under -113 is equally clear; and I know the transition relief for correcting an earlier violation has expired), but what about periods before 2009?

We currently administer a profit sharing plan for a doctor-sole proprietor with one employee. It was just brought to our attention that the doctor has a P.C. as well, with one employee also.

Per the client's wishes, we amended the sole proprietor plan to include the P.C. and its' employees. The salary for the doctor from the PC plus the self employed income from the sole proprietorship brings the doctor over the 415 limit on compensation, and he would be eligible to make the full $49,000 contribution.

However, his self employment income is only $150,000 and obviously can not justify a contribution of $49,000.

Can we combine the income from the PC with the self employed income so he can contribute the full $49,000; and if so, woiuldn't it have to be split between the PC and the proprietorship?

Can he deduct the full contribution from the proprietorship since the PC tax return has already been filed and the accountant took $0 deduction and wanted a $0 deduction.

A restricted top 25 HCE elected a lump sum form of payment at the end of 2008. Suppose the amount due then was $1,000,000. Suppose the unrestricted amount actually paid was $75,000 in 2008, $75,000 in 2009 and $75,000 in 2010.

The plan's funded status has improved and the restriction is now lifted. They will now be paid the remaining portion of their elected lump sum benefit.

Can the plan pay only $775,000 as the remaining benefit due?

The document was not specific about adjusting restricted benefits for interest, but wouldn't there be an interest adjustment required (perhaps due to the definition of 'actuarial equivalence')?

A plan freezes their benefits as of 12/31/2007.

Only one participant in plan.

As of 12/31/2007 the participant has a monthly benefit of 8,700 and the 415 limit of 100% of avg comp is 9,000. Dollar limit much higher.

As of 12/31/07 the participant is also at her NRA.

The plan provides under its fresh start rules that if frozen benefit is limited by 415 it shall increase after such date in accord with increases in 415 limit.

Plan also provides that late ret benefit is calculated each year as greater of actuarial increase benefit from prior yr and actual AB.

So, as of 12/31/08:

The actuarial increased ben would be greater than 9,000 and 415 comp limit is 9,000.

So what is AB at 12/31/08? I presume 9,000 (or should 9,000 be increased for 415 increase?). If benefit was already 9,000 as of 12/31/2007 then would max benefit be increased for cost of living increase under 415 (i.e. 9,000 *185,000/180,000)?

Now for 12/31/2009:

Say benefit is 9,000 as of 12/31/2008.

Could we increase 415 limit of 9,000 benefit by COLA (195,000/185,000) and compare to actuarial increased benefit and use lesser of the two? Or is AB still 9,000?

Of course benefit would not increase after 2009 since there have been no increases to 415 dollar limits.

Any thoughts?

thanks.

I am reviewing a frozen DB plan that I may be taking over and noticed code 4H (Long-Term Disability) on the 5500 under the welfare benefit code section. I reviewed the plan documents (prototype) and the plan's disability benefit was changed during the EGTRRA restatement from AE of retirement benefit to 1) if Class A Disability, AE of 110% of benefits earned to date, 2) if Class B, AE of 107.5% of benefits earned to date and 3) if Class C, AE of 105% of benefit earned to date.

I haven't gone back to the client yet with any follow up questions, but first, is it correct to use code 4H solely based on this definition of the plan's disability benefit?

Also, are there any other issues that I should be aware of? The plan is a small plan - only 4 participants, so I would think it would be okay to assume no preretirement disability in my valuation?

Company A and Company B are controlled. Company A Sponsors Plan A and Company B sponsors Plan B. Both are 401k plans. Participant is leaving Company A and going to work for Company B. Can she request a distribution? Can she roll over her funds from Plan A to Plan B? Note the plans will be merging into one plan in September.

Can anyone confirm that effective November 1, 2011, the new disclosure regulations will affect the blackout notice requirements?

I was informed that all eligible participants in a plan that is transferring are required to receive a blackout notice, & not only those that have account balances in the transferring plan.

Any insight would be appreciated!