My employer client has a divorce decree that has their employee giving half of his 401(k) to ex-wife. Employee wants to obtain a loan from his account, give the money to the ex-wife, and be done with it. I see some issues, but wonder if anyone has considered/done this. Employee's main reason is that he can get this done quicker via this route than by dealing with a QDRO. Any thoughts? Thanks in advance.

I hope I'm not breaking any rules, but I thought this was important for members of this board to be aware of an interesting developement coming off the COPPA board. If you are an actuary and a COPPA member, you should read this long message stream.

Basically, it comes down to Jim Holland (and many begrudgingly agreeing) that an amendment to increase in benefits that is adopted in the 2 1/2 months after the PYE CANNOT be recognized for funding in the prior year.

Maybe someone knows an efficient way to allow everyone on this board to see the entire discussion post, but in my opinion, it was just too long to cut/paste into a message. I just posted a link to the message and Jim's summary comments since he did a nice job with the sites.

http://finance.groups.yahoo.com/group/Coll...s/message/32388

From: CollegeofPensionActuaries@yahoogroups.com [mailto:CollegeofPensionActuaries@yahoogroups.com] On Behalf Of Jim Holland

Sent: Thursday, February 10, 2011 8:17 AM

To: CollegeofPensionActuaries@yahoogroups.com

Subject: RE: [CollegeofPensionActuaries] RE: Unfreezing the frozen

I will make what I expect to be my last comment on this topic. Prior to the issuance of the final regs, everything that Norm and Jeff have said could be a reasonable view of 412(d)(2). The final regs have an explicit provisions that

1. State that require that plan provisions adopted no later than the valuation date and that take effect by the end of the plan year be taken into account. 1.430(d)-1(d)(1).

2. Plan provisions that take effect in a later plan year are not taken into account even if adopted by the valuation date for the current plan year. 1.430(d)-1(d)(1).

3. An amendment for which a 412(d)(2) election is made is considered adopted on the first day to the plan year but when the amendment takes effect is unaffected by an election under section 412(d)(2). 1.430(d)-1(d)(1)(ii) and 1.430(d)(1)(iii) last sentence

4. If a 412(d)(2) election is made and the amendment takes effect by the last day of the plan year, the amendment is required to be taken into account. 1.430(d)-1(d)(1)(ii) last sentence

5. For purposes of paragraph (d)(1) (1.412(d)-1(d)(1), plan provisions taken into account, general rule), the determinatin of whether an amendment increasing benefits takes effect and when it takes effect is determined in accordance with the rules of section 436© and 1.436-1©(5). 1.430(d)-1(d)(1)(iii)

6. The regs under 1.436-1©(5) provide that an amendment that increases benefits takes effect under a plan on the first date on which any individual who is or could be a participant would obtain a legal right to the increased benefit. 1.436-1©(5)

7. The preamble discussion (sentence cited earlier) states that an amendment to provide increased benefits retroactively with respect to a prior year, but no participants benefits are increased until the amendment is adopted, the amendment takes effect at the time of adoption and must satisfy the requirements of section 436© for the plan year the amendment is adopted. 10-15-2010 Federal Register, page 53024, first column

All of the above statements should not be arguable because they come straight from the regulations, and anyone can look them up. The interpretation and effect can be argued about. The key words are the ones "take effect" because the regulation (IMHO) has now linked the taking into account for 430 funding (and by implication 404) and 436.

In doing so, it appears to change what all (including myself) had viewed as the interpretation of 412(d)(2). Now for a cautionary note. As I understand it, the Supreme Court decision earlier this year on the medical residents and FICA regulation addressed the deference given to tax regulations and gave them what is called Chevron deferance. That appears to mean that as long as they are a reasonable view of the law they will be upheld. (Let the attornies tell you the exact interpretation.) Even if you do not like a regulation, the question you have to face is what it actually says and means, and what risks you want to run for your clients or yourself in taking a view.

Is it problematic to allow payments to be suspended where the employer believes a participant is violating a non-competition agreement that would justify the forfeiture of remaining payments? I think it's okay provided there is no collusion between the employer and employee.

Got a situaiton where a client wants to take an in-service distribution of his 2010 profit sharing contribution (he's going to roll it to an IRA provider that does not allow 401k accounts).

Would it be acceptable to have him deposit the check to PenChecks (which allocates the money to an account in the plan's name, or at least segregates it at that level) and then have Penchecks process the rollover?

I'm sure there is not a separate account in the name of the plan, but since penchecks is acting as the agent of the Plan, then shouldn't this be OK?

Have several clients with IRAs. Their IRA custodian has just been indicted for operating a ponzi scheme. Government is searching for assets. Would clients' IRAs be subject to government forfeiture?

401k/PS plan with older doctor (50's) and younger doctor (30;s) as owners.

Would it be fair to say that component plan testing would only work better if the younger Doctor's "plan" would do better testing based on allocation rates (including disparity)? So if, for example, the younger doc is getting more under cross-testing all as one plan, then he would have received under an integrated allocation, then component plan testing would not help?

It occurs to me that if cross testing would work for an HCE it should work whether or not you’re doing compoentn testing – you’ve either got enough people in your rate group, or you don’t. Component plans will not increase someone’s EBAR.

This is a crazy question to which I am unable to find a definitve answer.

Owner makes $245,000 and will contribute $49,000 on his behalf.

One employee makes $75,000 and owner wishes to contribute 25% of compensation for this employee.

Would it be considered a violation of the uniform allocation requirement for a SEP if the owner is receiving 20% of compensation and the employee is receiving 25% of compensation?

Logically, it should be ridiculous for the IRS to object to this scenario and I realize that we could do this if it were a regular profit sharing plan -- however, a regular profit shring plan does not have the uniform allocation requirement.

I was also fascinated by the following from the Form 5305-SEP: "The employer agrees that contributions made on behalf of each eligible employee will be the same percentage of compensation for every employee."

Has anyone ever encountered this question?

Thanks for any thoughts.

I have a DB/DC 401(k) combo where no participant is in both the DB and DC plans.

The DC plan is cross-tested.

This is the set up:

'........DB DC

HCE ...1 1

NHCE ...2 2

Question 1: Do I have to provide the 401(k) Safe Harbor 3% to the 2 participants not in the DC plan?

Question 2: Do I have to provide the TH and Gateway minimum to the 2 participants in the DC plan?

Upon electing COBRA and after sending in the first payment....is there a mandatory required grace period?

For example, in the COBRA notice, there is usually a line "your premiums are due on the first of the month. The is no grace period".

Is "no grace period" allowed? For instance, premiums are due on March 1st. It is March 2nd. We term the employee since we have not received COBRA premiums. We then get the check on the 3rd (i.e. it was in the mail). Employee is NOT allowed back on the plan.

This is OK, right?

I have a client that allocates profit sharing contributions each quarter. The formula is pro rata as a uniform % of compensation earned each quarter.

Employer contributions allocated solely on the basis of entire plan year compensation are deemed to be nondiscriminatory. However, because the allocations are based on quarterly compensation is 401(a)(4) nondiscrimination testing necessary?

A large plan 5500 filing and audit were complete for a plan for the past 2 years (2008 & 2009). The participant account at the beginning of 2010 is less than 100 employees. Can the small plan filing be completed for 2010 with the sponsor's approval? My personal opinion is that a large plan filing should be completed. Any thoughts? Thanks!

My client would like some help and asked if I know where exactly it says that 401(k) accounts are established under an individual's name and not as a joint account. They are looking for the specific IRC and/or Treas. Reg Section. Can someone tell me where I can find guidance on this matter (i.e., the actual Code or Regulations)

Employer with self insured medical plan wants to waive premium payments for employees on unpaid FMLA leave? Is this permissible?

I am restating a DB plan for EGTRRA. In reviewing the file containing hte original document and subsequent amendments, I noticed that the DB (#002) plan was originally a 412i Plan which is a carve-out plan (401k plan is #001) and was later amended to a traditional DB plan. The second thing I noticed was that the original document excluded several people by name and then a few more by plan amendment. I assume that the reason for the exclusion was that it was a carve out plan.

I would like to gather opinions on:

#1 - a conversion of a carve out 412i/401k plan into a carve out traditional DB Plan/401k plan; any issues on this type of conversion?

#2 - a carve out 412i plan/401k plan - I do not see many of these in the industry so what would be your opinion of this type of arrangement?

#1: Is it permissible to rollover a life insurance policy from a previous qualified plan (DB) into a newly established PS Plan?

#2: If so, is it permissible to use the cash value of that policy to pay the current premiums on that same policy in this new PS Plan?

It is my understanding that life insurance premiums can only be paid from contributions and forfeitures (excluding earnings on that money). Premiums can also be paid from dividends from the policy.

Either way, would you please provide the cite to support your opinion? Thank you!

I would like to tranfer my self employed 401k account (through Schwab) to my SEP-IRA account (through OptionsXpress) for various reasons. I also have a ROTH IRA (through OptionsXpress) that I would like to transfer to my SEP-IRA account as well. It is inconvenient to have my money spread out over a few accounts. Are there any tax consequences for transfers like this?

My wife has a similar situation. She has a 401k from a former employer she will never work for again, a ROTH IRA and a ROTH CONVERSION from her childhood, and it sure would be more convenient if it was all under her ROTH IRA account.

Any thoughts or links to info would be greatly appreciated.

IN calculating the normal accrual rate and most valuable rate, do you take into consideration the 415 limit?

For example, if formula is 10% of pay and benefit is hitting the $195,000 limit, is NAR = 10% or 0% (assuming no increase in 415 limit)

Thanks for all responses.

Anyone have a cite supporting the propositon that a profit sharing plan can have fixed contributions (for example, a set dollar amount per hour)? Thank you.

Does anybody know how a prenuptial agreement that is in place in California would come in to play in the terms of attribution of ownership to a spouse? The client indicates that the spouse of the owner signed a prenuptial agreement and the company belongs 100% to the Husband. The representation is that the husband owns the company as sole and separate property. Can this prenuptial agreement negate attribution rules under 318?

Any suggestions on how to correct a top hat plan where RMD's were missed? A couple participants are now age 80 and did not receive the first payout. If we payout entire account this year should it be 2011 income? I think there is a limit to how far back corrected W2's can go. Technically plan is disqualifed, I suppose one option is to terminate it?

Any thoughts? There is no EPCRS program for top hat plans.