Can a qualified multiemployer DB plan loan money to the union's general fund as a means of keeping the union up and running? Pension fund is well funded and the amount of loans is less than

If so, is there a place where this should be disclosed on the Pension Fund's 5500?

I've never seen this question before. Suppose you have business A - a sole proprietorship employing Dad, Mom, and a bunch of part time employees. They have a PS plan.

Now son B decides to establish his own business. Technically unrelated to Dad's business, although it is likely (they are doctors) that Dad's previous patients will come to Son B. Son B will employ Dad and Mom in his new business. Son B is establishing a PS plan. The question came up - can Son B's plan assume the assets and liabilites of Business A's plan?

Part of me says "why not" and part of my says "how the heck is that possible" when Son is not buying Business A and there is no technical business relationship or merger?

Any thoughts on this? I'm just sort of drawing a blank...

P.S. Dad is ceased his business A as of 12/31/10, if that makes any difference in your thoughts.

I know there are special rules for governmental plans, but are there any for church plans? Do we file based on the EIN? I am confused! This should be simple ...

If a 401k plan has a discretionary match formula, and it is being calculated on a payroll basis, can there be an election to make a discretionary true up match at the end of the year? Does this violate a definite determinable allocation formula? It gives the employer flexibility, rather than being locked into a true up each year.

thanks!

My husband has an S Corp and is 100% shareholder. The corporation has always put 15% of his salary in the Profit Sharing Plan and 10% into the Money Purchase Plan. On the 2010 W-2 this year we are also adding in health insurance premiums in box 1 (which will be a considerable increase). The other boxes will have just the straight salary total. Can we make more contributions to the plans based on the higher amount or just use the salary portion. I have talked to TD Ameritrade (who handles the plan) and they told us to talk to a tax accountant. The tax accountant said to talk to TD Ameritrade because they would know what is in the plan. This has gone on back and forth. I have looked over the plan documents and find no clear definition of what is considered compensation for us. Any suggestions?

I recall reading somewhere that depending upon what kind of document you are using, there is a maximum number of allocation classes allowed based upon the number of participants in the plan. For instance, with only 4 plan participants with a prototype document, you might not be able to put each individual into their own allocation group. Can anyone give me a cite as to where to go to get better informed on this?

Thanks

An employer established an individually designed plan in late 2009 and made a 5300 submission. The employer is now in financial ruins and is winding down the business and terminating the plan. A favorable letter has not yet been received. Is there any way to convert that 5300 submission to a 5310? Will we have to pay any fees for doing so? Any input is appreciated. Thanks.

Forgive me if this is a silly question, but I am not an actuary: Which FASB statement is it that requires plan assets and liabilities be determined as of the plan sponsor's fiscal year end rather than the plan year beginning?

Thanks!

Plan has failed ADP test, the excess deferrals are distributed within 2 1/2 months. When calculating the Disc Match is the ADP excess included for the allocation of the Match (that is calc the match off the participants total deferral amount) ? The ACP does fail, but if it doesn't include the ADP excess it reduces the ER match total.

My thought is yes, include all deferrals for the plan year but I was wondering if there is some special rule regarding distribution of the excess within the 2 1/2 month that I don't know about and calculating the Match for the year (it is funded annually). Looking through regs now for somethign regarding this.

Thanks all

Since the IRS published an updated Form 5305-EA in October 2010, we are reviewing our current booklet. Has anyone seen any notices regarding changes to the MAGI limits for contribution eligibility for 2011? If so, please advise where they can be found. Thanks.

I am finding it difficult to locate consistent rulings on the Contract Clause and its application to governmental pension plans.

Specifically, I have seen some discussion on this board that many states protect from impairment of future benefit accruals. I am wondering whether a government who has reserved the right to amend and terminate the plan may reduce or eliminate benefits to be accrued in the future? (See Southeastern Pennsylvania Transportation Authority, 145 F.3d 619.) It appears to me that they can in the state of Maryland, for example, regardless of whether the employee is vested or not. The Maryland cases that I have seen say that pension plans create a contractual relationship with vested participants, and they say further that there is no issue with any plan amendment that does not reduce or diminish accrued benefits (i.e., a prospective amendment). I am over-generalizing a complex issue, but I am wondering if anyone has any thoughts on whether the government can reduce or eliminate future accruals in a governmental pension plan? Citations are appreciated.

I think this may other issues under IRC Section 401(a)(7).... do the partial termination rules apply to governmental plans?

Is there a ruling I can print out on moving small balances to the forfeiture account for those participants who already received a distribution but maybe recieved a very small dividend after or a settlement check for an account held years ago? I recall reading the cost of the distribution exceeds the balance then there is a de minimus rule. Any advice?

Say a one participant owner plan.

We assume he takes a lump sum at retirement, which for this example we'll say he is age 60 and will retire with lump sum at age 62 for valuation.

The plan act equiv for lump sum is the greater of 5% or the 417e rates.

For valuation purposes it would appear that for:

417e calculation we use the PPA funding segment rates and the applicable mortality table to determine FT.

For 5% lump sum we sould use PPA funding segment rates for deferral period from age 60 to age 62 and then 5% at time distribution commences to determine FT.

With the greater FT of 417e and 5% calculations above prevails.

Of course the lump sum is limited to 415 lump sum to give the final qualified FT.

Any other views?

In conclusion the valuation system does not handle the above matter it only does one of the calculations (i.e. with the PPA funding segment rates) subject to 415.

Thanks.

A potential new client is telling us that TIAA/CREF set them up with a 403b plan for deferrals (to avoid ADP test) and a 401k plan for the match. I'm not familiar enough with the new 403b regs (or anything 403b for that matter) to understand how a 401k plan can exist to make contributions for deferrals made into another plan. Is this possible?

Firm maintains both a DBP and DCP, which cover the same employees. Since the DBP is covered by PBGC the firm can deduct the amount needed to fund the DBP, PLUS 25% of covered pay under the DCP. If, however, the DBP was NOT covered by PBGC then the "25% Limit" would apply.

By 25% Limit I mean that the maximum deductible contribution would be 25% of covered compensation, but not less then the amount needed to fund the DBP. For this computation, we can ignore the 1st 6% of pay that the firm contributes to the DCP.

Did I state that correctly?

CalPERS, in its materials regarding its OPEB trust, mentions the following:

"A PLR does not guarantee tax qualified plan status. Tax qualified plan status is maintained by careful administration, not by a PLR. The unfortunate consequences of ignoring this fact were illustrated during 2007 in the case of a trust program marketed to local public agencies in Orange County by a nationally recognized trust administrator. This trust fund had received a favorable PLR from the IRS. Nevertheless, later the IRS found the trust program to be non-compliant due to improper administration" http://www.calpers.ca.gov/index.jsp?bc=/em...e_Letter_Ruling?

CalPERS does not have, and apparently will not seek, a private letter ruling on its trust.

Does anyone know what the provider in this case did wrong to lose tax exemption? Despite knowing the year, and that this was Orange County CA, I have not been able to find more details.

Just took on a new client for 2010 filing year and, as always, reviewing prior 3 years returns. Big problem in 2007, s-corp with 2 owners each contributed $45,000 ($90,000 total) to SEP on $50,000 each of W-2. They claim fidelity, the broker who established SEP plan, told them they could include income reported on K-1 from s-corp in determination of compensation for contributing maximum amount. I disagree. I think each has $28,500 excess amount in SEP ($45K less SEP of $50K*.25 plus $4,000 IRA) .

I've already advised them of the issue and necessity to correct ASAP. If we follow SCP procedures, I know contribution is not deductible by corporation...but which year.? Do we amend 2007 1120S or recognize income in 2011 when we remove excess contribution from plan?

What about VCP, if we use this procedure and leave money in plan paying the 10% penalty, does corporation lose deduction. If so, which year? Or does corporation keep deduction under VCP? If so, 10% penalty might be cheapest way to clear this up. Another question comes to mind on this (sorry, I ramble) regarding interim years. If owners were taking salary in 08, 09 & 10 but made no SEP contributions, could these reduce the excess amount as of today and hence the balance on which the 10% penalty is paid for the VCP agreement. Am I thinking of this correctly? I know there is an excise tax of 10% cumulative each year the excess is left in. Isn't the purpose of the VCP suppose to be in lieu of that excise tax...akin to getting a slap on the wrist for bringing the problem to their attention vs. waiting for an audit. I haven't run the numbers but they may have even used up all excess in these three years, in which case maybe excess amount is extinquished and the only cost of VCP is the $250 flat fee. But then, deduction then becomes an issue if they lose that.

Also, I'm looking into adopting solo 401(K) for 2011 whereby returned excess amount from 2007 can be recontributed into a solo 401(k), thereby creating a net-zero impact if SEP income and deduction for 401(k) contribution both hit in this year. This, of course, will only work if SEP excess comes into current year, not into prior year (2007) requiring amended returns & penalties and so forth. Seems I read somewhere that correction procedures did not require amending prior years returns in order to correct an excess amount in a retirement plant, that everything was accounted for in current year.

Client asked me this question, and of course my answer was that they need to correct the issue and pay any taxes or penalties, but they were wondering what the chances of getting audited or reviewed were at this point (2007 return 1120s was filed under extension on 9/15/08). I agree that there is no statue running as has been discussed on this board ad nauseum. However, given the amount of time so far, how likely is this to get inquiries or audits from the IRS. Wouldn't something have happened by now if it were going to?

As a Corporate Trustee is there any need to request an EIN for a Retirement Plan?

In looking at a prior EGTRRA amendment a plan sponsor filled out a section stating that they will not increase 415b limits and will retain pre-EGTRRA 415b limits.

Well what exactly does this mean?

Does it mean that accruals through the 2001 plan year cannot be adjusted by new limits and post 2001 accruals are based on the new EGTRRA limits?

Or is the entire accd benefit subject to pre EGTRRA limits? If that is the case then what is the DB limit for someone with a 12/31/2010 retirement at age 62 with 10 yeares participation? That is, not 195,000, but instead the 140k limit in 2001 increased by COLAs?

thanks

Who is responsible for figuring the amount of someone's eligible catch-ups in a 403b? The participant or the employer? The IRS publication 571 appears to be worded such that it is the participants responsiblity. So need the employer simply get representation from the employee?