From the

IRS Employee Plans News

The Employee Plans News is a periodic IRS newsletter with retirement plan information for retirement plan practitioners.

Special Edition - July 2010

Beginning with returns for the 2009 plan year, the Schedule SSA (Form 5500) has been eliminated as a schedule of the Form 5500 annual return/report and is replaced with Form 8955-SSA. Plan administrators must file this new form with the IRS and not through the EFAST2 filing system.

Plan administrators are not required to file the Form 8955-SSA for the 2009 plan year and subsequent years until guidance is issued by the IRS. The IRS anticipates the guidance will establish a special due date, expected to occur in 2011, for the 2009 Form 8955-SSA.

After the Form 8955-SSA and related instructions are available for filing, plan administrators should expect to have a reasonable amount of time to complete and file the form by the special due date. The information reported on the new form will be similar to the information previously required for Schedule SSA.

Caution: The special due date for Form 8955-SSA will not affect the time for filing the applicable Form 5500 or Form 5500-SF for the 2009 plan year through EFAST2.

a one participant plan has invested in art work.

To my knowledge such an investment has always been permitted.

A person said that there is an IRS ruling (fairly recent) that now prohibits such investments. Actually I would expect it to be a DOL ruling if anything.

Does anyone know of any rulings that prohibit such investments or changed the rules regarding these types of investments?

Are we in agreement that investing in art work (especially for a one person/owner plan) is permitted?

Of course the plan I am referring to is not an ERISA plan as there are no employees.

Thanks

Is the Cash Balance "compensation credit" fixed by formula per plan document?

Or is there a "minimum" and "maximum" contribution amounts that allows flexibility for plan sponsor (just like traditional DB plan)?

as a welfare or pension plan, where payment triggers are termination, CIC, death, disability?

If so, not sure whether this arrangement would qualify for top-hat exemption.

In the 2009 EZ Instructions, strict reading for Questions 6 and 7 indicates that only activity during the plan year should be reported. In 2008, one could use either accounting method (cash or accrual). Is this an IRS oversight, or are all 5500-EZ filers meant to be moved to a cash basis?

If a plan makes corrective contributions under SCP, do those count toward TH minimum?

A prospect wants to their SPD for their cash balance formula to state something like the text below (instead of naming the individuals or the specific officer titles with their specific accrual formulas like the plan document does):

"Group A will consist of senior executive officers. For each Participant of Group A, the cash balance credit will vary by officer. For details, see your Plan Administrator if this affects you."

We're thinking that this may not satisfy the disclosure requirements for a summary plan description.

Could the SPD be this vague and be alright? If not, what methods are others out there using to disclose accrual formulas in a not-so-revealing fashion?

In regards to filing 5330s for late 401k deposit. In 2008 the plan had a late 401k deposit of about 500. It was discovered in 2009 so the earnings were calculated (about $35) and deposited as earnings in the 2009 plan year. The Form 5330 was done with the 2008 5500 ($12 penalty). For 2009 we have to report the late deposit again on the 5500 b/c it was corrected in 2009, but I have also read that I have to do another form 5330 - is that correct? What amounts do I put on the 5330? Any help would be appreciated.

Thanks.

A pdf of an SB that is signed or initialed must also be embedded in the xml transmitted to IFILE (at least that's how I'm doing it). Must the pdf of the SB include all of the attachments (plan provisions, assumptions, age/service array, etc.), or do we simply embed the first 3 pages of the signed/initialed SB?

Long live the memory of Bob Sheppard, tireless Yankees no-nonsense PA announcer.

http://www.nytimes.com/2010/07/12/sports/b...=1&emc=eta1

Tom Lauricella's January 31, 2010 article in the Wall Street Journal entitled "Social Security Payback Pays Off" is worth a read. It describes a little known Social Security law. This provision offers pensioners who say retire at age 66 the option to repay at age 70 to SS all of their gross SS payments without interest and to have their pensions recalculated with the delayed benefit increase. Also, they receive a credit for the income taxes they may have paid. The catches are you need to come up with the cash and then you need to have a long life after 70.

http://online.wsj.com/article/SB126489831806038027.html [this came up through Google]

When a DB plan is terminated, can a 401(h) separate account continue to be administered to pay future retiree medical benefits as they occur or must there be some tyoe of disbursement of that fund at the time that the pension benefits liability is settled by, presumably, purchase of annuities?

We are a TPA firm and have a number of clients that did NOT authorize us to sign the 5500 return on their behalf (they don't want their signature on the www). So these clients have obtained their signing credentials, we've uploaded their 5500 & schedules to the DOL website, and the clients have signed the form 5500 electronically. As TPA, are we allowed to transmit / submit the filing to the DOL once the form has been signed or is the client responsible for doing this?

We just took over a plan that looks like has been filing under a fiscal year end of 1/31 and not 12/31 as the document states. I am researching if there were any amendments or such. Is the only way to correct by going back and amending the plan year end on all the 5500 with the incorrect date? I know I am way to optimistic about an easier way....

Thanks!

A 100% ESOP-owned S-Corporation would like to prepay its 10-year ESOP loan that matures in 2014. The S-Corporation also has a 401(k) plan. Two participants have already had their ESOP benefit curtailed in prior years due to the 415 limit.

If the S-Corporation prepays the remainder of the ESOP loan in one contribution to the ESOP, the remainder of the ESOP shares in the suspense account will be allocated to participant accounts in accordance with the plan document.

Can anyone confirm that the participants who normally hit the 415 limit in a plan year will not be permitted to share in this allocation of remaining shares resulting from the loan repayment due to the application of the 415 limit? If so, I understand that some additional participants may also hit the 415 limit due to the additional allocation of shares resulting from the prepayment of the ESOP loan and will also be prohibited from receiving an allocation of these shares once they hit the 415 limit. Is there some way to prepay the ESOP loan and not be impacted by the 415 limit?

Are there any other issues related to prepayment of an ESOP loan, other than the application of 415? All of the loan documentation permits loan prepayment without penalty.

Thanks.

A 100% ESOP-owned S-Corporation has been asked by former employees to make distributions from its leveraged ESOP before the ESOP loan matures in 2014. The plan document does not require payment until the end of the plan year following the plan year in which the ESOP loan matures. The plan document further provides that distributions may be made in cash or stock, in the sole discretion of the ESOP trustee.

(1) Can an S-Corporation defer distributions until the ESOP loan matures? I know that it is permissible for a C-Corporation to delay distributions, but I read an article that stated that distributions may not be delayed for an S-Corporation, but there was no citation of authority for the statement.

(2) The S-Corporation plans to contribute to the ESOP sufficient cash to fund the distributions. Will the contribution of cash be considered a distribution from the S-Corporation (rather than an ESOP contribution) to the 100% owned ESOP? Will this funding result in the allocation of shares from the suspense account to participant accounts, just as it would for a loan repayment made to the ESOP?

(3) If the ESOP Trustee makes the distributions in the form of stock rather than cash, is there capital gains treatment which would be more advantageous to participants when compared to a distribution in cash? Does the capital gains treatment apply all shares that are distributed? I read somewhere about capital gains treatment applying to a portion of a distribution and it wasn't clear if the portion not eligible for capital gains treatment was due to fractional shares being paid out in cash, or if the capital gains treatment was only available for a portion of the stock distributed.

(4) If the ESOP Trustee distributes stock, subject to a put option, and the S-Corporation buys back the stock, does the S-Corporation contribute the treasury stock back to the ESOP so that the S-Corporation continues to be 100% ESOP-owned? Does this contribution of stock result in an allocation to participant accounts equal to the FMV of the stock contributed?

I appreciate any information that you can provide.

After many completed filings, my last 3 clients all received 'Submission Failed' messages.

Anyone know what that means? No other description was given. The 'Help' in RGF indicates I should contact Technical Support.

This has been discussed out here before, but I am curious to know if anyone has actually split 1 plan into to two for the purpose of avoiding an audit. Has anyone actually done this? Has it ever been scrutinized by the DOL.

I putlled this from TAGData, who pulled it from an ASPPA Q&A session.

the question was raised at the 2000 annual ASPPA meeting, in the general Q&A session. The questions at this session were answered by Joe Canary, Scott Albert, Lou Campagna and Mabel Capolongo of the Department of Labor:

Question 5: A 401(k) plan has 150 participants. The plan must file a full 5500 and have an audit by an accounting firm. Due to the cost of the audit ($10,000 or $15,000), my suggestion to the client is to split the plan into two plans, each with 75 participants. For 2000 there will be an audit. The plans could be split into two plans on December 31, 2000. Therefore, on January 1, 2001, both plans have less than 100 participants and no audit required. For tax qualification testing, they can be permissively aggregated. In fact, my plan is to administer as if it was one plan and just separate for 5500 purposes. Is my conclusion correct?

Answer: This question raises issues of avoidance and evasion. It is not certain that you really have two plans for purposes of Title I of ERISA in this instance--even if there may be two plans for Internal Revenue Code purposes. In Advisory Opinion 84-35A, the Department stated it would consider, among others, the following factors in determining whether there is a single plan or several plans in existence: who established and maintains the plans, the process and purposes of plan formation, the rights and privileges of plan participants and the presence of any risk pooling, i.e., whether the assets of one plan are available to pay benefits to participants of the other plan. This Advisory Opinion also notes that the Internal Revenue Service has cited the existence or absence of risk pooling between funds as relevant to the determination of single plan status. See §1.414(1)-1(b) 26 C.F.R. §1.414(1)-1(b). In DOL Advisory Opinion 96-16A, the Department stated its position that whether there is a single plan or multiple plans is an inherently factual question on which the Department ordinarily will not opine in the Advisory Opinion process.

Client insists that they filed their 2007 5500. IRS sends out a notice saying the filing was never received. The first thing we do is respond saying, no it WAS filed, and here is a copy of the filing. They then respond and say, you need to efile this 2007 return.

What are people doing at this point? Fighting with the governemtn to convince them that it was filed? Or doing the efiling/DFVC program? At the end of the day, sicne this goes back 2 years, I can't see how anyone could say with absolute certaintly that it was filed (client does not have return receipts). I've been taking the cautious route saying that a known $750 is better than an unknown $15,000.

Also, now that they are asking us to efile, I think we have less basis for then going back and using the DFVC.

One person plan terminated but is underfunded by about $300,000. Should the Form 6088 show the total calculated PVAB? Or should it show the PVAB to the extent funded (i.e. $300,000 less than the actual PVAB). Is there any guidance on this issue someone could point me to or has anyone experienced this before?