Say a pension plan purchases a Denny's restaurant and that the plan owns the property and charges the tenant rent to use the property, but the plan does not receive income from the restuarant itself.

Based on a UBIT IRS publication my impression is that this would generate UBIT because even though the plan is just renting the property the tenant is using the property for a commercial business unrelated to the purpose of the tax exempt plan.

Does that seem correct?

Now let's say instead that the plan is experiencing the profits/losses from the restaurant as a commercial business. Does this create UBIT? My understanding is that it does as well.

And finally, as a generalization say a pension plan owns a portion of a limited liability partnership.

If the partnership only generates income from dividends and interest than it would not generate UBIT, but if it also experienced profits/losses from the business of the partnership it would generate UBIT. Does t his seem correct?

Thanks.

FYI the pension plan only has two participants

Say a pension plan purchases a Denny's restaurant and that he owns the property and charges the tenant rent to use the property, but the plan does not receive income from the restuarant itself.

Based on a UBIT IRS publication my impression is that this would generate UBIT because even though the plan is just renting the property the tenant is using the property for a commercial business unrelated to the purpose of the tax exempt plan.

Does that seem correct?

Now let's say instead that the plan is experiencing the profits/losses from the restaurant as a commercial business. Does this create UBIT? My understanding is that it does as well.

And finally, as a generalization say a pension plan owns a portion of a limited liability partnership.

If the partnership only generates income from dividends and interest than it would not generate UBIT, but if it also experienced profits/losses from the business of the partnership it would generate UBIT. Does t his seem correct?

Thanks.

FYI the pension plan only has two participants

Prototype plan has not been updated for years (presume GUST and EGTRRA have been missed). Very few participants. Sponsor wants to fix.

Couple of questions:

1. Is sponsor going to be required to adopt a GUST restatement and then an EGTRRA restatement, or is it enough to do an EGTRRA restatement as part of VCP?

2. Is there some particular guidance for this situation? (multiple missed amendments) I don't recall seeing it, but may have missed it.

If there are other threads dealing with this, I'd appreciate direction to them.

Thanks

For a non-spouse beneficiary to be able to roll over a distribution to an inherited IRA, must such a non-spouse beneficiary be a "designated" beneficiary - i.e., had been specifically designated as a beneficiary by the participant?

I have a situation where a deceased participant did not have a beneficiary designation. Benefits are to be paid equally to her parents and a sibling per plan provisions and state probate statute. Since these beneficiaries were not, per se, "designated" as such by the deceased participant, are the distributions eligible for non-spousal rollover?

Thanks for any and all replies and/or comments.

Plan sponsor failed to implement the automatic deferral provision in 2009. Just noticed the error today. Does this affect answers to the compliance questions to the Sch. H? I don't see that it is a failure to transmit participant contributions (4a); it is a failure to withhold altogether. The other possible question I see is 4l, but it is my incllination that a failure to pay a benefit when due refers to a failure pay a disitribution and doesn't relate to this issue.

Thanks in advance for any guidance.

What is the next step if a group health plan has not provided SPD after 2 requests or the SPD is missing components (simple things like phone numbers or addresses)?

Your thoughts are greatly appreciated!

An employee resides in state X and his marriage is dissolved by a state x court which enters a judgment of divorce and the decree provides for spousal continuation. At the time of the divorce, employee works for Company A. It is unknown whether employee elected insured or self-funded medical coverage at the time the divorce decree was entered. Employee moves to state y and works in state x for Company B. Employee eleects coverage under an HMO issued in state x. Assume both state x and state y have spousal continuation statutes for insured medical coverage. Generally, I would be fine if employee were employed by Company B at the time the divorce was entered. However, there seems to be an implied provision in the spousal continuation statute that the employee be a member of the plan at the time the divorce was entered and that s/he continue to be a member. Does this mean that if employee terminates his/her job and is hired by another employer, the spousal continuation statute would not apply to the new employer?

We recently took over as the TPA for a plan whose service provider processed a loan request twice within two days back in 2008. The participant’s account balance was $16,000 and each loan withdrawal was for $5,000. The participant evidently received both ACH transfers but did not say anything at the time. The first $5,000 withdrawal meets all of the requirements for an acceptable loan. The loan was documented and it did not exceed the maximum amount available for a loan. He has been making payments on one $5,000 loan. My concern is with the second $5,000 that was sent to the participant. I do not believe that the participant was eligible for any in-service withdrawals at the time. How do we correct this?

If a business consists of a younger owner, say age 45, and several older employees, say ages 55-60, can they have a Cash Balance plan with a uniform contribution credit of, say 25% of pay, in addition to a profit sharing plan?

Does this pass discrimination testing?

A traditional DB plan, with similar funding requirements, would almost certainly be discriminatory.

The PPA provides different effective dates for providing pension benefit statements to nonunion pension plans (due for 2009 plan year) and pension plans maintained pursuant to a CBA (for this plan, the 2011 plan year).

If a plan has both nonunion and union employees, can all benefit statements be provided for the 2011 plan year, or must the nonunion employees receive their benefit statements for the 2009 plan year?

It seems to me somewhat unclear whether the exception to lump sum distributions as set forth in Code Section 432(f)(2)(B) included a lump sum death benefit that is less than $5,000?

Company sells all of its assets including employees effective 9/30/2010. Owner continues to maintain the business entity, and would like to set up a defined benefit plan to help offset some of the income derived from the assets sale.

My thought was that we set up the new plan effective 10/1/2010 with a short plan year running 10/1/2010 to 12/31/2010. The idea being that the employees termination date was 9/30/2010 (the date of the asset sale), and they would not be covered under the new DB plan.

I now find out that they have an existing 401(k) Profit Sharing Plan. Since the 401(k) plan runs on the calendar year, does that mean I have to consider both plans for Non-discrim, coverage, top heavy, etc? They technically don't have the same plan year, since the DB will have a short plan year. But will I have to employees for the whole year in my DB plan because they were covered under the 401(k) PSP?

I'm not sure what's happening to the 401k as a result of the sale.

Any thoughts to point me in the right direction are greatly appreciated!

Thanks!

Plan granted a hardship distribuion for payment of post secondary education expenses. Plan sponsor did collect a Hardship Statement signed by the participant stating the prupose of the withdrawal, but did not ask for evidence of the requested expense. The employee did not in fact end up attending school. The plan sponsor did have procedures in place requiring that some type of written evidence be collected, but in this case those procedures were not followed. They have had 6 or 7 previous hardship requests and in each case collected written evidence.

A few questions:

1. Can plan sponsor use SCP since procedures were in place, but just not followed in this isolated instance?

2. The general correction is to request that the participant repay the money with lost earnings. In this case the participant has terminated employment. He is not going to cooperate with any correction. What would be an acceptable correction? The concern with an employer corrective contribution is that the participant walks away with that corrective contribution. The plan only contains employee deferrals and safe harbor match and the participant was under 59 1/2, so I don't see that plan amendment is not an option.

Thanks in advance for any guidance.

A stand-alone DB plan has multiple formulas for varying job classifications. Example, 7%, 2% and no accrual rate (0%) for some job classifications.

Obviously this is not a design based safe-harbor formula. The question is whether the general test under 401(a)(4) is the only testing method available or is there an alternate approach by testing each benefit accrual rate separately under 410(b) via "restructuring" by testing each formula separately for 410(b) and if it passes 410(b) on that basis does that obliviate the need for the 401(a)(4) general test ?

Like many TPA's, we have folks on staff who "prepare" 5500 forms. They take the data certified by the client, and input it appropriately on the 5500 forms, based upon valuations performed using the certified data. Question is, is the IRS going to consider them "preparers?"

This is a potential nightmare if the IRS takes this position, which doesn't seem reasonable at all - the analyst really doesn't have any "discretion" in the 5500 preparation, other than the EA who is already registered so no problem. But your typical DC analyst shouldn't fall under this foolish proposal. What are people thinking/doing about this? Is ASPPA going to advocate against this foolishness?

Here's a link to the proposed regulations, and following is an excerpt of the applicable exception and examples. One problem, of course, is that this whole hoo-hah is really designed to "regulate" people who have discretionary ability to affect someone's income tax calculation, and that really doesn't generally directly apply to a 5500 form.

http://frwebgate.access.gpo.gov/cgi-bin/ge...cid=fr26mr10-17

(g) Only for purposes of paragraphs (d), (e), and (f) of this

section, the term tax return preparer means any individual who is

compensated for preparing, or assisting in the preparation of, all or

substantially all of a tax return or claim for refund of tax. Factors

to consider in determining whether an individual is a tax return

preparer under this paragraph (g) include, but are not limited to, the

complexity of the work performed by the individual relative to the

overall complexity of the tax return or claim for refund of tax; the

amount of the items of income, deductions, or losses

[[Page 14545]]

attributable to the work performed by the individual relative to the

total amount of income, deductions, or losses required to be correctly

reported on the tax return or claim for refund of tax; and the amount

of tax or credit attributable to the work performed by the individual

relative to the total tax liability required to be correctly reported

on the tax return or claim for refund of tax. A tax return preparer

does not include an individual who is not otherwise a tax return

preparer as that term is defined in Sec. 301.7701-15(b)(2), or who is

an individual described in Sec. 301.7701-15(f). The provisions of this

paragraph (g) are illustrated by the following examples:

Example 1. Employee A, an individual employed by Tax Return

Preparer B, assists Tax Return Preparer B in answering telephone

calls, making copies, inputting client tax information gathered by B

into the data fields of tax preparation software on a computer, and

using the computer to file electronic returns of tax prepared by B.

Although Employee A must exercise judgment regarding which data

fields in the tax preparation software to use, A does not exercise

any discretion or independent judgment as to the clients' underlying

tax positions. Employee A, therefore, merely provides clerical

assistance or incidental services and is not a tax return preparer

required to apply for a PTIN or other identifying number as the

Internal Revenue Service may prescribe in forms, instructions, or

other appropriate guidance.

Example 2. The facts are the same as in Example 1, except that

Employee A also interviews B's clients and obtains from them

information needed for the preparation of tax returns. Employee A

determines the amount and character of entries on the returns and

whether the information provided is sufficient for purposes of

preparing the returns. For at least some of B's clients, A obtains

information and makes determinations that constitute all or

substantially all of the tax return. Employee A is a tax return

preparer required to apply for a PTIN or other identifying number as

the Internal Revenue Service may prescribe in forms, instructions,

or other appropriate guidance. Employee A is a tax return preparer

even if Employee A relies on tax preparation software to prepare the

return.

Example 3. C is an employee of a firm that prepares tax returns

and claims for refund of tax for compensation. C is responsible for

preparing a Form 1040, ``U.S. Individual Income Tax Return,'' for a

client. C obtains the information necessary for completing the

return during a meeting with the client, and makes determinations

with respect to the proper application of the tax laws to the

information in order to determine the client's tax liability. C

completes the tax return and sends the completed return to employee

D, who reviews the return for accuracy before signing it. Both C and

D are tax return preparers required to apply for a PTIN or other

identifying number as the Internal Revenue Service may prescribe in

forms, instructions, or other appropriate guidance.

Example 4. E is an employee at a firm which prepares tax

returns and claims for refund of tax for compensation. The firm is

engaged by a corporation to prepare its Federal income tax return on

Form 1120, ``U.S. Corporation Income Tax Return.'' Among the

documentation that the corporation provides to E in connection with

the preparation of the tax return is documentation relating to the

corporation's potential eligibility to claim a recently enacted tax

credit for the taxable year. In preparing the return, and

specifically for purposes of the new tax credit, E (with the

corporation's consent) obtains advice from F, a subject matter

expert on this and similar credits. F advises E as to the

corporation's entitlement to the credit and provides his calculation

of the amount of the credit. Based on this advice from F, E prepares

the corporation's Form 1120 claiming the tax credit in the amount

recommended by F. The additional credit is one of many tax credits

and deductions claimed on the tax return, and determining the credit

amount does not constitute preparation of all or substantially all

of the corporation's tax return under this paragraph (g). F will not

be considered to have prepared all or substantially all of the

corporation's tax return, and F is not a tax return preparer

required to apply for a PTIN or other identifying number as the

Internal Revenue Service may prescribe in forms, instructions, or

other appropriate guidance. The analysis is the same whether or not

the tax credit is a substantial portion of the return under Sec.

301.7701-15 of this chapter, and whether or not F is in the same

firm with E. E is a tax return preparer required to apply for a PTIN

or other identifying number as the Internal Revenue Service may

prescribe in forms, instructions, or other appropriate guidance.

Does anyone know what a "Variable Benefit Plan" is? One of our clients is interested in this type of plan but we do not know what it is

Based on the description it sounds like a Defined Benefit Plan, but the investment risk is on the participant.

Can we use pre-approved DB plan documents for this type of plan or would a IDP have to be done?

Any information would be helpful.

Thank you

The objective is to change the benefit formula.

(1) What is the procedure to amend the plan? (Corporate resolution, interim amendment ... ?)

(2) Is there a possibility IRS will reject the amendment?

thanks.

I realize this should probably be in the Relius users section, but that thread does not have too many users and the people on there seem to be short-tempered due to Relius' 5500 submission process and all the problems, and really dont want to have to answer a question about something other than that....

We are a TPA using Relius, doing daily plans. Have moved a lot of our plans to paperless processes (paperless statement delivery, online enrollment, etc). We already do paperless loan requests, but at the point we get the online request, we still do paper am schedules and promissory notes. We'd like to rid ourselves of all of that and go completely paperless.

I have been all over Relius' help sections but I cant find any instructions. Would you mind sharing how this process works if you do paperless loans? Does a notification somehow go to the HR person to begin deducting repayments, much like online enroll sends a notification? What section of Relius do I look at to set this up?

Thanks so much!

So may favorite client has cooked up what sounds like an absolutely *swell* idea for establishing spousal status, and I wondered if anyone here has seen a similar approach or has any thoughts about it generally.

Although I am sure counter-examples could be found, for the most part employers seem to take an employee's word for it if she says that she's married. Standard practice seems to be to ask the employee-spouse to certify her marital status and leave it at that, subject to discpline, recoupment of benefits improperly paid, and/or being turned over to the fuzz for fraud if the actual status is other than advertised. Some employers might even ask for a marriage license.

The brain storm my client has had is that marriage licenses and other ancillary evidence of marital status just aren't good enough! Instead, the idea is to require allegedly married people to produce a copy of their federal tax return (Each year? Once? Not clear.) showing either "married filing jointly" or "married filing separately" status. This would be the exclusive evidence that could be used to show marital status - no ancillary evidence would be allowed. Not even the sworn testimony of a bus full of bishops would suffice in the absence of the tax form.

I see the "logic" behind this idea since you are required to declare yourself every year on the tax form, and merely possessing a marriage license does not establish that you are currently married. Even so, the idea of a plan sponsor asking for sensitive financial information from employees every year - or even once - creeps me out just a little. If you only ask once, it is not any better than a marriage license at picking up subsequent divorce. To get what you really want, you'd need to ask for the form every year.

Problems? For one thing, I think the problem they are trying to solve - namely, unauthorized "dependents" on the plan - can be addressed adequately through less intrusive means. There is also the possibility that married people might check the wrong box on the tax form, either purposefully or accidentally. Or they might have a tax "strategery" that the plan sponsor would just as soon not know about. It's just TMI. Some things, a plan sponsor just doesn't want to know.

There is also the problem of how to deal with domestic partners and same sex spouses who may be precluded by law from "married" filing status - certification appears to be good enough for them, but not for married people? To this last point, the optics of requiring more personal info from married people than from domestic partners could rub some folks the wrong way.

I think it is fair to say that this approach would be a bit unusual. As such, I am thinking that clear communication would be imperative, or enforcing the rule would be (even more) problematic. I am also thinking that it would be a spectacularly poor idea to attempt to enforce this rule retroactively on employees whose spouses have incurred large medical claims where it is clear that the employees are married but refuse to hand over their tax forms.

Anybody have any thoughts about this?

Hi there.

I am trying to figure out when a defined benefit plan has to be terminated. It is going to be left behind in an asset sale and the company is winding down.

I understand that the termination process can take a year or so and the company needs to be around until distributions are made to avoid an "orphan plan" situation. But is it ok for the company to be basically an empty shell in the meantime, so long as contributions are made to the plan on time/annual reports are filed? I poked around and found an IRS official's informal response in a 1999 Q&A session indicating that this is fine, the company doesn't have to be actively engaged in business.

Not having seen any rules to the contrary, seems right to me so long as the plan is being maintained. But, considering the informal/dated source, was hoping someone could confirm.

Thanks in advance!