Is it acceptable for fiduciaries to use a minimum level of revenue sharing in search criteria when selecting investment options? For Plan Sponsors trying to have the plan pay for itself, it's difficult to manage the revenue sharing without using a minimum in search criteria.

Can anyone verify for me whether or not the new pension funding relief provisions of the Preservation of Access to Care for Medicare Beneficiaries and Pension Relief Act of 2010 apply to governmental plans?

Thank you!

This is a question about line 19 of the new Schedule R. Line 19 requires defined benefit plans to break down their trust holdings by percent of total assets into five separate asset classes (stock, investment-grade debt, etc.). If the plan hold assets in trusts, accounts, mutual funds, or other investment arrangements, line 19 requires the plan to disaggregate the underlying assets.

Plan A's assets include a GAC (a separate account) from Giant Insurance Company. Giant will not provide a breakdown of assets in the contract; instead, it will provide only the fair-market value of the whole contract, as determined under FAS 157 and state insurance law, and as reported on its 10Q and 10K. Giant's rationale is that it owns those underlying assets; all Plan A owns is the contract.

This makes sense to me, but Plan A's auditors (Huge Accounting Firm) aren't convinced that this is sufficient. Huge won't formally opine either, but points to language in the Schedule R instructions that clearly requires disaggregation of assets held in "accounts" and that provides no exception for insurance company separate accounts. We have been asked, at the last minute, to resolve this difference of opinion between Giant and Huge. I haven't had any luck finding more detailed instructions or even any formal discussion of this issue. Any pointers appreciated, as this is a very time-sensitive question. Thanks.

I have about 20 extensions I need to file for different clients. We usually file these via regular mail with return receipt requested. If we do this individually, it will cost a fortune. Do you think it would be alright to file them together using one of the overnight services?

In testing a DB/DC combination my understanding is that imputing permitted disparity can be included in the DB EBAR or the DC EBAR, but not in both, is that correct?

Hi everyone,

What are the mode of savings in 401k retirement plan? Is it safe?

I have a calendar year DB plan with a BOY val date. I just want to check to see if this is correct:

2008 val asset method = market

2009 val asset method = average (no IRS approval required)

2010 val can switch back to market without IRS approval.

Is that correct?

With HIPAA, is it okay to let the HR people know how many weeks' vacation an employee sold to purchase benefits under a health plan? I can't imagine that it isn't as the HR staff need to know how many weeks a person has left to take, but wanted to double check...thanks,

When does a participant's benefit accrue under a DB plan utilizing an elapsed time crediting formula? If participants are credited with a year of service on the last day of the plan year, and participants' accrued benefits are calculated based on years of credited service, does that mean under the elapsed time formula that participants do not accrue their benefit until the last day of the plan year?

A not-for-profit organization maintains a foundation which is a separate legal entity. Employees of the foundation are on contract and are paid by the sponsoring organization but foundation employees are treated as independent contractors and paid via 1099. I.e., each is a self-employed individual.

The sponsoring employer maintains a defined benefit plan.

Can the sponsoring employer cove the contract employees under the pension plan with the contract employees' 1099 income counted as compensation for pension purposes?

The sponsoring employer does not want to alter the 1099 arrangement so paying the employees W2 is not an acceptable option.

100% owner of a business sells 100% of the stock to a new owner in 2010. Who signs the calendar 2009 Form 5500? The form is being filed AFTER the sale and it was a stock deal so the new owner "bought the plan too."

My position is that the new owner signs, because the new owner is the Plan Administrator. Why should some unrelated 3rd party be filing a 5500? But of course the owner's valid point is "how can I sign as plan administrator if I wasn't the owner for that period?"

Of course, if the prior owner refuses to sign, the new owner has no choice but to sign. But if the prior owner is willing to sign, does anyone see a problem?

Corbel's adption agreement doens't let you elect hardship distribution for non-deferral balances under a 403b7 contract, but DOES allow it under 403b1. Can anyone shed some light on why that is?

An employer has life, disability, health and dental plans each with over 100 participants. Their ERISA attorney says they can use the policy as their plan document. Since each of these types of insurance is on a separate policy do they need to file a separate 5500 for each?

A client has old contracts under a non ERISA 403b plan. These contracts were frozen and no contributions for any employee have been made since before 2005 so they are orphaned contracts under Rev Proc 2007-71. The client has subsequently set up an ERISA plan, with a plan document. The question now is do the old orphaned contracts need a plan document, are they really part of the ERISA plan, or can they be excluded altogether as orphaned contracts such that no plan is required? For 5500 purposes it seems they would have to meet the requirements of FAB 2009-02 and 2010-01 to avoid 5500 reporting. But what about for plan treatment purposes?

How are you handling these situations? I suppose the conservative approach was to just prepare the plan document, but apparently this was not done in many cases, and now we are in 2010.

Any thoughts would be appreciated!

Thanks!

The Plan has 9 adopting employers, all part of a controlled group of businesses. Three of the adopting employers laid off between 20 and 30% of their workforce (most of whom were participants in the Plan). Overall the Plan lost approximately 10% of its participants to the layoffs of the 3 adopting employers. The auditor of the Plan says that the Plan most likely had a partial plan termination only with respect to the 3 adopting employers that laid off over 20% of their plan participants and all affected participants of those 3 adopting employers should be fully vested. The employers do not want to vest the affected employees. I say that partial plan termination is determined by looking at the Plan as a whole and therefore, since the overall layoffs total less than 20%, there is a presumption that no partial plan termination occurred.

Any thoughts are greatly appreciated. Thanks!

One-participant plan

TNC = $100,000 and FT = $200,000

Projected monthly benefit at NRA = $16,250 (415)

Death Benefit = AE of accrued benefit at death

Funded (partially) with Variable Universal Life; Death Benefit = $3,000,000 and Annual Premium = $30,000

Cash Value = $40,000 and Cash surrender value = $0

(a) Any problem with incidental death benefit if total contribution = $70,000 (trust) + $30,000 (insurance) = $100,000? What is procedure for testing?

(b) What is asset? CV or CSV?

Thanks.

5500s will be submitted using IFILE. I note that attachments may be created either on the specific form (e.g., enter age service array) or using the edit form attachment to include a pdf.

In the good old days, we simply piggy backed all the attachments to the 5500. Can this still be done -- i.e., add a single pdf glop (assumptions, plan provisions, age/svc array) or must each attachment be included to a specific spot?

A LLC or partnership issues a Sch K-1 showing Guaranteed Payments to Partners (GPP) on line 4 and shows Self-employment (S/E) earnings on line 14A.

I am now getting a little confused about the "normal way" of computing the maximum contribution made to a retirement plan.

I'm wondering if things can be structured to reduce the net S/E income taxed on the form 1040, and still get a maximum contribution made to a retirement plan.

Generally, I have considered the S/E on line 14A as the number to use for simple, basic computations for determining the amount to pay into a retirement plan. The amount listed as GPP is ignored for purposes of computing the maximum contribution made to a retirement plan. Pretty straight forward, but a year with low income can result in the partner/member being limited from contributing the maximum annual amount into his retirement plan.

SO WHAT IF THE TAXPAYER WANTS MORE RETIREMENT PLAN DEDUCTION?

Generally if the GPP payment is increased the expense of the GPP offsets any increase to S/E. So any year-end changes to GPP do not affect the S/E income (other than to the extent of minority interests in the entity).

But when the operations of the business are not enough to allow the maximum retirement plan contributions, then generally if the GPP payment is capitalized (rather than expensed) then a larger GPP results in a larger S/E income. So by increasing his GPP, he is allowed a larger retirement plan deduction.

My new thought today is in lieu of capitalizing additional GPP, the partner/member is paid for services outside the entity and is issued a 1099-MISC which is reported on the taxpayer's Sch C.

In this case he'd show S/E income on the Sch C, and could establish a retirement plan for the Sch C income.

As a result, the LLC/partnership would have additional expense for the service fees paid out to the individual. This would reduce S/E income (perhaps even to a negative) on line 14A of the Sch K-1.

When preparing form 1040-ES the positive S/E income from the Sch C is netted with the negative S/E loss shown on the Sch K-1, and the result would be a reduction in S/E tax.

As an example, taken to an extreme: a LLC with zero net income and no hope for a retirement plan deduction – could otherwise pay $200,000 as a sales commission to the member and report a $200,000 loss. The $200,000 Sch C would support a retirement plan deduction.

The $200,000 loss on Sch K-1 would totally offset the S/E income from Sch C when preparing form 1040-SE. In this extreme example, the taxpayer would then have a maximum retirement plan deduction and would have paid zero S/E tax.

I am looking for cites to attack or to support this extreme example.

Comments please?

I am on an industrial disability pension. My attorney and my spouses attorney decided on a QDRO and a QDRO drafter; both sides split the cost. Mistake.

The drafter sent a copy of the DRO to the Plan Administrator without my counsel even having seen it. Suffice to say it's all worded for my spouse and not for me (although a memo provided me and my spouse by the drafter would make you think otherwise)... and written so vaguely that my Industrial Disability might be taken. Granted, there is plenty of California case law against this happening, but Judges here haven't been using that case law until appeals!

So, I'm in a pickle. What do I do? Can I contact the Plan Administrator myself and give them the memo/DRO summary that I got from the drafter of the QDRO that clearly shows the intent of the QDRO was to divide my service retirement and not my IDR? If only that memo was what the drafter actually put in the DRO!

I fear there was collusion behind the scenes.

What can I do?

We have a 401K plan that has participant loans. Some individuals that have loans outstanding do not have sufficient wages available during weekly pay periods to repay the loans per the terms of the loan agreement (i.e. they are getting a zero balance check after all taxes/deductions). Our TPA will automatically reject partial payments and refund the partial payment to us. If the amount is being withheld from employee's paycheck but not remitted until a "whole" payment can be made per the loan terms, is this considered a late contribution or prohibited transaction? Is there any difference if the full amount is withheld from a subsequent paycheck (i.e. two full loan repayments are made in the next pay period). Some questions have been raised and I was wondering if anyone here could help. Thanks!