For purposes of the STD exception, is a life annuity considered a "single payment" such that there is no deferred compensation where the annuity is scheduled to commence (and actually commences) within 2.5 months following the end of the service recipient's fiscal year?

A life annuity is clearly a single payment for purposes of subsequent changes to the time/form of payment (1.409A-2(b)(2)(ii)), but what about for purposes of the STD rule?

Anyone have any thoughts or know of any guidance that I'm unaware of?

Suppose a corporate plan sponsor contributes their required 2009 Safe Harbor contribution on December 31, 2010 (due to cash flow reasons). The plan document requires the contribution and the notice was issued timely. They have lots of room under their eligible compensation for doubling up their 2010 and 2009 contributions since they are only planning on contibuting the SH amounts.

By doing this, they will miss the deduction deadline for their 2009 tax return. I assume this would be deductible on their 2010 return?

If so, I don't see the section under 404 that quite gets me there - any ideas?

Also, if a participant quit in 2009 and the deduction for that person occurs with the 2010 return, that's not a 415 issue, right?

I have a question that came up on a defined benefit plan holds a life insurance policy. The participant is 90 years old. He has been advised by his financial advisor that it would be good to get that policy out of the plan before it "matures." I received this voicemail and was hoping someone could direct me to appropriate sections dealing with life insurance held in a DB plan as I have no experience with it. He will have to contact his attorney about this, but was hoping to somewhat intelligently answer some questions for him off the clock. I don't know anything about this plan other than what was provided in the voicemail.

A doctor has a retirement plan and would like to convert some of his assets to a Roth IRA. He is in his 30s and looking for ways to have some retirement income that is tax-free down the road. If his plan is amended to allow an in-service distribution of his vested profit sharing account (say an age 35 requirement and the contributions need to be in the plan for at least 2 years), can he take those assets and convert them to a Roth IRA? Administratively, this sounds burdensome so I would like to discourage it. Are their AGI limits that could restrict this?

This is a specific Relius Cycle D question.

It's my understanding that Cycle D submissions will review PPA provisions (i.e. they are on the applicable Cumulative List). If anyone that uses Relius didn't notice, their original DB PPA amendment was a load of crap and they corrected it with a new release in December sometime.

The problem is that the Cycle D documents have that load of crap PPA language in them. The 436 language is the biggest culprit. They also come with a PPA amendment that seems to incorporate some of the provisions not already in the document. In other words it's a cut-down version of the full PPA amendment because many of the provisions are in the document body.

Has anyone noticed this? If so, what are you doing, assuming you don't want to have the client sign a document that has bad 436 language in it? My initial thought is having the client sign an entirely new PPA amendment, even though they signed a good PPA amendment previously. That new amendment would override the bad language in the document.

DB plan with a career average formula integrated with covered compensation froze benefit accruals on 8/31/09. It is a calendar year plan. The benefit accrual for 2009 is based on compensation from 1/1/09 - 8/31/09. Should the covered compensation used in determining the benefit accrual for 2009 be prorated for the 8 months?

Curious as to why the IRS released rates today, but didn't provide the 2010 Funding Transition rates (Jan-10 only shows for plan year 2009). Oversight?

Funding Yield Curve Segment Rates

When is a defined benefit valuation required to be completed? For example, a 2009 valuation with a calendar year plan year end is due when? Is there a 5 year rule where for the first 5 years you do not have to meet this date? Does it matter if it is a sole proprietor plan with a Schedule C? The reason I ask is the actuary is requiring Schedule C income for 2009 before preparing the valuation. I thought the val. was due in Sept. of 2009. Thank you.

What happens if a participant is due a 415 or ADP refund, but they don't have enough money in their account because they took a 401(k) loan? I assume you can just adjust the outstanding loan balance and create a 1099 for the participant. That seems to be the only alternative.

Does anyone know if there is any guidance regarding this?

Employer A sponsers an HSA program with employee contributions through a Cafeteria Plan. Employee X wants to cover his family under the HDHPlan. Employee X spouse also covers the family under her employers (B) traditional HMO plan. The question which our HSA provider can't answer with any cites is: What is the contribution limit for employee X? Is he limited to employee only limits ($3,050), because the family has "other health coverage", or can he elect the family limit of ($6,150)? I know this is an odd situation, because most folks no longer are double covered but we have run into this on two occasions recently and don't have an answer. Any enlightenment will be greatly appreciated.

Employee_Contribution_limits_HSA.doc

Seeking opinions on non-safe harbor floor/offset plan designs.

Lately I have see many floor offset proposals and fairly new plans done by others. Some floor offset plans appear to comply with the Schultz memo ( .5% accrual before offset and uniform offset) and some clearly comply with nothing. I admit to a bias against non-safe harbor floor/offset plans on the grounds of concerns about the consistent interpretation of 401(a)(26) by the IRS, some ambiguity in the regulations, and the general "thin ice" that I perceive them to be bullt upon when there is a $0 net accrual.

In contrast, a DB/DC combo (cash balance or traditional) can do much the same with the complication that lots of people might have small benefits in the DB plan. But a CB accrual is less powerful for testing purposes.

Do others share my view or are others ok with full offsets and general testing of non-safe harbor floor/offset plans?

In addition to waiving 2009 participant RMDs, 401(a)(9)(H) also changed the RMD rules for beneficiaries under the life-time annuity rule and 5-year rule. Can anyone cofirm the following points?

With respect to participants who died in 2008, beneficiaries have one additional year, until Decemebr 31, 2010, to elect the life-time annuity rule.

For participants who died in 2004 through 2008, the 5-year rule is extended by one year (e.g., for a participant who died in 2004, beneficiaries must complete distributions by Decemebr 31, 2010).

The 2009 RMD waiver has no effect with respect to participants who died in 2009.

In a case where the Put of shares back to the company is paid out via a Promissory Note over a 5-year period, is the stock held as collateral for the Note? Or, are all of the shares turned over to the company in exchange for the Note and the Note is held as the asset in the rollover IRA?

I think the IRA owner would be more comfortable holding the shares as collateral and then releasing 1/5th of the shares each year as the Note is paid down.

How are these typically handled?

Can allocation groups in a new comp plan be defined by name? For example: Group 1 = specific owner, Group 2 = specific owner, Group 4 = all other participants?

Thanks

We have a defined benefit plan with about 50 employees that is terminating. We started the termination process in August 2008. The IRS determination letter was received in November 2009. Normally, the PBGC requires the distributions be completed within 120 days after the IRS determination letter is received. The owner of the company is wondering if there is any way to extend the 120 day period. Like all other plans, there was a substantial decrease in the assets in late 2008 and early 2009. The owner will forego all of his benefits (which the IRS is aware of) but he still only has about 90% of the assets needed to pay benefits. He would like to delay the distribution date a couple of months in the hope that the market recovery will continue and eat up most of the $200,000 funding shortfall he currently has. Has anybody gotten the 120 day period extended? If so, how?

Thanks.

We are about to move all of our employees into a new entity. We need to change the plan sponsor of our 401(k) plan to this new entity. How do we do that? Do we just amend the plan? Do we need to do anything else?

We are about to move all of our employees into a new entity. We need to change the plan sponsor of our 401(k) plan to this new entity. How do we do that? Do we just amend the plan? Do we need to do anything else?

QACA is supposed to use a 414(s) safe harbor definition, but what if certain items such as bonuses are excluded and comp ratio test is passed, then this is ok because it satisfies 414(s). However lets say comp ratio test is failed, does this mean plan has to file under EPCRS or can you correct by making up contributions using a definition of comp that satisfies 414(s) - ie adding back in the bonuses?

A new plan (Cycle C) was adopted December 2009 and effective January 2009. Since it is a Cycle C the deadline was already 1/31/2009. Can anyone provide me a regs cite that might handle this situation (i.e. when is this plan required to submit, and when can it submit to be "on cycle"). Thanks.

Plan states that if participant dies with no spouse then distribution will be made to participant's children, per stirpes. What specifically should a plan fiduciary do to identify the participant's children? Participant's personnel files are of no help.