IRC § 401(a) begins by describing a trust "created or organized in the United States and forming part of a stock bonus, pension, or profit-sharing plan...".

The trust laws of most states include a concept called the doctrine of merger. If the only beneficiary is also the only trustee, then the two titles, beneficial and legal respectively, merge and that person holds title in fee. That is, the person owns the assets outright, free of trust. There is no trust under such circumstances.

Given the number of one-person plans that have sprung up, and many if not most listing just that one person as the trustee, it occurs that the doctrine of merger might be problematic.

Has anyone looked into this and found any ruling or logically arrived at a reason that the trust law doctrine of merger would not apply to one-person QRPs?

Participants in a 401(k) plan were set up for an auto increase in their deferrals, but those increases didn't take place because of system problems.

Participants in a 401(k) plan were NOT set up for auto increase in their deferrals, but because of system problems - increases took place. The participants did not authorize these increases.

Obviously, the first step is to get a new system!

But beyond that - what kind of corrections should be made? I think we're dealing with operational failures, correct? Would these be Self Correction Program corrections?

In the first scenario you would make up the missed deferrals and in the second scenario you would return the excess deferrals to the participants?

These are not the numbers, but I am putting in an example with numbers that may make it easier to understand:

Assume:

Testing failure said to refund $5,000 in ADP and refund $1,000 in ACP

The $5000 refund was made, but the 1,000 was not made.

The ACP refund will be made by the end of the year.

However, running testing to see how much the refund will be shows:

ADP refund of $4,500 and ACP refund of $800

Can we refund only $300 in ACP since the ADP refund is now $500 less than originally calculated?

I have a plan that is likely to be red when I certify in 2010. This plan has been at a 0% benefit accrual for 3 years now. That is obviously not a long-term sustainable position. They have been looking at adding an accrual back, but are wondering about timing. Does anyone see a problem with amending a plan in Q1 of 2010 to increase benefits (0% to x% accrual), prior to the actual certification? The code seems to allow a change right up to the start of the rehab adoption period.

does anyone know how many years a keogh can be frozen for? obviously at some point it needs to be terminated or unfrozen but is there a maximum time period we are looking at? business has been earning profits and plan has been frozen for a few years.

Duplicate Post found here: http://benefitslink.com/boards/index.php?s...mp;#entry189344

does anyone know how many years a keogh can be frozen for? obviously at some point it needs to be terminated or unfrozen but is there a maximum time period we are looking at? business has been earning profits and plan has been frozen for a few years.

I was handed a design reportedly done by an actuary, but the amounts seem unreasonable to me:

The design is for a new plan, so no existing years of participation.

Owner, age 48 (or 47 - depends on the valuation date)

pay over $245k has 10 years of service

first year contribution $310,000

Also has another owner age 42 (or 41)

pay over $245k has 5 years of service

first year contribution $267,000

Also reportedly not a 412(i) plan.

Ummm, did I miss something really obvious that came out with PPA that allows this?

We have an s-corp which will be adding the health insurance premiums to box 1 but not box 3 or box 5 of the w-2. Our quesion is do we use that portion of his wages in determining the plan contribution. We have usually used the guideline that if it is subject to social security taxes, it is counted for pension purposes. The only exception was section 125 which is also added in for pension purposes. Since the shareholder cannot participate in the 125 plan, do I treat these extra wages similar to section 125?

During a visit to the mental asylum, the vistor asked the director how do you determine whether or not a patient should be institutionalized?

"Well," said the director, "we fill up a bathtub, then we offer a teaspoon, a teacup and a bucket to the patient and ask him or her to empty the bathtub."

"Oh, I understand," said the visitor. "A normal person would use the bucket because it's bigger than the spoon or the teacup."

"No." said the director, "A normal person would pull the plug. Do you want a bed near the window?"

A taxpayer asks this question. He is planning to convert a traditional IRA to a Roth in 2010, and wants to elect to spread the tax payment over the 2 year period. Question that is raised is what happens if the taxpayer passes away in 2010 after the conversion is made? Does the conversion amount become taxable in 2010, or does it still spread over the 2 years?

Any replies are appreicated!

This is one of those stupid questions that annoys the life out of me because I don't think it makes much difference in "real life." Unfortunately, as TPA's we frequently deal with unreality.

A plan owns a deferred annuity. Is the interest treated as interest, and hence reported on 10(g), or is it treated as "unrealized gain" and hence not reported?

It makes no sense to me, in the context of a qualified plan, not to report this as interest. As an aside, if you choose to report it as interest when it really should be "unrealized gain" I can't see the IRS penalizing a client for disclosing it as interest. So the real life side is that I'm not sure it really matters all that much what you do. This issue doesn't arise on the regular 5500 form Schedule i, because you report the gain, whether interest or unrealized.

Hi I'm not sure if this is posted in correct spot. Employee is sole participant (self employed) in MPP. Employee has made a contribution for last 8 years. However in 2009 employee worked only four hours a week (part time). According to the plan 1000 hours a year of service are required to constitute a year of eligibility of service. Also 500 hours of service must be exceeded to avoid a break in eligibility service. Does employee still make a contribution for 2009 plan year? Thank you!

Hi all,

How are you planning to handle things when an AFTAP freeze ends (i.e. when the AFTAP rises above 60% after an automatic freeze had occurred)? Will your document language provide for the automatic reinstatement of accruals that would have occurred during the freeze period? Or will such reinstatement require a special amendment signed by the employer?

I'm leaning toward the latter approach (assuming it's permissible). My thinking is that sponsors of severely underfunded plans may adopt "hard freeze" plan amendments sometime after the automatic freeze kicks in, and will not want to automatically reinstate benefits that would otherwise have accrued between the automatic freeze and the hard freeze dates.

What do you think?

TIA,

Scott

Can the amount of the hardship required to satisfy the financial need include administrative fees charged by an administrator or vendor?

I've never been a fan of real estate as a plan asset for all sorts of reasons, but plan sponsors of one participant plans love to do it.

I have a husband and wife plan. They have plan assets of 400k where such value is based on a real estate property.

The lump sum value of each of their pensions is 200k if they terminate the plan today.

Can they re-title the asset as an IRA asset of 200k (50% of real estate) each for 2 separate IRA accounts?

I suppose if a financial institution allows for such an arrangement it might work.

And finally what about expenses and rental income; could they go in and out of the IRA account or must that be part of an after tax account? It seems it should be part of the IRA account though it is a little quirky.

Of course no one wants to sell their depreciated real estate these days.

Like I said, I'm not a fan of real estate in pension plans.

Thanks.

I have a client that is going to give shares of stock outright (not an option, but actual shares) to employees as a bonus. He is worried about having to include the FMV of the shares as compensation for plan purposes. Does anyone know if this type of income is includable in 415 compensation?

In the proposed 430/436 regs, "elect" appears 190 times; in the final regs, "elect" appears 492 times. I suggest you get your clients to the polls early to ensure they make all of their elections!

I have a new client that is an S Corp. We've established that the daughter of the 100% owner may not participate. This daughter's husband is also an employee of the company and they have one young child together. I have established that the spouse [is eligible to participate.

However, the question has been posed as to the eligible expenses for reimbursement under a Medical Flexible Spending Account and Dependent Care Flexible Spending Account. Would the daughter's expenses be eligible for reimbursement even though she is not allowed to participate (as an owner under the Section 318 attribution rules)? Would the husband be allowed to claim the dependent care expenses for the child (who would also have ownership under the Section 318 attribution rules even though he/she is underage) under the Dependent Care Flexible Spending Account?

I realize this may trigger some nondiscrimination issues and I welcome comments on that aspect as well but I really need information regarding the eligibility of expenses for the spouse since I can't find any guidance on this.

Thanks!

Say an HCE was receiving an allocation of 50% of compensation per year, what would be the potential pitfalls (other than having to give more to the NHCEs) to raising the allocation to say 75% of compensation?

Plan had an age 21 and 6 month wait, entry on the first day of the plan year coincident or next following.

Said plan was later amended to have an age 21 and 1 year of service wait, but the entry date was not amended.

This does not satisfy the statutory eligibility requirements, does it?

Is there a different answer if the plan provides for 100% immediate vesting (a la 2 year wait)?

Thanks!