I am trying to find out what firm/attorney submitted the PLR request that resulted in Private Letter Ruling 200836035, interpreting the 401(m) regulations as prohibiting the use of surplus assets to fund matching contributions in a qualified replacement plan. I am dealing with a similar issue and would like to find out as much information about the 2008 request and ruling as possible. Any ideas on how to find the author of this PLR request?

Company decided it didn't want to deal with 409A--was going to undergo a change in control in early 2006--and so decided it would go ahead and terminate it's deferred comp plan in 2005 and distribute the amounts in accordance with Q&A 18© of 2005-1. Company adopted resolutions terminating plan in 2005 and apparently paid out and reported all distributions in 2005 except for a couple of relatively small amounts. Those amounts for whatever reason did not get paid until mid-January 2006. Company reported distributions as income in 2005 or 2006 as they were made. Question is what to think of the failure to make all distributons prior to 2006 under the Plan and how to read the deadline requirement included in 18©.

18© says that all the amounts deferred under a plan be paid and reported as income in the taxable year in which the termination occurs so as not to have the amendment treated as a material modification. I read the "taxable year" portion here to mean the employee's taxable year so that all amounts are paid and distributed to employees in the year of termination. Here that would require all distributions to have been made in 2005 and recognized and reported in income in 2005 since employees are all on a calendar tax year. (Note, however, that the company is on a September 30 fiscal year so all amounts were paid out within the same year as termination if looking at the company's tax year.)

If having termination and pay out within the company's tax year argument does not work, what does the failure mean. All of the distributions under the Plan (including those paid in 2005) were paid out in violation of 409A and would be subject to 20% excise tax? Alternatively, only those amounts not paid in 2005 would be in violation? What are the risks to the company here where it timely reported and withheld on the distributions. Since it doesn't have duty to withhold on the 20% excise tax (if applicable) is risk simply that maybe it should have reported all distributions in income in 2005 rather than a couple in 2006?

A rare plan that is still over funded in this market is interested in using the qualified replacement plan (Profit Sharing) approach under IRC 4980(d). They will meet all the requirements (e.g., 95% of current participants will benefit, 25% or more of the excess will be transferred).

Logistically, since they are moving over a portion of the excess assets not attributable to any particular participant, so it's not all participant rollovers, does this then necessitate filing Forms 5310-As with the IRS giving the IRS a 30 advance notice of the transfer of excess assets ?

Thanks in advance for any opinions.

I work for a pediatric hospital and we are planning to introduce a HDHP with HSA next plan year. We wanted to have all domestic benefits (non-preventative services rendered at our facility) covered at 100% but it appears that is not possible.

Would it be possible to use a low co-pay that applies towards the deductible? The low co-pay is intended to incent members to use our facility. Or would this plan design make members ineligible for an HSA since the plan is covering services prior to the deductible being met?

Any guidance would be appreciated.

Filling out a EGTRRA restatement (prototype). Employer has had plan frozen since 1/1/2008. Should effective date of restatement be 1/1/2009 (as suggested in restatement agreement) or 1/1/2008? Any help is greatly appreciated need to get this done ASAP and brokerage house doesnt have the answer

I have a client who had a 401(a) plan with a 6% employer contribution (it's not a match). They have been including the parsonage allowance as part of employee's compensation - meaning this parsonage allowance

Does anyone know if a parsonage allowance is included in an employee’s compensation? I have a client who has a 401(a) plan with a 6% employer contribution (it's not a match) and they have been including the parsonage allowance in the employee's compensation and the employee has being receiving a 6% match on this. Is this allowed? Also, if you could point me into the right direction of the IRS regs that would be great.

Can I switch from a beg of year Val to and end of year Val in 2009?

The plan I was working on had a loss in Dec 2008 that creating a sizable minimum contribution if I keep the Val at the beg of the year!

Someone asked me to post this

In the webcast today I gave an example of interest on excess contributions for the year of deposit.

The excess contribution that is truly in excess of the gross MRC is credited with interest at the effective rate while the portion of the excess contribution that is excess only because of a prior application of the PFB is credited at the actual rate

Consider a plan that has the following

1/1/10 MRC 25,000

1/1/10 PFB 17,000

2010 Contrib 60,000 made 1/1/10

PFB election On 1/1/10 the employer elects to apply $10,000 of the PFB to offset the MRC

Since 10,000 of PFB is utilized to offset the MRC, the remaining amount of MRC is $15,000 after the offset

This means that the 60,000 contribution consists of $15,000 to satisfy the MRC and $45,000 of excess contributions.

The excess contribution of $45,000 consists of $35,000 of true excess (60,000 - 25,000) and 10,000 of additional excess due to the PFB utilization that adjusted the MRC from 25,000 to 15,000.

When rolling these contributions forward to 1/1/11 to add to the prefunding balance, the 35,000 will be credited at the effective rate for 2010 and the $10,000 will be credited at the actual rate of return.

Caveat- this assume the contribution is made on 1/1... if it was made later, the 60,000 would be discounted back to 1/1 using the effective rate and the discounted contribution would be divided into true excess and excesss due to a PFB utilization as of the 1/1 dates. These present values would then be brought forward to 1/1/11 at the effective and actual rates respectively

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!