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!

I have a cafeteria plan for a non-profit church organization. It has 126 other related entities, Parish Churches and Parish Catholic Schools. Since it is a non-profit, there is no ownership and each entity is a separate legal entity.

Their cafeteria plan offers medical benefits and also health and dependent flex accounts (POP & Flex).

They would like to establish another cafeteria plan with only medical benefits, NO flex accounts, and offer this plan to the other related entities.

Can the non-profit sponsor 2 cafeteria plans and offer the plan with POP and Flex to the administrative staff and offer the plan without Flex to the other related entities?

I would appreciate any guidance on this issue. Thank You.

Does anyone see a problem with the following definition of compensation, that will be in cash balnce plan.

The definition will apply only to the sole proprietor owner. Any other employees would of course have the normal definition of comp.

Definition of comp for owner only = Only compensation in excess of $100,000.

Large 401(k) Plan, with participants in virtually all states.

Plan document says that in event of failure of beneficiary designation, the account goes to

1. spouse
   
2. children, per stirpes
   
3. parents
   
4. siblings
   
5. estate
   

And ERISA council (who drafted plan) says that is best practice, because it avoids probate on the estate.

Recordkeeper on the other hand says that the best practice is

1. spouse
   
2. estate
   

Because of the administrative burden of being sure (for example) that the son who submits a claim for benefits is the only child of the participant.

So who do I believe?

I first should disclose that I know very little about ESOPs, so some follow-up qs may help. In connection with a refinancing, a company made a special allocation that was funded from unallocated dividends, cash, and forfeitures. The allocation was made to induce the trustee to do the refinancing. I am curious as to whether the amount of the special contribution that is funded from unallocated dividends and forfeitures is considered annual additions? Any thoughts or citations that can point me in the right direction?

I have something unusual. A public employer wants to charge a participant a premium if the participant’s spouse has health care coverage available from the spouse’s employer and turns it down with the intent of being covered by the public employer through his spouse.

The public employer wants the participant to execute an affidavit representing the accurate employment of the spouse, and if there is any misrepresentation, understands that all benefits will be revoked and any other legal action may be taken.

This seems a little elaborate and fishy to me. How does it strike you?

In reviewing the 2008 ADP / ACP Test Results for a Plan, it was noted that certain payroll periods were "miscoded" (e.g. a January 2008 Payroll was "miscoded" as a December 2007 Contribution). This resulted in the deferral percentages for 2008 being understated, and the 2007 percentages being overstated. Upon review of initial 2007 test results, other data errors were noted.

At the end of the day, the 2007 ADP Refund for HCE "X" was overcalculated by approximately $1,200 (and since it was completed before March 15, 2008, a 2007 1099 was issued).

Is there any guidance on how this participant could be "made whole" for the improper refunds attributable to the 2007 Plan Year?

Would this participant receive an amended Form 1099 for 2007, or is that "window" closed by now?

Are there any methods people have used to make the participant whole for the lost deduction in 2007, that may not involve the need to amend a prior return?

Would an improper ADP Refund in any way be treated similarly to the "missed deferral opportunity" correction under EPCRS? For example, when a participant is improperly excluded from the plan for a portion of the year, the correction is a QNEC equal to 50% of the "missed deferral opportunity", plus any applicable Match. Would this type of situation follow a similar pattern, in that a participant was "shortchanged" of a deferral opportunity?

Any thoughts would be appreciated.