Today, the IRS came out with the March 2009 30-year treasury rate (3.64%) and the 3-segment Corporate bond rates (5.70%, 7.53%, & 7.85%) ... see www.irs.gov/pub/irs-drop/n-09-39.pdf

Converting the (payout year 2009 60%/40% weighted) resultant Minimum PV Traditional Segment Rates (of 4.46%, 5.20%, & 5.32%) into a SINGLE interest rate gives 5.04% or 140 basis points above the 30-year treasury rate. THIS is with only 2 of the 5 years of grade-in now in effect. If this treasury-to-corporate spread holds, when fully graded-in (in 2012) the lump sum interest rate wil be 350 basis points (5 x 70 basis points per year) higher than the earlier (30-year Treasury) basis. The impact for a retiree approx age 60 is a one third reduction in the lump sum that would have been generated in the absence of the change in basis. In the period surrounding the 2006 PPA's passage, ths spread (once FULLY graded-in) would have been only 125 basis points or about 25 BP per year (NOT he 70BP per year we are now seeing). Certainly, Congress never contemplated a lump sum reduction of this magnitude.

Has anyone been involved in responding to participant-generated questions/complaints? Certainly, they cannot be well versed in the details, but it seems questions should be coming asking "why is my lump sum decreasing while my annuity is rising". Of cousre half-truthes can be used to explain it away, such as "its must be because your life expectancy is dropping with each passing year".

I'll bet some knowledgable Plan Administrators are "dancing in the isles" with this outcome ........ which scares me what abuse they may look to extract from AFTAP timing opportunities.

ESOP loan has been fully paid off for years. Is it correct then that participants who have joined since the loan was paid off will never receive stock shares in their account? Each time a participant terminates and is distributed the cash value, those shares will be reallocated back only to those participants who are already holding shares based on their share balance, with their cash accounts covering the cost. Newer participants will only receive allocations from cash contributions. Is that correct?

The QACA notice can be provided up to 90 days before an employee becomes eligible.

The QACA must be effective not later than the earlier of (1) pay date for the 2nd pay period after the notice is provided or (2) 1st pay date at least 30 days after the notice is provided.

Does this mean that if you provided the notice 60 days before an employee becomes eligible, the QACA must be effective before they are eligible? This seems like an absurd result. What am I missing?

Would the QACA simply become effective on the date of eligiblity?

TAM 200841042 appears to contemplate what is essentially a "paperless" distribution of employer securities from an ESOP to a participant and exercise of the put back to the company and the employee just receives a check from the company for the stock. The TAM seems to say that the NUA rules apply here (although LMSB initially argued that it should all be ordinary income). Does this mean that the former employee who immediatley exercises the put is taxed at ordinary income tax rates on the ESOP basis and capital gains on the NUA. If so, canthe employee take the proceeds of the put that are subject to ordinary income tax and roll them over to avoid that taxation and just "keep" the amount of the distirbution that is NUA and pay only the capital gains tax on that portion?

Here is the TAM

http://www.irs.gov/pub/irs-wd/0841042.pdf

If a large comany buys two small companys (stock deal), one has a SEP and the othe has a SIMPLE, can the acquiring company terminate the plans? Do they need to be terminated? If yes, is there a procedure to follow, forms to file, etc. like with a 401k plan? Thank you.

Item 2A of the Schedule E asks if the ESOP has outanding securities acquisition loan under Code Section 133.

Is this for old loans were the lender could deduct 50% of the interest paid?

Our ESOP does have a note out to the prior owner who did 1042 exhange but I want to confirm we still answer this question no on Schedul E.

the loan is new and I understand the 133 exemption no longer applies but is grandfathered for old loans.

Thanks!!

Client just informed us neither they or the investment firms prepared 1099-R/1096 for 2008. If this problem is now going to get resolved, should the '08 1099-Rs just be issued as usual despite being 3 months late?? Thanks in advance for any help.

Hoping someone can confirm: Is a non-profit 403b plan, that allows only for employee contributions and the ER has minimal involvement, considered a non-ERISA plan? If so, then a 5500 has not been required, is continues to not be required under the new 403b regs. Is that correct?

Thanks

On the annual San Francisco HCSO filing for 2008, is there supposed to be any duplication in Covered Employee count in subitems in Line E? The instructions appear to say no, so that a Covered Employee in a self-insured plan would only show up in Line E2 rather than E1 (or, if they had a lower-cost HSA or FSA, Line E3). Is that right? I can see why you wouldn't duplicate on E1 and E2, but E3 seems to be separate and so I don't logically understand why you wouldn't start a fresh count for E3.

Are all in agreement that a Partner's allocated share of a Partnership contribution to a Defined Benefit Plan flows through F-1065 Sch K-1 and is reported on the Partner's F-1040 thereby subjecting his/her allocated share of the DB contribution to Self-Employment tax (SE).

If not, do you have IRS Code, Regs, or Rulings or Tax Cases to support a deduction at the Partnership level (line 18 of Form-1065) and eliminating the SE issue for the partners on their allocated share of DB contribution?

If a C-corp has one employee (the owner), can his Health Insurance be paid 100% by the company (and deducted by the company)?

I just picked up a client who has been doing this for years.

OK. Sec. 1102 of PPA amended Code Sec 417(a)(6)(A) by striking "90 day" and inserting "180 day" and modified the regs sec 1.402(f), 1.411(a)-11© and 1.417(e)-1(b) by substituting 180 days for 90 days each place it appears. The problem is 90 days does not appear in reg sec 1.402(f)- it's 60 days. Making the matter worse, Section VII of Notice 2007-7 states that PPA 1102 provides that a notice required to be provided under Sec 402(f), 411(a)(11) or 417 may be provided as much as 180 days before the annuity starting date.

How to reconcile? Statutory construction over agency guidance? Hmmmmmmm.

We have a client who presently has a 401(K) with profit sharing and 3% non-elective safe harbor. The entry requirements are 1yos and age 21. The plan was amended on 1/1/08 to include prevailing wage contributions by participants who do prevailing wage jobs. The eligibility for this is immediate entry. Anyone hired by this company during 2008 would be in one sense eligible for the plan (prevailing wage) even though they don't work the job. The plan is considered top heavy without the safe harbor.

My question is since the participants who are not eligible for the 401(K) portion of the plan be entitled to a top heavy contribution since they are eligible for prevailing wage?

Hi all,

I'm a bit confused about the interaction between the exclusion for insubstantial non-monetary compensation and the $5000-compensation per person threshold for reporting a service provider on the new 2009 Schedule C.

Does the de minimis exclusion (and its various rules) apply for purposes of determining the $5000 reporting threshold? So if a person receives $4990 total in reportable direct and indirect compensation plus a nonmonetary gift valued at $20, then that person need not be reported at all on Schedule C?

Thanks!

Hello! Please help. Would I need to report an overpayment of less than $500 into my 401K (2008), and if yes, which form should I use? I plan to e-file in a few hours... Please help!!

Has anyone ever used the QTA to terminate an orphan plan? I am just curious if anyone has used these procedures on the DOL's website and if you could share your experience? Thanks.

There is no exception from the 2009 MRD suspension in a non-spouse rollover context, correct?

Employer has ceased doing business and received notice of withdrawal liability, which employer disputes (construction industry exception). Union has indicated a withdrawal liability monthly payment (to amortize the full liability), and has demanded payment of the monthly amount.

If the employer disputes the withdrawal liability, must it make monthly payments during the union's review? If arbitration results, must the employer make monthly payments during the arbitration?

If the answer is yes, that monthly payments must be made during either/or the review & arbitration processes, what is the consequence if the employer does NOT make those payments?

I have seen the option of offering a discounted lump sump payment for withdrawal liability in a settlement agreement. I am trying to convince a trustee that this is blessed by the DOL/PBGC but cannot find the authority which will do so. Can anyone provide assistance on this? Thanks.

If a plan sponsor handed out a Section 436 participant notice regarding benefit restrictions last year, and this year the funding status has not changed enough to change the restriction, is another participant notice required?

The notice last year did not mention anything about an annual update.