Do the regs under 414© regarding control groups apply to an educational organization which maintains a 403(b) plan? Specifically is the following used to determine control "common control exists between an exempt organization and another organization if at least 80 percent of the directors or trustees of one organization are either representatives of, or directly or indirectly controlled by, the other organization?" Reg 1.414©-5

Any insights would be appreciated.

An employer wants to offer financial planning for its employees. The financial planner would provide advice to plan participants on their qualifed plan investment choices in connection with investment direciton and would also provide information on insurance and presumably would make insurance product sales. The employer would like to compensate the planner in part from qualifed plan assets.

I see any number of problems with this idea including potential liability for the employer for bad advice given by the planner and the use of plan assets to compensate the planner.

Has anyone see this type of arrangement used successfully.

The EP News released by IRS on March 31st states that using yield curve and any of the lookback months for 2009 plan year is considered a reasonable interpretation of the statue and will not be challenged. My recollection is that the yield curve can be used only for the purposes of minimum required contribution. Does it mean the election to use yield curve applies only for the calculation of MRC? And for AFTAP purposes such as benefit restriction, we still need to use segment rates (if segment rates are what was adopted for the 2008 plan year)?

I have a terminated participant who received their distribution (rollover) of their entire account balance. The account is closed.

The employer now wants to make their employer contribution to which this terminated participant is entitled to. I told them that they will have to make the contribution (reopen the account) for the termed participant and then request a second distribution.

The employer asked if he could just cut a check to the rollover company instead of reopening and depositing it into their account, whereby the participant will incur another distribution fee from the investment company.

What are your thoughts on this?

I feel that for IRS purposes (paper trail) that the deposit should be made into the plan, and then distributed, but the employer would really like to avoid additional fees for the participant. Is there any clear direction (cites) on this that anyone knows of?

Thanks so much!

I am looking at a plan that has a Social Security Level Income optional form of benefit. The plan has an AFTAP < 60%. The level income option produces a value greater than a life annuity (until actual soc. sec. kicks in). Is that a restricted form of distribution under 436?

An employer established a presumed VEBA three years ago. At the time, I had not read the IRS Memo on Processing VEBA exemption applications and was unaware of the increased review on these smaller VEBA's. The employer made three annual contributions of $100,000. Amounts were invested in mutual funds that are now valued at $250,000. After more than two years, the IRS has indicated that an exemption letter will not be issued. All participants are owner-employees and their parents (HCEs through stock attribution rules). We can challenge the initial ruling or withdraw the exemption application.

If we withdraw application, can we take the $250,000 and put into an insurance product with no tax conseqiences? Amounts will be held in a non-VEBA trust. Are there also no current adverse tax consequences since assets have decreased in value?

Any thoughts on this matter would be greatly appreciated.

Thanks. Ed

A Defined Benefit Plan holds individual life insurance policies on eligible participants. One of the participants would like to purchase his insurance policy and hold it personally. This does fall, I believe, under the DOL class exemption. The major question at hand is whether or not there is some method to coming up with the amount of money necessary for the participant to purchase the policy. I was under the impression that it would be the current CSV of the policy; however, I have been told (informally) that there is some formula to determine this amount.

Am I off base, or is there a formula to determine the amount of cash necessary to purchase the policy? Thanks for any replies.

Let me say that I know just enough about HSAs to be dangerous! A CPA I work with has a client that called and explained that they, the employee, loaned their HSA money to pay for a medical procedure. The employee had this medical procedure, paid the medical bills with the HSA, and intends to withdraw the original "loan" amount when enough employer contributions are deposited into the HSA...is this possible????

I am over 55 and I just got a 2 week notice to be layed off. My employer says I can't get my 401k until renewl time which is Jan 2010. What can I do to get my money?

Thanks,

Dickey

Dumb question, I am reviewing the filing instructions for the 5330. I might have missed it, but I don't see who the check is made payable to?

IRS? DOT?

Any idea...

What is the UVB valuation date for the PBGC premium filing for a calendar year plan?

For a BOY val is it 12/31/2007 or 1/1/2008? I'm thinking 1/1/2008.

Is it 12/31/2008 for an EOY val?

For an EOY val, are the liabilities calculated as of 12/31/2008 but using the BOY accrued benefit?

Also, I assume that the market value of assets is as of 12/31/2008 (for EOY val). So if no 2008 contributions are deposited during 2008 then it would be using the 12/31/2008 MV only (#2a of Schedule SB).

.

What a frustrated old actuary does when he's not certifying AFTAPs

What_Good_Is_Probability..pdf

One client had a plan loan with a balance of about 30k (after making some payments) and then discontinued paying off the loan. It was actually 15k for husband and 15k for wife.

The client than took an additional $60k for a total of 90k for the two participants, split 50/50.

The client did not pay anything on the 2nd loan.

As far as the rules go, I see these as deemed distributions subject to income tax and since under 59 1/2 the 10% penalty.

I can simply break the bad news to the client as it is.

Does anyone respond to a situation like the one above in any other creative way?

Finally, a separate client (one participant plan) took out 55k and defaulted on that loan immediately.

In this case it seems that we treat the 50k as a deemed distribution and since the remaining 5k is above the 50k limit it would be addressed as a prohibited transaction.

Since the employee has not reached the plan's NRA I don't see the extra 5k as a retirement type taxable distribution.

How have others addressed this type of situation in practice?

Thanks.

Member is eligible for benefits under a collectively-bargained, multiemployer health plan. Member's eligibility relates to work performed as an employee for an employer contributing to the plan via CBA. Member also formed an LLC, of which he is the single member and single employee, which is also an employer obligated to pay into that plan via CBA. However, the LLC did not make contributions for certain hours worked by the Member for the LLC. Thus. the LLC owes delinquent contributions.

Assuming that the Member could be held personally liable for the delinquent contributions under either an alter ego theory or a fiduciary liability theory, we are left with the situation where Member is owed benefits by the health plan, but also owes the health plan for delinquent contributions for hours worked for the LLC.

Can the health plan setoff the delinquent contributions personally owed to the plan by Member against benefits owed under that plan to the Member? If so, must the plan get a judgment of personal liability and the amount owed first to avoid creating liability for the plan? None of the plan documents address this unique issue of a single individual functioning as an employee in some cases and the employer in another.

Any guidance on this issue is much appreciated.

JHG

Rev. Proc. 2008-50 provides a useful Appendix B , Section 3 to help us calculate earnings in the case of corrections. However, that section does not refer to losses, which must be taken into account for some, but not all corrections. Do you think it is appropriate to simply "read into" the language that any losses are to be calculated the same way. For example, if you choose the method that calls for using highest investment return among various funds, you would use the "least loss" where there is a negative return for all funds? On second thought, it is unlikely that the money market fund would actually be in a negative position, so I suppose that fund would be the rate of return to use in calculating earnings/losses to be applied to the contribution. Does this make sense?

I have a plan that based on the 12/31/2008 determination date, is top heavy for 2009.

This is a straight profit sharing only plan, no 401(k) provision built into their document.

However, we are looking at adding a 401(k) and basic safe harbor match provisions as of 6/1/2009.

How does this 2009 year work if they are deemed to be top heavy, yet also added a bsaic safe harbor match?

At the end of 2009, would we just have to look at what each person received as far as a safe harbor goes, and make-up any differences to get to the 3% top heavy?

Would the 3% only be due on compensation from 1/1/2009 - 5/31/2009?

Thanks in advance.

I could use some opinions here. I am surprised this has never happened before. I have a 401k Plan that failed the ADP test. They are not interested in doing a QNEC and are not a safe-harbor. The two HCEs who need to have funds returned have terminated.

What process do you use to alert them of this? How is my client (the Plan) protected if the HCEs ignore the instructions?

I can argue that if the HCEs took a direct distribution and were taxed on it, the end result is the same and I need do nothing further. Do you agree with that statement?

But, like most HCEs, they rolled the funds over to an IRA. What do I do now?

Finally, should I institute a rule that I will NEVER distribute HCE balances until after year-end testing? That could be a year or more later (if the termination was in January). Is that even allowed? Even if the Plan is an SH or SHM, the client could stop the SH mid-year and be subject to testing. So the only real time I could distribute is if it is someone over age 50 who deferred up to the catch-up limit.

What do you all think? Thanks in advance.

Is there any way to get around Hipaa requirements with a low contribution ($100 per year) HRA? Is there a "petty cash" waiver similar to the $500 flex credit FSA situation?

I'm thinking not, but hoping so.

I researched a few other posts and understand that gap period earnings are no longer required. But could anyone clarify the following:

1) Is it required that Gap earnings be eliminated, or is it optional?

2) Does WRERA (enacted 12/23/08) eliminate Gap earnings on excess deferrals for plan years beginning in 2008 or 2009?

3) Does PPA eliminate Gap earnings on excess contributions/aggregate contributions for plan years beginning in 2008

4) We currently have in our final 401k/m amendment, and then as part of our 415 amendment, that gap earnings must be calc'd. Based on WRERA and PPA, does that mean we could not use Gap, and documetn that with an amendment at a later date?

Thanks for any assistance