Can a custodian designating as a beneficiary pursuant to the Uniform Transfers to Minors Act roll over an eligible distribution to an inherited IRA on the minor's behalf pursuant to IRC 402(2)(11)?

Any nonspouse designated beneficiary, as defined by I.R.C. section 401(a)(9)(E), who receives an eligible distribution from a qualified retirement plan can roll over the distribution to an IRA, which will then be treated as an inherited IRA. 26 U.S.C. 402©(11). Because only “designated beneficiaries” are eligible to roll over eligible distributions, the definition of “designated beneficiary” is the crux of this issue.

Section 401(a)(9)(E) defines “designated beneficiary” as “any individual designated as a beneficiary by the employee.” Treasury Regulation §1.401(a)(9)-4, Q&A-3 elaborates on the definition of “designated beneficiary” contained in section 401(a)(9)(E). It reads:

Q-3. May a person other than an individual be considered to be a designated beneficiary for purposes of section 401(a)(9)?

A-3. No, only individuals may be designated beneficiaries for purposes of section 401(a)(9). A person that is not an individual, such as the employee's estate, may not be a designated beneficiary. If a person other than an individual is designated as a beneficiary of an employee's benefit, the employee will be treated as having no designated beneficiary for purposes of section 401(a)(9), even if there are also individuals designated as beneficiaries. However, see A-5 of this section for special rules that apply to trusts and A-2 and A-3 of Sec. 1.401(a)(9)-8 for rules that apply to separate accounts.

Only individuals and trusts (which satisfy the requirements of Treas. Reg. §1.401(a)(9)-4, Q&A-5) are “designated beneficiaries” for purposes of I.R.C. section 401(a)(9). Therefore, only individuals and trusts may roll over distributions into an inherited IRA.

Any thoughts on whether an UTMA custodianship is an individual or a trust or neither?

Can a custodian designating as a beneficiary pursuant to the Uniform Transfers to Minors Act roll over an eligible distribution to an inherited IRA on the minor's behalf pursuant to IRC 402(2)(11)?

Any nonspouse designated beneficiary, as defined by I.R.C. section 401(a)(9)(E), who receives an eligible distribution from a qualified retirement plan can roll over the distribution to an IRA, which will then be treated as an inherited IRA. 26 U.S.C. 402©(11). Because only “designated beneficiaries” are eligible to roll over eligible distributions, the definition of “designated beneficiary” is the crux of this issue.

Section 401(a)(9)(E) defines “designated beneficiary” as “any individual designated as a beneficiary by the employee.” Treasury Regulation §1.401(a)(9)-4, Q&A-3 elaborates on the definition of “designated beneficiary” contained in section 401(a)(9)(E). It reads:

Q-3. May a person other than an individual be considered to be a designated beneficiary for purposes of section 401(a)(9)?

A-3. No, only individuals may be designated beneficiaries for purposes of section 401(a)(9). A person that is not an individual, such as the employee's estate, may not be a designated beneficiary. If a person other than an individual is designated as a beneficiary of an employee's benefit, the employee will be treated as having no designated beneficiary for purposes of section 401(a)(9), even if there are also individuals designated as beneficiaries. However, see A-5 of this section for special rules that apply to trusts and A-2 and A-3 of Sec. 1.401(a)(9)-8 for rules that apply to separate accounts.

Only individuals and trusts (which satisfy the requirements of Treas. Reg. §1.401(a)(9)-4, Q&A-5) are “designated beneficiaries” for purposes of I.R.C. section 401(a)(9). Therefore, only individuals and trusts may roll over distributions into an inherited IRA.

Any thoughts on whether an UTMA custodianship is an individual or a trust or neither?

Sal Tripodi's ERISA Outline refers to the use of liquidating trusts or partnerships to facilitate the distribution of illiquid assets when terminating a plan. Basically the plan distributes the illiquid assets to the trust or partnership, which in turn issues participation certificates to the participants. When the liquidating trust or partnership sells the assets it makes disbursements to the participants. Anyone ever attempt this sort of thing? What benefit would this have over making distributions "in-kind"?

Does anyone have a good handle on this new COBRA premium subsidy signed today by President Obama? If you have no employees who involuntarily were terminated or laid off during that specific time period 9/1/08 through present, does that mean you don't have to go back and do anything? I believe we will still have to update future COBRA notices even if you do not involuntarily terminate employees or lay them off. Any guidance would be appreciated.

Current regulations do not allow employees to cancel dependent coverage paid for on a pre-tax basis if the child becomes enrolled in a state sponsored SCHIP program. However, the new SCHIP Reauthorization Act of 2009 allows employees and dependents 60 days to request to enroll in an employer's group health care plan due to becoming eligible for premium assistance under a Medicaid or a SCHIP program. Does anyone know if the new regs also allow employees to drop pre-tax coverage to enroll dependents in a SCHIP program?

A not-for-profit company has their 403(b) plan with a large insurance company. One of the HCEs decided not to invest there, so he set up a 403(b) (including a plan document) with another investment firm and his assets are invested there. First, assuming the 2 documents have identical provisions, is that acceptable?

If that's not acceptable, I recall that plan participants have the ability to invest anywhere that will accept 403(b) assets. However, would there have to be an information sharing agreement between the 2 investment providers?

I am reading a Plan Documument that defines compensation as "W-2" Compensation.

"Testing Compensation" means wages within the meaning of Code section 3401(a) and all other payments of compensation to an Employee by the Employer (in the course of the Employer's trade or business) for which the Employer is required to furnish the Employee a written statement under Code sections 6041(d), 6051(a)(3), and 6052. Testing Compensation must be determined without regard to any rules under Code section 3401(a) that limit the remuneration included in wages based on the nature or location of the employment or the services performed (such as the exception for agricultural labor in Code section 3401(a)(2)). For any Self-Employed Individual, Testing Compensation shall mean Earned Income.

Can someone explain to me what Box on a W-2 I should be looking at?

And if the participant made any Employee Deferrals, should they be included in the definition of Comp?

Any help would be greatly appreciated.

ALEX

I also posted in the DB forum, but I am posting here b/c it seems this forum has more activity.

As you know, plans were required to start operating in compliance with the Qualified Optional Survivor Annuity ("QOSA") rules for plan years beginning after 12/31/2007. What do you do if a plan failed to offer QOSA as an option in 2008? Is there a correction method for this type of failure? If not, is there a correction procedure for failiing to offer a QJSA that by analogy could be applied to a failure to offer a QOSA?

Under PPA the funding is based on a unit credit method.

So a plan freeze may not reduce a funding to $0 since the FT may be greater than assets.

Alternatively, it is my understanding that an owner can irrevocably waive benefits in order to reduce funding requirement.

So let's say an owner's AB is 40,000.

Can the owner waive 10,000 to result in an AB of 30,000? Or does h e have to waive the entier AB?

So, for example if the owner can waive 10k he can in effect still have his gross AB increase and then be offset by 10k which would presumably be an irrevocable wiaver.

Curious to get thoughts and cites (notice, rev rul, etc.) if popssible.

Thanks.

As you know, plans were required to start operating in compliance with the Qualified Optional Survivor Annuity ("QOSA") rules for plan years beginning after 12/31/2007. What do you do if a plan failed to offer QOSA as an option in 2008? Is there a correction method for this type of failure? If not, is there a correction procedure for failiing to offer a QJSA that by analogy could be applied to a failure to offer a QOSA?

Employer has a total of 3 employees- 2 NHCE and 1 HCE. Currently, the 2 NHCE are eligible to receive benefits and do receive benefits. The HCE is not yet eligible, but will be soon. The HCE will not be taking benefits. Accordingly, the health plan would not meet the 70% rule under 105 (h) b/c 2 out of 3 is 66%.

I think this is a non-issue since the nondiscrimination rules are directed towards the tax treatment HCEs receive for health benefits. Here, the HCE is not taking the benefits and therefore there shouldn't be any unfavorable tax treatment for the HCE. The fact that the health plan wouldn't pass the 70% rule won't affect the NHCE's tax treatment.

If I'm missing anything, could someone please comment?

Is it true that for the 2008 ADP/ACP excess distributions made during the first 2 1/2 months are taxable in 2009?

If distributed after March 15th, does the 10% excise tax apply?

Does anyone know if a small DB plan that terminated December 31, 2008 needs to be amended for WRERA?

Executive agreement provides for separation pay upon "good reason" termination, and the agreement provides, among other things, that there is a "good reason" condition if the executive's office is relocated more than 25 miles from its current location. Read literally, this provision will apply even if the office is moved closer to the executive's residence -- for example, if the executive lives 35 miles from the office, and the office is then relocated to within 5 miles of the residence.

I believe this provision was intended to apply if the office relocation increased the executive's commute by 25 miles or more, and was the victim of lazy drafting. Assuming that the intended meaning of this provision would constitute a "good reason" condition (not under the safe harbor, but under the facts/circumstances test), could the executive and the company execute some type of clarifying amendment or a memorandum of understanding regarding the intended meaning of the provision to bring it within the involuntary separation pay plan rules?

I think that if the executive were to attempt to enforce the provision in a situation that does not appear to involve a true involuntary type of termination, the company would argue against the payment.

Any suggestions on how to deal with this provision?

Belatedly reviewing executive agreement separation pay provisions whereby the executive will receive a year's salary upon involuntary termination without cause. Currently the executive's salary is well under twice the 401(a)(17) amount, but it's rising fast.

I assume I can amend the agreement now to cap the payment -- that is, the amount would not be subject to 409A if involuntarily terminated today.

Am I correct? The 2x compensation provision indicates that only amounts in excess of the limit are subject to 409A (assuming other involuntary separation plan rules are satisfied).

The new 65% COBRA premium subsidy for up to 9 months under the American Recovery and Reinvestment Act applies to plans subject to COBRA provisions under ERISA, the Code, or the Public Health Act, and to "a State program that provides comparable continuation coverage." See section 3001(a)(10) of the Act.

But how does it apply to a nonelecting 414(e) church plan which is exempt from COBRA under ERISA, the Code, and the PHA? Church plans in Ohio are subject to the Ohio continuation coverage law but it only requires 6 months. (OH Rev Code 3923.38) Assume a church plan voluntarily provides 18 months of quasi-COBRA coverage although it is not required to. Can that church plan qualify for 9 months of reimbursement under ARRA when the Ohio law requires only 6 months of coverage?

The Chairman's mark of the ARRA notes that church plans and small plans are exempt from COBRA. It goes on to say: "The Chairman's mark provides assistance for coverage required under State law that requires continuation coverage comparable to the continuation coverage required under the Code's COBRA rules for group health plans not subject to those rules (e.g., a small employer plan) and includes continuation coverage requirements that apply to health plans maintained by the Federal government or a State government." But nothing about further requirements for church plans. See the Chairman's mark here:

http://readthestimulus.org/01-23-09_UI_Hea...ARRP_senate.txt

The intent probably was to subject all plans to the subsidy requirement but that's not exactly how it was drafted. Is it reasonably safe to take the position that state law requires at least 6 months of coverage but does not limit it, and therefore apply for 9 month reimbursements?

Is it necessary for a governmental entity to amend its plan (i.e., statutes or ordinances) in order for the plan to allow eligible public safety officers to take advantage of the $3,000 gross income exclusion for health insurance premiums allowed under the PPA.

The plan states that if a participant's account balance at separation from service is less than $1,000, "the Plan Administrator MAY direct the Trustee to make an immediate lump sum distribution..." [emphasis mine]

It take the "may" as this being optional. The plan administrator has yet to use this provision, but there are several old balances and a few newer ones (due to a missed deposit some years ago), and he would like to zero these accounts out.

My questions are: did the administrator do anything wrong by waiting? And, how quickly do these types of accounts have to be liquidated in the future? Can he just periodically sweep them out? Some of the accounts won't even get a check because of the distribution fee being higher than the account.

I originally posted this on the Plan Correction board but have not received any responses and so thought readers here might have some thoughts / experience on the question below:

What is the usual procedure for correcting a 401(k) plan's failure to timely adopt proposed amendments submitted in connection with application for determination letter on continued plan qualification? Here a Cycle A 401(k) plan restatement was timely submitted to the IRS and received a determination letter in early 2008 conditioned on the plan's timely adoption of some minor additional amendments within the period set forth under 401(b). The Plan has not yet adopted the amendments. Can such a failure be corrected under EPCRS's nonamender provisions or does the fact that the plan arguably does not have a valid determination letter impair its ability to rely on EPCRS? Is there some other procedure outside EPCRS for fixing what I would think could be a fairly common slip up but not one I have encountered before? Thanks.

Good Afternoon:

I have a general question that has been posed by a potential new client. The client is over age 50, has a New Comparability Plan, wants to make a deferral contribution of $5,500 and recharacterize it as a "catch-up" contribution for the 2009 calendar year without making any other derrerals, and then wants to receive the maximum employer contribution of $49,000. In essence, what he is looking at is for the adp test to show zero deferrals made on his behalf and a 415 test to show $49,000 as all employer contributions. I'd like to know what anyone's thoughts are on this.

Thank you.

Terry W.