Profit Sharing plan has insurance policies in it. The policy's are "owned" by the plan and are held for certain individuals. The Plan is now terminating and the policies have surrendered for the cash surrender value. The insurance company then issued a 1099-R to the plan, for the surrender value of the policy (minus acculated PS-58 costs).

Does this sound correct? What exactly should the plan do with this 1099-R, attach it to the 5500? The plan does not file a tax return or anything of that nature that an individual normally would. I'm not sure how the 1099-Rs for past PS-58 costs were handled (I suspect they were never issued, but thats another story).

Any comments?

Reg 1.414(s)-1(b)(2) provides that .."an employer may change its definition of compensation for a subsequent determination period ..." So, an employer could use "simplified" compensation under 1.415©-2(d)(2) for 2008 nondiscrimination testing of welfare and retirement plans even though "regular" 415 comp has been used in the past.

But, could an employer use "simplified" compensation for testing one of its h&w plans, and regular for all other plan testing?

What say you?

A certain man loved his wife very much. He wanted this Valentine's day to be special, So he had ordered a bottle of her favorite liquor imported from France and it had arrived in time for the occasion. On his way home, he stopped at the local florist. He had planned to have a bouquet made with her favorite flower, white anemones. But to his dismay, he found that the florist had sold all her flowers and had only a few sterns of feathery ferns left for decoration.

In a moment of inspiration, he had the answer. He asked the florist to make a bouquet using the flask of liquor instead of flowers and what she produced was magnificent well beyond his expectations. He added a card, and proceeded home. When he arrived, his wife was beautiful in her most elegant gown, and it was apparent that she had spent much of the day preparing a romantic candlelight dinner for the two of them. He presented her with his gift, and she opened the card to read, "Absinthe makes the heart grow fonder." With a tear in her eye, she whispered to him lovingly, "Yes, and with fronds like these, who needs anemones."

My client has a fully insured health plan. insurer changed co-pays in prescription drug plan but has not issued any document to be distributed to participants notifying them of the change. The participants did not find out about the change until they went to have prescriptions filled at pharmacy or through mail order service. My question is - in a fully insured plan, who has the duty to inform participants of changes in plan specifics, such as co-pays and when does such notice have to be given (i.e. before the effective date of the change?)? Thanks.

Plan agreed (with union) to provide a 2% nonelective contribution for 2008. Plan was not amended by 12/31/08. Plan would now like to make the contribution. Can we amend the plan now (given that it is before the sponsor's tax filing deadline and had the plan been amended last year, the contribution would be timely) and make the contribution?

Thanks

Putting 1096's on paper with red ink, is not a big bother, but it would be easier to print them on white paper using all black ink.

I have heard of people that have never bothered getting the paper with the red ink and never had a problem.

Can anyone tell me anything about this?

Is the paper with red ink, required or preferred or...?

http://www.irs.gov/retirement/article/0,,id=123231,00.html

Click on "Monthly Yield Curve Tables". The IRS has finally provided these in spreadsheet format!

Having my first "encounter" with a direct rollover to a non-spouse beneficiary and want to make sure I correctly understand the rules and process (have my doubts).

Facts: Profit Sharing Plan participant died in September, 2008 at age 68 (i.e., before her required beginning date for required minimum distributions). No spouse. Daughter is the participant's "designated beneficiary" and is electing to have the death benefit distributed as an direct rollover to an "inherited IRA" in 2009.

Questions:

1. Must a required minimum distribution be made to the daughter from the Plan for 2009 (i.e., the 2009 RMD amount may NOT be rolled over to the inherited IRA)?

2. If the answer to 1. is "Yes" - is this RMD based on the daughter's attained age in 2009 and her Table 1 - Single Life Expectancy factor?

3. If the answers to 1. & 2. are "Yes", is the RMD for 2010 (from the inherited IRA) based on the daughter's Table 1 - Single Life Expectancy factor for 2009 minus 1?

Am I anywhere close to understanding this correctly? Any there other "aspects/pitfalls" of which I need to be aware?

Thanks!

Eligible employers for 457(b) purposes are:

457(e)(1)(A): a State, political subdivision of a State, and any agency or instrumentality of a State or political subdivision of a State, and

457(e)(1)(B): any other organization (other than a governmental unit) exempt from tax under this subtitle.

My client is a tax exempt organization and also has an attorney general letter from our state attorney general opining that client is a "political subdivision of ____ County" for purposes of local law.

I know my client is an eligible employer, but I don't know which one.

Any ideas?

Does the 1+-year free pass for coverage testing resuting from a merger/acquisition (IRC Section 410(b)(6)© and Treas. Reg. Section 1.410(b)-2(f)) apply to the purchase of assets--i.e., Entity X buys the assets of unrelated Entity Y, including the plan, and all Entity Y employees move over to Entity X--where there is no resulting controlled group being formed? The regs seem to indicate "Yes" (last sentence of -2(f)), but I can't get that result from the Code provisions (which require that "a person becomes, or ceases to be, a member of [a controlled group] . . .").

An actuarial report prepared using the Datair system shows a TNC for a DB plan that has been frozen since the 1990s. Why would this be? Would they be measuring the actuarial increase to late retirees as a change in accrued benefits? This would make some sense, though the assumption page does not indicate there is a retirement delay for those actives over the normal retirement age on the valuation date. I.e., the assumption would be they retire immediately.

I received a potential take over plan. In looking at it: 1) There is an insurance policy in effect for one of the two eligible HCEs. No other participant has a policy in force. 2) In looking at the document there is nothing about insurance except that the trustees can purchase any contract from an insurer. They also define an insurer. That's all.

In contacting the prior administrator she said the plan was previously a Money Purchase Pension Plan and that when it was converted to a Profit Sharing Plan they ceased allowing new insurance policies. There are a couple of employees hired in 1981 and 1999. I'm unsure if they were even offered insurance under the old plan. Clearly on one else has been offered insurance coverage. She also said there were no other provisions relating to insurance other than the plan allows the trustees to invest monies any way they want.

She wasn't concerned with only one HCE having a particular benefit under the plan or that no one else had. THis is because of their "not allowing new policies".

My document spells out insurance in detail to include "authorizing" the purchase of insurance.

I think there is a benefits, right & features issue. I don't think their not allowing new policies when the plan was converted to a PS plan carries much weight.

Where is the requirement that the plan give detail on insurance purchase? Is there a listing of required document provisions out there? On an IRS site, or?

Your thoughts.

I have a combined DB/DC plan.

I am in the process of researching these items, but wanted to get the ball rolling on my questions anyway.

1. My understanding is that only one of the two plans can apply permitted disparity in the non discrimination testing?

2. Let's say we apply permitted disparity to the DC plan and that we are testing the combined plans on the accrual method, i.e. cross testing the DC allocation. Is permitted disparity first computed and then followed by conversion to accrual rates OR is conversion to accrual rate done and then permitted disparity applied? I perceive that it is the former.

Thank you.

Company M maintains a 401(k) plan that contains a number of features, including after-tax contributions and Roth 401(k) contributions. Company T participates in Company M's 401(k) plan. M has reached agreement with Company U to sell the stock of Company T. U will establish a new 401(k) plan but it will not have after-tax contributions or Roth 401(k) contributions. U will enable Company T employees to roll over their account balances in Company M's 401(k) plan other than after-tax contributions, Roth 401(k) contributions and that portion of outstanding plan loans containing after-tax contributions and/or Roth 401(k) contributions. Can M divide the loan into two: one portion including the portion of the loan attributable to contributions other than after-tax contributions and Roth 401(k) contributions and the other loan being the portion of the loan attributable to after-tax contributions and Roth 401(k) contributions? Why or why not?

Do we have the 2008 Schedule SB instructions yet?

Question 21b, for example, asks for the code for the Applicable month for the Segment rates lookback - October (3 months) in this case.

Anyone know the code?

I thought the whole idea of a transitional rule is to lessen the impact of new laws/regulations.

With that in mind, I thought the transitional segment rates would produce lower required contributions. But that is not to happening in general because looking at the 2008 rates, the 2nd & 3rd segments are about equal to or less than the regular rates!

Needless to say, transitional rates produce higher FT & TNC for a benefit stream starting after 5 years than the regular segment rates!

Was this intended or is there something wrong with the published transitional 2nd & 3rd segment rates or have copied them down wrong?

WRERA applies as if part of PPA. So, the following question arises. Actuary "A" performs the 2008 actuarial valuation and AFTAP certifications of a January 1, 2008 valuation for a calendar year plan as 90% and got all this done by March 31. Actuary "A" couldn't not take it any more and retired suddenly but is still around to bridge transition and clean up loose ends. Actuary "B" was retained going forward.

The issue is why should the client have to pay to redo 2008 valuation [though most of the heavy lifting (e.g., determination of Funding Target) has been done? The result of redooing the valuation is that the employer will have made excess contributions since the redoo will reduce the 2008 minimum. So, why not let the sleeping dogs lie, have the employer elect not to redo the valuation [the election feels good but there is no legal basis], let Actuary "A" just sign the 2008 SB, and then Actuary "B" recognizes the 92% funding target when he/she determines the 2008 amortization charge and remaining base in 2009?

How should Actuary "B" proceed? Please vote.

Participant A was 52 years old in 2008, worked for 2 companies, and contributed more than the 2008 limit of $15,500 plus the $5,000 catch up allowed. The contributions to the first employer's 401k plan have been rolled into a Rollover IRA account. The Rollover IRA owner (i.e. participant A) can take a distribution from the Rollover IRA, but how should the distribution be coded for tax purposes?

I see that IRS Publication 525 says to add the excess to the W-2 wages on the tax return, but not sure how to code the Rollover IRA distribution.

Participant A is 49 years old in 2008 and makes an excess deferral to Plan X. A reports the excess deferral to the sponsor of Plan X in early 2009, the year in which he will attain age 50. Can the employer simply recharacterize this amount as a catch-up contribution or must it refund the amount as an excess deferral?

Can anyone confirm the fact that Congress is thinking about changing how DBs value assets for EOY 08 valuations, 09 valuations and for AFTAPs?

Thanks