It seems under PPA there are many more required computations and present value calculations.

Below I present a scenario and then give my interpretation of the methodology of the applicable present value calculations.

I am curious to determine if I am on solid footing.

Say we have a new DB plan implemented 1/1/08 for one participant.

We will assume he is to receive a lump sum at retirement age of 55 and the participant is currently 45.

For minimum funding it appears that the following PVs must be determined.

1. PVAB applying 417e would be based on 430 funding segment rates and applicable mortality

2. Plan has lump sum act equiv of 5.5% and GAR94, thus PVAB using plan rates is based on funding segment rates for deferral period and 5.5% and GAR94 at time of distribution.

3. The 415 lump sum limit would be based on (lowest annuity purchase rate below):

a) plan rates of 5.5% GAR94 stated above and same methodology stated above.

b) 415 basis of 5.5% and GAR94 (same as determined above)

c) 105% 417e basis - which would be funding segment rates for deferral period and 417e minimum present value segment rates and applicable mortality for period beginning at time of distribution

For maximum deduction purposes the following PVs are to be determined:

The plan allows for lump sum of PVAB at termination. We will assume the participant could receive his AB as a lump sum if he were to leave at end of plan year. So we have the following PVs:

1) Plan lump sum basis is a one year deferral using 1st funding segment rate and then a lump sum beginning in 1 year using 5.5% and GAR94 at time of assumed termination.

2) using 417e - it would be the same as done for minimum funding since the funding segment rates are used for entire period

3. 415 purposes.

a) plan basis and 415 basis (GAR94, 5.5%) are the same as plan lump sum basis above.

b) 105% 417e basis is based on 1 year deferral using 1st funding segment rate and then use 417e min present value segment rates beginning in one year at assumed termination.

For purposes of the above example, the lump sum is the present value of normal retirement benefit (i.e. no early retirement subsidy).

So, what do you all think?

Thanks.

5% Owner turned 70 by June2008, retired in July 2008. Wants to rollover all assets before the end of this plan year. The Prototype Document only states RMD must be done by RBD which is April 1 2009. Plan is a calendar year plan. Can owner roll 100% of his money out of the plan before he actually turns age 70 1/2 in December of this plan year without the plan doing his RMD? Annuity company that holds his plan assets says that he does not have to take RMD since he is removing his assets prior to age 70 1/2. As the TPA, I don't want to be on the hook for possible plan disqualification in not forcing the RMD.

First, the two companies are not related in one bit.

Second, Owner A is 50% partner in Company Y and Sole Owner in Company Z.

Company Y has a db plan where Owner A is at the 415 limit.

My question is, can he start a plan in Company Z where he gets up to the 415 limit in that plan too?

Participant made a 401k election for 2007, however the Employer did not withhold any 401k money for the participant, in error. The employer found the error and made the participant whole for 2007, by depositing the corrected amounts in 2008 to make the participant "whole" for 2007.

1. Does the 2007 ADP/ACP test need to be rerun for 2007 with the correct information?

2. Or is the 2007 corrected deposits applied to 2008, since the deposit was made in 2008?

3. What about the taxes? Does the employer get a tax deduction for these corrected contributions, and if so, is it for 2007

or 2008? Does the participants payroll get affected?

Anything else you think I might be missing. I know this is common, but this is the first time I've had it cross my desk.

Thanks for the help!

I'm willing to give HSA a try but have hard time getting answers from the HR Dept.

So if you're picking up your prescription medication at the pharmacy - and your deductible (if any) hasn't been satisfied:

- do I pay full price at the register

- or Pharmacy might submit claim and/or wait for EOB and apply discounts (again if any) later?

We have a calendar year (2008) non safe harbor DB plan that excludes non-key HCE's from participation. Plan document calls for compensation method to determine HCE's. Due to change in demographics, the 2008 401(a)(4) test will produce non favorable results--compared to prior years. Amending the plan in determination year, from compensation method to Top-Paid Group will shift a few HCE's to a non-HCE status benefiting our test results.

I don't see any cut-back issues if the amendment affects only the 401(a)(4) testing. Are there any underline issues that may be challenged by the IRS (i.e. such change in method needs to be done prior to determination year).

Citations to authority is greatly appreciated.

Ok, I will try to make this question as succinct as possible:

A Multiple Employer plan. One big-daddy holding company, several small employers. One employer "spun out" and opened their own plan. The employees/participants went into the new plan of their employer (ER did not change), and their balances went with them, non-vested and vested. 100% of their balances moved into the new plan. They did not become 100% vested; the part's will continue on their same original vesting schedule.

Here's my question: now another of the employers is pulling away from the big-daddy corp, and does NOT want to open its own plan. But the big-daddy corp wants those 3 participants to be able to take their entire balances, whether vested or not.

There is a great attorney involved in all these corporate splits, but he is very expensive (duh!) and my client(s) don't want me to call him. SOoooo, here I am, asking the experts in my field to HELP. I know this is confusing to me; but maybe you have had experience with this sort of transaction. How can I make these 3 part's be 100% vested? Per the expensive attorney: there is NO partial termination!

Thank you thank you THANK YOU!!!!!!!

Aspen's DB Answer Book 4th Edition Q6:43, part 2a, talks about 80% or more ownership by the same 5 or fewer persons for Brother-Sister controlled group test.

But, IRC section 1563(a)(2) says more than 50% ownership by the same 5 or fewer persons.

Is the 80% number a typo in the DB answer book or has the law changed since the book was published? I looked through the 2008 & 2009 supplement but don't see Q6:43 covered in either of the supplements.

A DB plan participant turned 70 1/2 in 2008. His required beginning date is 4/1/2009 for a RMD. What is the deadline for the required distributions? His first one obviously has to be taken on or before 4/1/2009. However, let's say he gets paid out 3/1/2009. Is his next required minimum distribution not due to be paid out until 3/1/2010, a period of no longer than 1 year later? Or does the deadline move to the end of each calendar year. So if he took a distribution 3/1/2009, another one would be due 12/31/2009? And each successive payment would be due by the end of the calendar year for which the dsitribution applies?

Thanks!!

Can a multiemployer health and welfare fund (a 501©(9) VEBA) provide third party administration services to a different health and welfare fund? It seems to me that providing such services is outside the scope of the "benefits" that can be provided under 501©(9) and possibly even under the Taft-Hartley Act. If they can be provided, I assume the receipt of any fees for such servivces would constitute UBTI. Thanks for any input.

A sole owner of a small business has a Keogh which is managed by financial services company A (plan document maintained, assets held there). She wants to roll all assets from the old Keogh into an IRA and start a new Keogh with financial services company B using their prototype plan document.

Are there any material issues associated with closing down one Keogh as of 12/31/08 and beginning a new keogh in Jan 2009?

I had thought about having the old Keogh amended/restated using the new company's prototype, but wouldn't this prevent her from moving the existing assets from the old Keogh into an IRA?

Thanks for any assistance available!!

Pre-PPA I don't think it was ever a "problem" to assume individuals working beyond NRD retired on the valuation date and therefore had no normal cost. This is fairly common in "real" retirement plans.

If I used this method to do a small plan's BOY valuation where the primary person is beyond NRD I don't think I would have a TNC for that person. Then, if they worked the year and earned the benefit, their accrual would be part of Yr2's Funding Target and therefore amortized (assuming a funding shortfall) and not immediately funded like TNC. This seems to follow the old theory that pushed you to immediate gain methods if you had no active participants accruing benefits.

Typically I would have done these types of plans using EOY valuations, but w/ PPA it seems like shifting to BOY would actually be beneficial. I could use the 150% to fund the accrual if needed, or shift it into future if the client doesn't have the cash.

Does that seem right? Comments? Would anyone argue it is "unreasonable" to use a BOY valuation?

We are trying to encourage greater participation in our HSA and was wondering if anyone can share an HSA User Guide

thanks

A participant deferred $17,000 for 2007 into one plan. Obviously over the $15,500 limit (she is under the age of 50), my question is... is the Employer responsible for any of the tax? The 10% or the double taxation issue? (Refund was given after April 15th of 2008).

Thank you!!

A client has negotiated with the union representing its employees to withdraw from a multiemployer plan. The new labor contract is effective 1/1/09, so presumably that is the effective date of the withdrawal. Is there any particular form of notice the employer needs to provide to the plan, or will a letter suffice? Any timing requirements? The employees know about the withdrawal because they voted to approve the new contract, but is the employer required to send them a formal notice?

Anything else the employer needs to do apart from budgeting for withdrawal liability payments?

I have an owner (HCE) that put in approx $7K in employee deferrals. When his taxes were prepared, the CPA put all of the income on his wife's return and he had negative compensation. The husband and wife own serveral companies.

I will return $2k in employee deferrals, but can I allow the $5k for catch up?

In a question I posted yesterday in this forum on 403b plans, I noted that I'm advising an ER that has received a 240-day correction letter from EPCU (employee plans compliance unit) of the regional IRS Center. The EPCU correction letter notes that some excluded EEs perhaps should have been included, and for this a lost-opportunity contribution is required during the 240 day period.

The EPCU letter is silent on how far back in time this lost-opportunity contribution ought to be made. It simply states that "a contribution to the plan on behalf of each eligible employee for each year the employees was improperly excluded from participation" may need to be made. The EPCU letter also notes: "A violation of the universal availability requirement puts a section 403(b) plan at risk for losing its tax-favored status, resulting in the loss of the retirement savings and tax benefits provided to its participants."

If the ER did not have a valid 403b program because of the universal availability violation, then those EEs that did make 403b elective deferrals, it could be argued by the Service, had taxable income in the amount of the 403b elective deferrals.

For those EEs that did have the opportunity and did make 403b elective deferrals, the statute of limitations on their Forms 1040 would be 3 years from later of date filed or due date of return (as perhaps extended), unless more than 25% of taxable income was not reported--then it is 6 years. Since it is possible that some of the EEs 403b deferred amounts that equaled or exceeded 1/3 of what they did report as taxable income for a year, I think the correction should go back at least 6 years, picking up 2003-2008.

The ER does not pay income taxes, so deductions are not an issue. It is a public school and does not file any return other than payroll ones. For Forms 941/945, the instructions to the correcting form, Form 941c, provides:

No Forms 5500 have been filed (nor required). So statute of limitations on a year of the plan likely has no statute of limitations period triggered to run.

What are the arguments for going back to years earlier than 2003?

I have a takeover end of year cash balance plan with a maximum formula for an owner in his low 40s. We are doing the first year of the plan. The owner's contribution credit based on the plan formula is $90,000, however, his maximum 415 limit for his age is $75,000. What would his maximum hypothetical account balance be?

Is his hypothetical account balance limited to his 415 maximum,

or

can his hypothetical account balance be more than his 415 limit (except that we could not pay out more than the 415 limit upon distribution)?

Client has a 401k plan and several welfare plans. The plan sponsor has changed its name (from "Inc." to "LLC"). EIN stays the same. Does this require a plan amendment changing the name of the plan sponsor for all its benefit plans?

A db plan was totally frozen as of January 1, 2005. The services provider has indicated to the client that if the AFTAP falls below 60%, the Plan may not pay any restricted payments. I have reread the code and August 2006 proposed regulations and do not get this interpretation. I.e., there would be no prohibited payments except possibly to HCEs.

Do I need to go for an eye examination?