if existing simple ira;can sponsor establish in 2008 a db or a p/s?

We know you cant establish simple ira if you have anither plan;what about vice versa?

DB Plan was termianted, PBGC filing made and IRS favorable letter received. Client sent out distribution forms, and could not locate 4 former employees after appropriate due diligence (let's take that for a given at this point). Client sent PVABs of the 4 missing participants to the state under escheat statute. We are now completing PBGC Form 501. How much trouble will we get into with the PBGC when we answer the question about locating all participants "No" but we don't indicate that we are sending $$ to PBGC?

Looking for a provider (preferably a mutual fund family or discount broker) who offers a "prototype" SEP versus IRS Form 5305-SEP. Client also sponsors a 403(b) Plan, so cannot use IRS model form.

Thanks!

Say a plan sponsor implements a new DB and a new 401k PS plan.

Say the DB plan provides past service credit up to 5 years.

If the plan is tested for non discrimination testing on the accrued to date basis would the following make sense?

DC plan account balance is based on one year of service since it is th eplan's first year.

DB plan is based on service to date (up to 5 pre participation years as well).

Plans are cross tested on using accrual method.

This results in relatively low accrual rates from DB plan since the accrued benefit is spread over all years of past service and the accrual under DC plan is spread over only one year of service.

Thanks.

I received an e-mail from an AXA advisor who is trying to move some of a 1 man DB plan's assets into an annuity contract. I don't have a problem with the annuity being int he plan, but the Contract agreement has provisions that AXA is requiring the Actuary and the TPA to agree to by signing the contract.

My actuary has refused to sign the agreement, and I can understand why. I've never seen anything like this before, and I'm wondering if anyone else has ever seen anything like this before?

If the plan document has language in it referring to the "act" and the act is identified in the plan's definitions as ERISA, is the plan, by default, an ERISA plan?

This looks like a pre-approved Corbel volume submitter document without any changes to pre-approved language.

Does anyone self-administer their Section 125 flexible spending account? If so, do you use any special software; what about nondiscrimination testing and plan docs?

We have 117 employees, about 40 participate in this program. Thanks.

Under PPA

Assume new plan.

Say you have a beginning of year valuation (we'll use 1/1/08) and determine that the maximum deduction is 100,000 as of 1/1/08.

Can this figure be increased at the effective rate of interest until 12/31/08 as a maximum?

That is, if eff int rate is 6% could it be $106,000 for max deduction?

Other views?

Thanks.

Okay. Have a client who is reimbursing for medical insurance, co-pays and dependent day care from a basket of funds that consists of only employer money. No ee money involved. They set this up without any input from us -- their frame of reference was Pub 15-B.

Employees are NOT given cash for unused amounts, but those amounts can roll to the next year.

There is no "formal" document on this just a blurb in the benefit information that they give to new employees.

First of all, not quite sure how to handle the situation as a whole. Wouldn't the choice of medical costs vs daycare put me in a cafeteria type of document world with total EMPLOYER funding? Could I do an HRA in this type of situation (as opposed to an HSA -- which they don't want)?

Then, my original question before I started with the fact that Pub 15-B (on page 6 of the 2008 version) says that the exclusion from taxable income rule "applies to contributions you make to an accident of health plan for an employee.." It goes on to state that the exclusion "also applies to payments you directly or indirectly make to an employee under an accident or health plan for employees that are...[for] payments or reimbursements of medical expenses..." The next subheading states that "[t]he plan may be insured or noninsured and does not need to be in writing."

This is where I am getting hung up. Any help or comments would be appreciated?

Is anyone doing end of year valuations anymore?

Recently an overpayment was made to a former participant of one of the plans we administer. We contacted the former participant and were lucky enough to get in touch with the IRA institution in which she rolled the funds into. They are helping us get the overpayment back, but they are going to issue a 1099 with a code 8, which appears to make that distribution taxable for the former participant. In addition, that money was invested and lost about 20% of its value in the month it was invested. Here are some quick details:

Distribution made: $25,500

Correct amount: $23,500

Amount that we are getting back: $1,600 <-- Amount to be reported by the IRA company as income for 2008; to be given back to the plan.

As of now they plan on adding $1,600 to her income by issuing the 1099, code 8, even though the money is going back to the plan of which she is a former participant of.

Does anyone have any suggestions of how the IRA company should be handling this so she doesn't have this overpayment distribution made into a taxable event? 1099 code suggestions? When we issue the 1099 on our end, should it be for 23,500, or 23,900 (to include the amount that was not returned to due decrease in the investment)?

Any advice is welcome. Thanks!!

I have a 401K that I plan to rollover to an IRA. The statement lists the funds in the 401k in various categories. I have talked to the plan administrators a number of times and can't get a good handle on what the categories mean.

They are as follows, using, as an example, $1000 for the total plan balance

(A) Nontaxable Contributions Post-1986 = $19 (Pre-1987 not listed, assume=0)

(B) Before Tax Contributions & Earnings = $718

© After Tax Contributions & Earnings = $60

(D) Company Contributions & Earnings, Non-contributory = $6

(E) Company Contributions & Earnings, Company Match Pre 2007 = $215

What happens when I rollover to an IRA? I have been told that:

$981 (=$1000-$19) would roll over and I will receive a check for $19.

(1) If I roll to a traditional, I assume I would file a form 8606. Would the

nondeductible amount be C or C-A or $0?

Can item A be rolled over to a Roth IRA?

Can part or all of item C be rolled over to a Roth IRA?

I have a Roth already, can I put any Roth rollovers into it or is there an advantage to not commingle?

Are there better options or am I completely bonkers on all this?

TIA

Pete

We are arguing with cpa.

he says if contribution to p/s plan(calendar year plan 2007)went in on 10/18/08

it should still go on the sked I for the 2007 filing since it's receivable.

I say that's absolutely incorrect.

to further complicate matters;we were told monies were put in by 10/15 and filed sked I with contribution included;I claim we need to do amended return for 2007 with zero contribution!

and also we say accountant needs to do amended corp return.

any thoughts?

ty

It appears that the only election required to use the alternate funding target (e.g., 430 assumptions) to determine unfunded vested benefits is to check a box on the PBGC electronic filing. Is anybody requesting the employer to make a separate written election? I wonder since the election is irrevocable for 5 years how much slainin' practitioners are doing.

I recently received a copy of the audio portion of last month's ALI-ABA program in Washington DC on Pension, Profit-Sharing, Welfare and Other Compensation Plans. A portion of that program includes a discussion between Pamela Baker, Sonnenschein, and Bill Schmidt from the IRS regarding lingering 409A questions. One question included a fact pattern / set-up along the lines of the following:

A lot of agreements say something like this: "If you are terminated after age 60, we will provide coverage under our medical plan until age 65 (or for five years after separation from service or some other period that is clearly beyond the maximum COBRA period) and if we cannot do that--if that kind of coverage is not available under the medical plan for whatever reason--then we will provide you the cost of paying for that kind of benefit on your own."

Ms. Baker asked if something like this could be done in a compliant way with 409A. Both she and Mr. Schmidt seemed to agree that it was not. Ms Baker's analysis and chief concern seemed to focus on the fact that the benefit provided was potentially being converted from an in-kind benefit to a cash payment in this case and so ran afoul of the 409A reimbursement rules. Analysis seems to be something like this:

1. The extended coverage goes beyond the COBRA period so not exempt from 409A altogether.

2. If the arrangement cannot fit within the exception, then we should seek to comply with the reimbursement rule.

3. Here though the reimbursement rules would not seem to permit this because one of the conditions of the reimbursement rules is that you cannot convert the benefit to cash and that seems to be exactly what you are doing here.

The discussion went on to note that the outcome could possibly vary depending on whether the health plan is self-insured or fully insured where it may be exempt from tax, etc.

Maybe I am misinterpreting the question / fact pattern here and would appreciate hearing others' thoughts on this, particularly if you heard the discussion live. I agree that there would be a clear problem if, at the end of the COBRA period or other point when coverage under the existing plan ends, the company simply paid the former employee a cash amount without any restrictions and truly "cashed out" the benefit. Shmidt's analysis, however, seems to say that the 409A problem would exist not just if the amount was cashed out but even if the amounts were provided in true reimbursement fashion where the company only reimbursed amounts the participant had paid for comparable coverage under some other policy or plan and was structured as a reimbursement of premiums previously paid.

If that is the case, I guess I have a hard time understanding exactly what the reimbursement rules were intended to do. Couldn't you argue that really the benefit being provided under the Plan was a cash benefit (in the form of the cost of coverage under the plan) rather than in-kind benefits such that continuing to pay cash for same level of coverage under some other policy or plan did not represent a change? As the discussion touched upon, it seems to me true reimbursements should not be viewed as cashouts or cash payments but simply another way to continue the benefit promised--i.e., continuation of health coverage. In this case though, some of those benefits would come from the existing plan and some outside that plan. In the end though the employer is simply doing the same thing for the duration of the coverage--paying the cost of continued health coverage for the terminated employee.

Based on my understanding of the discussion, that does not appear to be acceptable interpretation though. Ms. Baker suggested that one alternative might be to promise the former employee a fixed amount (e.g., up to $1,000 per month) toward medical coverage and if we can do that under the existing plan we will but if not the participant can apply the amount under some other plan. That way, the benefit is always presumably a fixed cash benefit and it doesn't change forms, etc. Again, I don't see how that really differs much from the interpretation above--other than fixing the amount and I'm not sure that is appropriate because it seems continued coverage under the existing plan could / would likely result in increased costs if it went on for any time.

Anybody have other thoughts or interpretations on this or suggestions of better ways to structure benefit continuation provisions?

If a plan has only a 401(k) arrangement and a safe harbor match, we know that the elective deferral is not counted for determining whether a person is vested for purposes of the rule of parity under 410(a)(5)(D). But what about the safe harbor match? Is that considered an elective deferral for this purpose or does the safe harbor match mean that the participant is vested and thus the rule of parity cannot apply for eligibilty purposes?

I'm feeling particularly irate this morning with regard to stupid IRS agents. While I do not yet have full details:

Profit sharing plan (NOT a 401(k) plan, nor even a document with a 401(k) option) was terminated as of 12-31-06. We (or more accurately, the client) applied for, and received, a favorable determination letter for the termination.

Client subsequently received a letter from a Revenue Agent, who shall for the present remain nameless. In this letter, the agent presents a list of "failures that were presented and the correction that was completed during the examination of the plan." The agent also says that the Area Coordinator has proposed a sanction of $7,000.00.

The "failures" are:

1. Not timely amended for automatic rollover requirements under IRC 401(a)(31). Naturally, it was timely amended, and this amendment was provided as part of the termination.

2. Not timely amended for final 401(k) regulations. Interesting, since it isn't a 401(k) plan anyway!! I'm surprised they don't want a PFEA amendment as well!

3. Not timely amended for 401(a)(9). It was.

So now the client is understandably in a tizzy, and we have to waste our time educating one or more morons at the IRS. We've been having a lot of trouble on plan terminations with people who don't know what they are doing, and WE have to waste our time instructing them - are we alone, or are others having similar problems?

GRRR!

I do graciously give thanks to God for all those who have provided so much useful information. It does make a difference to me, I can never stop learning, and that knowledge does help. And a special thanks for all the extra wit and humor along the way. I know I am truly blessed and so thankful for all those I can consider friends. May your Thanksgiving holidays be truly blessed.

A potential client wants to setup their prevailing wage plan so that the prevailing wage contribution offsets the safe harbor match and the profit sharing contributions. The profit sharing formula would be new comparability.

Our volume submitter document can handle this setup, but I have a question about how the offsets affects the rate-group test.

The prevailing wage contribution is a nonelective contribution, so typically I would include it in the rate-group test.

But if the prevailing wage contribution offsets the safe harbor match, should I include the portion of the prevailing wage that offset the safe harbor match in the rate-group test?

The entire prevailing wage contribution would still be a nonelective contribution and deposited in the prevailing wage source, not the safe harbor match source.

Thank you in advance for your help.

A one participant plan invested in loans.

That is, they did what appears to be a private promissory note and loan that was secured by real estate.

The appeal is interest rates on the loans of above 10%.

Does anyone detect any problem with such arrangement?

The loans are to non parties in interest.

Thanks.