Public Service Announcement

A number of clients have asked what in the name of J. Fred Muggs they are going to do about the 80% threshold in 2009. This is particularly a concern to those who dumped in a considerable sum in 2008 so that their plan could continue to pay full lump sum benefits (except to the HCEs).

In 2008 it would have been a stigma, perhaps even a sign of poor asset management, to all of a sudden announce that lump sums were restricted. So, many employers ponied up. Now, bless this stinking market. Only those people who went to cash early or who are lying made money during this slump. Most (yours truly included) got decimated. The market now provides a natural and reasonable rationale for letting the chips fall where they may. While participants will not welcome with smilies the benefits restriction notice, they will understand the reasoning and may not be so apt to burn the employer in effigy.

If the market continues to decline throughout the remainder of 2008, don't be surprised if Congress comes back with some temporary 436 relief (perhaps removing for 2009 the deemed 10% reduction of the 2008 AFTAP presumption). Of course, don't be surprise if they don't.

Does anyone know if it is acceptable to use numbers rounded to the nearest thousand on the Schedule B?

I have a client that has an employee going out on maternity leave and will be out towards the end of December through January. So she asked me what happens to the FSA election, contributions, new elections, claim reimbursement etc... I tried looking it up in the regs and I am no luck. Any suggestions ?

Can small plans use unisex mortality under IRC 430(h)(3)? The regs, at 1.430(h)(3)-1(b)(2), only seem to allow small plans to use combined tables for annuitants and nonannuitants; the regs don't seem to say anything about combining the male and female tables. Although, in the Explanation of Provisions, the IRS states, "These regulations provide an option for smaller plans that choose to use static mortality tables to use a single table for all participants - in lieu of the separate tables for annuitants and nonannuitants - in order to simplify the actuarial valuation for these plans."

Clearly, the male and female tables are combined under 417(e)(3); but, what about 430(h)(3)?

Does anyone have a link to a website where I could easily cut n paste the full IRS spot rate yield curve into Excel ?

A client wants to terminate his Profit Sharing Plan. Only asset is a Real Estate, that has a mortgage on it. Current market value is less than outstanding principal on mortgage.

In this case, it appears that the net distribution is $0, with the client holding the property outside the plan now with $0 cost basis. If and when it is sold, the full sale price would be taxable as capital gains.

Do you see anything wrong with this logic? How do we issue a W2-P for $0?

Is it considered a "qualified change in investment options" under the 404© regs if a plan offers a new investment fund (Fund B), which will not replace an existing investment fund (Fund A), (i.e., money invested in Fund A will stay there) but in which a participant's money that they have elected to invest in Fund A will abe invested in Fund B after a certain date?

Have a small DB plan that pre-PPA was funded with Individual Aggregate - this method was not only reasonable but essential since there was a need to allocate pension cost by participant - enter PPA - what would be a mathematically appropriate way to allocate either the Shortfall Amortization Base or Charge ?

In proportion to Target Normal Cost ? Individual Aggregate NC ? Some other way ?

Suppose a small non-PBGC DB plan terminates 12/31/2007. No participant is close to the 415 limit. The plan document allows for lump sum distributions based on the greater of the plan rate or 417(e) rate. The 417(e) rate per the document would be from November 2007.

Suppose benefits are being distributed in two weeks based on an ERISA 4044 allocation.

Our understanding is that since the termination took place prior to the effective date of PPA'06 segment rates, we would not use them and instead follow our plan document.

Does anyone disagree with this?

Is there a rule that says distributions if you were born before 1936 might qualify for capital gains rather than ordinary income taxes? If, under what conditions? Thank you.

I've decided I want to begin investing a portion of my yearly Roth IRA contributions in high yield CDs. The best CDs I've found, however, don't offer IRA accounts. GMACBank.com, for example.

I thought someone had told me you could find IRA accounts that let you put the money pretty much anywhere you want, but I haven't seen anything.

Can anyone help?

Thanks.

Minimum wage questions; what age does a person have to reach to get covered by minimum wage, and do some states have mandatory time and a half for Sundays and holidays?

How does the initial eligibility computation period function when the required service period amounts to two years?

The non-profit org. (which arguably is controlled by a church - that's a separate discussion) has filed Form 5500s for many years (never thinking it could be a church plan) but never did the 410(d) election formally via on the Form 5500 or Determination letter application. Does this mean that this org. is still eligible to be a church plan or is the filing of the Form 5500 deemed an irrevocable election? If there is any authority for this, I would also appreciate the citation. Thank you!

Employer wants to term 401(k) by 12/31/2008 and have a SIMPLE 401(k) for 2009.

Existing 401(k) plan has participant loans. Can the Employer continue to allow any loan repays to the 401(k) through the time that the actual distributions are completed or does that consitute "maintaining" within the same year?

We are having an internal disagreement regarding actuarial equivalence in reference to the QOSA 75% requirement. We have the 75% option already, but it is based on a reduction formula which doesn't match the document's stated table.

One position (position #1) is that if a reduction formula is stated in the document (no table reference), it is by default actuarially equivalent. Even though the reduction formula provides a greater reduction than the plan's defined table would provide, this person is certain that since it is a written formula, it satisfies the requirement of actuarial equivalence to the life annuity. They are leaning on a 1979 revenue ruling which seems more relevant to defining "definitely determinable" than actuarial equivalence.

The opposing position (#2) is that in order to be actuarially equivalent, the reduction would need to correspond to the plan's defined table.

All opinions are welcome.

Can retirement plans be legally used for garnishment?

A calendar year PS Plan submitted its Form 5310 with a proposed termination date of August 2008. The Plan now wishes to amend its Form 5310 by changing the proposed termination date to December 31, 2008. Does the IRS have a procedure to do this without formally withdrawing the determination letter request?

Some cash balance plans allow allocation provisions such as last day employment requirements. What is the justification for that when a year of service is defined as 1000 hours? Or is there one?

Can a cash balance plan that has a last day employment requirement be amended during a year to freeze benefits (with 15 or 45 day notice) and avoid a contribution if such allocation is conditioned on last day employment?

Help please. These are not hypotheticals.

I have a client that's an insurance broker. It has been advised that it cannot receive commissions for products provided to its own plan with 120 employees. The employer seems to have met the criteria for PTE 79-60.

Is there anything new out there that I am missing about the viability of 79-60?