Assume an entity is wholly owned by a taxpayer's IRA. Would the sale of that entity to another IRA of the taxpayer be treated as a prohibited transaction? If the sale is between the two IRAs it doesn't seem like there is a disqualified person involved. Any thoughts (other than why on earth would we do this)?

A terminated plan distributed all assets in Sept 2008. I'd like to use the 2007 Form 5500 and enter the appropriate dates (01/01/2008 to 09/30/2008), but with the changes to the Form 5500 beginning with 2008, I'm not sure I can do this.

We've done this in the past, for example, using the 2006 Form 5500 and entering 2007 dates, without any problems (so far).

Do I have to wait until the 2008 Form 5500 is released?

Thanks....

I work with nonprofit that has a non-ERISA 403b plan for only deferrals in excess of 5% of pay.

They also have an ERISA 403(b) plan for deferrals that are matched (i.e. below 5% of pay).

Some think this is impermissible re the anti-conditioning rule in the regs as a failure to meet the effective availability requirement. I guess this is because in order to defer into the non-ERISA plan you have to defer over 5% of pay - otherwise all your deferrals go into the ERISA 403b plan. I know this 2-plan strategy is common to TIAA CREF plans and many others.

What do you think?

Suppose your defined benefit plan defined "average annual compensation" as the average of compensation paid in the 60 highest-paid consecutive months of employment.

When determining the 60-consecutive-month period, do you use whole calendar months?

Or do you use some other measuring period, for example, the period ending on the participant's date of termination and beginning 5 years earlier (e.g. the participant terminates on November 4, 2008. His 60-month period begins on November 5, 2003 and ends November 4, 2008.)? If you use a measuring period like this, what do you do when the date of termination isn't among the highest-paid months?

I have been doing some reading and some thinking about cross testing and the gateway requirement. (I know, very dangerous.) My understanding is that in order to pass 401(a)(4) when cross testing, the plan must satisfy the gateway requirement. When a plan allocates a profit sharing allocation to group of NHCEs that does not satisfy the gateway requirement, then their allocation must be increased to satisfy the gateway. (i.e. NHCE participants get a 3% TH min cont and the gateway is 5%. The cont is increased to those who only got the 3%.) I know that the allocation needs to be increased, but here is where I need additional confirmation. It appears that in order to do this increase, the plan may require an amendment to allocate the additional amount. Is this correct? Can a document be written such that it states that the increased allocation is required to select participants? Even if this violates the terms of the plan which may allocate the contribution comp-to-comp inside the allocation group? Does anyone inform their client of this and require them to execute an amendment?

Client has a calendar year plan which has failed the 2007 ADP/ACP test. They were provided with a QNEC number which they were going to contribute. They were under the impression that they had until 12/31/2008 to make the QNEC to correct. While this is correct, they only had until 10/15/2008 (corporation with Fiscal Year = Calendar Year and taxes on extension) to make the contribution to be counted under the 2007 415 limit. Since they have not made the contribution, it now needs to be recalculated for those participants who term’d in 2007 and have no comp in 2008. The QNEC is increased 3.5 times the original figure. As usual, the client is upset and wants to know what can be done. We have been brain storming and have come up with many off the wall ideas. The one most interesting is as follows: Make the original QNEC amount to the original group of participants. The argument is that the 2008 415 test does not get run until after the end of the year and we would not know who would violate 415 until that point. What if all of the people who were terminated were re-hired in 12/2008? If not, then we would simply process the 415 violations through EPCRS and process distributions.

I firmly believe that this cannot be done, but I wanted to get some opinions/confirmations. As it says above, this is grasping at straws, but I wanted to explore every avenue and see what everyone else thought. Thanks in advance.

We have a situation where the plan and the spd require only that plan loans bear a reasonable rate of interest. However, the loan policy requires the plan to charge a rate that is updated monthly based on the prime rate as published in the wall st journal. Unfortunately, a loan was made based on last month's rate because the plan had not yet calculated the new rate at that time. The rate actually used is reasonable (based on commercial standards) and actually is lower than the rate that should have been charged.

The issue is whether we have an operational failure. Is a loan policy considered a plan document?

A not for profit client with a defined benefit plan wants to give two HCE participants with compensation in excess of the comp limits additional benefits under a non-qualified arrangement.

The Reg sec 1.457-2(b)(3)indicates that the limit for a nonqualified defined benefit plan is the present value of the increase in the participant's accrued benefit during the year. This plan's formula is A simple until accrual of X% of average compensation for the first 35 years of service. One participant has already achieved 35 years of service and has accrued the maximum benefit under the qualified plan. If this client sets up a non-qualifed plan, is the accrual for the first year the full difference between this maximum benefit and the benefit calculated without regard to the comp limits. I guess my question is: In year one does this participant accrue the full difference in benefits with subsequent year accruals based solely upon increases in the comp limit or, must the plan accrue the difference in benefits over the participant's remaining service (e.g. the participant has 8 years to NRD ). Or, can the client decide up front which methodology to use. Concerns are is service with employer prior to effective date of the 457 plan allowed to be used, and is there a maximum benefit that can be funded in this plan.

A plan uses a calendar year plan year. For simplicity, assume there is a single Plan participant and a single trustee. The plan is a money purchase pension plan that imposes a last day requirement. The employer anticipates in March 2008 that its single participant will be employed on 12/31/2008 and prefunded its anticipated contribution. The employer estimated that the single participant's contribution will be $10,000 so in March 2008 the employer contributed $10,000. The $10,000 contribution is not allocated to the participant's account, but is held in a trust subaccount and is invested in mutual funds. In late summer, the $10,000 contribution is worth $8,500. The trustee decides to do an interim valuation, permitted by the plan, and the single participant's account is adjusted to reflect the $1,500 loss. In October 2008, the $10,000 contribution is worth $5,500. The trustee again decides to do an interim valuation and the single participant's account is adjusted to reflect the additional $4,000 loss. No portion of the actual $10,000 contribution is allocated to the participant's account. On December 31, 2008, say the $10,000 contribution is worth $6,500. On the valuation performed as of 12/31/2008, the participant's account will reflect a contribution of $10,000 and an investment loss (everything else being equal) of $3,500--so their net 2008 MPPP contribution will not be $10,000, it will be $6,500.

Does anyone else see this as a problem? If so, why?

I tend to think it may be an impermissible cut back because the participant's 12/31/2008 allocation is less than the amount promised by the MPPP's formula (due solely to the investment losses the trustee is attempting to transfer to the participant).

What if, instead of the participant receiving $6,500, the participant receives $10,000, but the $3,500 loss is made up by reducing the participant's pre-allocation account balance by $3,500--you get to the same point.

Any thoughts? Thanks in advance for your comment.

My questions relate to how to amend an equity-split dollar arrangement to comply with Section 409A and Notice 2007-24:

1) If the arrangement is amended to remove the employee's ability to unilaterally terminate the arrangement, does this amendment constitute a material modification?

2) Are there other issues/provisions of an equity split-dollar arrangement that need to be reviewed and possibly amended in order to make a standard arrangement compliant with 409A?

3) If the business owner and the employee are one in the same, does this cause a problem? In other words, even though the agreement is amended so that the employee cannot change the time/form of payment (in his role as an employee), is he deemed to be able to do so indirectly because he has the right to terminate the agreement in his role as the business owner?

When someone has a money purchase plan, when must they include leased employees?

Hi,

We are switching to an HDHP with HSA with the option of keeping a Limited Purpose FSA for dental/vision/dependent care in January and are also keeping regular FSA's for our employees not participating in our HDHP. I can't seem to find clear answers to some of my questions about keeping both an HSA and FSA. Maybe someone here can help.

Here is the situation:

An employee currently participates in family coverage for herself and her husband through our non-HDHP health plan and has an FSA. Her husband (who works for a different employer) also has an FSA. When she switches over to family coverage through our new HDHP with HSA plan in January, can her husband keep his FSA through his employer or can they only contribute to an HSA and Limited FSA?

How does an FSA for post-deductible expenses only work?

Thanks so much!

We have a private school with a Tax Deferred Annuity Plan which provides for a 3% non-elective safe harbor contribution for all eligible employees and a matching contribution of 100% up to 7 1/2% of annual compensation. Eligibility is a year of service and age 21. Can someone tell me exactly what I need to test, i.e. ACP, Non-discrimination, 410b, etc.

The trustee seems to think they do not have to have any testing at all.

Thanks

We are terminating a DB plan and are making final distributions. Participants were provided all benefit options including a lump sum distribution. There are several participants who have not returned their election forms (not missing participants) and the plan will purchase annuity contracts for their benefits.

1. Is a deferred annuity purchased for the accrued benefit payable at normal retirement, or an immediate annuity?

2. If the plan should purchase the immediate benefit and it is very small and too small to purchase, then what?

3. We believe a 50% J&S benefit is automatically provided for a married participant.

4. The plan provides automatic cashout only for distributions less than $1,000. There are several participants whose distribution amounts are less than $5,000. What are the alternatives for these participants as I anticipate that it will be very diificult or impossible to purchase annuities for these benefits?

Thank you for your thoughts and comments.

It is the time of year to revisit the DB rules on RMDs (post 70.5 variety). A few that need refreshing:

1. When using the "term certain" method, assuming no additional benefit accruals since the initial calculation was done, is it necessary to recalculate the prior years' periodic term certain payment due to changes in the 417e interest rates, or does the certain payment from prior years simply continue unaltered?

2. When calculating a term certain annuity for an RMD in 2008, do we value the benefit using the new 417e segment rules and divide by a term certain amortization factor using the 3 appropriate segment rates (analogous to the amort base for funding shortfalls)?

3. When calculating the initial RMD in a DB, assuming the initial distribution calendar year is 2008, is the benefit determined as of the beginning of 2008 or is it determined as of the end of 2008? The regs do say that for increases in benefits occurring after the distribution calendar year, you can wait until the following year to reflect them but the regs are SILENT on the initial distribution calendar year.

Any thoughts or opinions would be welcome!!

I'm updating a Plan/SPD for a self insured health and welfare plan. It's grown considerably and in addition to medical vision and drug benefits, also offers insured life insurance and long term disability benefits. This is going to be a huge SPD/Plan.

Can we just use booklets provided by the life insurance and long term disabilty provider as 'breakout' SPDs to save printing costs and just reference them from the big SPD/Plan? Incorporation by reference--is that permissible?

Hello,

I'm looking for somewhat current national statistics on the use of daily valuation vs. traditional recordkeeping. Can anyone offer a good source? So far, I've looked at PSCA, EBRI, etc. Can't quite seem to find the needle in the haystack.

Thanks for any information you may provide!

A 501©(3) client wishes to implement a Safe Harbor Match in their 403(b) program. However, they also wish to exclude an identifiable class of non-highly compensated employees from receiving the match.

Can they do this?

If not, can they set up a second 403(b) plan just for those employees?

Thank you.

We have an employee going on disability leave in late December who has also elected the Flex Spending Account for 2009. We will not be able to deduct any of the pretax contributions since their will not be a paycheck in 2009 (while the employee is on leave). Should the employee pay us with after tax dollars (check) so they can access the entire annual election for 2009? They probably will return to work in March.

A small non-pbgc db plan terminated December 31, 2007

The plan sponsor initially did not want to get a D letter but we finally convinced them to.

If the submission is done now, we may not get the letter for up to eight months and they would prefer not to pay benefits until they receive the favorable letter.

1) If benefits are not paid until after 12/31/2008, are they in danger of the plan not being considered terminated because more than a year has gone by?

2) Since the plan terminated in 2007, PPA segment rates are not used for 417(e) purposes. Instead, the old stability period, look back month and 30 year treasury rate is used. What would happen if we drifted well into 2009 before benefits were paid? I guess the 30 year treasury rates will still be published.