It has been proposed that the 'correct' or 'most accurate' method of calculating the current value of a QDRO in a daily val, self-directed plan is to find the actual shares as of the date of division, and apply dividends paid on the 'divided' shares from the date of division to current date to get the current number of shares, and then determine the value based on the current share values.

This method is EXTREMELY time consuming, and of course subject to human error. It may be 'perfect', but is it the only 'correct' way?

If it were a pooled, balance forward plan, one would apply the earnings rate only from date of division to current date. There would not be another way to determine the current value.

If the application of earnings rate is 'correct' in the balance forward environment, would it not also be correct in the daily val environment? That is, from the date of division to current, determine the earnings rate of the individual account, apply that earnings rate to the divided account to determine the current value of the QDRO.

What is your opinion on the acceptability, accuracy, and defensibility of the earnings rate method?

Participant wants to pay $25,000 on a $37,000 loan. The loan is current. Can the payment be applied to P & I as provided by the amort schedule? I seem to remember something somewhere that stated interest cannot be prepaid. However, in researching this, I could find nothing to support this statement.

Don't do very much with cash balance plans, so a little curious about some of the proposals that I see across my desk. Have a proposal in hand that is showing seriously high cash balance additions for a group, and want some thoughts.

Participant Age 39, NRA to be 65 (not sure why they didn't go with 62), salary of $230,000, interest accumulation rate of 6%.

They are showing a first year annual credit of $170,000 for the participant. Now if I value 1/10th of the dollar limit using the 2008 417/415 Applicable Mortality Table at 5.5% (with no pre-retirement mortality), I get a current present value of around $52,800, which seems to be a little bit of a discrepancy compared to a $170,000 allocation.

What am I missing; seems that this type of credit is way beyond the 415 limits to me.

here is the challenge (and its free) for bragging rights amongst us :

http://games.espn.go.com/frontpage/games

there is college pick em - each week 10 games are listed, and you rank the teams (ten through 1) based on your confidence.

they already have the first 10 games up and ready to be picked.

soon they will have pigskin pick em (with or without the spread (you can do both)) just pick the winners

and

eliminator - pick one team to win each week. but you can only pick a team once.

if there is an interest, it is easy to set up a group just amongst the pension folks to see who is the best (without an actuarial adjustment of course).

I remember someone advocating the facts and circumstances position to eliminate the hassles of the deferral suspension period. I am considering changing the 16 plans I have with hardship to F & C when I restate for EGTTRA.

I started with safe harbor provisions with prototype documents years ago and have never used F & C provisions. I have heard that the burden of proof and the employer's liability are greater with F & C. Can anyone shed any light on how much greater or how you handle it?

If there is no employer stock in the Plan, does anyone know of any problems with the document allowing distributions in cash or property?

This is a question about determining the earned income of a partner. The partnership has determined that the partners do not actively participate. They meet from time to time as a board to discuss and decide issues that have come up in the partnership's business. The partnership reports on K-1's the income to its owners as passive, not subject to self-employment tax.

One of the partners reports on his 1040 that he materially participates in the business of the partnership for the year and pays self-employment tax, so that he could accrue a plan benefit. The other partners report the K-1 income as passive on their 1040s and do not pay self-employment tax.

The partnership does not take into account as plan compensation what it reported to any of the partners on the K-1's as passive income.

The partner that claimed material participation and paid self-employment tax wants his income to be earned income under 401© and considered as plan compensation so that he can accrue plan benefits. He points to some proposed regs that show as an example that attending regular business meetings of the partnership meets the de minimis activity level required.

The other partners are concerned that if the plan were to accommodate him, it would call into question their treatment of the K-1 amounts as passive income and trigger self-employment tax for those other partners. Some of them spent more time attending to the partnership's business (i.e., attended more of the management meetings) than did the partner that chose to pay self-employment tax.

The partner that paid the self-employment tax insists that if he is not allowed to accrue a plan benefit, he will file amended returns to claim a refund of the self-employment tax and that could be what triggers an audit of the partnership and the partners on that issue.

As the plan administrator, the partnership must decide if the partners' earnings are "with respect to a trade or business in which personal services of the taxpayer are a material income-producing factor". IRC 401©(2)(A)(i).

What should the partnership, which is controlled by the 'passive' partners, do?

For purposes of the hardship safe harbor, would tuition and related fees for masseuse school count?

Hello, I am 31 years of age. I currently contribute 10% of my pre-tax salary into my company's 401K. This does not meet the $15,500 year max allowed by law. I have additional monthly funds to invest, and thought that instead of increasing the 10% 401K contribution, I would start up a Roth IRA. I would contribute $300-$500 monthly.

First, is this a good idea, or should I increase the 401K? Second, if Roth is the way to go, then I admit, I'm a little clueless as to where and how to get this going. I'm not really interested in paying a finacial advisor. I'd rather manage/learn this process myself.

Thanks.

Are you allowed to discriminate against HCEs and not give any of them a SHM? Are you allowed to discriminate against some but not all of the HCEs if you can divide them into reasonable classifications? Can you give the SHM to Keys but not other HCEs (as well as NHCEs)? Thanks.

We have a client who has a plan year beginning 12/1.

They have a paydate in December that they are considering a December payroll, however the dates the employees work for that December 1st paycheck are prior to the beginning of the plan year, so for the employee that worked 11/15 to 11/30 - since the check is issued in December, the employer wants to take the first payroll deduction out of that 11/15-11/30 time period that the employees worked instead of the 12/1 - 12/15 dates.

It seems all wrong to me to allow payroll deductions for a period that is clearly out of the plan year to be applied to the current plan year's cycle...

Any thoughts on this or cites you can provide will be GREATLY appreciated!

Is this a required disclosure when preparing an annual actuary report, if not, is it required in order for auditors to make a clean opinion on financial statements relating to a DB plan?

I have a participant whose termination date is 12/28/06. That is the last day he worked. The payroll ending date for his last paycheck was 1/5/07. SO he has compensation and deferrals on his 2006 W2.

Should he be in the 2007 test? He did not work one single day in '07, and the pay he received was for work in 2006.

I work for a company with a 40% ESOP ownership. The current ESOP valuation was influenced by a trustee(CEO) to lower the value. The CEO felt the value was high and the firm doing the valuation lowered the price. It appears the valuation was improperly influenced because the audit firm had already issued a preliminary value and further conversations caused the value to be reduced. In all of the previous years, the value had never been reduced after the preliminary value was issued. BTW-the trustee is no ESOP expert and this appears to impact the independent requirement on the part of the audit firm.

Is this legal?

Thoughts PLEASE.

I work for a company with a 40% ESOP ownership. The current ESOP valuation was influenced by a trustee(CEO) to lower the value. The CEO felt the value was high and the firm doing the valuation lowered the price. It appears the valuation was improperly influenced because the audit firm had already issued a preliminary value and further conversations caused the value to be reduced. In all of the previous years, the value had never been reduced after the preliminary value was issued. BTW-the trustee is no ESOP expert and this appears to impact the independent requirement on the part of the audit firm. Is this legal?

Thoughts PLEASE.

We recently filed 5558 forms for two clients. The forms were sent USPS, with a return receipt attached. Due to an error in calculating the postage, the package was returned to us, postage due. The timing of the return has me a little perturbed. The package was originally posted on 7/11. It was not returned to us until 8/8. We are resending the forms today.

What are the chances that these forms will be considered timely filed? There are now two sets of machine printed postage on the package, the first of which is dated 7/11. My understanding is that the delay in the package being returned would have been caused by the IRS' delay in refusing it. I realize we made the error in applying postage, but this long delay in getting the package back seems unreasonable.

More importantly, should I wait until these clients get late filing notices before pursuing a course of letter writing with the IRS? Or perhaps would it me more appropriate to include such a letter with the 5500 when it is actually filed?

Thanks for any input.

So if an employer is the plan administrator, how do they avoid Hippa compliance issues?

Please help me untwist my mind!

The 409A(a)(1)(B) heading says "Interest and additional tax payable with respect to previously deferred compensation."

The detailed rule in 409A(a)(1)(B)(i) says "If compensation is required to included in gross income under subparagraph (A) . . . the tax imposed . . . shall be increased by . . . (II) an amount equal to 20 percent of the compensation which is required to be included in gross income."

So, the heading to 409A(a)(1)(B) refers to "previously deferred compensation," but the detailed rule makes no such reference. And, I can find no such reference in the committee reports (unlike the committee reports' discussion on the interest rule). In fact, the conference committee report states "The amount required to be included in income is also subject to a 20-percent additional tax."

My question is whether the 20% additional tax applies to amounts which arise under the plan for the current year and are included in gross income for the current year, and thus are not "previously deferred compensation."

Thanks,

Ken Davis

Univ. of South Alabama

We have a plan that didn't submit census data to us for 2006, so we did the 5500 with the info we had on the record keeping system. We have since got the information and found that our participant count changed by about 5 or 6 for questions 6 & 7 on Form 5500.

Changing the numbers would not be the difference between filing a schedule I or H. So would you amend the 5500 for a few people? Especially since one year's numbers have no bearing on the next or the filing type?

The original proposed PPA technical correction bill had provisions for a mandatory non-spousal rollover option in qualified plans. However, that bill was never passed.

Has any subsequent legislation been passed which requires plans to include mandatory non-spousal rollover option?