My client has an employee who took a loan in April then terminated and moved away. He never made any payments on the loan. He took a distribution and his distribution was offset by the loan. He has now moved back and been reemployed. What are his options on repaying the loan now? If he repays his distribution, could he have the loan restored and resume payments? Would he have to repay the distribution in order to resume the loan? I can't find any information about this in the plan's document.

Say a one participant plan sponsor contributes a total of $1,000,000 to a pension plan over a 5 year period.

Then the IRS disqualifies the plan retroactive to its inception.

While it is clear that the participant must pay taxes on his pension and the trust is taxed on its earnings, should there be a 10% 4972 excise tax for non deductible contributions (i.e. all $1,000,000 of contributions)?

Thanks.

Here's a strange one - at least seems strange to me.

Participants in a Defined Benefit plan have an insured death benefit. Plan sponsor decides to reduce plan formula, so the life insurance must be surrendered or purchased from the plan for its Fair Market Value. There has been NO distributable event under the plan, so no participants are eligible for any current distribution.

Pursuant to Prohibited Transaction Exemption 92-6, the plan may sell the policy to a participant for its Cash Surrender Value. Note that this may be less than the FMV, but isn't germane to this question.

Here's where the rot sets in. The plan assigns the ownership of the policies to the participants. However, the participants HAVE NOT paid the plan anything whatsoever. This apparently took place a few months ago. So, the participants have received an impermissible distribution from the plan in the amount of the FMV of the policies.

ERISA 406(a)(1)(D) prohibits a fiduciary from transferring plan assets to any party in interest. Party in interest is defined under ERISA 3(14)(H) to include an employee. However, each of these common law employees, while a "party in interest" under ERISA, is not a "disqualified person" under IRC 4975(e)(2).

So, it appears that there has been a Prohibited Transaction. But, what penalty is payable in this specific situation? It would appear that the IRC 4975(a) tax isn't payable, as it isn't imposed on a fiduciary who is acting only in that capacity? And if that's correct, what is paid, and to whom? Since the DOL gets the 5500 forms that will presumably show that a PT has taken place, do they send the information to the IRS under their "coordination" clause in ERISA 3003, and then the IRS imposes a penalty? Would the DOL have to bring an action under ERISA 502(a)(2) for a Fiduciary breach? Basically, we're looking at something on the order of a $3,000 distribution, so the recovery plus interest will be peanuts, but I'm trying to see if any other penalty is automatically imposed.

Thanks in advance for any insight!

A client is stating that they would like to offer a Defined Benefit 403(b) and 457 plan. I have told them that this is not possible since they are mixing two very different plan types together, however, I would look and see if this option is a possibility. Thus far, my internet searches have not come up with anything substantial to state definitively if this "hybrid" plan is allowed. My personal out reach to other retirement professionals has yielded laughter.

Can someone please let me know if this plan type is allowed under the code and what would be a good resource to review the rules? Thanks.

When both a defined benefit plan and defined contribution plan exist, how does that affect contribution limtis?

How does that affect the limit on what one person can get?

How does the initial eligibility computation period work with someone who is something of a transient worker? Say he or she first ever performed work for an employer in 1989, leaves eight months later in 1990, returns off and on again over the years. Does this mean that his or her initial eligibility computation period still remains the year from when he or she first ever worked for the employer?

I have a few very small 501C3 organizations ( not schools ) that have a couple of 403B accounts in each ( salary deferrals only ) - very simple.

I understand that they will need a plan document by Jan 1. Are there documents available from the fund companies or the IRS ?

If not are there TPA's that could provide a basic document for a low cost ?

THanks

NQDCP provides that shareholders can, at any time, cash in their shares. The act of cashing in of their shares gives them the right to an in-service deferred compensation "Bonus" in the same year.

The shareholder can elect not to take the Bonus, in exchange for the right to a Deferred Compensation Payment only upon actual termination from service.

The Deferred Compensation Payment is calculated based on an average of compensation formula. The Bonus is computed using the same formula reduced by 25%.

Is the Deferred Compensation Payment subject to a SROF because it is materially greater than the Bonus? Or is this an impermissible haircut because the shareholder can elect to receive a deferred benefit subject to a penalty?

I think it is subject to a SROF and not a haircut because its not entirely discretionary (i.e., only in the year of retirement of shares) and it is not an insignificant cut (more than 10%).

This design is intended to pass muster under the 2009 regs.

I'm newly retired (age 62) and will be living on existing savings from now on. I will need to begin withdrawing from investments for living expenses and I need to know if it makes sense to sell some additional stock to continue funding an existing HSA. I would initially be selling out of a taxable S&P 500 index fund and paying capital gains, leaving the IRA money for later. I expect to have to pull about $50k out per year and with other income would have a gross income of about $70k. No mortgage or other source of significant deductions, if that matters. Any advice will be appreciated.

Does the excise tax on late refunds applicable if the plan is also making a 1-to-1 QNEC to satisfy the 2006 ADP test?

If so, on what year's 5330 do I report it? '06 or '08?

Thanks in advance.

If a participant owns company stock inside the plan greater than 5% of the total stock out there, is that participant considered to be a 5% owner? He does not own more than 5% of the stock outside the plan.

A carrier has found a willing buyer for a block of COLI business. What basis is used to calculate the carrier's gain on sale of the block?

Has anyone taken a look at the new 5307 form? We're starting to get our process going because we've start EGTRRA restatement. In particular, if a plan is filling in 5307 and is an ADP/ACP safe harbor plan, there's no spot anywhere on the form to mention it. For example, page 2 asks if the plan has 401(m) match. If the plan had no 401(m) match but had a safe harbor match would we check no here?

Thanks for the help.

Trying to figure out if my client is exempt from the $1,000 Form 5310 user fee.

Small DB plan terminated 7/31/08. Current participants are doctor, spouse. Only NHCE was paid a lump sum in May 2008.

Form 5310 will be filed Aug 2008.

Rule says you must have an NHCE "Participating" and that the determination is made at the time of the 5310 request.

If I'm out of luck above, what if we argue that the NHCE is due a few more dollars of interest because the lump sum was figured based on 5/15/08 payment and actual payment was made at the end of May.

I provide actuarial services to a TPA and I was just sent the 1/1/08 data. The situation is: DB plan with an owner past NRA and receiving annual actuarial increases on his AB. His 415 benefit limit is based on his high 3 average salary of $125,000. The owner died during 2007. The plan death benefit is the PVVAB. As of the date of death the PVVAB is restricted to the 415 lump sum limit (this restriction just happened btw). The spouse has not taken the distribution yet. The spouse was entitled to $1,290,000 at the date of death. At this point in time if I were to value the deceased participants PVVAB the amount would be $1,250,000 ($40,000 lower) becuase he has aged a year and the 415 maximum lump sum is based on the comp limit. Can she now take out the $1,290,000 she was entitled to at the date of death? I guess that would be looking at it like at the date of death she became a participant in the plan with an account balance rather than an annuity. Not sure if that's acceptable?

The plan is now being terminated. At 1/1/07 the assets and liabilities were very close. During 2007 there was a large increase in the assets and now there are significant excess assets. I can't see how the spouse could share in that given the death benefit is the 415 lump sum but if anyone has any ideas I would like to hear them.

If a small plan has a 12/31 valuation date for calendar year 2007, can it switch to a 1/1 val date for 2008?

It appears to me that PPA 06 Sec. 302(d)(1) takes away the automatic approval to a BOY val date that was in Rev. Proc. 2000-40. But looking onward in PPA 06, I'm not sure this isn't allowed in this case.

Employer discovered they had missed depositing SIMPLE IRA deferrals. Some of the employees are no longer employed, and some may have cashed out their SIMPLE IRA. How would the employer handle depositing the late deferrals (plus earnings, etc.) if the IRAs have been closed.

What happens if the employee has moved out of the country and can not be located?

Thanks for the input.

Plan Year = Limitation Year = Calendar Year.

Benefit formula = 100% x hi-3 amc

Deferred retiree, age 69 at 12/31/07

Hi-3 amc = 38113

AB at 12/31/07 = 20334 = actuarially increased 415 $ limit = Grandfathered Accrued Benefit

At 12/31/08 the 415 hi-3 = 18750

Is he entitled to an actuarial increase on the GFAB, or is he capped at 20334?

Possible answers:

1. Of course he is. The AI is part of the AB and protected by 411.

2. Of course not. The 415 limit, in this case now 18750, trumps all.

Thank you for any and all thoughts.

A client (about a hundred employees) wants to allow participants to defer into the plan earlier. This affects no HCEs and does not affect any testing (the employer contributions do not need 401(a)(4) testing due to the design). The plan is not even close to top heavy.

However, the plan is a calendar year safe harbor plan. Currently the eligibility for deferrals and matching are the same (one year, age 21, semi-annual entry). Starting September 1, they want to allow recent hires to defer after 6 months, age 21 with monthly entry dates for deferrals with no changes to the eligibility requirements for safe harbor contributions. They currently foresee no HCEs ever being in this early group, so the "Otherwise Excludable" rule makes that group okay (as far as I can tell).

I know the IRS received comments regarding the types of changes (amendments) that should be alright to do mid-year for a safe harbor plan.

Any problems with doing the above? Any grapevine comments from the IRS about allowable mid-year SH plan amendments?

I am desperately looking for a needle in a haystack.

In March 2006 IRS announced a relief initiative whereby it would be allowing employers who had not amended their SIMPLEs to conform to EGTRRA to do so by the end of 2006. Further, the IRS said that it would be sending letters to employers who it had identified as having SIMPLEs through a W-2 match to remind them to amend their SIMPLEs. The IRS published the sample letters on its website: Letter 4083 and Letter 4084. Unfortunately, neither sample letter is currently available on the IRS website (at least that I could find). If you have copies of these letters and can make them available to me, I would be most grateful.