A plan provides for lump sum distributions. The plan has a COLA and for purposes of lump sum distributions, 3% is assumed. The regular actuarial equivalence is 71GA and 7% interest. The plan has been amended to allow for inservice retirement on or after age 65. Upon the employee's later termination of employment, the plan stipulates to calculate the accrued benefit and offset it by the actuarial equivalent of the distribution received. The obvious question is what is that? My recommendation is to have the plan define how the adjustment is made rather than simply saying "the actuarial equivalent."

Assume an employee takes a lump sum at 65 and later terminates employment at 70, it would appear that an appropriate way to handle this is to calculate the accrued pension at age 70 and offset it by the age 65 pension increased by 3%.

Now, assume the employee takes a monthly pension at age 65 and later terminates employment at 70, it would appear that an appropriate way to handle this is to accumulate the monthly payments with 7% interest and determine the offset by dividing this acculation by an annuity factor at age 70 computed using 71GA, 7% interest, and the assumed 3% COLA. Clearly, if the employee elects a lump sum, there is a whipsaw effect.

Any suggestions?

When FAS 87/88 first came out, a few accounting firms at the time came out with well written guides - PWC and Ernst&Whinney are a couple that come to mind - is anyone aware of something similar for 158 ?

Any suggestions are appreciated--

Client is a sole proprietor, age 70 1/2, who is expected to die within the year. He has no current income, but he does have $2M in a defined benefit plan that may be overfunded by about $150,000 (actuary isn't certain). He'd like to settle his affairs now and leave things in the best order for his wife.

He has an estate planning attorney, but she has not worked with DB plans before. I've worked with DB plans, but not often with solo plans and not lately with overfunded ones!

Is there a way to avoid some of the reversion tax on the overfunding?

Our client is a business Corporation whose employees are anesthesiologists and CRNA's.

A not-for-profit hospital owns 79% of the stock of this Corporation. The remaining 21% is owned by an unrelated person who is neither a licensed anesthesiologist nor a CRNA.

The employees of the Corporation (the anesthesiologists and CRNA's) provide anesthesiology services to patients of the hospital.

QUESTION: Are the hospital and the Corporation part of an Affiliated Service Group?

Any insights are appreciated!

The stock of Corporation A was purchased by Corporation B earlier in 2008. Corporation A is being maintained as a wholly-owned subsidiary of Corporation B. The employees of Corporation A are continuing on the payroll of Corporation A.

Corporation A currently sponsors a 401(k) Plan. As of January 1, 2009, it is expected that Corporation A will adopt the 401(k) Plan established by Corporation B which currently covers the employees of Corporation B and the employees of the other wholly-owned subsidiaries of Corporation B.

Have the employees of Corporation A had a “severance from employment”? Based upon my reading, I would say “No”.

If there has not been a “severance from employment”, what are the options for the Corporation A 401(k) Plan?

(A) Merge the plan into the Corporation B 401(k) Plan?

(B) Freeze the plan and make distributions when the participants incur a distributable event (age 59.5, termination of employment, etc…)?

© If the plan is terminated, am I correct that the part of the account balances attributable to salary deferrals (including safe harbor & QNEC’s) cannot be distributed until a distributable vent occurs (same as in B above)?

Other???

Thanks for your input -- I am hoping for an alternative that is better than what I have currently discovered since each of them has a negative aspect for the current plan participants or for Corporation A.

I need some thoughts on making a Partial Plan Termination Determination.

I have a plan that had two divisions. A and B. B was sold in August.

There were 25 total employees for the year. (Including 2 new participants in A -3 month serv req)

3 participants voluntarily left A before B was sold and had nothing to do with B.

2 voluntarily quit B prior to knowledge of sale of B Feb,Mar

6 voluntarily quit B after knowledge of sale even though they were guaranteed a job with the new employer. (Had six months notice and were told that their jobs would continue with the new Employer)

2 participants stayed to the end and then the new company took over their employmentl upon completion of the sale.

Partial Plan Termination?

Who would vest 100%?

Thanks

Pat

This is a follow up to my earlier question. We are a CPA firm that has been asked to complete Form 5330 for a Plan that was audited by the DOL. The DOL found that the Plan did not follow it's terms for years 1994-2002. Specifically, one of the Plan's investments was not an allowable investment according to the Plan Document/ Trust Agreement. The Plan had some of it's assets invested in a Pooled Common Stock Fund. THe Bank that sold the investment was also the Trustee. It was always the intention of the Plan Sponsor and the Trustee to invest part of the funds in the Pooled Common Fund. Inadvertantly, the amendment adopted in 1994 did not include this as an investment option.

The DOL allowed the Plan Sponsor to retroactively amend the Plan Document to allow for the specific investment for the years 1994 - 2002. Additionally, it it's closing letter, it strongly advised that the Employer file and pay an excise tax on Form 5330 for prohibited transactions for the years 1994 - 2002.

As I read through the regulations, I don't believe this was a prohibited transaction. I believe that this is a failure to follow the Plan's Terms. Am I right? Should I advise that the Plan be corrected through VCP?

Thank you!

Hi,

We have a Plan that went through a DOL audit. THe plan had pooled investments. The audit uncovered that for the period from 1994 - 2002, the plan document/ trust agreement did not have the wording to allow the Plan to investment in a "Pooled Common Fund". A small piece of the Plan's assets where invested in this pooled fund. In 2002 the plan document was amended and the wording allowed the trust to invest in pooled funds. So clearly, there was a problem with the investments from 1994 - 2002.

The DOL allowed the Plan Sponsor to retroactively amend the Plan Document to allow pooled funds for the years 1994 - 2002. In it's closing statement, it advised that the Plan file a Form 5330 and pay an excise tax - The investment in the Pooled Common Fund was considered a prohibited transaction.

My question is - for what years should we calculated the excise tax. Does a statue of limitations apply? A Schedule P was always filed. Wouldn't the statue of limitations then have expired for all years where there was a problem.

Thank you so much.

We have about 300 full time employees and many of our employees are over the age of 65 with Medicare coverage. From the laws I have read, we have to stay primary for full time employees and can not offer a "individual" supplemental Medicare program or financial incentives to waive group coverage.

My questions:

Could we offer a group supplemental medicare program for full time employees over 65? Would the employee have to be allowed to choose between the supplemental and group health plan?

Could we offer part-time employees over 65 supplemental Medicare coverage (do not meet the eligiblity rules for the group health plan)? If they are under 65 working part-time, is it discriminatory not to offer them some type coverage as well?

Years ago Schedule Q and Demo 6 as I recall were used to report results of the General Test - but I don't recall if they were part of the 5500 or not ?

Does anyone know how the General Test results are reported for 2007 filings ?

An employee was given a loan from his employer's qualified plan before he became a participant. The Pension Answer Book specifies this scenario as a prohibited transaction since the employee would be considered a party in interest. However, the instructions on Form 5330, though they list most of the definitions of parties in interest, do not reference this situation. I'm thinking this is just an oversight and the loan should still be considered a PT. Would that be the correct approach? BTW, the employee eventually became a participant in the plan from which he borrowed from but I have to think the loan still remains a PT.

I am curious when and in what manner people are notifying participants of late quarterlies over 60 days late. I have never figured out when these are due to participants as the language in 101(d) is "...at such time and in such manner as the Secretary may prescribe."

A participant in a 401(k) Plan died with a $4,000 outstanding loan balance. His account is worth $100,000 and his spouse is the beneficiary on his account.

What are the options of paying back this loan? What if his beneficiary does not want to pay back the loan?

Any help would be greatly appreciated.

ALEX

employer took a deduction but failed to actually make the contribution. can they make it now or what is the procedure for dealing with this?

IRS proposed Reg 1.430(f)-1(b) is entitled "Election to maintain balances." In fact, -1(a) provides that "paragraph (b) of this section sets forth fules regarding a plan sponsor's election to maintain a fscob and pfb."

I was of the understanding that the employer must make an election to burn credit balances. However, having to elect to maintain blances creates the convolution that if you must elect to maintain the balance, and you must elect to burn the balance, what occurs if you make no election whatsoever?

Is anyone advising their clients to elect to maintain the FSCOB? I presumed we were simply dealing with some errant wording?

I heard some people talking on a radio show about a strategy for converting only the post-tax portion of a Traditional IRA to a Roth IRA. I believe that it involved moving money into an existing 401k account. Can anyone provide (or direct me to a source for) a step-by-step guide for doing this?

Thanks.

Michael

When it comes to the taxable wage base and integrated contribution, do special limits set in when dealing with a self-employed individual regarding the 5.7% and the taxable wage base?

This is not a question about benefits, per se. But with so many employment experts here, I'm hoping you won't mind offering any thoughts.

The idea: In order to AVOID having employees here's a concept that I want to know if there's any holes that can be shot through it:

Company "A" needs services performed, so it hires LLC "B" to do the work.

LLC "B" advertises for people to work with.

When acceptable people are located, they are offered a membership interest in the LLC for a $100 capital contribution.

The LLC has only two items on the IRS form 1065. Gross revenues (all from Company "A") and guaranteed payments to partners (the newly found people who will work).

The LLC tells the new members that they are in luck! No FICA withholding, and they also get to write off all transportation and other costs "above the line" on the member's Schedule E.

The LLC member of course pays 15.3% SECA, but that's after deducting all their car expenses, some meals expense, and so on.

Seems to be a win-win for the member who gets to write off all his business expenses, that as an employee he'd have to eat on his own.

And a win for the Company as they avoid the various payroll taxes including State unemployment tax and workman's comp premiums.

Of course the members may get their own disability insurance if they want it. And of course the cash paid would be fairly determined, so we're not talking "abuse of employees" here. We're talking about honestly and legally avoiding payroll taxes, and optionally avoiding any unwanted workman's compensation insurance.

I am a newly divorced gay female in the Commonwealth of Massachusetts. My ex-wife recently signed a separation agreement for the divison of property and splitting of the 401K at her work. In Massachusetts, her company recognized me as her spouse for 3.5 years. I recieved dental benefits from her through her plan at work and for three years, I contributed to the 401 K account. Her company matches the amount that she adds to the account every payday.

However, now my ex-wife is claiming that according "Goodrich vs. Dept of Health" and in accordance with DOMA, she is not obligated to divide this property as instructed, agreed upon and signed for and by her in the separation agreement. This agreement was certified and put into effect per the judge (happily I might add) the day we did this. Our divorce becomes final 90 days from that day in the dissolution of marriage that will show up at my door.

I did my homework pertaining to this, but I am very confused.

First and foremost, the Goodrich decision on behalf of Massachusetts Appellate court ; pertains to the "recognition of same sex couples and equality along with definition of marriage." So basically I think that she is confused pertaining to this origin of law.

Secondly, "DOMA" pertains to federal benefits such as social security, survivor death benefits under federal guidelines and numerous other things such as rollover for deceased spouse 401K/IRA accounts, burial allowances, and taxable interested on properties. No where does DOMA discuss the division of property or assets with exception of federally recognized heterosexual marriage.

When it comes to Federal taxes, I always file single. I have always filed "married" on my state taxes, but single on my federal taxes because I cannot for tax purposes under the federal government.

She has decided this last season to file "single" on her state taxes when in fact she was married. Is this legal? The IRS (state) also wants to know why she did this on her taxes, and the IRS also wants to know where her added income came from on her financial statement to the divorce court. (she padded it heavily).

I am also a veteran and on disability. As this is a federal benefit for me, she cannot be added to my VA medical coverage, nor can she touch any of my disability that I recieve monthly. I don't touch her federal social security, she doesnt touch my disability. End of story.

If the company matches her 401 contributions and recognized me under state law as a married couple in the Commonwealth with all the same rights and priviledges of marriage, can she deny this agreement that she signed or refuse a judges order on this?

Any help or advise I can get would be greatly appreciated.

Thanks

I manage 5 medical plans in 3 states. They vary in their descriptions of what constitutes and eligible dependent. Some go to 25, some don't need student status, etc. The IRS is pretty clear in Publication 501 that to be a qualified dependent for tax purposes, you must be under 24, provide no more than half your support, be a full-time student and live at home. What if a carrier extends dependent coverage to a 23 year old who is not in school? What about a 21 year old who lives by herself, has a full-time job and goes to school nights? Would these be a taxable benefit to the parents?

Thanks for any wisdom.

Parker