If I had a security purchased in 2001 for a cost of $4,000, worthless and valued at zero on 1/1/07, and removed from the account as of 12/1/07, do I record a -4,000 on line g of the 5500EZ for 2007 even though it does not reflect in the change in value of the plan assets for the year 2007?

Thanks.

A one employee corporation has a 2/1/07-1/31/08 fiscal year.

The corporation sponsors a DB with a 10/1/07-9/30/08 plan year. The deduction is taken for the plan year that begins in the corporation fiscal year.

Is there anything wrong with using salary from the 2/1/06-1/31/07 fiscal year for the plan year 10/1/07-9/30/08?

This way, the valuation could be done in October for the upcomming year rather than having to wait until the end of January for the salary.

Which principals can waive benefits upon plan termination?

Do they have to own a certain percentage of stock in the company?

An employer maintains a cafeteria plan for its employees under which, among other benefits, employees may elect from among various medical coverages. An employee and his spouse have elected medical coverage during 2007. In October, 2007, the couple becomes divorced. However, the employee fails to notify the employer of the divorce until March 2008. In addition, the plan has a requirement that employees provide notice within 30 days of the occurrence of a change in status event. It appears to me that there are a number of options available to the employer in this situation:

(1) Drop the former spouse's medical coverage and deny the former spouse COBRA rights as permitted by the IRS Regulations at 54.4980B-6, Q&A-2. The employer could also impute into the employee's gross i ncome its portion of the premium attributable to the former spouse's coverage and treat the employee portion fo the premium attributable to the ex-spouse as if it were made on an after-tax basis.

(2) Treat the employee as if timely notice were provided and that the former spouse elected COBRA coverage. The employer could then impute its portion of the portion attributable to the ex-spouse into the employee's gross income and treat the employe's portion of the premiums attributable to the ex-spouse as being made on an after-tax basis. On the basis of the 7th Circuit decision in Trustees of AFTRA Health and Welfare Fund v. Biondi, the employer could also seek to recover the portion of the COBRA coverage equal to 2% of the administrative fee.

Under either scenario, this presupposes that the employer is waiving the 30-day notice requirement for notification of a change in status event. Does anyone have any other options?

The Dept. of Labor has determined that a welfare benefit plan isn't unfunded if employees contribute. The benefits aren't paid solely from the employer's general assets and, therefore, the plan doesn't qualify as unfunded.

Does the term "employees" encompass both active and terminated employees?

Here's the situation: There's a life insurance welfare benefit plan. The employer pays 100% of the premiums for its active employees. If retirees want to participate, however, they're required to pay their own premiums. I believe that this is a funded plan.

Looking for a concept check/correction, know points discussed before. Assume DB plan new for 2008 (1 man plan w/225k comp) with EOY valuation and would have target normal cost of say $100,000 at EOY if accruals based upon participation. It's been discussed that in this situation the first year of plan that min=max funding since cushion (max funding) based upon target liability at BOY which is zero (0).

It's been further discussed that switching accruals to past service would give you a target liability at BOY that is not zero, and could therefore create a funding range in the first year. If we take this approach, and given 415 apparently has special rule for funding as of 1st day of plan year (can assume a 1/10th 415 limit accrual), would the mechanics of putting in a rich unit credit formula of say 10% for each YOS (maybe limited to 1 year past service credit) produce a funding approach like the following:

Target Liability @BOY: $100,000 (might be discounted back 1 year for interest adj.)

Cushion Amount: $100,000 * 1.5 = $150,000

Target Normal Cost: $ 0 (since 1/10th of 415 limit is max accrual and it's been applied as of 1st day of plan year to past service accruals).

Shortfall Base/Pmt: ($100,000)/TAF (based on appropriate segment rates), assume payment is maybe $16,000.

DB Funding Range: $16,000 to $150,000 (or whatever the exact number produce).

Does this work ? Corrections ? The lack of normal cost seems weird but you wouldn't have 2/10ths of the 415 limit at EOY so I don't see how you'd have an accrual for normal cost.

We were recently retained to assume administration for an individually designed plan handled by a deceased attorney. The plan was amended for GUST, but nothing since. I restated onto our Corbel GUST volume submitter document to get the necessary amendments to file under VCP (streamlined). My intention was to the restate it again during the two year EGTRRA restatement period (our document is not yet available). While restating, I noticed that the employer has an EIN ending with a 1. Accordingly, the document has missed the EGTRRA 1/31/07 individually designed restatement deadline. We cannot find a Form 8905.

What is the proper correction procedure?

I am working with an individual who was a partner in a firm but left there as of 1/1/07. In mid 07 he received a payment for 2006 trailing receivables. The partnership operates on a cash basis of accounting. The payment he received is "unrealized receivable" according to IRS Pub 541. His accountant has told him he could contribute a retirement plan contribution to his former practice’s plan for this income. Does this sound right?

We all breathed a sigh of relief when DOL allowed the annual statements due date for "balance forward" type plans to extend to the 5500 due date. However, there are still unresolved issues. How are people handling the following:

1. Permitted Disparity Formulas - Are you attaching language describing these allocation formula in trustee directed plans? Are the major software providers (Relius, Datair, etc..) providing any boilerplate language to be part of the statements?

2. Plan Asset Description - Are you including a description of the total value of each investment in the plan with each statement? Are you somehow breaking down each participant's ratable share of each investment in the plan? Are you ignoring this requirement abscent further DOL guidance?

I've read about a "product" that would allow an individual to use 401(k) assets to establish and operate a business. I won't give any free advertising to the company. Bascially, an individual sets up a corporation and the corporation adopts a 401(k) plan. The sole participant then rolls his account from a prior employer into the plan and would direct that the assets be invested in a new entity (solely owned by the 401(k)). Anyone heard of this? I can't imagine that it's legit.

A client sponsors a profit sharing plan that allocates contributions on an integrated basis. The owner makes < TWB, so allocation is effectively comp/comp. Sponsor has historically contributed 25%of comp. Plan requires 1000 hours and employment on last day of PY for actives to get an allocation. Retirees share regardless of hours.

Client wants to amend to a tiered allocation. One participant retired 3/1/08. What is the correct application of 9735001?

1. Can't amend for 08. Start a new plan.

2. Amend for 08, but make sure the retiree gets 25%

3. Something else?

Comapny A includes the son and daughter in law of it's owners.

In mid 2007 a new co(B) was formed.

The son owns 20% of co.B.

Co.A and B are controlled group.

Q: for 2007,is the daughter in law an hce?

We use a Corbel VS document for a profit sharing plan that allows cross-testing and has each participant in a separate group.

In certain years, is it permissible to use design-based safe harbor allocations and not utilize the cross-testing feature. Specifically, comp-to-comp allocations or TWB-integrated allocations. Unfortunately, younger employees terminate employment when you least expect them.

Thanks for your insight!

Investment advisor structured as self-employed, who has his own DB plan, wants to know if he can pay himself the 1.5% advisory fee on certain investments if the plan invests the money with the firm he's associated with (sounds like the financial equivalent of a real estate agent structured as Independent Contractor but still associated with a real estate firm). There are no employees.

What I can find suggests that since he'd be the one appointing the investment manager (i.e., himself) that he does not qualify for the normal exemption for reasonable fees/services. However, I could swear I've seen in my pension lifetime people getting "Trustee fees" who were also 1-man plan/owners (of course those would all be takeover plans ;-).

Any thoughts or opinions as to whether he could get paid the 1.5% advisory fee ?

If a money purchase plan was merged into a profit sharing plan, do the money purchase assets have to comply with the "new normal retirement age" rules?

What happens or what must you do when you merge a money purchase plan into a profit-sharing plan? What plan language is required? Do the assets that derive from the money purchase plan count as rollovers?

I've read that a distribution from a nonqualified plan that is paid to a beneficiary in the year following the participant's death is not subject to income tax withholding. FICA and FUTA were already incurred. Can anyone confirm this? The participant has not been an employee for several years, so 1099-R will be used. Please help.

Hi,

I'm looking for old DC-3 sample exams or cram session material for the DC-3 exam, can anyone oblige? The old sample exams used to be available on the ASPPA website, but now I see they have only one available, and there is a fee for it.

Thanks!

Sch C filer. Profit sharing plan. Accountant misses the deduction for the single employee, but takes the deduction for the owner in 2006. No wages or contribution in 2007. Can they take the deduction for the contribution for 2006 (actually made in 2007) on the 2007 Sch C - even if it creates a loss? Any different answer if it didn't create a loss?

Ok, here's my question. Suppose you have a Doctor in private practice. He owns the practice, sponsors a PS plan, and receives a maximum contribution for 2007 of $45,000. He also works, as an employee, for a local hospital. And he makes elective deferrals to a 403(b), AS WELL AS receiving employer contributions to the 403(b). Clearly, the elective deferrals must be aggregated with his PS plan. What about the hospital employer contributions? While it seems an unjust result, it seems like the regulation could be read to require aggregation of any 403(b) amount, and not just the deferrals. What do y'all think?

(2) Special rules under which the employer is deemed to maintain the annuity contract -(i) In general. Where a participant on whose behalf a section 403(b) annuity contract is purchased is in control of any employer for a limitation year as defined in paragraph (f)(2)(ii) of this section (regardless of whether the employer controlled by the participant is the employer maintaining the section 403(b) annuity contract), the annuity contract for the benefit of the participant is treated as a defined contribution plan maintained by both the controlled employer and the participant for that limitation year. Accordingly, where a participant on whose behalf a section 403(b) annuity contract is purchased is in control of any employer for a limitation year, the section 403(b) annuity contract is aggregated with all other defined contribution plans maintained by that employer. In addition, in such a case, the section 403(b) annuity contract is aggregated with all other defined contribution plans maintained by the employee or any other employer that is controlled by the employee. Thus, for example, if a doctor is employed by a non-profit hospital to which section 501©(3) applies and which provides him with a section 403(b) annuity contract, and the doctor also maintains a private practice as a shareholder owning more than 50 percent of a professional corporation, then any qualified defined contribution plan of the professional corporation must be aggregated with the section 403(b) annuity contract for purposes of applying the limitations of section 415© and §1.415©-1. For purposes of this paragraph (f)(2), it is immaterial whether the section 403(b) annuity contract is purchased as a result of a salary reduction agreement between the employer and the participant.