Participant has RE in his self-directed PSP account worth 2.5 MIL. Assuming plan allows for in-kind distributions, is there any reason why participant could not request an in-kind distribution of an undivided interest in the RE each year until it was all distributed out to participant? Particpiant's thinking is that as each undivided interest is distributed it would appraise for much less than the pro-rata value of the entire 2.5 MIL tract and thus he will have less tax to pay on the distribution. Two issues: 1) It seems incongruous that the PSP could have the property valued at 2.5 MIL inside the Plan and then have the participant receive for example, ten (10) distribbutions valued at less than 250K each because of the undivided interest aspect; 2) appears there would be potential for prohibited transaction issues in the interim, e.g., when participant would own 10% of the tract and the PSP would own the other 90%, e.g., PSP inadvertently pays all of the property taxes, etc.... Any thoughts? Thanks for the help.

The employer is switching from a self-funded plan to a fully insured health plan. Annual open enrollment for the self-funded plan is April 1, but open enrollment for the insured plan does not begin until June 1. The employer does not want to permit anyone to enroll in the self-funded plan on April 1. Can they amend the plan to eliminate the annual open enrollment period? If so, what kind of notice do they need to provide to plan participants?

I am looking at taking over the 401(k) Plan for a company with 6 employees. This company is owned by a company listed on one of the stock exchanges. The big company also owns at least one other company with 4 employees and no 401(k) Plan.

I am trying to picture how I am going to do coverage testing. I think I am going to have a hard time getting all of the census data for the large company and all of the little ones. Does anyone know of any shortcuts I can take?

(I think the previous TPA saw the Basic Match Safe Harbor and thought no testing was necessary.)

Have a small 401(k) plan that was late for one payroll period for a few weeks. (Was caught and corrected within 2 months.) The penalty tax is well under $50. (The cost of a EPCRS filing is obviously not justified.) Is there a level at where the tax is just ignored (no filing) since the amount is so small? I don't know of any, but thought this was a good question to post.

Can anyone provide guidance on the correction prodedure for in-service distribution failures in a multiemployer plan?

I took a look at EPCRS and did not find a correction method provided for in-service distribution failures. My thoughts were to model a correction method after the correction method provided for hardship withdrawal failures (i.e., retroactively amend the plan to provide for the in-service distributions that were made available and then submit the amendment to the Service during the Plan's restatement cycle). Any guidance, any thoughts? Thanks in advance.

My understanding is that a self-employed person's earned income for pension plan purposes is the income on which Self-Employment tax is paid/payable - income shown on Sch SE of Form 1040?

An individual has Sch C earnings of $X and royalties (from inventions) of $Y but only pays SE tax on $X. Can the royalties be considered as his earned income for pension plan purposes and deduct DB cost against that income?

Having a problem with a takeover case where the client has, in the past, contributed and deducted far more than the Sch C earnings of $X.

(Why royalties from inventions are not subject to SE tax is a question for another day).

I am trying to match some annuity factors provided to me from someone using Relius DB valuation software. Can anyone tell me what Relius produces for the age 64 immediate factor with the following assumptions:

1) GATT (-5) & 5%

2) RPA CL mortality & 4.37%

3) RPA CL mortality & 5.77%

Thank you for the help.

Have a plan with loan provisions that state that oustanding loans become due and payable upon termination. Loan promissory note says due and immediately payable on date of termination of employment.

what is the experience out there? If a guy is getting laid off, if he does not pay back loan THAT day, is it a default and taxable? In anybody's experience, do you give any kind of grace period to repay?

In reviewing the recent regs on Measuring Liabilities for Pension Funding, there is a provision for plans that pay lump sums based upon the greater of 417(e) or actuarial equivalence (most small DBs). It seems to indicate that the computation of present value for Normal Cost and Target Liability must take into account the extent to which the PV of the expected lump sum distribution is greater than the PV of the 417(e) lump sum using 417(e) mortality and 430 segment rates.

In trying to decipher this, it seems if we have a plan that, for instance, uses GAR94 @5% for AE, then can we value the lump sum at assumed NRA based upon actuarial equivalence and then discount to current age using the 430 segment rates? Or, could we possibly discount to current age using the pre retirement AE interest rates?

Has anyone figured this out, since this has a direct impact on minimums and maximums for most small plans?

An employee of mine waived our group coverage in order to take her husbands family plan. He was laid off, and their coverage ended Jan 31st for that plan. So we talked about bringing them back onto our plan Feb 1st due to loss of other coverage, but they decided to stick with that plan through the COBRA coverage. Now 2 months later, they are significantly increasing their COBRA rates, so she is wondering if she can come onto our plan now. And I can't think today, so I'm not sure if that rate change would be a qualifying event.

Thanks for any thoughts.

Client has a 401(k) plan and uses prior year method for 2006 and 2007. Definition of Compensaiton in 2006 excludes bonuses. For 2007 year, client amends definition of testing compensation to 415 comp Does the 2006 test need to be re-run with the amended definition of compensation when calculating the ADP for the NHC group (which will be used in 2007 test.) My opinion is it does not, but wanted to see what others thought.

A covered dependent spouse is divorced by the employee spouse who promptly quits and obtains immediate non HDHP coverage elsewhere. What is the least the annual deductible applicable to the divorced spouse can be assuming no claims had been applied toward the family deductible in place prior to the divorce?

A Participant wants to rollover his IRA to his 401K.

Is this allowed?

I know you can rollover over from a 401k into an IRA, but I was not sure about the opposite way.

I ran across something in Sal's book Index that I cannot seem to find further information on.

The section reads:

"Section 401(k) plan maintained by LLC" - Member's elective deferrals treated as matching contributions if LLC taxed as partnership."

The Index directs you to look in the ADP/ACP testing or 401(k) plan sections, but I was unable to locate this specific topic in either of those sections.

Has anyone ever heard of this?

Thanks,

Rachel

Good morning. I'm a benefits attorney who has already looked at "Who's the Employer" and wanted to run a question past the community.

Individual 1 owns 100% of Company A, 0% of Company B, 60% of Company C and 68% of Company D.

Individual 2 owns 0% of Company A, 100% of Company B, 40% of Company C and 32% of Company D.

Individual 1 maintains a retirement plan at Company A.

Individual 2 maintains a retirement plan at Company B.

Employees art C and D are covered under separate elective deferral only 401(k) plans.

If we were only looking at C and D, it looks like a brother-sister controlled group.

Does this change when we look at A, B, C and D?

I am only concerned with the brother-sister issue, as I have concluded that there is no affiliated service group issue.

Thanks very much for your assistance.

Ed

Regarding the family attribution rules under IRC Sec 1563, there was an interpretation years ago by S. Derrin Watson that stated that a husband's & wife's ownerships in an entity cannot be double counted even under the attribution rules. For example, if a husband/wife both own 50% of Corp A you cannot state that under Sec. 1563 that each own 100% (50% direct ownership + 50% indirect ownership). Instead, you can state that the husband owns 75% and the wife owns 25%, 100% owned by husband and 0% by wife, or any other combination to equal 100%. It seems to me that by interpreting the family attribution rules in this manner, that you are able to manipulate the controlled group status.

Any thoughts on the double counting interpretation?

We have client that wants to increase the safe harbor match effective April 1, 2008. Can we do this as long as we provide a new safe harbor notice. The 2008 notice was provided to the participants in timely fashion. Thanks.

I have a client with a Master Trust that was dissolved as of 8/31/07. The plan year was a calendar year, and they filed their 1/1/06 - 12/31/06 5500 on time. What is their filing deadline for their 2007 5500?

1. The 5500 instructions indicate that the filing deadline is within 9 1/2 months of the end of the plan year. Would their plan year be 1/1/07 - 8/31/07, making their 9 1/2 month deadline June 15, 2008? Or would their plan year be 1/1/07 - 12/31/07, making their 9 1/2 month deadline October 15, 2008?

2. The 5500 instructions indicate that, for short plan years, the filing deadline is the end of the 7th month following the end of the short plan year. The instructions don't seem to differentiate between Master Trust and other filings for this purpose. This would make their filing deadline 3/31/08!!

Also, could you please confirm that Master Trusts are not allowed to file for an extension of their filing deadline?

Self Insured client changed TPAs and stop loss carriers. The prior stop loss contract was on a 12/15 basis- incurred in 12 months and paid in 15. Here's the issue:

Claim was incurred in the contract period and paid in the 15th month. So far no problem. However, the NY Surcharge for the claim was paid in the beginning of the 16th month as required by NY.

I've been told by several TPAs that the NY Surcharge is treated as having the same "paid" date as the claim it is attached to, not the actual date paid to NY.

The stop loss carrier is treating this as a totally separate event and denying the surcharge claiming it was "paid" outside the contract window. What is common practice on the street as I am getting two different versions?

Thanks,

Phil

When i first started a Roth IRA in June 05 I didn't plan well and realize that I would be making over the income limit when I had my full time job. I feel handcuffed now because I can not contribute to my Roth, nor will I be able to for the rest of my career. Can it be transferred to my wife's name, thus allowing contributions? (although, she will most likely become a non-working entity soon when we start to have children, thus dis-allowing contributions). The money is just sitting there, and I realize that I can take out the contributions w/o penalty. There are almost zero dividends since it has been invested in June 05. Would it be most prudent to simply withdraw all contributions and place the money elsewhere in a vehicle that is more suitable? If so, what happens to the account? Is it simply closed like a money market acct or such would be? Would my shares of stock (VFINX) just be sold on the market to get my money liquid and withdrawable?