A participant in a DB plan wants to know whether he and/or his wife are eligible to make deductible contributions to traditional IRAs for 2007. The DB plan was frozen in 2005. However, the employer was apparently required to make additional contributions to the plan--what they are claiming are "actuarial adjustments"--before terminating the plan in August 2007. The question here is whether there was active participation in the plan in 2007. Normally, relying on Notice 87-16, I would say there is no active participation in a frozen DB plan. However, does the fact that some sort of actuarial adjustment was made change this? I'm guessing that it does.

I invest in homes and have to pay capital gains taxes on the sale, etc. I recently found out I can buy my homes by paying the down payment from my Roth and due to this will never have to pay capital gains taxes on properties purchased through my Roth. How does this work? Where can I get additional information on this entire process since my broker is leary of course, but I think I know why he feels the way he does, and that is losing commissions on something that may be a great idea. Thanks in advance. wd

We have 3 employees in Puerto Rico on a fully insured group health plan. We have 1000+ employees on self-insured health plan in US. I cannot locate any information on COBRA coverage in Puerto Rico. Does anyone know if they follow the same US reg's?

Thanks.

Prospect currently maintains a profit sharing plan for two doctors and their spouses, no common law employees.

One of the doctors wants to initiate a defined benefit plan, the younger doctor does not wish to participate, and wants to contribute to the profit sharing plan.

I assume since these are all HCEs there is no problem setting up a DB for one owner and his wife and setting eligibility to exclude the other doctor and his wife.

Hi,

I currently have an HDHP with HSA through my current employer and I am getting ready to start a second job that also provides medical coverage. While I know if I get other non hdhp medical insurance I will be unable to add funds to my HSA. What my question is since my second employer also offers an HDHP and they provide a match to the HSA can you have two different HDHP plans and still contribute to an HSA?

I originally was just gonna decline medical insurance with the second job.

Thank you

The big boss of a major client recently divorced, and as part of the divorce he agreed to name his children as the beneficiary of his death benefits under a qualified plan and 457 arrangement, and for most of his death benefits under various life insurance arrangements provided by the client.

The former spouse wants assurance that the beneficiary designations have been made, that they will remain in place, and that they will be honored by the plans; and the boss wants assurance that there will be no further claims against his benefits (other than those rights granted under the agreement). They want to do all this without going back to the judge.

One of the qualified plans is a defined benefit plan that provides that the death benefit will go to the spouse unless the spouse has approved another beneficiary. I know that can't be changed except with a domestic relations order. So my question really relates to beneficiary designations that the plans say are entirely within the discretion of the employee - can the employee direct the plans not to recognize any changes except with the spouse's consent.

Do you have any suggestions of what might work to meet these goals. I would think this was a fairly common scenario - how do companies handle it?

Happy new year, and thanks for your help.

The only form of distribution for a plan is a lump-sum distribution. Plan also allows in-service withdrawals at age 59 1/2. Does the participant have to take a total distribution if he wants an in-service since the plan does not allow for partial withdrawals?

Thank you.

Hi: We have had a Roth IRA for about seven years. Every year we had put in 1500 dollars. Total contribution 10500. Portfolio shows 14429.92. Am I right to assume that i can pull out the 10500 early without penalties and fees?

Thanks

Can someone tell me how the Annual Percentage Rate (APR) is determined for cross testing?

I see a lot of liturature with the following:

The participant is age 55, the interest rate is 8.5%, and the UP-1984 Mortality Table is used.

In most examples I see, the ARP is 95.38 or the Actuarial Factor is .035155.

Can someone explain to me how these numbers are arrived at? I assume they come from a table. Is this true?

Thank you in advance.

Employer of single owner-employee corporation mistakenly contributed $4000 excess profit sharing contribution in excess of the limits (25% of salary). Noticed mistake on Dec 28th the same year. Question: (a) Must form 5330 be filed if excess contribution is returned to employer before year end? (b) Section 4972 ( c ) (1) (A) (for the current year) surprisingly does not have a provision as in ( c ) (1) (B) (i), does this mean contribution returned to emplyer can only 'compensate' overcontribution from previous year but not from the current year?? ( c ) Section 4972 ( c ) (3) on the other hand seems to imply that employer's excess contribution can be returned without penalty until employer's tax filing date for the year in question? But only if the overcontribution was due to a 'mistake of fact'? This is not mentioned at all on form 5330.

Is there a short answer: File form 5330 or not? Penalty or not?

Thanks for clarification!

The copyright symbol © should be ( c )

Takeover DB plan from a major firm says the lump sum (not just the minimum lump sum-only one definition) is based upon the

"mortality table specified in Section 417(e)(3) of the Code and an interest rate equal to the rate defined in Section 417(e)(3)(A)(ii)(II) of the Code for the month of October immediately preceding the Plan Year during which the termination occurs."

So, if I terminate in 2005 and get a lump sum in 2007 the 417(e) rate used is for 10/04. The plan has been administered this way and the actuarial firm even gave client a template that calculates benefits this way.

Is there any justification for this that we may have missed? We think that "termination" replaced "distribution" in error, but major actuarial firm applied it as written.

I have been going through the new proposed regulations that came out on August 6, 2007, trying to decifer how the different compliance tests are performed as per 1.125-7. I am currently looking at the Safe Harbor testing under 1.125-7(e) and (f) and had a few questions. In looking at these two subsections of the code, it appears that there are 2 different Safe Harbor tests that a Plan Administrator will have to pass in order to be released of the burden of performing the Contributions and Benefits Testing as well as the 25% Key Test. I am trying to determine how these 2 tests interact with one another or if they are completely separate. Is one a Safe harbor from the C&B Test and the other from both? Also, can someone give me a few different examples to walk though the reguation based on 1.125-7(e) as to how this test actually works (The example in the regulation shows all 10 employees electing $8000 salary reduction, what if not all 10 elect to participate?). Maybe some examples of 1.125-7(f) would help as well. Thanks in advance.

I've seen at least one blog and other sources (including clients) suggesting that the PPA non-spouse rollover rules (optional in 2007 per Notice 2007-7) will be required in 2008 based on a statement in the IRS's 2007 List of Required and Interim Amendments. That statement indicates that pursuant to impending PPA technical correction legislation, nonspouse rollovers will be required in 2008. However, that legislation has not been passed. As such, it is my view that the IRS's conditional interpretation of what would happen should the legislation be passed should not hold the force of law. In otherwords, I believe those who are saying the nonspouse rollover rules to be required in '08 to be wrong.

Anyone want to quibble with this?

401(k) Plan

Beneficiary on record is deceased participant's friend

Friend doesn't want the death benefit from the plan - want's the deceased children to receive the benefit.

Is she allowed to reassign the benefit to the kids so the plan pays the kids directly?

If yes - what do I need to have her do to accomplish this.

Thanks

PF

I know someone can help me. I just need to know where I can go to find IRS regs on hardship distributions. I used to have a website saved in my favorites where I could look up any reg but it doesn't work any longer.

Thanks

A plan provides a projected benefit of X% of comp, reduced for service less than 35. So far, so good. The accrued benefit is then defined as the projected benefit multiplied by service to date divided by the greater of service at NRD or 35.

Is double pro-ration like this as wacky as it seems?

Is there any way around 406(b) to permit the plan sponsor to direct the investment of the profit sharing piece of an individual account 401(k) plan in a proprietary fund?

Happy New Year from the IRS. The IRS is increasing the reenrollment fee from $25 to $250 (yup, 10 fold). The recently published final reg. indicated an effective date of January 22, 2008, which led one to believe that you could get your application in before then and pay the bargain basement price. I spoke with a representative who indicated:

(1) The $250 renewal fee will apply to the new enrollment cycle that begins April 1, 2008 so no early-bird specials; and

(2) There will be no mailing of the renewal application (can't use any of that $225 increase for postage!) and it will be incumbent upon EAs to go to the Joint Board Website to get the new application.

(3) The new application is not yet available and should be available in mid-January from the Joint Board for Enrollment of Actuaries website, which I believe is non-existent. Go to the IRS wbsite.

By the way, the IRS justification for the steep increase is, "The dollar amounts of the fees are not, however, substantial enough to have a significant economic impact on any entity subject to the fees. The amounts of the fees are commensurate with, if not less than, the amount charged by professional organizations. Persons who elect to apply for enrollment or renewal of enrollment also receive benefits from obtaining the enrolled actuary designation." In short, the IRS is increasing the fee because they can.

Calendar year top-heavy 401(k) Plan that will allocate the basic safe harbor match and a discretionary match for 2007. There will not be a profit sharing contribution for 2007, but there are profit sharing forfeitures to reallocate. Payroll ceased for all employees (keys and non-keys) in mid-September due to asset sale. Plan termination paperwork has not yet been drawn up, but will be in the near future and we will submit the plan for an fdl in 2008.

After allocating the Basic SH Match, the regular match and the PS forfeitures, we calculated that the plan sponsor would need to deposit an additional $10,000 (appx.) to satisfy what would normally be the top-heavy requirement. But since there was no payroll after mid-September, meaning no one is actually employed on 12/31/07, is the additional $10,000 deposit required? How do you handle this?

Any thoughts on this would be greatly appreciated.

Thanks!

Do all Benefit Plans have to make the changes (i.e. exceptions) listed in KETRA, even if those Plans do not have anyone affected by Hurricane Katrina?

In other words, if a Plan does not have anyone who had a principal place of abode in the Katrina disaster area, does the Plan still have to have language in it that corresponds with the requirements of KETRA?

Also, KETRA states that and Plan Amendments must be made no later than the last day of the first plan year beginning on or after January 1, 2007. Has that date been extended by subsequent bulletins from the IRS or DOL? I have performed extensive research and have not found any extensions, but I wanted to make sure I covered all the bases.

Thank You.