Employee elects to participate in 125 plan but, because of a payroll processing error, no amounts were contributed on behalf of the employee. Expenses have been incurred but not reimbursed. Although there is no correction program, is there a way the 125 plan can pay the benefits without becoming disqualified and without the employee having to defer his entire paycheck (even assuming the employer pays a bonus that's contributed to the plan)?

I have a client who currently sponsors a profit sharing plan through his medical practice that covers himself and his one employee. He also teaches at a local university and now has the opportunity to participate in the u's 403b plan. His 403b deferrals count towards his 415 limit, and thus will reduce the amount he needs to deposit for himself to get to his maximum allocation, which in turn will require a smaller allocation for his employee in his ps plan. But as far as I know, for all other purposes, the 403b is completely separate and apart from the ps plan for purposes of coverage, nondiscrimination, etc.

Am I missing anything? Is there any reason not to recommend his participation in the 403b plan?

We are speaking with a prospective client about an issue that has come up regarding real estate in profit sharing plan. The plan had invested some money in a real estate venture through a default the property has reverted to our prospective clients plan. This property has the possibility to greatly increase in value do to the mineral rights. These issues lead us to a few questions that we thought we would run by the board to see if anyone has gone through this before. Our questions are:

1. How do you establish a value on this property with these speculative mineral rights. Our feeling would be for the company to hire a real estate appraiser with knowledge of mineral right valuation. Is this correct?

2. The owner is 68 so RMD isn't required yet but we know this is going to be an issue very soon. We are assuming we would use the appraised value of the real estate to calculate the RMD. Is this correct?

3. RMD leads to the question of liquidity...if there is not enough money in the plan how do we handle the RMD with the real estate.

4. Finally...is there a way to move the real estate out of the plan? Any ideas on how this could be replaced. Again it would appear to us that the real estate would have to be bought out of the plan to provide the cash asset. Any alternative ideas. ESOP/KSOP?

Any ideas would be great.

thanks

I must be missing something regarding the date on which the new PPA rates and mortality apply for lump sum payouts.

Do these apply in determining the amount payable to a Participant having an annuity starting date on or after January 1, 2008, regardless of the plan year?

I expected this to be tied to the plan year, but I didn't see the plan year tie-in.

So, for example, could (or should) an October 1 plan year begin utilizing the new PPA interest rate and mortality January 1, 2008?

Is it required that there is language in the Document or Adoption Agreement that speaks to the ability to 'gross up" the available Hardship amount to cover applicable Federal, state or local taxes?

Thanks

Have an IRS auditor requiring Form 56 to be signed as part of an audit of a small husband and wife defined benefit plan. I've never had an IRS auditor require Form 56 to be signed before. Auditor is threatening that audit will be closed unagreed if plan sponsor does not sign Form 56. Is this normal?

What is the difference between a Automatic Contribution Arrangement (ACA) and an Eligible Automatic Contribution Arrangement (EACA)?

In PLR 200404050, the IRS concluded that "market value equalizer payments" (which are essentially payments to a plan by an insurer to make up for a surrender fee paid to a prior insurer) were not considered plan contributions for purposes of Sections 404, 401(k), 4979, etc....

Could someone familiar with these kinds of insurance arrangements comment on why this would not be a prohibited transaction (i.e., a loan between the plan and a party in interest)? Thanks.

Hy!

I have a question regarding contributions to a nonleveraged ESOP: the contributions can be made either in cash or in stock. From where a company takes cash to put it in ESOP (I assume that one option is from annual company profit, are there any other options?) and from where stocks (I assume again that one option are newly issued stocks, I read somewhere that company can buy stocks from its owners or it can buy stocks from its shareholders?) Can you please explain more detailed.

Thanks.

Natasa (Slovenia)

Suppose the plan year and limitation year are 7/1/07 to 6/30/08. The plan terminates 12/31/2007. This is a one participant plan. There are excess assets in the plan, as of 7/1/2007 and at plan termination. The maximum benefit is the 415 $ limit, which is $185,000 for the current limitation year. If the distribution is made in 2008, the $ limit is $185,000 per 1.415(d)-1(a)(4)(ii).

The accrued benefit is grandfathered as of 7/1/2007 under the final 415 regs. The formula benefit gives a higher benefit than the 415 limit at 7/1/2007. If the benefits are not paid out until 2009, can the participant get additional assets because his formula benefit was limited by the previous 415 limit? Can the participant get additional assets if the plan provides for the allocation of excess assets to participants?

Announcement 95-99 audit guidelines said that the dollar limit was frozen at the date of plan termination. But perhaps the final regs overrule this? Or do the final regs just apply to periodic payments or to plans that have COLAs? 1.415(a)-1(d)(3)(v)©

If you were considering starting an investment advice program for plan participants now, would you make sure that the program met the PPA requirements, or would you be okay with using pre-PPA, i.e. SunAmerica, guidelines? I think that having the DOL say that SunAmerica continues to be okay is nice, and if I already had a program that met SunAmerica, I would say this is a great outcome. If I'm implementing a new program, I can't think of a good reason to go with a program that only meets SunAmerica because it seems like the stakes have been raised. Thoughts?

Would anyone care to offer an opinion of what "issued or delivered" means in an insurance contract context?

I often run into state insurance laws that purport to affect any policies "issued or delivered" in that state. It appears that one state could dictate the contents of another state's insurance policy.

For example, State A requires coverage of domestic partners in all group health insurance policies issued or delivered in State A.

An employer in State B purchases a group insurance policy in State B from a carrier licensed in State B. The contract happens to cover some employees who live in State A.

In this situation, must the State B employer make domestic partner coverage available for all employee that reside in State A?

I am looking at a situation where the IRS is considering disqualifying a client's defined benefit pension plan for the plan's failure to meet Code Section 401(a)(26) and 410(b) requirements. In effect, the plasn covered only the two owner-employees.

Due to relatively high compensation amounts and plan contributions in the first few plan years, the client's accrued benefit exceeds the amount of plan assets.

I am very familiar with Code Section 402(b)(4). In this situation, the client will have to take into income approximately $1,000,000, even though the client only contributed $500,000 to the plan.

Does anyone have any experience in dealing with the IRS on this issue. Are there any creative arguments that can be made that would lessen the impact of the application of Code Section 402(B)(4).

Thanks in advance for your comments.

Ed

NQDC plan provides that the plan must terminate within 30 days of a change in control and provides for a benefit to otherwise ineligible employees, upon a change in control.

Employer negotiates stock sale of entire company; seller will not exist after sale and buyer will not assume seller's obligations under plan. Plan terminates and benefits are distributed.

Change in control transaction falls through.

Is this a 409A violation?

If so, is it something that foreseeably could be corrected through the proposed 409A voluntary compliance program?

Plan also allows for discretionary termination but 409A prevents distribution of benefitsfor 12 months unless benefits would have been distributed had plan not terminated, and in this scenario benefits are already distributed.

I have a new client whose plan excludes collective bargained employees. One employee works for a union (collective bargained), but is laid off from that employer. He is working for my new client, but not as a unioned (collective bargained) employee. Is he eligible for this plan?

Thank you so much!

Has anyone thought about how to best use the IRS transition guidance to deal with nonqualified stock options to purchase preferred stock (that are subject to 409A)?

401k wants to terminate 12/31/07 and start a simple ira starting 2008. Can assets be rolled from the K to the simple? Can a plan liquidate the entire k plan, complete testing and filing for the final year and be done with it or do they have to go thru a termination process with the IRS? I get different responses from different TPA's.

Thank you in advance for any advice.

I've got an in-the-money option that is about to expire. Would like to extend it but can't do it under regular 409A rules (for example, extension would go beyond 10 years). Question: any problem with changing the option during the transitional period (ending 12/31/2008) to allow exercise at a 409A date, such as change of control or separation from service? By taking out the employee's discretion as to the time of payment, the revised option would be compliant with 409A. We're changing the payment date, but that's allowed during the transition.

I think it works - but will call on the megabenefitsmind out there in cyberworld to see if it disagrees.

Is anyone familiar with a "Rainmaker" 401(k) Plan that is designed by a potential business owner to invest in a new C Corporation? Company that proposes this program is Benetrends.

Does a SIMPLE 401k that is being terminated need to be amended for PPA?