Our volume submitter cross-tested DC plans have a resolution and a Gateway amendment (signed as late as 10-14-2003). We have been placing that same language (it has been cut and pasted) at the end of the vol sub basic document ever since. We just talked to another practitioner who used the (same provider for their vol sub doc). They do not have any gateway amendments in place for plans that were setup before 2005 (and many of them are cross-tested plans). What's the story regarding these gateway amendments for these vol sub documents?

An employee of an LLP who is participating in the health FSA (11/1 plan year) became a partner on 2/1/08. The loss of eligibility to participate would result in his termination from the FSA as of 2/1. Can the employee COBRA his FSA (participants are eligible to continue the benefit up to the last day of the plan year, after-tax) and what are the tax implications if the employee is reimbursed the entire balance (non-taxable)?

Does anyone know of a report in RA 12 that reports Roth separate from Pretax or else tags the number with and * signifying footnote or an R signifying Roth?

I am wondering if there are any kinds of reports. Participant statements, account summary, contribution report or anything else?

We are attempting to duplicate the 2007 Mortality tables, which were published in the "Updated Mortality Tables for Determining Current Liability" regulations around 2/2/2007. We are matching qx values for most ages but are slightly off for ages between 41 and 49 and between 71 and 79, which is where the Non-annuitant and Annuitant tables are smoothed. Has anyone been able to match these factors?

An example may help:

Male age 76

qx from published table =.034523

qx per our calculation below =.034489

Non-annuitant qx (using smoothed transition since no actual non-annuitant qx at age 76)

.030710 = .009922 + (.064368 - .009922) x 21/55 (smooth transition discussed in proposed regs on Mortality Tables dated 5/29/2007)

(.064368 is age 80 annuitant qx and .009922 is age 70 non-annuitant qx from published table)

Annuitant qx

.042169 from published table

Non-annuitant qx (projected to 2007)

.022520 = .030710 x (1-.014)^22 (.014 is from projection Scale AA for 76 year old male, 22 years from 2000 to 2007 plus 15)

Annuitant qx (projected to 2007)

.034615 = .042169 x (1-.014)^14 (.014 is from projection Scale AA for 76 year old male, 14 years from 2000 to 2007 plus 7)

Calculated qx formula

.034489 = .022520 x (1-.9896) + .034615 x .9896

(98.96% of those age 76 are annuitants using weighting factors from "Updated Mortality Tables for Determining Current Liability" proposed regulations on 12/2/2005)

Any help would be greatly appreciated.

I just took over administration of a Plan that needs an audit for last year (PYE June 30, 2007) for the first time. We may not be able to get all the information the CPA's need for the audit. One thing that seems no on has a copy is the 1099s for 2006. Without them the auditor says they cannot confirm that money was paid out of the Plan to thes 6 participants.

1, Does anyone have any suggestions about how we can show that money out of pooled investments were paid to Participants, other than cancelled checks?

2. What are the options if an audit cannot be completed?

I am new to QDROs and would be grateful for any insights.

Before Worker retired, a DRO was submitted to his plan on behalf of his ex-wife. The Plan determined that it was not a QDRO.

Worker retires, begins pay status. Plan Administrator notifies ex-wife that appropriate amounts would be segregated and withheld for up to 18 months or until a QDRO is received, or the amounts would go to Worker. Nearly two years pass and Segregated amounts are released by the plan to Worker.

Three months later, State Court Judge says that Worker must surrender the segregated amounts which were paid to Worker and give them to his ex-wife.

Is this correct?

Does anyone have familiarity with the exemption from FICA tax under 3121(a)(2)© for employer paid life insurance (other than group term life insurance over 50,000) where the benefit is available to employees in general or to a class of employees.

For example where a split dollar life insurance program is implemented for employees who are senior vice presidents and above with x years of service, this would seem to be a class of employees. Does anyone see why the exemption from FICA tax would not apply to the amount imputed into income as the economic benefit to employees or retirees who hold policies?

We converted a DB to CB (1999) and provided a transition benefit for those over 45 and 10 years service. The transition was to offset formula differences for those people close to early retirement, which under the old plan started at age 55. At age 55, the transition is credited to their account balance.

1. Is this transition benefit considered a protected retirement subsidy since it would continue after age 65 in an annuity?

2. Can this transition benefit be contingent upon being an employed participant at attainment of age 55?

3. If the transition can be made dependent upon being employed at attainment of age 55 and the participant leaves employment as part of partial termination at age 52 and is eligible to return to the plan if rehired for 5 years, and does not take distribution until after 55, would we be required to provide the transition benefit even if he is not rehired?

We only have a few people in this position but we want to do it correctly. It seems there have have been rulings close but not specific to addressing this issue.

Added 2/15/2008 Maybe in light of the 2008-7 Revenue Ruling we should be revisiting the transition benefit as not being allowed due to backloading violation by having it accrued all at age 55, rather than each year up to age 55 when it would fully accrue. AS it now stands, age 55 employees see an increase in benefit exceeding 50% of their account value. We are awaiting a determination letter on the plan as of the hold for several years.

A profit sharing 401(k) plan has an option for participants to defer under 401(k) - based on all taxable W-2 wages. The plan also has a CODA option, which allows participants to take some or all of the company "profit sharing" as cash instead.

I must have been working on DB plans and the why's and what's of a CODA plan slipped by me.

What is the advantage of having a true CODA vs normal 401(k) deferrals - or are they considered to be the same thing?

Are there any differences, like FICA taxation, what amounts count for testing, etc?

The new 415 regulations require us to limit a benefit to the lesser of the 415 dollar limit (as adjusted for RA > 65 and <62) or the 401(a)(17) comp limit.

Does the 401(a)(17) limit for 415 purposes apply even if the participants 3 year average is less than the 401(a)(17) limit?

For example

Participant age 68

20 yrs service

7 yrs of participation

$14,500 average comp

401(a)(17) average comp limit $18,194 mo.

Is it $18,194 x 7/10 = $12,736

Thanks much

Can you terminate a safe harbor 401(k) plan that provides for the 3 percent employer contribution in the middle of the year without a financial hardship? The regs aren't clear. I think you can provide a notice to participants, the 3 percent for the period the plan was in existence, and subject the plan to discrimination testing for the year, but I am not sure. Anyone agree or disagree?

Back in 2004 there was much discussion of the fact that the IRS was inactivating trust EINs that had not been used in a few years. Supposedly they agreed to stop doing that after much protest from plans that didn't happen to have distributions every year. I remember seeing discussions of the issue here, but wasn't able to find any just now.

We are running into the issue again, with EINs that were issued as recently as 2006. Does anyone have up to date information about where and to whose attention the request to reactive the number is supposed to be sent?

We have a client who has a Rabbi Trust. A key person has approximately 6.5 million and is now fully vested. However, they plan to work for the next 1.5 years. After 1.5 years the income will drop significantly. They would like to have the money rolled out now however postpone tax on the distribution.

Is there a way to do this?

Thank you,

Mike

We are going to evaluate moving from a flat percentage to a fixed dollar subsidy of our health plans. Is anyone else doing this currently? Any comments or lesson learned that you would be willing to share. Thanks.

Earlier this week, I came across a QDRO that was approved, but shouldn't have been. It was a shared payment order, but gave the AP an election to come into pay status anytime after the P's early retirement date. On our advice, letters were sent to the parties approving the order as a QDRO back in 2004. We have six years before the P hits early retirement age.

Should we tell the parties to go back to court to revise the order? Does the plan or our firm have any liability exposure for getting it wrong the first time? Any thoughts on the best course of action would be appreciated. Thanks.

Has anyone taken this recently? How much study time would be needed on average? I know that this is a broad question. I recently finished taking the Series 7 and the study time was extensive. Based on the amount of material that this test covers and since I have some experience in the industry...what would be the average? 1-2 months? Any tips?

- PYE 7/31

- Er FYE 12/31

- Plan term date 6/1/07 (falls within 8/1/06 – 7/31/07 PY)

- Plan is underfunded and employer planned to make final deposit to make sufficient once IRS FDL was received. FDL came last week.

- Sponsor will make the final deposit within next 30 days

- Pattern of deductions has been, contributions for the PY that ends in each FY (2005 contribution deducted on 2006 return, 2006 on 2007, etc.)

Would this final contribution be deductible for employer’s 2007 taxable year or can they deduct in 2008?

Thanks in advance for your responses!

If you are passing the 410(b) test using the ratio test, but failing the average benefits test, can you still use cross-testing? Or do you need to pass the average benefits test before you can go to the 401(a)(4) test.

I'm hoping against hope here.

Key employee prior to EGTRRA became former key due to the law change. (Officer whose comp. no longer sufficent to be key) We have been exlcuding him from top heavy since he is a former key. It would be awful nice to callhim non-key. Was there anything in EGTRRA that I may have missed that would allow us to classify a former key due to the law change as a nonkey employee? I haven't found anything, but it doesn't hurt to take a stab in the dark.

Hi everybody,

As I promised last week, I herewith post a free copy of my program which will calculate certain PPA lump sums. IMPORTANT NOTE: I guess my magic moderator permissions are a bit lacking at the moment, because the message board wouldn't let me upload the file unless I changed the extension from .exe to something it thinks is benign. Hence, I changed the extenstion to .pdf. But, I promise that it really is an executable file that you must rename from ".pdf" to ".exe" in order to allow it to run on your computer. Windows only, please, as it isn't set up to run on Unix.

The program is in the form of a regular windows installation routine. The program does not write to your computer's registry. Hence, it has an uninstall that comes with it that will completely eradicate any traces of the program from your computer as long as you haven't stored any additional files in the program's directories. If you have stored information, then the uninstall will not delete that additonal information.

I will be honest with everybody and state up front that the purpose of posting this copy of my program is to encourage you to purchase a version of my program that has more capability than the posted version.

NOTE TO THE MODERATORS: I have already discussed this with Dave Baker and he has encouraged me to post this version here and to announce the availability of the other versions.

The purpose of the attached program, other than the obvious attempt to have everybody and their mother's uncle write me checks or otherwise funnel money to me so that they can have their very own copy of one of the other versions, is to provide everybody in the industry with a completely free calculator that can be used as they see fit; including the ability to:

1) check the results produced by my program against their own spreadsheets or programs they have developed

2) check the results produced by my program against the results that their valuation system produces

3) compare the relative value of present values based on alternative assumptions such as the funding segment rates versus the lump sum segment rates

With that said, the attached version, which I have labeled the "trial" version, has some limitations that can be removed by purchasing either the "lite" or the "pro" version. The trial version can only calculate present values for ages between 62 and 65 (either current age or retirement age). It does calculations at non-integral ages. In addition, it can only use certain periods of 0 through 12, 60 and 120 months. That should be enough to check against whatever system you want to check against.

Obviously, the "lite" version eliminates the restriction on ages and certain periods and is otherwise fully functional, calculation-wise. The lite version can be used in a production environment, but it isn't intended for heavy lifting, so to speak. It is intended more for one-off type calculations where you want to have a quick and handy way to calculate present values.

The "pro" version includes a number of options that are intended to be used in a production environment. From the help file:

1) the ability to enter dates (valuation, birth and retirement) rather than ages (current and retirement). The system will then calculate the resulting ages. The system provides for six separate methods of determining ages based on the difference between two dates. You can select which method to use separately for current age and retirement age. You can use dates for one age (current or retirement) and not for the other, if you choose.

2) the ability to save a specific calculation in a separate data file.

3) the ability to call up the information from a specific data file so that it is redisplayed on the screen

4) the system maintains a history file which records the full path and file name each time a data file is saved. This history information is accessible by accessing the FILE menu option and selecting the HISTORY option which appears on the drop-down menu. Use of this option allows one to recall a prior calculation easily. The number of files maintained in the history file is configurable.

5) the ability to create your own output file (like a mail merge file) and therefore format the output as you see fit. [Actually, I have left this capability in the trial version.]

6) Range Print Option - you can easily print a series of calculations so that you can publish what the present value will be in the future. This option is intended to allow the user to generate output for a client indicating how much a plan should pay to a participant based on the exact date in the future that a payment is made, but it is not limited to merely that.

7) the information that is recorded allows for participant name and plan name.

A program like this requires that interest rates and mortality tables be updated in order to remain usable. I currently intend to provide 12 months of such updated information to purchasers of the lite version without an additional charge and 24 months to purchasers of the pro version. I expect any additional charge for updates beyond those dates to be nominal.

The cost for a single user license of the lite version is $225 and for the pro version it is $425. Additional licenses for the same site are 25% of the original price, with a maximum payment of twice the original price. That is, once you have purchased 5 licenses (the original and four additional licenses) you have a site license and can use it on all computers in the office. Contact me about pricing for multiple offices or for those, like me, who have businesses where employees work from home in multiple locations.

I want to thank Dave Baker for generously agreeing to let me post this. I intend to use a separate site for support discussions as I don't really think it is appropriate for me to use the regular forums within the BenefitsLink message boards on a continual basis.

If anybody notices any calculation errors, please let me know about them.

I can be reached via email at mike.preston@prestonactuarial.com

I intend to set up a download site that will enable purchase and downloading online.

Thanks

mike

NOTE: The attachment was deleted and re-uploaded at 9:45am Eastern time on Friday, February 8. If you downloaded the attachment before then, you may want to uninstall that version (or not install it at all) and install this version. Then again, you may not. The only changes were: 1) fixed a mis-spelling on the main screen (you would think I would know how to spell preretirement) 2) enhanced the pathing so that the context sensitive help will hopefully work no matter how one has their explorer settings "set".

PPAPresentValuesInstallTrial.pdf