We are auditing a plan that is a 401(k) that provides a match and a profit sharing contribution using 4.3 and $40,000. I have asked for the 401(a)(4) and the TPA is telling me that it is not needed because any integrated allocation is a safe harbor allocation and therefore the test is not needed.

I thought that the only safe harbor was a pro-rata and an integrated allocation using 5.7 and full TWB, or 5.7 and 20% of TWB. Am I missing something?

Thanks for any thoughts.

The last sentence of Treasury regulation section 1.409A-2(b)(2)(iii) states: "[A] schedule of payments does not fail to be an installment payment solely because such plan provides for an immediate payment of all remaining installments if the present value of the deferred amount to be paid in the remaining installments falls below a predetermined amount, and the immediate payment of such amount does not constitute an accelerated payment for purposes of section 1.409A-3(j)..."

The question is:

Can the "predetermined amount" be any amount or are we limited to the amount described under Treasury regulation section 1.409A-3(j)(4)(v)(B)? This regulation limits "cashouts" to an indexed about under Code section 402(g) (e.g., $15,500 in 2007).

Some commentary is suggesting it can be any amount. However, other commentary indicates that the limit may apply.

Any insight would be appreciated.

Thanks.

The crux of the issue has to do with unfunded health benefits to be provided by companies to senior corporate executives upon separation from service (retirement) or disability. The rights to these benefits are housed in employment agreements or top-hat plans. Some agreements limit the benefits to a number of years, others provide them for life. Since they will be paid in a future tax year beyond the COBRA continuation period, the health benefits would likely be deferred compensation. My question revolves around how to structure the contractual provisions for the "time and form of payment" elections that will be made by the employer with respect to these benefits. For example, in connection with health benefits for life, beyond the COBRA continuation period, should the monthly payment of premiums by the company be characterized as a "life annuity" payable on a certain day each month, with the premiums capped at a certain amount (e.g., cost of premiums of similarly situated executives)? I don't see any guidance in the final regs that deals with this specific issue.

If an IRA participant doesn't get his RMDs for certain years, it's clear that he/she is penalized 50% for the distribution he/she should have received.

However, is there any liability for the IRA custodian for RMD failures?

I have a case where the participant had his IRA account changed from a Keough to a SEP. An auto-distribution was set up for the Keough but not the SEP. Thus, the participant didn't receive his RMD for 2 years, thinking it was automatically set up. The RMD notices were sent in the proper fashion.

Is any of this on the custodian or is the custodian only obligated to report? I saw in the 1.408 Regs that custodians are treated as Plan administrators for qualified plans. If you take the analogy all the way, if this were a qualified plan, there would be a ERISA § 404(a) violation for not adminstering the plan properly -- as well as a prohibited transaction?

I've read Notice 2002-27 and there is nothing about any penalties for custodians for not reporting the RMD and/or when an RMD has not been made.

Any guidance and authority would be appreciated. Thanks!

Can an individual calculate the MRD from each 403(b) contracts they have and have it paid from one or more contract even if the individual has contracts with different employers?

The regs (1.403(b)-6(e)) state that "...only amounts in section 403(b) contracts that an individual holds as an employee may be aggregated..."

This leads me to believe the aggregation rules only apply to multiple 403(b) contract held under one employer. If the employee has a contract with a school plan and a contract with a hospital plan, the indivudual would need to get two MRDs, one from each plan.

Has anybody encountered or addressed the 80-120 rule in reverse? In 2005 plan had 240 participants as of the beginning of the year, requiring a Schedule H and certified audit. For 2006, certified audit is prepared, however, plan administrator just notified TPA that union employees have been improperly counted for 2006. Therefore, the 2006 Form 5500 shows 69 participants as of the beginning of the year, and the TPA has enclosed a Schedule H for the plan sponsor to file.

Question: Since the BOY count is 69, doesn't a Schedule I have to be filed? As the count is under 80, I don't believe you could attach a Schedule H (80-120 rule in reverse), even if you wanted to.

Any replies would be helpful.

I’ve received conflicting answers to this question and I’m hoping someone can set me straight.

Do the contract exchange provisions of the final 403(b) regulations in effect apply to church plans today? Are they exempt until their delayed effective date of 1/1/10? In other words, can a church employee still do a 90-24 transfer?

In the good old days, quartlerly contributions could be satisfied if a plan had a healthy credit balance. However, going into 2008, we cannot assure we not have to "burn" these healthy credit balances. The answer is not (for calendar year plans) that the actuarial certification will be completed by March 31 so you'll likely know the 2008 contirbution. For many plans, draconian consequences or otherwise, the sponsor will not provide the census and assets in a timely manner.

Any thoughts?

Actuaries will thumb-wrestle over how large an active employee population must be before actuarial assumptions have statistical significance. Like Supreme Court Justice Potter Stewart (who couldn't define pornography but knew it when he say it), I feel the same about actuarial assumptions. It would be inappropriate not to assume pre-retirement decrements for the California State Teachers Retirement System and conversely, postulating pre-termination, disability, mortality, severance assumptions for a one-person DB plan makes no sense. Plans in between are subject to debate.

Under current law, using "no preretirement decrements" certainly affects the calculation of current liability, which in turn could affect the deductible limit. I'm unaware of no printed guidance that this assumption is permissible and yet this is common treatment. However, there appears to be no legal issue with employing this assumption to compute the basic cost elements (e.g., individual aggregate normal cost) so long as the assumtpion is reasonable. To the contrary, under PPA, the "no decrements assumption" and in particular, "no preretirement mortality" affects the basic cost computation which is now prescribed by law.

Unless I am overlooking some printed word (a realistic possibility), there does not appear to be any small plan exceptions, such as in the IRS proposed 2008 mortality regulation. What are actuaries planning to do in respect of small plans under PPA? I would suspicion this question falls under the category of "don't ask."

Re IRS Notice 2007-81. This deals with minimum funding and yield curves. If you have questions, contact an Enrolled Actuary. No one who is sane would ever bother to read this, and if they did, wouldn't understand it.

That's my tongue-in-cheek summary. However, the truth is probably substantially similar...

Is new plan language needed, and if so is there any good-faith language available, for plans wishing to allow non-spouse beneficiaries to roll Qualified Plan monies to a Non-Spousal Inherited IRA (with appropriate labelling/reference to deceased name as per Q&A #13 under IRS Notice 2007-7) ?

I don't remember seeing any kind of good faith amendment or model type of amendment but I believe these non-spouse rollover provisions are supposed to be available now in 2007. Did we get remedial amendment relief on this so that we can do it now and amend for it later ?

Any thoughts ?

Is it possible to terminate a 403(b) plan in the same year you start a 401(k) plan (i.e. would the 401(k) plan be considered a successor plan)? Also, it is my understanding you cannot directly transfer the assests from a 401(k) plan into a 403(b) plan. Does that hold true for a direct transfer of 403(b) assests to a 403(b) plan?

Does anyone have any experience with electing foreign plan treatment under Section 404A(e)? This election is required to exempt a foreign plan of a US corp from having to file a 5500. From what I've read, to make the election you need to claim a deduction for the plan or attach a statement to the corporation's tax return electing foreign plan treatment. Has anyone have any practical experience with making the election? Has anyone ever seen this issue be raised by the IRS?

Does anyone know where I could find a sample 415 amendment for both a DB plan and a DC plan. Sometimes companies like Relius publish snap on amendments. I know there's some language in the LMR for a DB plans that the IRS put out over the last few months - I'm hoping to find something a little more straightforward.

How do I go about terminating an HRA? What happens if there is still money in employees' accounts? Does it revert to the employer, do the employees have to be given a spend down option? Since it's a plan termination I don't think COBRA applies.

Plan Year 2006

A Highly Compenated Employee terminated on 11/16/2005, but was paid a commision in 2006 (3/24/2006) that was earned in 2005.

My question is do I include this employee in my 2006 ADP Test?

I am aware of the 2 1/2 month rule, and the commisions were paid 2 1/2 months after severace from employment.

I am correct to say they I should not include this employee in my 2006 ADP test?

In 2006, the Plan mistakenly allowed an ineligible employee to make elective deferrals to the plan.

This was caught in 2007. The employee terminated in 11/06.

The Plan Document allows for the deferrals and earnings to be distributed to the ineligible employee.

My question is what tax code I should use on the 1099 R? The ineligible partipant is 36 years old.

If a participant in a 401(k) plan receives investment commissions are they considered a "disqualified person" with regard to a prohibited transaction?

Does anyone know of or think there's a possibility that the IRS (or DOL?) will require a mandated restatement across the board because of the new proposed regs? I have never come across an instance of mandated restatements for 125 Plans but I guess there's a first for everything. We think the new proposed regs present a good opportunity to make sure all clients' (we're a mid-sized to small TPA) Documents are complete and include everything required by the new proposed regs. However, my boss would like to have some kind of mandate to fall back on to justify doing this so clients will cooperate. Any input is much appreciated!

Yankees Payroll, of course.

year payroll

2007 189,639,045

2006 194,663,079

2005 208,306,817

2004 184,193,950

2003 152,749,815

2002 125,928,583

2001 112,287,143

total 1,167,768,432

number of world series bought in the 21st century: 0

number of Yankees living on past laurels: too many

PRICLE$$