It's a very simple thing we do every year. We want to review the IRS Instructions for the 5498 Form. What could be simpler?

If you haven't done it before, here's the link to their Forms and Publications: http://www.irs.ustreas.gov/formspubs/index.html

Go there and try to find the 5498 instructions. Under 2007 5498, you'll find the 5498 information-only form and the 5498-ESA information-only form and the 5498-ESA instructions, but you won't find the 5498 Instructions under "5498"!

So, are they really there or perhaps they don't really exist?

They're out there, you just have to remember that the IRA 5498 instructions aren't logically listed by the form number 5 4 9 8, they are under Form 1 0 9 9-R." We aren't kidding.

Please join us and email a constructive comment to the IRS: PLEASE SEPARATE THE 1099-R and 5498

Instructions.

Try this email address: Irs.gov.website.helpdesk@speedymail.com

If that email address doesn't work, go to www.irs.gov and click on the CONTACT IRS link at the top of the page. Go to the bottom of the next page and click on SEND US A COMMENT ABOUT THE WEBSITE.

Thanks!

A frustrated 5498 preparer!

A DB plan sponsor amended the plan to offer terminated vested participants the right to an immediate lump sum (they already had the right to take a lump sum at early or normal retirement date). There are a few participants who elected not to take an immediate lump sum (can you believe?) and so the Plan has decided tol purchase a deferred annuity in their behalf.

The annuity contract will include the lump sum option. However, the insurer indicated the contract will pay lump sums in accordance with the Plan provisions in effect at time of annuity purchase. So, a lump sum paid at a later date would not, for example, reflect PPA2006. This allows the possibility that two persons (one for whom the annuity was purchased, the other, an active employee who later terminates) could receive lump sums at the same distribution date but calculated on two different actuarial bases.

Can anyone who has had experience with a similar annuity purchase provide any legal basis that the insurance company's treatment relinquishes them from applying an actuarial basis that would otherwise have applied had the annuity not been purchased?

Client has decided to terminate their 401(k) plan as of 10/31/2007. They are in the process of adopting an amendment/resoltuion to terminate and to cease any 401(k) deferrals. They have asked us to process the ADP test immediately, utilizing the data through 10/31/2007. Since the amendment resolution does not make a short plan year, can the testing be done utilizing the data through 10/31/2007? Or do we have to wait for 12/31/2007? Of does the client have the option?

Any advise would be greatly appreciated.

I haven't been able to find this issue directly addressed by either IRS or DOL documentation, so figured I'd try here. I am wondering if a plan with a short plan year (plan was merged into another plan) is eligible to file a 5558 to extend the 5500 filing deadline 2.5 months after the normal due date. There is nothing in the 5558 instructions indicating this wouldn't be possible, but I've heard murmurs that it isn't allowed. This particular plan has a 3/31/07 year end thus an initial 10/31/07 filing deadline, and the potential extension would be to mid January 2008.

I have a question regarding the new IIAS requirements that go into affect 1/1/08. I understand that after December 31, 2007, health FSA or HRA debit cards may not be used at any store, vendor or merchant that does not have a health-care-related merchant category code unless the store, vendor or merchant has implemented an inventory information approval system as described in Notice 2006-69. My question is if anyone is aware if a merchant can only put the IIAS based on the terminal or if it is always for the entire store. For example, if Wegmans were to implement the IIAS, could there be a possibility that the IIAS would be active in the Pharmacy but not at the normal Check out aisles in the front of the store (kind of like having different merchant category codes at different terminals)? Thanks.

Rev. Rul. 79-237, 1979-2 C.B. 190, provides that minimum funding standards apply until the end of the plan year that includes the termination date. Does this statement continues to be valid under PPA2006?

I've seen some similar postings but not sure if theyr'e on point.

Employer A maintains Plan X, traditional 15% of pay PS plan, no 401k.

Employer B maintains Plan Y, traditional 401k with match, doesn't make additional ER contr.

Employer A acquires Employer B. Does the controlled group transitional period apply if Employer A changes the PS allocation to a New Comparability design?? If so, does that mean that the 401k provisions can be applied to Employer B without providing such provisions to Employer A and if so desired are employees of Employer B not required to receive minimum gateway allocation due to the New Comparbility allocation of Employer A?? Any help is greatly appreciated.

Thanks.

An attorney has both a 401K and an IRA, can he take his RMD from one source based on the total account value in both or does it have to come from each?

Thanks

I have a feeling that this question has a really simple answer, but I haven't been able to find it yet so I hope someone out there has run into this before:

A sponsor has a 401(k) PSP that allows for discretionary nonelective contributions. The applicable period for determining compensation is each payroll period. Would the sponsor have the ability to change the allocation rate for their profit sharing allocation each payroll period?

I've always thought that the rate was discretionary on a plan year basis, not a payroll basis, but have been unable to substantiate this with the plan document or regulatory guidance. It seems to hinge on what "discretionary" really means, and it's not defined in the document. 401(a)(4) could obviously be a hurdle here, but is there any known guidance on whether this type of change is permitted in general? Any insight you might have on this would be appreciated.

The plan uses the PPD N/S Prototype document if you are curious.

Thanks!

I am with a recordkeeper who uses a proprietary recordkeeping system.

We had anticipated that we would be required to develop an enhancement to our system to handle tracking of short-term trading ("round trips"), warning of participants approaching the fund's policy and ultimately temporarily blocking the participant from future trades if the policy has been violated.

However, the way that things seem to be panning out is that perhaps the fund company's are really retaining responsibility for such tracking/analysis.

The reason I say this is because our custodian (for our omnibus accounts) requires us to respond with summary and detail transaction data only upon request from a fund company. It is not clear to me if they will also expect us to have already blocked someone from a trade or if they will only ask us to block the participant from further trades for a period of time. Fortunately, we have not had any requests to date. Secondly, the prospectuses for many of the funds that I have checked indicate that in the case of an omnibus account there isn't a specific indication that the recordkeeper is obligated to track/warn/block as needed. One prospectus of a fund (that has an obnoxious short-term trading policy) indicated that the recordkeeper is expected to follow the policy "or some other reasonable alternative".

Our situation is that the custodian is the "intermediary" as far as is goes with the agreement with the fund company. In our situation if we do not respond within 4 days of the fund company's request for data then futher trading (as the recordkeeper remitting trades) in that specific fund may be halted by the fund company (except that we may be granted a short extension if necessary).

I am looking for feedback from other recordkeeper's as to how they are handling the SEC Rule 22©2 short-term trading requirements:

1 - Does your recordkeeping software fully handle the rules set per each fund company?

2 - Are you using the SPARK recommendation (or some other reasonable and consistent policy) regardless of the specifics of any given fund company's policy?

3 - Are you only responding upon the custodian's requirement to provide data per fund company requests?

Thanks in advance for your input.

Do the final 409A regulations require any changes that apply to 457(b) plans?

We have a client who has fired an employee for stealing (not related to the Plan). The plan is a non-standardized safe harbor 401(k) using the safe harbor non-elective 3%. No other contributions in the Plan.

Of course the client is spitting nails about having to pay the participant out the Employer portion of the account (can't say I blame them!) Anyway, in the interest of the client, I thought I'd grasp at that straw...anyone have any ideas on how the Employer could delay or deny payment or does anyone have any experience with this situation in the recent past? I have advised them to check with counsel.

These are real #s from the 1/1/07 valuation:

mva=4859962

ava=5665671 (limited to 120% of mva)

credit balance =1295808

RPA CL=6041049

no annuity purchases in last 2 years

To get the 08 presumption:

ava must be limited to 110% of mva so ava becomes 5345958

ava is < 90% of CL so CB must be subtracted

07 AFTAP is (5345958-1295808)/6041049 = 67.0%, so my 08 presumption is 57.0%

To improve 07 AFTAP:

Sponsor must elect to burn the credit balance. This will make the 07AFTAP 88.5% so 08 presumption becomes 78.5%. Benefit payments are restricted. Since the plan's normal form of benefit is a single life annuity, and all optional forms are the equivalent of the SLA, can I say that the payments to the retirees are not affcted by the restriction?

If sponsor contributes approximately 625000 (within the range for 07) can I add that to the ava and improve the 07AFTAP to >90% so mt 08 presumption to > 80%? I think so, but...

Do I have this anywhere near right? Thanks for any and all help.

Hi,

I am a member of my employer's 457b oversight committee. I learned a few weeks ago that our former lead consultant started working for our current TPA in early June of this year. We have a new investment consultant who started working on July 1st of this year. I spoke with some of the members individually about this and it comments ranged from "nothing is wrong" to "this is unethical behavior." Last year, some members of the committee including me were very critical of this former lead consultant because we felt the consultant was looking our for the TPA by selecting funds that charged high fees than looking our for the hard working employees. Looks like our instincts were right because the lead consultant eventually started working for the TPA. What do you think? If any of you have similar scenarios, please share.

Thanks,

Steve

What are other TPA's using for vesting on individual accounts statements as far as which year to apply on the upcoming statements (12/31)?

We are comtemplating using 12/31/2006 vesting information then updating as census information for 2007 is received but don't see any clarification as to whether or not this would be appropriate.

I understand that the employer must now have a contract with vendors, but is there a problem if the employer transfers all existing contracts with various vendors to one vendor (so long as the new contract with the single vendor meets all the requirements for distributions, etc.)?

Also, with a qualified plan, a blackout notice typically is required in a transfer situation. Would this also apply to the 403(b) transfer?

A collective fund will often hold mutual funds that charge their own fees. Do the underlying fees charged by investments of a collective fund need to be disclosed to participants for 404© compliance?

I thought this statement with regard to fee disclosure that appears in the preamble to the 404© regulations was interesting: "This requirement relates to the dislscure of fees and expenses directly assessed against the participant's or beneficiary's account, not expenses, fees or commissions incurred by the investment alternative attendant to the operation and management of the investment alternative."

Can an employer sponsor two 401k plans because of different options offered by providers. Namely, one provider allows Roth, and one does not. The Employer wants to establish a plan with the non-Roth company, but wants Roth. So he wants to establish two plans. Can they do that?

Does anyone have the actual formula for determining each employees EBAR? I need to calculate this by hand for an employer to verfye the software...

I need the EBAR formula for a comparability plan. In the past I have used the administrative software, however, I have an employer who wants to verify the results. Thanks.