One man-corp A has a DB plan covering the owner X with PYE 09/30. The owner X was less than 80% owner in another corp B (with 20+ employees) which has a DC Plan with PYE 12/31. X bought the remaining ownership of B thus creating a controlled group situation.

The objective is to pass the coverage & nondiscrimination test by aggragting the DB/DC plans. However, reg 1.410(b)-(7)(d)(5) requires that for permissive aggregation both plans must have the same plan year!

Required number of employees of corp B will be brought into the DB plan to pass 401(a)(26).

One solution being considered is to change the plan year of the DB plan, say, to the calendar year. However, in the year of plan year change, the DB will have a short plan year from 10/01 to 12/31 and will not have the same plan year as the DC plan and therfore, I think, the plans cannot be aggregated for the first short year of the DB plan. Am I wrong?

Any suggestions/solutions would be appreciated.

A person had contributions of $35,000 towards a SEP for part of 2007. They left this employer and started with an employer offering a 403(b). He would like to make elective deferrals to the 403(b) and wants to know how much he can contribute. Is he allowed to defer the full $15,500 for 2007 in if he has the capability and desire to do so, or is he limited to the 415 limit minus prior SEP contribution = $10,000? Someone is telling us that the 45k limit would apply and he could only do 10,000. But that doesn't sound right. These are two different employers. I thought 415 was per plan, not per individual for the year. Please provide a cite for or against if possible. Thanks.

This prior thread

http://benefitslink.com/boards/index.php?s...p;hl=AFLAC+flex

does a good job explaining the compliance issues presented when an employer allows employees to pay for individual health coverage (e.g., cancer coverage, intensive care coverage) on a pre-tax basis through the employer's Section 125 plan.

It so happens that AFLAC provides its own Section 125 program - Flex One - which naturally and prominently includes among the list of eligible pre-tax benefits these very types of individual coverage.

Has anyone ever looked at whether this type of arrangement would constitute employer "endorsement" of the individual coverage and hence dissolve the "voluntary plan" exception to ERISA that generally applies to these type of individual policies?

I would be interested to know. Thanks.

A client has a profit sharing plan. The old owners sold the business to a new owner. New owner wants to continue with the plan as is, except add a 401(k) provision. As a result he strongly believes that he should terminate the existing PS and start a new 401k, effective 1/1/08. While this is obviously unnecessary, isn't it also not permitted to terminate a PS plan, only to start a new one (with or without 401(k)) immediately thereafter? Something about the potential to abuse this situation to initiate a termination allowing for distributions, only to start another plan immediately afterwards?

Thanks

http://www.sfgov.org/site/olse_index.asp?id=27461 Does anyone know about this? I have a client who wants to try to set up an account for this. When I went through it, I got the idea that the payments were to go to the city. Any Ideas?

Many Thanks,

MissChele

A plan has a short year 7/1 to 12/31 and will have full calendar plan years thereafter. The actuary elects to use the unit credit funding method. The accrued benefit at the end of the period is 100 and the beginning is zero. Can the entire 100 be used in the normal cost OR must it be prorated for the short plan year? It would seem logical to fund for the 100 so assets equal liabilities at the end of the year (no gain / loss going forwards) - otherwise funding 50 would produce an immediate loss on the 1/1 valuation following. Am I missing something or is there a Revenue Ruling dealing with the short plan problem?

Thanks in advance.

a leveraged ESOP had an amazing $19.90 left on a loan from the prior year.

That was paid off in the current year.

since less than 1/3 of that loan pmt went to the HCEs, then forfeitures (of shares) don't count against the 415 limit?

(This year they also made a large cash contribution in order to pay distributions. This resulted in a big chunk of forfeitures as well, so people are bumping into the 45,000 limit.)

In future years since there are no loan pmts, does that rule no longer work since there really is no '1/3 of loan pmt' left???

I seem to be receiving conflicting answers. Do deferrals to a 403(b) plan (other than an educational organization or hospital) count against the 415 limit for DC plans?? Thanks.

Suppose a DB client has a two participant DB covering just husband and wife. They filed for divorce Dec. 1, 2006. The wife (the major bread winner here) wants to continue the DB plan but not if the AP (her former husband) would continue to benefit from her participation.

I wouldnt think the alternate payee continues to benefit in a DB. For example, suppose the participant has an accrued benefit of $5,000 as of the date they file for divorce. I would think the AP would be entitled to xx% of the $5,000 accrued benefit payable at the participants NRD. If the AP requested a lump sum distribution now, I would think he would be entitled to xx% of the PRESENT VALUE of $5,000 which would be payable at the participants NRD. Agree?

Also, are the benefits usually determined as of the date they file for divorce or the date the divorce is finalized?

Thanks much.

A one participant plan was created for an owner.

The owner did not include employees of another company he owned (i.e. within same controlled group).

The IRS disqualified the plan after a few years of operation.

The plan has 200k in assets, the PVAB for the owner is 400k and the vested AB is $25,000 per year. He is 100% vested in his AB.

402b4 provides in part that if a trust is not exempt due to a 410b violation then an HCE shall include in gross income for the taxable year with or within which the taxable year of the trust ends "an amount equal to the vested accrued benefit of such employee as of the close of such taxable year of the trust."

The question is how should the term "an amount equal to the vested accrued benefit" be defined?

Is it the vested accrued benefit (i.e. the annuity of 25k) or is it the PVAB of 400k?

It says in 402b4 "vested accrued benefit", but it seems it would make sense to be the PVAB.

And if they mean PVAB one would think it would say that and provide assumptions to use.

Or perhaps it depends on how the assets are distributed. That is, as an annual benefit where the taxable trust stays in place or a lump sum if the total pension is distributed.

Of course a distribution of 400k when there are only 200k in plan is harsh.

Curious to get any thoughts.

Being an independent cuss, I developed a generalized spreadsheet (which I'd be happy to share) to calculate lump sums under PPA 2006. Since the use of commutation columns has been outlawed in the state of Missouri under penalty of death, I used first principles. I figure most of you are wiser than I and have purchased software that will accommodate the new law. In any event, if someone else has a mechanism in place, I would appreciate a sanity check on my calculation mechanism.

The calculation example uses the 2008 applicable mortality table and the October 2007 segment rates: 4.85%, 5.02%, and 5.09%.

I am valuing a deferred annuity to participant who is currently age 61 and 10 months of $1 payable monthly at age 65 and 4 months on a 120 months certain and life basis. There is no death benefit if the participant dies during the deferral period.

The factor I developed is 121.16.

Anyone come within a tolerable percentage?

Any help is most certainly appreciated.

Wanted to check on something.

Say we have a one-participant plan. Participant is age 50 and NRD is 65. The plan provides for lump sums. Normal form is life annuity.

It seems to me that despite the fact the participant could take a lump sum at age 65, the present value determined for funding is based on a life annuity. In other words, payments projected from age 65 to 69 11/12 are converted using the second segment rate, and everything after that is converted using the third segment rate.

However, I thought I read something somewhere that said that if a lump sum was assumed to be paid at NRD, the entire benefit was to be converted using the second segment rate.

Just wanted to throw that out there. I am thinking that last notion was incorrect, but I want to make sure.

Does anyone know of a procedure for obtaining a copy of a Schedule SSA that would have been filed a few years ago? I've been on hold with the IRS/SSA for a very long time. . .

Question came up regarding the order of deductions from NQDCP and 401(k). Since 401(k) must use 415( c)(3) as the definition of comp, shouldn't the 401(k) deferral percentage now always be applied after NQDCP deferrals are deducted?

Example - gross salary $150,000, 10% 401(k) deferral, 10% NQDCP deferral

Deferrals - $15,000 to NQDCP and $13,500 to 401(k)

Alternate payee proposed draft DRO to Fund. Participant not in pay status, so DRO creates a shared interest. Fund requested changes. Things stall. Now, Participant submits papers to retire effective Dec. 1. Alternate payee wakes up and has counsel prepare to enter revised DRO and get certified copy approved by Fund. The next Fund Trustee meeting is mid December.

Does the Order fail because now participant is retired and in pay status so we need a shared payment?

Can Fund follow order in that break between December 1 and when the first check is cut and preserve shared interest?

Plan Document says an DRO is not a QDRO until Fund Trustees approve.

What say you?

Evidently line 8b of the PBGC form 1 asks for a CUSIP #. I didn't know what a CUSIP # was, so I googled the definition, and here's what I came up with:

A nine-character number that uniquely identifies a particular security. CUSIP is an acronym for the Committee on Uniform Securities and Identification Procedures, the standards body which created and maintains the classification system. Foreign securities have a similar number, called the CINS number.

If it identifies a particular "security" - why would it be used? And what if there is more than one? This doesn't make sense to me...anyone familiar with this?

Participant dies with an outstanding loan of about $3,000. The total account balance, including loan balance) is only $3,500. The sole beneficiary (non-spouse) elects a cash distribution.

Is the entire $3,500 taxable to the beneficiary? Or, is the outstanding loan balance taxable to the decedent and the remaining balance taxable to the beneficiary.

Any help with this situation would be appreciated!

A large contribution was made early in 2006. Some of it was reported on the

2005 Schedule B. Some of it was reported on the 2006 Schedule B. Some of it

has not yet been reported.

Can the 2007 Schedule B list it as being made in 2006? Will this cause any

problems? Does this violate any rules?

Thanks for any help.

My company, a large health care organization will be receiving proposals/presentations from two consulting companies to be our executive comp consultants. Does anyone know of good questions/issues to ask during these presentations to better evaluate them? Any good sources on issues/questions?

Thanks.

It is my understanding that contributions to 403(b) and Keogh for self-employed persons must be aggregated for calculation of the 415 limit, but that a separate 415 limit would apply if the individual also participated in a qualified plan (i.e. a university), for a possible total 90k limit.

Am I correct?

Does the situation change if the individual has a SEP-IRA instead of a Keogh as a consultant apart from his work at the institution, or does the same result occur.... 45k total for the SEP and 403(b), and a separate 45k for the institution's qualified plan?

Thank you. Any citations to reference materials that explain how aggregation works across many plan types would be great.