School district created a trust fund that is used to set aside money that will be used to pay the district's post-employment benefit obligations when teachers retire. This is usually done for health benefits, but now the district wants to do it with its post-employment 403(b) contributions.

Will the district somehow cause problems for its 403(b) plan by depositing money into one irrevocable trust now then using the money as a 403(b) contribution at some point in the future?

I searched the 403(b) forum and 403(b) answer book with no success, so I'm wondering if anyone has ever run into this in the past? Something doesn't seem right, but I can't put my finger on exactly what the "something" is. Thanks.

Maverick

FAS 158 seems to eliminate the concept of Prepaid Pension Cost and Unfunded Accrued Pension Cost. My question deals with what to do with a Prepaid or Accrued when a company transitions to 158.

Prior to the adoption of 158, the company has:

PBO $1,000

Assets $1,020

Funded Status $20

Loss $900

Prepaid $920

What does the company do with the Prepaid asset when they adopt 158? Do they write down the Prepaid and recalculate the Gain/Loss? Or do they maintain the asset and recognize the entire Gain/Loss in OCI? Is there a choice?

The IRS is now releasing the interest rates for target liability and PVAB minimum lump sums for PPA. Has there been anything released with respect to PBGC (since they supposedly are using a different composition for their interest rates)??

It's election season for 457(f) plans that permit salary deferral elections. What are plans doing for 2008 in light of IRS Notice 2007-62, which said salary

deferral elections generally cannot be made subject to a substantial risk of forfeiture? No salary deferrals in 2008 at all? Continuing salary deferrals for current participants only? Operating as usual until guidance is issued? Any thoughts would be appreciated.

I have a client that purchased a limited partnership investment in his IRA. the K1 from the LP shows UBTI. how does the client or IRA deal with this tax? my understanding is the IRA must pay the tax and it is at trust tax rates.

I am trying to determine the initial five-year remedial amendment cycle for an individually designed plan which merged with a pre-approved plan (the plan is maintained as an IDP). Is the plan still considered an IDP for purposes of making an election under the the controlled group plan filing rules of Rev. Proc. 2007-44 or is it a pre-approved plan that must remain on a six-year RAC?

I am being told by a tax examiner with the state Dept. of Revenue that on eligible rollover distributions paid directly to participants, when the federal mandatory tax withholding is 20%, South Carolina requires 7% withholding. State tax withholding is voluntary on all other distributions. When I asked for a reference source for the required withholding, the examiner could not provide one. I have not been successful in locating any information on required tax withholding. The best I can tell is the 7% is the maximum tax rate.

Does anyone have information on South Carolina's tax withholding requirements on periodic and nonperiodic distributions from retirement plans? Thanks for your help.

Anyone know if new IRC 430 has a corollary to 412©(8) that would allow a plan to adopt an amendment within 2.5 mos after plan year end and use it in minimum funding ?

Does anyone know how the calculation of aggregate sales price under the registration exemption provided in Rule 701 applies with respect to phantom stock, phantom units, or restricted stock? Specifically, Rule 701(d)(3)(ii) provides:

“(ii) Time of the calculation. With respect to options to purchase securities, the aggregate sales price is determined when an option grant is made (without regard to when the option becomes exercisable). With respect to other securities, the calculation is made on the date of sale. With respect to deferred compensation or similar plans, the calculation is made when the irrevocable election to defer is made.”

However, when does the "date of sale" occur with repsect to the issuance of phantom stock, phantom units, or restricted stock?

so the final regs are out and i have a practical application question. a participant is about to receive a contribution but has no investment elections on file. under the final regs, the PA is expected to give notice 30 days in advance of the first investment. in the meantime (the time between when contributions are received and the 30 days passes) what does the PA do with the money?

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)©