Would welcome thoughts on the following.

Company has a SERP plan for its directors. SERP benefits are nonelective, employer-provided funds which provide directors a specified annual payment amount for X number of years (up to maximum of 10) following retirement. The SERP provides for payout upon the later of (1) age 72, and (2) separation from service. The SERP benefits are subject to a vesting schedule which ties into the number of years of payment. The directors all have extensive service on the board such that they are all vested in the SERP benefits and all are entitled to the set annual payment amounts for the full 10 year period.

In the event of a change in control, all SERP benefits receive accelerated vesting if not already vested and will be paid to the directors in an accelerated lump sum payment equal to the present value of their benefit if it were to have been paid out over the 10 year period. Company is contemplating an event which would constitute a change in control under the SERP and thus result in accelerated distribution of SERP benefits.

If change in control occurs, half of directors will leave board and thus do not really have a problem with receiving their SERP benefits on an accelerated basis. (Some are actually over age 72 and thus would be entitled to distribution under normal plan provisions upon separation from service.) The other half of the directors, however, will continue on Board of the merged company. Some of them do not want to have their payments accelerated. Parties to the merger don't want their payments accelerated either since it would be a cash drain on the company.

I am not sure there is an easy way to delay those payments under 409A or traditional constructive receipt rules. I suppose they might try changing the definition of a CIC so as not to provide for immediate payout on that trigger but that would presumably carry over to the retiring directors as well--some of whom are interested in getting accelerated payouts. The subsequent deferral rules under 409A wouldn't seem to work here because there is no way the election to put off the deferral could be made 12 months in advance. I read the special change in control exception provided in Treas. Reg. § 1.409A-3(i)(5)(iv)(B) to apply to only nonvested compensation / amounts such that an election to avoid change in control acceleration would not apply where benefits are already vested and not subject to a substantial risk of forfeiture. Also, from a general constructive receipt standpoint, it seems the continuing directors are basically on the verge of receiving the payments (although not final agreement has been reached) and would be turning their backs on the SERP benefits if they delayed receipt now.

Am I missing an easy argument or method for basically waiving accelerated distribution of the vested SERP benefits that doesn't raise significant risks. Thanks.

We had denied a claim for teeth bleaching for the CFO of a good client. Now he is saying that this tooth is part of a root canal. Every few years the dentist takes off the cap, rebleaches the tooth and puts the cap back on. Does anyone consider this to be different from other types of teeth bleaching?

Can the terms of a participant loan to buy a residence be extended to longer than 5 years if the home that is being purchased is outside of the US? Proposed property purchase is in China. US citizen currently living overseas.

edited to add location and citizenship.

Has anyone ever received a DL where DB benefits were offset by a profit sharing plan that has tiered language?

In this case, the employer originally had the intent of just having a profit sharing plan but then adopted a floor offset DB plan later that year. The PSP was never amended to have comp to comp allocations. However, in operation, the plan always provided uniform allocations each year.

It is well known that the 3-year statute of limitations starts when form 5500 or schedule P is files, and never starts when it is not filed.

However, what if there is no requirement to file as assets are <$100k?

When is the start date, what is the statute of limitations, if any?

I can't believe it would never start, as then it would be extremely (unnecessarily) risky to follow the advise not to file if assets <$100k?

Thanks for your insights.

Thre Questions:

Q1: If a participant wants more than 20% withheld from a eligible rollover distrbution, or more than 10% from an ineligible rollover distribution, are people getting a signed WP-4? Our forms have always provided for the regular defaults, but we often get participants who want to do the right thing (i.e., withhold appropriately), and most of them end up not following through with the WP-4 and just go with the defaults.

Q2: Can any provide me any sort of logic for why the government wants to make it so hard for participants to have their taxes adequately paid via withholding???

Q3: I've seen many providers forms allow participants to request more than the minimum withholding without requiring the WP-4. Have others seen this too?

The more I think about it, I can't help but wonder if this is just not enforced. What IRS agent would care that a participant had MORE than the minimum withholding withheld? I mean, the government gets their money quicker and the risk that they'll never get it dimishes?

What is the story? Any thoughts or, even better, knowledge on the subject?

What happens if a distribution is made without spousal consent when spousal consent is required? The plan participant took a distribution from his 457 plan without getting spousal consent. The plan participant has since passed away. Is there any recourse for the surviving spouse?

Is there a copy of the final regulations showing only changes from the proposed regulations? If you know of a link, please share it. Thanks.

I am in the process of getting contracting with a Wellness Provider. We would like to have Health Assessments, a Wellness self help portal and communications, Biometric Screenings, and High Risk Wellness Coaching. According to the VEBA requirements, an employer can pay for life, sick, accident or other benefits to its members or their beneficiaries. My understanding from that sentence is that since this is for the benefit of employees, these expenses can be run through our VEBA.

Does anyone have an opinion in agreement or disagreement?

Can a spouse rollover pre-tax qualified plan assets to a ROTH IRA?

Can a nonspouse rollover pre-tax qualified plan assets to a ROTH IRA beginning next year?

Can an owner of a self-directed IRA direct the IRA to obtain an interest (15%) in an LLC where the owner of the IRA is also an employee of the LLC? Is this a prohibited transaction under Section 4975(e)(2)©? Thanks.

Hello,

I am a relatively new user to Relius and would like to learn more about the system. I am hoping someone in the forum can suggest a good workshop/conference for a new user as well as one new to working with employee benefits.

Thanks in advance.

As we look at implementing the Roth 401(k), I wanted to make sure that our payroll department is properly handling the deferrals.

Let’s say that participant has:

 Annual Salary = $30,000

 Elected Pre-Tax Deferrals of 2%

 Elected Roth Deferrals of 2%

Will the total amount contributed to the retirement account be $600 ($300 in the traditional and $300 in the Roth)? The difference is that only $300 (pre-tax) reduces taxable income for tax purposes? This will result in less take-home pay for the participant because more taxes are taken out, but I don’t have to figure out the taxable net salary on 2% and have the net deposited into the Roth, do I?

Last year PLR 200620025 said that a disabled beneficiary of a parent's IRA could essentially re-designate the IRA, naming as beneficiary a newly-created special needs trust (SNT) of which he was the sole beneficiary. The IRS said that (a) the transfer of the IRA to the SNT was not taxable because the SNT was a self-settled "grantor" trust; and (b) the SNT beneficiary's life would be the measuring life for minimum required distributions from the IRA.

In the PLR situation the SNT was created after the death of the IRA holder, as a way for the disabled beneficiary to remain qualified for Medicare and other gov't. benefits. So it was not an estate planning technique, per se.

My question is the degree to which practitioners are using the PLR as a basis for estate planning, for instance by instructing clients to name SNTs as IRA beneficiaries during life, whether or not the SNT is a grantor trust or third party trust.

Would the transfer of the IRA to the SNT on the IRA holder's death under these circumstances still be a nontaxable event under these circumstances? Would the SNT beneficiary still be the measuring life in such circumstances?

Just trying to figure out if practitioners are interpreting the PLR aggressively or cautiously, given the eternal provision about applying PLRs to different factual circumstances. I have posted on the "IRA/Estate Planning" board but also interested in opinions shared on this board.

Last year PLR 200620025 said that a disabled beneficiary of a parent's IRA could essentially re-designate the IRA, naming as beneficiary a newly-created special needs trust (SNT) of which he was the sole beneficiary. The IRS said that (a) the transfer of the IRA to the SNT was not taxable because the SNT was a self-settled "grantor" trust; and (b) the SNT beneficiary's life would be the measuring life for minimum required distributions from the IRA.

In the PLR situation the SNT was created after the death of the IRA holder, as a way for the disabled beneficiary to remain qualified for Medicare and other gov't. benefits. So it was not an estate planning technique, per se.

My question is the degree to which practitioners are using the PLR as a basis for estate planning, for instance by instructing clients to name SNTs as IRA beneficiaries during life, whether or not the SNT is a grantor trust or third party trust.

Would the transfer of the IRA to the SNT on the IRA holder's death under these circumstances still be a nontaxable event under these circumstances? Would the SNT beneficiary still be the measuring life in such circumstances?

Just trying to figure out if practitioners are interpreting the PLR aggressively or cautiously, given the eternal provision about applying PLRs to different factual circumstances.

I am desperately searching for any conversation "out there" about continued health coverage for retired/terminated executives. I'm looking primarily for articles in print, but I'll take blog entries if I have to. Any suggestions of where to look?

Are their any rulings that specifically state that an employer is required to maintain enrollment forms for it's employees regardless of participation? I know it makes sense in the event of an audit, but is there a ruling that states this?

Thank You,

CConnell

I have what I hoped would be a simple question: Pension plan has a plant shutdown benefit -- unreduced pension if 55 and 10 years of service. Employee has over 10 years of service at time of shutdown, but he is only 50. Is the employee allowed to "grow into" the benefit and receive the unreduced pension at 55?

The Bellas case and the 411(d)(6) regulations indicate that shutdown benefits are accrued benefits, and the Gillis case and RR 85-6 indicate that an employee may "grow into" eligibility to receive accrued benefits, but I haven't found anything directly on point.

Relevant plan language: any employee who shall have had at least 10 years of service and shall have attained the age of 55 may retire, provided that at the time of retirement the Employee has been laid off as a result of a plant shutdown.

A business owner and one other employee paticipated in nonintegrated SEP. The owner consistantly received a 10% contribution for the last 8 years and the employee received 7%. In addition, the owner's 2 children were eligible for at least some of the years, and it is not know whether they received contributions, and if so, at what rate.

What do you think: is the failure to allocate in accordance with the plan's provisions an egregious failure under Revenue Procedure 2006-27? Assume children received (a) $0, (b) 7%, and © 10% in years that they were eligible.

From Rev. Proc 2006-27

Egregious failures. SCP is not available to correct Operational Failures that are egregious. For example, any of the following would be considered egregious: (a) a plan has consistently and improperly covered only highly compensated employees; (b) a plan provides more favorable benefits for an owner of the employer based on a purported collective bargaining agreement where there has in fact been no good faith bargaining between bona fide employee representatives and the employer (see Notice 2003-24, 2003-1 C.B. 853, with respect to welfare benefit funds); or © a contribution to a defined contribution plan for a highly compensated employee is several times greater than the dollar limit set forth in § 415. VCP is available to correct egregious failures; however, these failures are subject to the fees described in section 12.06. Audit CAP is available to correct egregious failures.

a non profit tax exempt org wants a executive benefit plan for a select group of HCE's.. the plan would not allow for elective deferrals. it would only be employer money. could this entity do this plan or are they restricted by 457?