I think I've been in this business too long. Can someone tell me if for the 415 Annual Limit do you include the catch-up deferral amount? i.e. 15,500 + 5,000 + 29,500 = a total of 50,000 to max a owner out in 2007. I thought that was the case, but someone told me differently, in that the $45,000 for 2007 includes the catchup for age 50 & over.

We have a DB Plan that offers several distribution options upon retirement, with the usual suspects (single life annuity, QJSA, lump sum distribution and a hybrid lump sum and annuity).

The client wants to eliminate the last option (the hybrid lump sum and annuity). It never advertised this benefit under the plan (guess there was no SMM) and I don't believe anyone has taken his/her benefit as a hybrid payout. This leads me to two questions:

1) Eliminating this option certainly would violate 411(d)'s anti-cutback provision; and

2) How do you correct the failure to advertise a benefit offered under a plan?

It isn't like you can cut a benefit on the grounds that since no one knew about it, no one will be penalized. Have any of you ever come across a situation like this?

We are a TPA that has a client, structured as an LLC that has a 401(k) plan. One of the member sent me this e-mail yesterday

"I am not sure that ** understands that we are members of the LLC. The payments made to us by ** are considered guaranteed payments and each of us pay self employment taxes on the gross amounts. I file my taxes off a K1 I receive from **. My understanding is that we did not change the plan documents from those with PayChex. Under that plan doc I was able to make my contribution anytime prior to April 15th of the following year for the prior plan year. "

I have not been able to find anything that extends the deferral date to the next year for members of the LLC to show it credited in the previous year. I am drawing a plan. Thanks for any responses.

We've come across a Corbel document that seems to define the years of service to be counted for the top heavy minimum benefit as years while the employee was a participant. It's been a while since I've had to do such a calc, but I seem to recall that all years of service need to be counted for TH min benefits, even those before the employee was a participant - isn't that correct?

Also, the actuarial equivalence in this doc is defined as the "applicable mortality table as prescribed by the Secretary of the Treasury" which I believe is the 94GAR table. However, the interest rate is defined as those used for 30-year Treasury securities. Weren't these the interest rates that used to be called the "GATT rates"? I have several bookmarks for referencing these monthly rates, but the rates shown frequently conflict with similarly defined rates published in newsletters. Can anybody recommend a website that reliably reports the rates needed to calculate such lumps sums?

In one-person plan, the owner is up against the 100% Hi 3 limit and the plan has excess assets of $100k based on the pre new final 415 regs Hi3 limit. After 12/31/07, the excess will increase to over $300k.

The owner is past NRA and his Hi 3 is unlikely to increase in the future.

To reduce further increase in excess assets, a proposed solution is for the owner to take in-service distribution and rollover his money. Owner’s wife will start taking wages and will enter the plan to use up the assets remaining in the plan.

Anyone see any problem with this solution?

With the new QACA plans that will be available next year, is it possible to have the automatic deferral enrollments go in as Roth deferrals? (I'm not asking if it's a good idea, just if it's possible.)

Situation: a one-person plan has been overfunded. The person has been receiving a monthly annuity for years and now wishes to take a lump sum. The person's benefit was at 100% of Hi-3 compensation. That Hi-3 has not increased since.

Obviously, the change in the payment structure causes a new annuity starting date. The new 415 regs provide that prior distributions are actuarially adjusted and counted toward the 415 limit. However, the final regs aren't applicable until 1/1/2008 in this case (calendar year limitation year).

So, my question is what is your opinion about ignoring the final regs and going back to the pervasive thinking before they were issued? I know my opinion then was that when a person was at a Hi-3 limit, because that limit didn't increase as the person got older, prior annuity distributions didn't count against the 415 limit.

I found this thread along that line of thinking:

http://benefitslink.com/boards/index.php?s...or+distribution

My thinking is there wasn't really guidance beforehand and these 415 regs, while not effective yet, do provide the IRS' line of thought on the subject. I would be largely inclined to follow the methodology spelled out in the final regs.

This firm's joint venture with UnitedHealthcare being rolled out nationwide (feature article in yesterday's USA Today) allows employers sponsoring $2,500 high single annual deductible plans to roll back same to $500 provided consumers pass four tests.

How does the fact that employer cost is insured through supplemental coverage obviate fact that it constitutes illegal discrimination based on health status?

A handful of employees have joined the ranks of the 'Working Aged' and are opting for Medicare as their primary insurance. I am being instructed that the employer will pay for the supplemental policy and that it is a deductible expense. All the references I can find say the opposite.

Could somebody please direct me to the actual rule. Either way, allowable or not, I need to be able to cite an authority rather than 'everybody says'.

Thank you,

gf

Question 1: Is it definitely required to re-adopt the EGTRRA good-faith amendment for a post-GUST plan restatement? (getting conflicting answers from different sources)

Question 2: If it is required and the re-adoption was not done at time of restatement, is it a self-correction situation or is an IRS correction filing required?

Situation: We restated a client's plan using a volume submitter plan back in 2003 for GUST. At that time the client also adopted a good-faith EGTRRA amendment, and a final RMD amendment. In 2006, the client wanted to change their elig. and a few other discretionary plan features. We restated the plan in entirety, but did not re-adopt any interim amendments.

We justified our action after reading Rev Proc 2005-66, Section 5. Also, Rev. Proc 2005-66, Section 6.03 kind of infers that if it was unintentional that we can still fix through the end of the EGTRRA RAP.

Any thoughts are appreciated.

Based on a non-random, too-small sample of 16 corporate sponsors of DB pension plans with fiscal years ending 12/31, about 1/2 used 5.75% as the end of year disclosure discount rate for their pension plans and about half used 6%. I know this is really, really hard for you actuaries, but I conclude from this that the world at large was disclosing at more or less 5.875% on 12/31/06.

Now transport yourself a couple months into the future when the disclosures as of 6/30/07 are being made public. What do you suppose the 5.875% will have moved to?

I could offer a prize to be awarded this fall to the responder who comes closest. But, nah.

How are employers/sponsors dealing with the PPA requirement to provide participants with a notice that describes the investment options available and fees if a distribution from the plan is deferred? Are they changing their 402(f) notices, adding something to the distribution form, etc? I haven't seen any firms really complying with this yet...

Can K-1 Wages be used to allocate employer contributions?

A large profit sharing plan is in the process of terminating. At the beginning of the year it still had account balances for more than 100 participants.

Is an audit still required in this instance or could there be an exception available that would enable them not to incur the expense of an audit?

I do not see that they would qualify for a waiver 2520.104-46 since that applies only to plan with fewer than 100 participants.

Thanks for the assistance

Client has a large number of employees who normally work fewer than 20 hours/week, but occasionally someone will work over 1,000 hours during a year. Under the plan, once an employee hits the 1,000 hour mark, he or she may contribute to the plan for the remainder of the year (but no contributions allowed come January 1).

Arguably this is a reasonable interpretation of the exception to the universal availability rule, but it doesn't comply with the proposed regulations, so the client is planning to change to comply with the definition in the regs (assuming the definition carries over to the final regs coming out any minute now).

The proposed regs (1.403(b)-5(b)(4)(ii)(E)) indicate that an employee falls into the fewer-than-20-hours group "if and only if" (1) in the employee's first 12-month period the employer does not expect the employee to work more than 1,000 hours, and (2) for "each plan year" afterwards the employee works fewer than 1,000 hours in the preceding year.

It is not clear to me whether an employee who hits the 1,000 hour mark will ever again be excluded under this rule. The "if and only if" language is quite strict, and once an employee hits the 1,000 hour mark it appears the second prong is blown -- the employee is not under 1,000 hours "for each plan year" after the initial 12-month period.

How have others been interpreting this language? I haven't come across any guidance or commentary on this specific issue.

I'm just looking for confirmation that the rules I remember for leased employees haven't changed.

My recollection is that a leased employee can be excluded from the leasing company's plan (plan in place at the company where they are performing services) for the first year, but after that they must be covered under the leasing company's plan -- unless the leased employees are covered by a 10% money purchase plan sponsored by the leasing organization (the company that leases them out).

Is that still the case?

Hello.

My boss has taken a client that has not filed a 5500 for his plan since 2001. The client wants all past 5500s completed and filed including that of 2006.

The trust and accounting records are not the best and I'm having a bit of difficulty producing adequately completed 5500s for all the past years.

The plan is on a calendar year basis for filing purposes and July 31st is approaching fast.

My question is would it be prudent to file an extension for the 2006 Form 5500 while I complete all the past years?

My boss thinks that filing an extension for 2006 would put the gov. on notice which would result in the DOL sending a letter to the client re past missed filings which would disqualify the client from using the delinquent filer program.

My opinion is that the extension is filed with the IRS and that notices from the IRS don't disqualify delinquent filers from the DFVCP.

Any help with this matter is greatly appreciated. Thank you.

We are considering taking over a multiple-employer plan. The 5500 which was prepared by the current TPA was coded as a single emplyer plan. The plan covers a group of unrelated business entities that share a common trust. The current TPA stated that for 5500 purposes it is possible for a multiple-employer plan to file as a single employer.

Is anyone aware of any exceptions that allow a multiple- employer plan to file as a single employer for the 5500 filing?

There are several times during the year when I want to batch print one report for many companies. In the group I have set up, some Plans are calendar year and some are fiscal year. The date I would like to print is for what ever is the last date of the latest plan year on my computer. When I try to print, there is almost always a few Plans that won't print. Now Relius will not let me delete these plans without a lot of bother in actually changing the group.

I have found that some choices for date work better than others. Plan year is the best choice I have found. I would like to hear what the best choice for date other people have found.

Thanks.

1. The final regs say that installment payments that are not an annuity are considered a "single payment" unless the plan specifically states that each scheduled payment is considered a "separate payment." Reg. 1.409A-2(b)(2)(iii) What does this mean?

2. I have an arrangement where employees elected deferred compensation payments in 5 annual installments. An idea was that the employee could elect to change the payment date on the first installment under the 1 year/5 year rule, so in a sense the employee making that sort of election every year could indefinitely delay payment, with the only downside being that he or she would have to be paid out over 5 years.

3. Now if the installment payments are considered a "single payment," does this mean that the election to delay under the 1 year/5 year rule would mean that none of the installment payments could begin until 5 years after the originally elected payment date, but that the entire thing could be paid as a lump sum then?

4. If the installment payments are designated as separate payments, does this mean that you could get the "rolling" payment effect described in paragraph 3, but that you could never get a lump sum payment unless you elected to get paid 5 years following the end of the original payment period for the last installment?

If anyone has thought about this, I would appreciate your thoughts.