Part 1:

I would like to check my interpretation of Testing Age in 1.401(a)(4)-12.

Combining plans for 410(b) and 401(a)(4).

DB Plan NRA = Later 62 or 5 YOP (NRD is first of mo. following)

DC Plan NRA = 65 (NRD is first of mo. following)

No EE is at or past either plan's NRA. No EE comes under the 5 YOP NRA provision.

EE1 is in the DB Plan Only

EE2 is in the DC Plan Only

EE3 is in both plans.

Testing Age:

EE1 = 65

EE2 = 65

EE3 = 65

Agree/Disagree????

Part 2:

What if the NRD in the DC plan is the last day of the plan year NRA is attained (the DB NRD is first of month following NRA). Therefore, in the DC plan, some particpants actually retire at age 66 based on age nearest birthday. Would that change anything? The regs only use the term "normal retirement age" not "normal retirement date". I can add that my software vendor uses age nearest at NRD. If age nearest at NRD is applicable, would everyone's testing age be 66 or just those that are actually 66 at NRD (the rest would have an age 65 testing age)?

I am contemplating rolling over my 401k assets into a Roth IRA and a traditional IRA. My 401k contains both qualified (taxable) and non-qualified (already paid taxes) assets. My 401k administrator will issue separate checks when I roll them over. If I understand the new rules for 2008 (and that's a big IF), I can roll the qualified monies into a traditional IRA and the non-qualified monies into a Roth IRA. I'm also thinking that both of these transactions will just be rollovers not subject to any current taxation in 2008.

Am I correct in my interpretation of the new rules for 2008? Am I ignoring any other consequences? Are there any other things to be aware of with this proposed transaction?

Thanks in advance for any help!

A payroll company put in a PS/401k plan for a client who had a PS/401k plan with me. They established it as a new plan rather than a restatement.

I seem to remember but cannot find that the TP Grp election must be consistent for all plans of the employer.

I used the top paid group election. They did not. Since their document is executed later than mine does that effectively amend my doc?

(I would just tell the client that the payroll company is now handling the entire thing (the new plan vs restatement treated as a mistake) but they used a standardized PS doc and that will cost the employer thousands of dollars compared to my new comp plan to get the same max allocation to the partners. So I am trying to see if I can do anything to work around all this. Lots of issues to chuckle about...)

Thanks

I am looking at a plan that had a QDRO come in that the plan qualified. The terms of the QDRO was that the benefit of the alternate payee is not distributable until the participant turns retirement age. (In my opinion, poorly drafted).

Despite this knowledge, the PA went ahead and processed a rollover to the alternate payee. Despite it being rolled over, the participant cashed the check (the check was made out to the IRA institution for her benefit, and some bank cashed it into her checking account).

While the QDRO didn't support the distribution, the Plan Document is a prototype document that permitted it.

Question 1 -- Is there any guidance that states the distribution is OK since the document supports it? (i.e. can the document override the qdro?)

Question 2 -- If not, what is the correction method? I'm thinking this is an overpayment under Section 2.05 of the ECPRS -- which means (1) the PA makes reasonable efforts to get the money returned and (2) if it is refused to be returned (where we are now), the PA makes the contribution to the suspense account to be used for future ER contributions.

So an insurance broker asks me to take a look at this client's DB plan. He is a sole prop and has a smallish $200,000 whole life insurance policy in the plan for a number of years. He wants to increase the death benefit and is wondering how high he can go.

While playing around, I come across a few sources that indicate an owner-employee can not deduct the current cost of life insurance. **Screeech** (that is me slamming on my imaginary brakes)

Ok so I do some thinking about this. Typically a corporation can deduct the entire premium and then the individual pays the taxes on the Table 2001 rate or some other equivalent. In essence the individual is paying the taxes for the insurance coverage for the current year. This gets me thinking that the reason an owner-employee of a sole prop can not deduct the premium is because by paying the Table 2001 rate you are in essence taking a deduction on the schedule C and then paying the tax on the 1040. In essence they are just canceling each other out right? So we are really doing the same thing as the corporation just skipping a step because we aren't taking the deduction on the schedule C for the cost of the current life coverage. If this is correct, it is kind of a pain, because I have to indicate to the client what his total contribution is and then indicate what his deductible amount is. Plus explain the difference. I guess I won't hav eto explain why he is receiving a 1099, but I think his exisiting actuarial firm has been treating this like it was a corp and issuing the 1099 all along.

The client wants to do a 1035 exchnage on his current policy into a UL with some no lapse guarantee. I think it stems from a term policy he holds outside the qualified plan that is getting too expensive and he wants to let it lapse, and pick up the death benefit coverage inside the plan for the deduction. The UL policy is fairly inexpensive so I figure the investment part of the policy is minimal. The way I see things, he may only be able to deduct about $4,000 of the $15,000 premium. I guess that is better than nothing though.

There may not be enough information here to make a thorough review of the situation, but if someone could concur or disagree with my analysis of the reasoning behind the sole prop losing the deduction for insurance that would be a good start for me. I already started the conversation with the broker and it was going down a bad path. I'll don't mind going there, I just don't want to be proven wrong later.

Eligibility is first of month following 3 months of service. Document also has last day/1000 rule for match. Turns out the employer prefunded the match on a payroll by payroll basis rather than annually as the plan document stated AND they neglected to wait the 3 months for a few participants.

Fortunately this is first year of match so terms can forfeit entire account balance and I can figure the shares that were purchased early and have those amounts liquidated.

But there are a number of individuals who received a match but did not work 1000 hours and client wants them to keep the money. Is that an amendment (eliminate the 1000 hour rule) that we can do retroactively? Match amount is not discretionary so it won't change/reduce anyone elses benefit.

Is anyone aware of a New York State law stating that 401(a) plans are no longer available, as of January 2006, to public sector employees, for purposes of employer contributions.

Assume that a class action suit has arisen and certain participants in an ERISA plan potentially qualify as members of the class. Would it be sufficient for the fiduciaries to simply disclose this information to the plan participants to give the participants the opportunity to join the class if they wish? Could this be considered to be acting in the best interest of participants, or would the fiduciaries need to join the class on behalf of the participants? I'm sure it's difficult to come up with an answer without knowing more details, but any comments would be welcome. Also, is anyone aware of commentary or case law addressing this issue? Thanks.

I am working on a 401(k) / New Comp Plan and and need to increase the contribution percentage of one NHCE in order to pass the Rate Group Analysis for the only HCE in the plan.

Can I do this, or do I need to increase the contribution percentages of all the NHCE's?

The current contribution allocation is

1 HCE: 16.67%

10 NHCE: 5%

Thank you, AJM

What is the standard interest rate used for a New Comp Plan?

I have seen both 7.5 % and 8.5 % used.

Thank you

AJM

My company has a DB Plan and is thinking about terminating it. Is it permissible for employees to rollover their accrued DB benefit into a 401(k) Plan? Or must the accrued benefit be used to buy annuities on behalf of the participants?

If it can be rolled over into a DC plan, please point me in the direction of the ERISA or Treasury Regs that permit it.

Thanks.

We have a takeover client with a 401(k) plan that has a frozen ESOP component. The company pays quarterly dividends on the ESOP stock that are deposited in a holding account and distributed in December of each year directly to participants. The prior TPA did not show these dividends on the Schedule I. Is this correct? The 1099-DIV forms list the plan as the payor which would lead me to believe that we should show the in/out of the dividends on the plan balance sheet. Perhaps the payor shouldn't be the plan?

Any help would be appreciated.

I am working on a Safe Harbor 401(k) Plan / New Comp Plan with a 3% Safe Harbor Cont.

4 participants terminated during 2006. I know that they are entitled to the 3% Safe Harbor Contribution, but are they also entitled the 2% New Comp contribution to satisfy the 5% gateway?

Hello,

Can anyone tell me if a defined benefit plan MUST offer the surviving spouse the ability to defer commencement of the QPSA past earliest retirement age? That is, say, if she did not want to begin receiving it at the participant's age 55, ERA.

Thanks.

We have a client that has a small amount of excess (over the 415 limit) in their 3 person DB plan - about $30,000 extra (all employees are at the 415 limit). They are a corporation - for profit (not a tax-exempt employer). They are still a functioning company and will have enough wages to support the allocation in the QRP.

So, if they transfer 100% of the excess assets to a qualified replacement plan, according to 2003-85 it looks like they pay no excise tax, since no reversion occurred (and also avoid income taxes of course). Is this how you would read this?

Is Revenue Ruling 2003-85 still the most current guidance for this?

We'll assume calendar year plan year.

Say a client comes in to see his CPA for tax planning in early December, 2006 for the 2006 fiscal/plan year.

The client has a one participant DB plan.

The client says he is going to take $50,000 compensation for 2006 and wants to know the minimum funding for 2006.

The CPA needs an immediate valuation for the client, so the client can plan and know.

Available to me is the client's 2006 actual compensation and the plan assets, plus receivables as of 12/31/2005 (assets on 2005 5500EZ). The client doesn't have (and it doesn't exist at t his time) 12/31/06 assets or any plan assets available.

If say a 1/1/2006 valuation is prepared, is it reasonable to compute the present value of future benefits or increase in current liability during the year (2006) or present value of accrued benefits at year-end based on the actual compensation that is known? And then bring, for example all costs, values as of 1/1/06 to the end of the year at the valuation interest rate?

The reality is that the data includes current year-end compensation and prior year-end asset data.

Curious to hear suggested approaches based on the data provided.

Of course the intent is to use a method that is consistent and not arbitrary and capricious as the legal minds might say.

Thanks.

Model language in several DCAPs suggests that upon termination of employment a participant can access unused amounts in the DC FSA to reimburse expenses incurred through the end of the period of coverage. This appears to be the result of the 12-month period of coverage rules for DCAPs, but I am unable to find anything to support this practice.

Any guidance is appreciated.

Can a qualified plan trustee be a foreign corporate entity or non-resident foreign national?. The client has non-US owners and the domestic officers would prefer not to be plan trustees.

An IRA owner died at age 73 and he had been taking required distributions. Just after his death, his spouse beneficiary asked the custodian for a check for the remaining value of his IRA which was about $45,000.

She was hoping to "rollover" the check into an IRA in her name within 60 days. She is age 72. But now her new IRA custodian has told her that she cannot deposit the $45,000 as a tax-free "rollover" because she took a full distribution from her deceased husband's IRA and instead she should have left it there and then had the two custodians handle a "trustee to trustee transfer" of the $45,000 to avoid taxes.

Does the above sound correct? Is there a way for her to "rollover" the funds within 60 days to avoid having to declare the full amount as taxable income?

Thank you for any help you can provide!

Frank1971

Is there a safe harbor investment for money that a company puts aside to cover its future repurchase liabilities?

Thanks -