Notice 2007-7 provided detailed and controversial rules governing the ability of a nonspouse beneficiary to roll over benefits from an employer plan to an inherited IRA, where the 5 year RMD rule applies to the employer plan distributions.

While the Notice applies specifically to nonspouse beneficiaries, why wouldn't the IRS apply the same logic to a spouse beneficiary in the same situation?

For example, a spouse beneficiary might want to roll over 401(k) funds to an inherited IRA in order to get distributions free from the 10% early distribution tax. If the 401(k) plan requires use of the 5 year rule, what rule applies to the spouse beneficiary? why wouldn't he or she also be subject to the same rules the IRS sets out in Notice 2007-7? Ie, would the spouse beneficiary be required to complete the rollover by the end of the year following death in order to be able to take RMDs using the life expectancy method?

A plan offers the following distribution options: lump sum and installments.

The plan wants to get rid of the installment option.

Currently, there are no installment payments being made to any participants/beneficiaries.

Can the plan jettison the installment option pursuant to 411(d)(6)(E)?

Here's an interesting prospect:

Employer has 2 Profit Sharing Plans (no deferral provisions):

Plan 1: Covers only the 1 HCE of the Employer, the document is a vol sub cross-tested doc

Plan 2: Covers all NHCEs (7 or 8 ees), the doc is a NS prototype, allocation is uniform pct of pay

To pass 410 coverage, plan 1 must be aggregated with plan 2 in order to pass (obviously). Then, for plan 1 to pass 401(a)(4) nondiscrimination, the prior TPA ran a cross-tested 401(a)(4) test including the HCE and all NHCEs. The contribution that is then decided upon for Plan 2 is at least equal to either 5% of pay or 1/3 of the pct given to the HCE in plan 1.

1. Doesn't plan 2 need to have gateway language somewhere in order to be in compliance (in form) so the plan can actually support its position that it really gave a "gateway"?

or

2. Is the gateway language somehow not needed in plan 2's doc?

I have 2 companies that are now owned by the same group of people. I only administer Company A. Company B has a match provision and Company A does not. Company B failed it's 2005 ADP test and neglected to make the refunds. The TPA for company B would like to aggregate the plans for 401(k)/(m) testing for 2005 because together, A & B pass the tests (both (k) and (m) test) and no refunds would have been necessary.

My question is, can these plans be aggregated when Company A does not have a match feature?

Thanks.

I undertsand that that a church plan is not required to cover all employees. However, if the plan allows all employees to participate in deferrals but restricts employer contributions to a select group of individuals, could there be a coverage problem if the restricted group only covers 25% of the eligible participants (including the 1 HCE)? (In this case all of the eligible employees would fall under a typical non-excludable category under an ERISA plan.)

If this isn't a coverage problem does anyone have a citation I could refer to?

Thanks

How are we supposed to handle SSA reporting for plans that we takeover? It is rare (at least, in my experience) to get the 5500's going back far enough* to show that all my terminated participants have been previously reported on an SSA, so I'm wary of reporting them with the "D" code when they get paid out because I don't know if that will generate any correspondence from the Social Security Administration or the IRS.

I've sometimes used the approach of reporting all my old terminated participants with a code "B" on the first year's SSA that I do (and preparing to say "whoops, I meant A" for any that I get questioned on), but I don't have any real basis for that.

Is this really an issue that needs to be worried about? Or does someone at the SSA just note that a participant with a "D" this year was never reported before, mutter under their breath about stupid plan administrators, and forgets about it?

* of course, the SSA is not public information (since it contains the SSN)

has any one read the new 5330 instructions regarding 4972? do the instructions dovetail with 2007-28? They seem either circular or ingruent with the notice and I can't even tell which. who writes these things?

draper1

Does anyone know of any articles or commentary addressing the definition of "executive officer" under SEC rules for purposes of determining who the Named Executive Officers are? Of course, the definition of executive officer is helpful, but what do they look to determine what a "principal business unit, division or function" is?

In 2004, decision made to spin-off certain participants from a DB plan into a new plan, then terminate the new plan. New plan prepared for adoption effective 1/1/2005 (and frozen as of such date) with short plan year of 1/1 to 6/25 for the first plan year; however, due to a number of reasons, the spin-off did not actually occur until January of 2006, effective 12/31/2005. Assets and liabilities were transferred in January of 2006 based on 12/31/2005 valuations and benefit accruals. Notices of the termination were sent to participants in June of 2006.

I was just asked this morning whether a Form 5500 should have been filed before now, meaning for any time period before the assets and liabilities were transferred in January of 2006. Not being a Form 5500 expert, I came here.

It is clear that there were no assets in the plan for short plan year from 1/1 to 6/25/2006. In addition, the spin-off amount was based on what the participants had accrued in the original plan as of 12/31/2005. However, it appears that a 5500 might be required even if there are no assets. What I can't decide is if I can argue that there weren't even any participants until 12/31/2005 and, even if I could, whether a Form 5500 would still be required because the plan was effective 1/1/2005. Any thoughts?

I think that it is clear that a Form 5500 would be required for the 6/26/2005 to 6/24/2006 plan year, but I don't know what to do with the first short year....

Is anyone aware whether the Schedule T will again be required in 2008? A three year break was nice but I hope it's longer!

I have a 401(k) profit sharing plan whose document reads that only participants who have a year of service and are employed on last day of plan year receive a profit sharing contribution (it's a calendar year plan). Plan sponsor gave me incorrect census information (did not note a participant was terminated before the end of the plan year on the census request). Therefore, I calculated a profit sharing contribution for him and it was deposited before their corporate return was filed. Their Corbel plan document seems to address the situation of when an "ineligible employee" has erroneously been included as a participant and receives a contribution (employer can recover if it's within 12 months -- it's only been one month), but I'm not sure it this fits the situation; he was rightly a participant, but was not eligible to receive the profit sharing contribution. Any thoughts?

An employer provides each eligible employee with $2,400 a year on a prorata basis to use toward their cafeteria plan. If an employee chooses to use this money toward their medical flexible spending account, do they have access to the full $2,400 on the first day of the plan year? Also, what happens if this employee goes out on an unpaid medical leave (not subject to FMLA)? Do they still have access to the full $2,400? Can they continue to submit claims incurred while out on leave?

A client is considering a health reimbursement arrangement which will also provide retiree coverage. The employer has two classes of retirees – one eligible for benefits and the other group not eligible.

Any thoughts an how the nondiscrimition rules of Section 105(h) and 1.105-11©(3)(iii) would apply in this case?

Any opinions/guidance is appreciated.

Hello, i have a question about ROTHs. There seems to be some very intelligent people here so i appreciate & look forward to your help.

My wife is 44 and our plan is for her to retire between 55-57 yrs old.

Social Security is all she will have, and that of course won't be til 62 or older.

I just want to set up a simple CD type ROTH at our local credit union for her so that when she retires, she will have some monthly spending cash for a few years (from about 57-62)

Once she reaches 62 we should be fine then. I will be 56 and just retiring myself and will be eligible to withdraw from my 457k at that time. To compensate for the fact that i can start withdrawing at 56 instead of the normal age of 59 1/2, i contribute ALOT more. Anyway, thats another stary and slightly off topic from what my question is.

If she opens up a ROTH now, the plan is for her to begin withdrawing at 57.

Correct me if i am wrong here...

- Until she reaches 59 1/2, she will ONLY be able to withdraw contributions, right?

- Any interest money she makes will have to be left in til 59 1/2 otherwise it would be subjected to the 10% penalty, right?

If the answer to the above is YES & YES, then my plan is for her to contribute an amount accordingly so that from 57 to 59 1/2, whatever amount we decide that she can take out per month as spending money, it will not surpass the amount she has actually contributed, therefore insuring to avoid any 10% penalty.

Thanks.

The final 415 regs posted by J4FKBC is timely for this question.

Suppose a county employee retires with full pension benefits and then establishes a very profitable business at age 68.

If his corporation adopts a DB plan, must the 415 limit be adjusted for the benefits he accrued under the county plan? I would think not because the two entities are not related in any way.

Thanks much.

http://benefitslink.com/taxregs/td9319.pdf

Looks like the final regs will keep the 401(a)(17) comp limit as an extra limit for 415 as well. This will limit the maximum accrued benefits for older employees so the actuarial increase in the 415(b) limit (post age 65) is also capped at the high 3-year average of the 401(a)(17) comp limit.

It allows a grandfathering of accrued benefits earned under plan provisions in place before April 5, 2007.

Anyone else looked at this yet? Agree? How do you perceive the grandfather provision working?

ak2ary - when do you anticipate being able to present on this topic?

IRA's not my area of expertise so I'm looking for some guidance!

I believe a trust can be named as beneficiary for an IRA. Our client would like to set up a IRA with the beneficiary as a trust for his 10 year old son (the client is unmarried). He would like to stipulate there be no access to the money until his son is 25. Here are the questions we have:

1) Is this possible?

2) If the client dies, will the IRA then pay a benefit to his son (regardless of his age)? Or will the funds stay in the IRA until the son reaches Age 25? If there is a payout, can it be lump sum or does it have to be calculated and paid out according to the son's life expectancy?

3) What are the trigger that require money to be paid out to his son (generating a taxable event)?

4) Once there is a distribution, how are the taxes calculated? Based on current rates? Any excise tax?

Your help is appreciated!

Hello,

We have a union plan and non-union plan currently on separate prototype documents. Consideration is being given to merge them together, but seem to be having one issue that does not seem to fit on the prototype.

The CBU calls for a fixed match formula, while the non-union plan also has a fixed formula but the match formula for the non-union is different than the union.

I do not see a way within the prototype we are looking at to provide for the two different match formula (union vs. non-union).

Even if the single plan is established with a discretionary matching formula, the prototype does not appear to provide for the ability for diffferent match formulas for different groups within the plan.

I guess my question ultimately is whether this a specific prototype design restriction, or is it a general prototype restriction whereby no prototype can provide for the different match for a union/non-union group within the same plan using a prototype?

Thank you in advance for any insight/confirmation you might be able to offer.

Andmik

Section 401(a) reuqires spousal consent when a participant wants to name a beneficiary other than the participant's spouse where the plan's only form of distribution is a lump sum. I'm not sure that makes much sense when no consent is required to receive a distribution. I doubt there is a way around this requirement, but I'd like to hear any suggestions.

We have a 401(k) Plan with three doctors, each has Schedule C income (no W-2 income). There are other employees (paid via W-2) that participate in the plan.

It is our understanding that because this is a Title I plan, the 401(k) deferral deposit deadline applies to the self-employed individuals as well as the employees. So, if one of the doctors didn't defer the maximum during 2006, (s)he can't fund the additional deposit now in order to get to the max for 2006 (even though it's still before the due date of his/her tax return). If the deposit is made now, it's considered a "late deposit" and is subject to the 15% excise tax, "lost earnings" calculation, VFCP submission, etc.

Are we correct in our assumptions? All of the regs I can find regarding the timing of deposits for self-employed individuals imply that the plan is not subject to Title I (in which case they have until the due date of their tax return to make the deposit). Where can I find this this in the regulations?

Any input would be greatly appreciated.

Thanks!