I am unable to find the answer to the following question and would like to hear your thoughts/suggestions:

Two plans (Plan A and Plan B) have become first-tier subsidiaries of a parent corporation, as follows:

Plan A has a plan year ending January 31 and was acquired by the parent on January 3, 2005.

Plan B has a plan year ending June 30 and was acquired by the parent on August 9, 2005.

We know that Plans A and B have to be tested as a controlled employer at some point, but the question is

WHO IS IN PLAN A'S TESTING GROUP as of February 1, 2006 (which is "the last day of the first plan year following the date of the acquisition...")??? When we do the testing for PLAN A, do we also include Plan B in the tests, even though Plan B's transition period is not yet expired??

I have looked at 410(b)(6), I have looked at the regs, I have looked at secondary materials all to no avail. Where is the answer????

Help!

FYI, The IRS appears to be sending compliance questionnaires to public school districts in Washington, Missouri, and New Jersey, according to the National Tax Sheltered Accounts Association (NTSAA). The association's website contains what appears to be copies of the mailing. Here's a link: http://www.ntsaa.org/news.php

A second letter is mailed to school districts whose responses suggest that their plans might be discriminatory. This letter offers forgiveness in exchange for the school's making contributions to the 403(b) accounts of employees who missed out.

According to a bulletin published by Lincoln Investment Planning, Inc., the IRS discovered that certain groups of employees, such as substitute teachers have few participants in the 403(b) at some schools. See the bulletin at http://www.lincolninvestment.com/emp/pdfs/IRS403bSummary.pdf

my brother-in-law says we can take $4000 out of my husbands roth ira to fund a hsa ?? i say he is wrong... what do you say??

We have a client that generally uses te GATT rates, however, if a participant works until normal retirement age and then retires, the lump sum is determined on the basis of the greater of the GATT rate or the PBGC rate with a 4 year setback. Currently, the PBGC rate provides a better benefit.

The question is, could the PBGC rate be eliminated for anyone who has not yet reached NRD without having to guarantee that the benefit earned to date would be subject to that provision?

Any guidance/regulations is appreciated - thanks.

Is a MEP with one trust to hold benefits of the employees of the different, unrelated employers subject to securities laws registration if no trust assets are invested in securities of any of the participating employers? Or is there a securities law exemption where no employer securities are involved?

Plan sponsor adopted 401(k) in 2000. Changed TPAs and prototype plan sponsor in early 2006.

Didn't understand the process and thought it was "adopting new plan" and wanted safe harbor. Found out

that it could do that because of the notice provision until 2007. Owner of plan sponsor was informed by TPA that he could also adopt Simple 401(k) year for 2006 thereby allowing himself the opportunity to defer the most. The TPA told them that instead of deferring to the 401(k) for the year the employees would simply contribute to the Simple 401(k). So, no elective deferral contributions were made for 2006 to 401k.

Now, the TPA has sent a letter to the plan sponsor stating that it believes that there was a plan compliance problem because no contributions where made to the 401(k). The employees never revoked their elections to the 401(k) when they decided to defer to the Simple 401(k). I agree that there was a failure to follow the plan document but what is the remedy? The employees still deferred to another plan sponsored by the employer.

We want to use 6% as our 12/31/06 discount rate for our pension plan. I keep hearing that 5.75% is the rate likely to raise the fewest eyebrows, if any. Anybody using 6% with no push back from auditors?

Company x is headquartered in the United States and has a Canadian branch. The branch maintains a "retirement contribution arrangement" ("RCA") which is essentially a non-qualified plan where the employer gets much of the benefits of a qualified plan, by being able to make a current deduction for contributions to the RCA, the participating employees are only taxed at the time they receive a distribution and while, in the RCA, the assets are protected from the employer's creditors. In addition, the assets are held by either a custodian or trustee. Assuming that the 90% resident test is satisfied, can a US employer elect to deduct contributions pursuant to Code Section 404A?

For those TPA's out there, what are you planning in the way of participant statements to comply with PPA? For clients who use individual brokerage accounts or some other platform that does not maintain vesting, what are you going to do? The thought of duplicating account balance information, just for the purpose of adding a vested balance section is too maddening to consider, but I haven't heard a good alternative.

Suppose its not an option to just tell the folks who drafted the PPA to stick it?

I have a new client who started their business in Aug. 2005. They started a 401(K) Plan as of 1/1/06. I understand that the owners of the co. will be HCE for the first yr based on the ownership of 5% or more of the co.

My question is in using the look back year, can a determination of HCE be made for any other ee's based on prorated compensation from Aug 2005-Dec2005? Or for the first year of a plan is it owners only?

Under PPA maximum deductible amount includes a "cushion" amount if the plan is "at-risk". There is special rule in determining the cushion amount if a plan has 100 or fewer participants. But under the definition of "at-risk" plan doesn't a plan have to have 500 or more participants. So how could a Plan be "at-risk" with 100 or fewer participants and have the cushion amount at all?

A plan is sponsored by a company that is 100% owned by a husband and wife. The plan covers three of the owners parents.

If a plan covers only substantial owners then it is exempt from PBGC coverage.

It seems that the attribution rules of IRC section 1563(e) apply in this case. And those rules seem to indicate that if the adult couple directly owns 100% of the stock then the parents would not be considered to own any of the stock in the plan and thus would not be considered substantial owners for purposes of the PBGC requirements.

Thus this plan would not contain only substantial owners and would not be eligible for that particular exemption.

Any comments on the use of section 1563(e) and my interpretation of such section?

Thanks.

Say we have a plan that is sponsored by a married couple who fully own (100%) a company.

The other three plan participants are the parents of the couple.

For purposes of determining 5% ownership as applicable to the RMDs, it seems that IRC section 318 provides that the parents would be 5% owners. Let me know if anyone disputes this reasoning.

With that said, it would follow that once the parent reaches age 70 1/2 he would be required to receive his RMD.

However, let's say that the participant enters the plan at age 74 and the normal retirement provisions provide for age 65 & 5th anniversary of participation.

Could the plan provide that the participant can wait until he reaches NRD before being required to receive his RMD?

That is, could the plan enable the participant to defer his pension at least until NRD?

Thanks.

I know it is possible to exit a safe harbor matching 401(k) plan mid-year by complying with 1.401(m)-3(h).

Does anyone know if it is possible to exit a safe harbor 401(k) plan with a 3% nonelective contribution duirng a plan year?

I have a client who matches 50% on the first 6% of comp deferred and 100% on the next 2% of comp deferred. Is this still allowed? Someone mentioned that it might not work any more.

Thanks!

Employer has several hundred loans outstanding from qualified retirement plan. Employer is changing its payroll practices, and will switch from monthly payroll to bi-weekly payroll.

Plan loans were issued with amortization schedule reflecting monthly loan payments. In the future, employer would like to have plan loan payments made from each bi-weekly paycheck.

Employer's concerns include (i) the requirement of Code section 72(p)(2)© that substantially level amortization must be required over the term of the loan, and (ii) the fact that under the loan agreement, loan payments are required on a monthly basis.

Employer believes that the fact that the loan agreements in place REQUIRE monthly payments satisfies item "(i)" above (because the literal reading of the Code simply requires that the loan CALL FOR substantially level amortization). However, employer worries about the permissibility of unilaterally requiring that employees make loan repayments on a schedule that differs from what is required under the loan agreement.

How should employer handle? (Any citations to authority for the approach you recommend would be appreciated.)

The ERISA Outline book talks about the ability to recharacterize ADP refunds to after tax contributions. In order to do this, the plan document must allow Employee contributions.

The EOB also says that the recharacterized after-tax money is subject to be tested in the ACP test.

My question has to do with WHICH ACP test this money is tested in.

For example, say a 1/1/06 to 12/31/06 ADP test fails. HC Employee A elects on 2/9/07 to recharacterize all of his $1000.00 ADP refund to an after-tax contribution.

Is that $1000.00 EE contribution then retested in the 12/31/2006 ACP test? Or is it treated as a 2007 plan year contribution and tested in the 12/31/2007 ACP test?

Suppose you have a pooled profit sharing plan with a 9/30 year end. When determining the 2007 minimum distribution for the age 72 owner-participant, must we adjust his 9/30/06 balance to 12/31/2006? If so, by what interest rate? The 10/1/05-9/30/06 rate of return for the plan?

Does anyone know what the implications are if a DB plan sponsor makes contributions to a trust that doesn't have a tax ID ?

In other words does the actuary for the plan still have to recognize the contributions and assets in this trust ?

Is the plan sponsor faced with any penalties ?

Is the ID just a nice to have rather than a need to have ?

I'm looking for a 2-3 day seminar on remedial amendment periods, determination letter requests, the new cycles, etc.

Does anybody know of one?