Is an unforseen emergency distribution from a governmental 457(b) an eligible rollover distribution?

I know this has come up before, but there seems to be disagreement about whether an employer can go after a participant to recover a money that was overpaid from the DB plan. In this case, the participant received a lump sum distribution. Several months later, the participant was notified that he received several thousand too much and the plan wants it back. In a perfect world, the participant would say "Oh, sure. Here you go." But nothing is that simple.

I've heard that it depends on if the money can be tracked to a specific account where it is still being held. Is that true?

Is there somewhere I can look to find out what the employer's, the plan's, and the participant's legal rights and obligations are?

Company X has a 401(k) plan permitting participants to elect, among other options, distribution in the form of an annuity contract. The plan language lists three or four available options. Under the annuity contract provided by Insurer I, more annuity options are available than are described in ths plan document but because of the plan's language, annuities offered to X's participants have been limited to thos specified in the plan. X would like to adopt a more flexible provision, basically allowing a participant to select any form of annuity offered by Insurer I.

However, I see two problems with amending the X plan to state "and any annuity form of benefit provided under the annuity contract with Insurer I at the time of the Participant's Termination of Employment." They are: (1) The IRS consent regulations require that the plan furnish a participant "a general description of the material features of the optional forms of benefit available under the plan." Reg. Section 1.411(a)-11©(2). and (2) IRS regulations provide that it is a violation of the anticutback requirement if the availability of an optional form of benefit is conditioned upon the exercise of discretion by the employer or a third party. See Reg. Section 1.411(d)-4, Q&A-4 and 5.

Does anyone have any suggestions on how to deal with these issues in this context? Could the plan be amended to state that an annuity contract will be purchased to provide an annuity in form X, Y or Z and such other forms as are then provided under the annuity contract between the insurer and the plan." The description required to satisfy the consent requirement would have to be updated to reflect the addiion of optional annuity forms.

I have a physician employment agreement in which he is to be paid on severance from service (1) collections received during a specified run-out period (5 months), and (2) accrued but unpaid amounts (he receives a monthly draw and then there is a quarterly reconciliation to actual collections, and if collections exceed draws, he receives a percentage of collections).

The agreement has a "good reason" provision so the severence exemption is not available.

Are both payments on severance from service, NQDC subject to 409A?

Client failed to execute proposed amendment referenced in determination letter within 90 days. Propose to file as nonamender, but want to avoid determination letter application.

The amendment involved was a model amendment (which would normally not require determination letter application with the VCP).

Will it stick?

A company has grown in size to where the insurance carrier is changing from age-related premiums to composite premiums. As a result, the company is considering restructuring how it charges employees for premiums. It is considering paying 100% of employee-only coverage, but requiring employees to pay a portion of spousal or family coverage. The cost to each employee would be the same for spousal coverage, but for family coverage the employee's cost would increase for each child. So, for example, an employee with 4 kids under family coverage will pay more than an employee with 2 kids under family coverage. Any reason this can't be done?

Does anyone have a good summary of how the Pension Protection Act affects 403(b) plans? Also, do the provisions that require a 75 percent QJSA and extent the notice period to 180 days apply to 403(b) plans?

What news letters, subscriptions are people using to keep on top of pension issues?

Thanks!

The new diversification requirements under the Pension Protection Act generally apply only to DC plans holding publicly traded employer stock. However, the rules generally provide that where the plan holds employer stock that is not publicly traded, it will be treated as publicly traded if the employer (or any member of the employer's controlled group of corporations) has issued a publicly traded security. I have a client which holds employer stock in their plan that some 5 or 6 years ago was publicly traded but is no longer (having gone private). Does anyone have any insight on how this new rule will apply? How far back will we have to look? Has there been any discussion on this?

401(k) plan is a large plan filer. All of plan's assets are participant directed and held in separate accounts at a mutual fund company.

I know I have to check line 4i "YES" - assets held for investment purposes. Is there somewhere I could see a sample of the schedule needed for mutual funds?

The format is

(a) {What the heck is this column for???}

(b) Identity of issue, borrower, lessor, or similar party....would this be "XYZ Mutual Fund Co"?

© Description of investment including maturity date, rate of interest, collateral, par or maturity value.... would this be "XYZ Balanced Fund"?

(d) Cost....does this mean that I have to list purchase of each individual transaction (2 pay periods per month, with 12 funds available for 175 participants)?

(e) Current Value - I understand this one.

Also, does this mean I have to list individually the info on each participant loan?

There should be a smilie pulling out his/her hair

Thanks

Monica

May an employer create a VEBA and immediately fund it before any claims for benefits have been "incurred by not paid"? Is this contribution deductible by the employer? Everything I have read on the contribution and deduction limits speaks in terms of contributions made at the end of the taxable year. But my client wants to create the VEBA and immediately make a contribution. Any help would be greatly appreciated!

I think I am thinking too much today....

In another area I asked the question... controlled group? Now I think I have the answer but have this question... Here are the specifics:

Company A ... son and wife 50/50 owners

Company B ... son, wife, mom, and dad 25/25/25/25 owners

From my research (hope I am getting it correct) this is not a controlled group. And since it is not a controlled group can the son and wife both participate in both plans? 2 separate 415 limits?

To delve deeper... Company A would establish a plan and since it would be a husband and wife business there would not be a 5500 requirement. But, if Company B was to also establish a plan would we still be able to file an EZ?... 4 partners/owners? No 5500 requirement? Is there a catch I am missing?

Thanks!

Pooled PS plan has $3 million in assets. They want to investment $100-$150K in an investment that will have no return for 5 years. Allowable, prudent, draw backs, etc.?

Here is the scoop...

Company A : son & wife 50/50

Company B : mom, dad, son wife 25/25/25/25

Control group? I didnt think so... thanks!

I now have more info......

Company A... Buys land and develops it. Sells lots to builders

Company B...

Purchases lots from A exclusively

Builds houses and sells them

Profit is split among the 4 owners (mom, dad, son, wife)

Now, a CG? ASG?

Bottom line, Can there be one plan? Can there be 2 plans with 2 415 limits? If one plan and company A sponsors it, would mom and dad be EEs of A or owners? If owners, then can we file 5500EZ?

Here's an interesting potential takeover that is causing me to examine my interpretation of 1.401(a)(26)-5:

Two business owners (50% each) have differing investment philosophies, so they set up 2 DB plans, one for each owner (and each plan covers the employees too, uh sort of, - well, you'll see...)

They set up the formula for Plan A (for owner A and all non-owner employees) to provide the largest benefit (both plan's have the same retirement age provisions and actuarial equivalence).

For owner B and all non-owner employees, they set up Plan B which has a smaller formula where the benefit accruals are offset by the actuarial equivalent of the amounts accrued under Plan A. Thus, the benefits in Plan B are completely offset by the benefits accrued in Plan A, other than the benefit for owner B. You see, the document for Plan A excluded owner B from participation in Plan A. Likewise, Owner A was excluded from Plan B.

However, the requirement under 1.401(a)(26)-5(a)(2)(iii)(2) states,

"The employees who benefit under the formula being tested also benefit under the other plan on a reasonable and uniform basis."

Does that mean ALL employees under the formula MUST also benefit under the other plan?

If so, then doesn't this two-plan arrangement (described above) fall apart, since it does not get to disregard the offset when determining who 'benefits' -which is what 1.401(a)(26)-5(a)(2) would otherwise allow?

Is there a way such a 2 plan arrangement could be established to ultimately have only one owner with a net benefit in the plan?

Struggling to think the following situation through. Client has father in DB plan and plan provides for the greater of (a) 10% of Average Mo. Comp (career avg.) or (b) the 10k Deminimus benefit allowed under IRC 415(b) (pro-rated for years of service less than 10). Standard Form of benefit is a 100% J&S. Since father's avg. comp is only 2k per year times a 10% benefit formula, the 415 10k deminimus benefit is the greater benefit. Father is over age 70.5 and has begun minimum required distributions with no formal election as to final form of benefit since still working, but now dies. Question, what is the death benefit available if the spouse does not want the J&S annuity benefit but rather wants a lump sum as allowed under the plan (but 415 may not allow it based on the 10k) ? I don't think the 10k deminimus benefit under IRC 415(b) has an ancillary death benefit feature available other than the J&S if this is the standard form of payment (which it is), so I'm thinking if the spouse does not take the 10k as a continuing J&S benefit the death benefit available for a lump sum option could only be based on the regular 10% benefit formula using actual comp paid ($2,000 * 10% x 2 YOS/P). Any thoughts ?

Please let me know if you think there is IRS guidance pertinent to this issue.

Tax-exempt employer makes a firm commitment to executive to continue to provide free health insurance for life after retirement or other termination of employment; or, stated differently, there is no "substantial risk of forfeiture" with respect to the executive's entitlement to this post-employment benefit. Is this commitment a deferred compensation arrangement subject to Section 457(f), or does it escape 457(f) because the deferred compensation is nontaxable compensation?

A participant is working after normal retirement. Their accrued benefit is limited by 415 salary cap.

They have not taken the retirement benefit that was payable at normal retirement.

An actuarial increase for late retirement is not available.

If they continue work and receive higher pay to justify a new limit, then the facts change and an increase is permitted.

I believe they should receive a notice of suspension of benefits, because they permanently lose

the right to take that payment.

Plan design – 12/31 PYE, DF & MT (no hours or EOY requirements), 21 & l YOS, enter semiannually.

Our client forgot to tell us about a new company they formed in July of 2004. The ownership percents in each company indicate they would be considered a controlled group.

My understanding of the transition rule in the ERISA outline book is that the rules cannot be applied since the company in question is a newly formed company not the acquisition of an already existing business.

I have not received any information regarding the number of participants in the new company. Since the transition rules do not apply, I will have to try testing out the eligible participants of the excluded controlled group for calendar year 2005 (non of the excluded company’s employees would have been eligible in 2004).

Now in 2006 they want to start allowing the employees in the company that was excluded to enter the plan as of October 1st. How do I test coverage?

As of December 31, 2006, all eligible participants of the controlled group will be benefiting in the plan. But for three quarters of the year one company was not allow to participate in the plan.

Do I perform a coverage testi as of September 31, 2006 and then again at December 31, 2006.

Any help would be greatly appreciated.

A grandmother had been receiving annual death benefits from her deceased son's IRA since his death in 2002. Before she could receive the 2006 benefit from that IRA, she passed away at the age of 90. Now her grandson is the beneficiary. Should the 2006 distribution be paid to him? If so, should the calculation be based on his life expectancy or hers at the time of death? In otherwords, how should the 2006 distribution be handled? Thanks.