With the PPA now signed, I would like to be able to provide education on the topic and provide CPE credit for CPAs. Do I need to begin with the state board of accountancy? I am guessing I would need to provide the seminar materials to be approved that sort of thing. Anyone know the process?

Ok - here's my situation...we have a client where one of the partners is leaving and joining another firm. He currently has an outstanding loan balance. He has already checked with the his new Employer's plan administrator and they will accept his loan balance as a rollover (we'll be providing them with the backup loan origination forms and amortization per their request).

The plan I adminster, however, does not allow for distribution until after the val date following termination; in this case after 12/31/2006. All plan distributions are done once the safe harbor contribution has been made in the following year (could be as late as Oct if the client is on extension (self-employed partnership).

The loan provisions of this plan state that the loan becomes due and payable upon termination of employment. According to the plan loan policy, the loan will default in the quarter following the quarter in which the last payment was made if payments cease.

The client wants to work with this terminated employee to address the loan situation. They don't really want to change the plan distribution date, because then they will be doing multiple distributions whenever someone leaves. I'm not sure if they want to change the loan policy to allow for repays from terminees to keep this loan current.

Does anyone have any suggestions?

During the 2005 PY, a broker accepted personal checks as deferral deposits from 3 participants. The plan administrator was unaware of this, and therefore showed only the deferral amounts actually deducted from payroll on the W-2s. 2 of the participants have terminated and rolled their accounts into IRAs, while the 3rd employee still has her money in the plan. One participant even exceeded the 402(g) limit by $3,000.

The client rightfully feels that they should not have to amend the 2005 W-2s and corporate tax return, but that the participants need to amend their returns instead.

How do we go about correcting this?

I read a prior post on this issue, but I have another question. if the margin account results in a "negative" cash balance at the end of the plan year, wouldn't this amount be reported as a payable on Schedule I of form 5500?

I have a 401k Plan. They have 28 segregated Brokerage accounts, one for each Particpant.

The Trustee sends the money to the Trust on time each payroll period.

The Brokerage House does not credit interst to the cash postions?

How do you go about calculating lost earnings, since the cash position changes everyday/month due to account activity.

Can an employee whose marital status is single designate his estate as his beneficiary for the purposes of payment of any lump sum death benefit that his beneficiary may be entitled to under the provisions of the pension plan?

Thanks!

We've got a Profit Sharing Plan, PYE 12/31/2005. Discretionary contribution was funded timely, 5500 completed and filed, participant statements distributed, etc. and we get a call today from the client informing us that an employee that was listed as a new hire on the 2005 census was really a participant from 1998 - 2002 (but he never had an account balance). Turns out he was called to active military duty back in 2002, which is why he left. Anyway, he returned to work in 2005 and we didn't give him a contribution because he got deleted from our software system after years of inactivity so he looked like a new employee.

Side note: they did not make a contribution 2002, 2003 or 2004, but they did in 2005.

To correct this (pursuant to Rev. Proc. 2006-27 page 76 (2)(a)(i)), we've given him a 2005 contribution based on what would have been his full-year wages had he not gone on military leave in 2005. His contribution will be deposited this week, and the client will take this as a deduction on their 2006 return.

My question is: do we have to amend the 2005 5500 and Schedules to account for his contribution, or can we just show it as a current year contribution in 2006? I'm sure the RIGHT thing to do would be to amend the 2005 return and re-run all the reports, but is it really necessary? This guy's contribution is only about $500, and it will take several hours to re-run everything. Any thoughts on this?

Thanks!

I've got a PLR that I'm trying to interpret for one of our accountants and I think I understand what's going on but would like some confirmation....

Can someone give me a brief laymans explanation of the unfunded liabiliities described in 412(b), their required amortization periods and the connection to the reduction of future accruals and actual cash dollar outlays so that I can correctly explain this to them...

I've seen a few summaries that say the repeal of the PBGC variable rate premium full funding exemption is effective for plan years beginning in 2008. It was my understanding this provision is effective for plan years beginning in 2007. Coudl someone confirm the effective date of the full funding exemption repeal. Thanks.

We are coming toward the end of a strike situation (we hired permanent replacements, etc.). Now, we finally have an agreement - but the new agreement provides that we no longer have to contribute to the Union's multiemployer-DB plan (rather we are putting a 401(k) plan in place - sponsored by the employer/not the union - per the terms of the new C A).

Because the union agreed to this, do we have a withdrawal-type of situation? I'm a little confused because some of the striking employees have accrued benefits under the union's multiemployer DB plan - but we no longer have to contribute and no employee accrues any more benefits under the union's DB plan (per the new agreement).

Do we have to send a letter to the fund asking for our withdrawal liability or have we not withdrawn b/c of the accrued benefits that some of the strikers have under the union's pension fund? I'm just a bit confused on how this is all going to play out

Does anyone have any insight as to what the dollar amount limitation found in section 1104(b)(2) of the Pension Protection Act of 2006 means?

It amends IRC section 457(f) . . . and states that a portion of an applicable employment retention plan will be exempted from inclusion in gross income when there is no substantial risk of forfeiture (i.e. the requirement of 457(f)(1)). The portion that is exempted is the "portion of the plan which provides benefits payable to the participant not in excess of twice the applicable dollar limit determined under subsection (e)(15)." For 2006, the (e)(15) amount is $15,000.

Does that mean that $30,000 per year or $30,000 total can be exempted from the 457(f)(1) requirement of inclusion in gross income?

Thanks

Company changed its name. What must/should be done regarding the company's PS Plan?

I assume that the plan does not be need to be amended to simply reflect a name change. Would a board of directors' resolution indicating something like: "in conjunction with the company's name change the name of the ABC PS Plan shall as of xx/xx/2006 hereafter be referred to as the XYZ PS Plan" - with possibly a SMM to the same effect - be sufficient?

Thanks for any and all replies!

What is the corrective procedure when a 401k plan sponsor erroneously contributes after-tax employee contributions on behalf of a participant when the plan document does not permit such contributions?

I'm assuming we have to refund the contributions plus gains/losses. Would the participant be taxed on the earnings? Any excise taxes apply?

I have a DB plan that only allows benefit payments to start at termination for those who continued working beyond NRD. They got the greater of AE and additional accruals. Now the accruals are frozen and the sponsor wants to amend to say the participants must start payments at NRD even if they are still working. I know they can amend to allow participant to begin payments at NRD while still working, but I'm not sure they can take away the option to defer payments (with AE increases) until actual retirement. Would that be a protected benefit that can't be removed?

Thanks for any thoughts/guidance.

Can a survivng spouse roll over the 401(k) assets to an inherited IRA? The reason for doing so would be to allow the surviving spouse to take distributions on account of death without incurring the 10% penalty. (If the survivng spouse rolled over the assets to his/her own IRA, the survivng spouse would have no exception to the 10% early withdrawal penalty)

My 56 year old client has some highly appreciated stock from her 56 year old ex-husbands qualified plan, divided via a QDRO. He is still employed by the company. We were told by their benefit distribution expert that since the ex-husband is still employed by the company, the wife cannot utilize favorable NUA treatment on the highly appreciated company stock. The company is forcing her to rollover or withdraw all assets in her portion of the plan within 60 days. Since we live in a "Hurricane Wilma" zone, any taxable distributions the wife receives in 2006 is exempt from the 10% premature withdrawal penalty, but we need to know if NUA rules apply to her. Please advise. Thank you.

I have been contacted by a business owner who put in a SARSEP at the last possible minute in 1996. She was assisted in this process by a large, national brokerage firm. Since that time, it is quite likely that the plan has not operated in compliance. She was unaware of the 50% participation rule, the non-discrimination testing and the top-heavy rules.

She wants to know if there is a statute of limitations as to how far back she is subject to penalties, in the event her non-compliance was discovered.

She also wants us to give her an idea of how much fixing it all would cost. Based on the number of years involved and the multitude of issues, I'm not even sure where to begin. Is there any correction program open to her that would make sense for her to use?

There are only 3 people participating in her plan, herself included.

Thank you.

Just received this via e-mail.

Issue Number: IR-2006-136

Inside This Issue

--------------------------------------------------------------------------------

Delay in Effective Date for Regulations Under Section 403(b)

WASHINGTON —The Internal Revenue Service announced today that the general effective date for the regulations regarding section 403(b) arrangements that were proposed in 2004 (including the related controlled group regulations under section 414©) will be extended.

In order to provide employers, employees, insurance carriers, and mutual funds involved in section 403(b) arrangements a reasonable advance period before the regulations go into effect, the final regulations generally will not be effective earlier than January 1, 2008.

Here is the actual link

PPA 06 grants 5-yr amortization extensions for some multiemployers:

Automatic extension of amortization period. The amortization extension procedure is changed for plan years beginning after 2007. The sponsor of a multiemployer plan can apply to the IRS for an automatic extension of the period required to amortize any unfunded past service liability, investment loss, or experience loss. The IRS must extend the amortization period for a period of up to five years. The plan's actuary must certify that: (1) absent the extension, the plan would have an accumulated funding deficiency in the current plan year or any of the nine succeeding plan years, (2) the plan sponsor has adopted a plan to improve the plan's funding status, (3) taking into account the extension, the plan is projected to have sufficient assets to pay its expected benefit liabilities and other anticipated expenditures in a timely manner, and (4) required advance notice has been provided to affected parties. The automatic extension will not apply with respect to applications submitted after December 31, 2014 (Code Sec. 431(d)(1) and ERISA Sec. 304(d)(1), as added by the Pension Act).

However, this doesn't take effect until Plan Years beginning after 2007. Previously, 412(e) was an option, but PPA appears to remove this option retroactively to 6/30/05.

Grandfather rule for benefits funded under an agreement. The changes discussed here do not apply to benefit increases funded under an agreement to which a multiemployer plan is a party if certain conditions are met. The agreement must have been approved by the PBGC prior to June 30, 2005. The agreement must provide for benefit increases, and provide special withdrawal liability rules similar to those available in the entertainment and construction industries (ERISA Sec. 4203(f)). A firm in either of these fields is allowed to withdraw from a plan without incurring any liability, unless it continues to perform work in the covered area of the sort performed by the covered employees (ERISA Sec. 4203(b), ©). In addition, the benefit increases must occur under a plan amendment adopted prior to June 30, 2005, and the plan must be funded in compliance with the agreement and any amendments to it (Act Sec. 206 of the Pension Act).

Does anyone know of any options available to a plan that will have a deficiency prior to 2007, but didn't submit a 412(e) filing prior to 6/30/05?

This may be an unusual question but I want to explore all avenues. Underfunded PBGC covered DB plan has lump sump provision "subject to consent of the administrator" and has only paid out lump sums under 5k although there is no cap on the lump sump option per se (just the subject to consent of administrator language). Recent terminee has 40k lump sum benefit he's requesting. Plan Administrator (employer) is balking at paying the lump sum given severe under funding of plan and fears adverse impact on remaining participants (about 6-7 participants including 1 owner). Plan does not qualify for distress termination and not sufficiently funded for a standard termination (majority owner not willing to limit personal distribution at this point to allow plan to terminate in standard termination). Employer will continue to fund plan as able but is struggling so immediate funding not likely to help a lot. Terminee engaged attorney to pursue lump sum, stand-off has occurred between participant's attorney and employer over interpretation of language in plan regarding lump sum availability. Unsure if lawsuit will be filed or not. This is all background info for the question of "is there any ability to pro-actively solicit the DOL's help (from the employer's side) to act as a mediator in this process ? I assume the DOL normally just responds to participant's complaints but do they ever act on an Employer's request for help ? None of this will preclude legal action I realize, but assuming it moves to the DOL's court first, client is wondering if a pro-active request from help from the employer to the DOL might be helpful and if such an avenue is even available. I've never heard of this approach but wondered if anyone else knows if the DOL would respond to an employer's request for help in a situation like this.