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.

I am preparing a form 5500-EZ. I am confused as to how to answer line 3f which is a disclosure of loans (other than participant loans). Do corporate bonds or government bonds get disclosed here as well as traditional loans? I am confused because the directions state that "securities loans" are to be disclosed. Has anyone had any experience with this?

An ESOP for an S-Corporation has all of the match and profit sharing contribution tied up in employer stock. The plan has not been in existance for 10 years yet so they haven't encountered the diversification requirement yet. Deferral contributions are invested in mutual funds but participant have the ability to transfer a portion of their deferrals to ER stock once per year.

The plan sponsor is wondering if there is anything preventing them from allowing the participants to diversify their investments now? The document does not appear to address this question directly (Corbel ESOP Document). Is there anything restricting them from allowing diversification once a year. If they can allow this now, is there a percent of the participants account that it would be prudent to limit the diversification to?

Any thoughts would be appreciated.

Assume you have separate 401(k) plans for the same employer that each pass 410(b). What provisions of the Plans need to be the same? I can think of:

1) Availability of catch-up contributions

2) Limitation Year

3) Top-Paid group election

4) Calendar Year election

5) Testing methodology (current year or prior year) but only if you think you might need to aggregate the plans in the future.

Anything else that you can think of?

A plan offers employees $300 per month. They may use this towards benefits (insurance) or else they may use as deferrals. Is this okay?

When must an employer announce his intention to match employee contributions? Must he do this prior to the Plan year or can he wait until the plan year is over and then decide if wants to make matching contributions? The plan document states that employer contributions are discretionary.

In the past, if we had a plan that needed to file a Schedule P, and it didn't have a Trust Identification Number, I'd add a comment to the cover letter stating that the Trust needs it's own number that is independent of the sponsor's EIN.

So, next year, when the P is no longer needed what do I do? I'd have no idea whether or not they have a TIN. And what else would the TIN be for?

I am trying to find the answer to the following scenario:

A company has both a 401(k) and and ESOP with plan years ended 12/31/05 and 6/30/06, respectively. How do I determine the Defined Contribution Plan contribution limit that each particpant must abide by? I am trying to make sure that no participant exceeds his or her contribution limit, but am unsure on what to base my limits on.

Thanks!

In an effort to increase my Funded Current Liability Percentage as of 1/1/2006, I'd like to use a 2006 quarterly payment made on 7/21/2006 as a 2005 contribution.

Question : Can the resulting Credit Balance be used to cover the 2nd quarterly due on 7/15 - with an appropriate late or penalty interest calculation - or does the Credit Balance have to be effectively created on or before 7/15 ??

I found several threads on these boards discussing the question of how to deal with outstanding 401(k) plan loans when the participant dies prior to full repayment, but none of them seem to come to a conclusion I'm comfortable with. The issue doesn't seem to be addressed at all in Treas. Reg. 1.72(p)-1 which deals with loans treated as distributions and I haven't found another good source of authority.

Here's the situation. Participant has $100,000 in his 401(k) plan. He takes out a loan for $10,000, the repayment of which he defaults on. Then he dies. The IRS has not yet taken any lien/levy type enforcement action. The plan says they will send a 1099 to the estate, but the estate is insolvent (there's not even enough to pay for administration expenses, so the IRS won't get anything out of the estate. I want to tell the non-spouse beneficiary that she can take the the remaining balance of the 401(k) plan without worrying about the IRS holding her liable for the participant's debt and penalties/interest on that debt.

Does anyone have any thoughts on where I can find authority for this question? Any insight would be a great help. Thanks!

Does anyone know of any authority making it permissible to merge a subsidiary's 403(b) plan (it is a 403(b)(7) custodial account) into the parent corporation's 403(b) Plan? We would like to be able to keep all the money in the same pot when the subsidiary's plan is discontinued. Thanks!!

I understand that the FSA component of a cafeteria plan is an underlying benefit subject to form 5500 filing if there are over "100" particapants. My question is what defines a participant. Suppose you have a Cafeteria plan with an FSA and of the employees, 70 are pop only, and 50 are pop & FSA. That's 120 total employees in the plan, but in actuality, only 50 are participating in the FSA component. So for filing purposes would this group only have 50 participants or 120 participants?

Thanks

Wisln

I found several threads on these boards discussing the question of how to deal with outstanding plan loans when the participant dies prior to full repayment, but none of them seem to come to a conclusion I'm comfortable with. The issue doesn't seem to be addressed at all in Treas. Reg. 1.72(p)-1 which deals with loans treated as distributions and I haven't found another good source of authority.

Here's the situation. Participant has $100,000 in his 401(k) plan. He takes out a loan for $10,000, the repayment of which he defaults on. Then he dies. The IRS has not yet taken any lien/levy type enforcement action. The plan says they will send a 1099 to the estate, but the estate is insolvent (there's not even enough to pay for administration expenses, so the IRS won't get anything out of the estate. I want to tell the non-spouse beneficiary that she can take the the remaining balance of the 401(k) plan without worrying about the IRS holding her liable for the participant's debt and penalties/interest on that debt.

Does anyone have any thoughts on where I can find authority for this question? Any insight would be a great help. Thanks!

Is spousal consent required for a participant to take a loan on his company's 401(K) plan?