The board of directors of a publicly traded shell company with no assets have received a valuation from an investment banking firm showing that the value of the company is $2 million. Yet, the stock is trading at a value which would indicate a market capitalization of $70 million. Clearly, the market does not understand the capital structure of the company even though the company has taken efforts to explain it (90% of the equity securities are in the form of preferred stock). Can the board grant non-qualified stock options using the $2 million valuation without having a 409A problem?

Hello All,

I have a new client who has been treating his SEP as a SARSEP. Can he go through the self correction program to fix this?

Thanks!

We had a transfer plan that had a match formula based on years of service. Per 1.401(a)(4) regs, non-uniform match is a benefit, right or feature. I performed a current availability test on the match and it failed for several years. The client determined a reasonable business classification to give certain people additional match to make the current availability test pass. We filed VCP since we were outside of the correction period of 9 1/2 months. After several discussions with the IRS agent regarding whether or not the client did an ACP test (they did) and whether or not this was really a demographic failure, the IRS sent the VCP back saying the submission is ineligible under EPCRS. So in the eyes of the IRS, if the match is tested in ACP, no further testing is needed.

I called the IRS for an explanation and the agent told me since this is a 403(b) plan, they have goodfaith reliance until the new regulations are finalized. My opinion is Notice 89-23 gives goodfaith reliance for employer other contributions, but not match.

The prior carrier was also doing the testing but not correcting as they went along. I find it interesting that I am not the only one doing this testing on a 403(b) plan. Any other opinions?

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I have a Roth IRA and moved to Ireland last year. I will not have a US mailing address soon and want to know what the options are for my Roth IRA ie is it possible, or practical to continue having them, what are the penalties for terminating them etc?

Does it make sense for a company to offer a NQDC plan to it's "core key" (their term not mine) employees if they are not likely to take full advantage of the 401(k) deferrals? The "core key" employees are those that are in management positions that they hope to use this plan to retain and/or attract.

Plan in question is a Profit Sharing plan that they are modifying to a SH with a match. They anticipate only about 50%-60% participation even with the match. Only 2 of those "core key" employees are true HCE/KEY employees. All the rest fall into NHCE category.

Likely that all of the "core key" will hit the 15k limit but only because of the quarterly bonuses that are provided. Otherwise they would fall short.

I just can't see the benefit of the second plan....but I've no experience in the arena either. Certainly an employer contribution funded plan makes sense but not employee deferral.

Also, am I correct in saying that the distributions are funnelled through payroll? And thus aren't eligible for rollover or anything of that ilk?

Thanks in advance...

I have a plan that terminated on 12/31/05. The plan has some lost participants and their assets have not been distributed. Does the 1-year waiting period to start a new plan begin on 12/31/05 or when all the assets are actually distributed.

Thanks!

Schedule I plan merged into another plan (all assets) 8/30/05.

No extension, no filing as of today.

If they file under DFVC, what penalities would they be facing?

we are doing a hybrid DC conversion. would we be offering a "right or feature" under ERISA 401(a), and hence subject to discrimination testing, if we allowed EE 65 and older to opt out of moving into the new plan and staying in the old DB plan?

Wife is self employed. She hires husband and pays him $15,000 per year. They both participate in the wife's 401(k) plan. Husband defers the full $15,000 into the 401(k) plan.

Husband is also employed elsewhere, his other position offers him a 403(b) and he participates.

Are 403(b) and 401(k) deferrals considered the same for an individual's maximum deferral limit? The missing piece of information right now is how much he participates in the 403(b). If the 403(b) does not count towards his 401(k) personal deferral limit then I won't bother tracking down that information.

An employer (sponsoring a qualified 401(k) plan) wishes to replicate the contribution allocation provisions of a state-sponsored 457 plan by increasing the amount of matching contribution available to employees with longer service, as follows:

If the employee has 0-9 years of service and defer 3% they get 3% employer profit sharing, and 1.5% employer match (this is the maximum employer contribution).

If an employees has ten years of service or more, the match would work as follows:

Employee Deferral 3% Employer Profit Sharing 3% Employer match 2%

Employee Deferral 5% Employer Profit Sharing 3% Employer match 3%

Employee Deferral 7% Employer Profit Sharing 3% Employer match 4%

Isn't this a discriminatory contribution formula and, therefore, not allowable in a qualified plan? I thought the rate of match was not allowed to increase as the deferral rate increases or is that just a safe harbor thing?

Thanks in advance for your thoughts.

If I have a 401(k) plan that runs from November 1, 2006 though October 31, 2007, does that mean that we have until October 31, 2007 to amend for final 401(k) regs?

Under the pension bill non-sposue beneficiares from a qualified plan can now "roll" to an "inheritied IRA.. This is effective for distribitons in 2007 or later. Should apply to participants who die in '06 since the distribution over the beneficiariy's life expectancy would not have to start until '07. What about the following situations:

1) Non-spouse beneficiary begins receiving distributions over his/her life from the qualified plan (assuming the plan allows this). Can they now simply transfer the amount in the Plan to an inherited IRA and keep up this distribuiton pattern.

2) Non-sposue beneficiary elects to use the 5 year rule and does not begin distributions by the end of the calendar year following the calendar year of death. I would assume they couldn't now transfer to an IRA and then start using their life expectancy.

SEC. 829. ALLOW ROLLOVERS BY NONSPOUSE BENE-

FICIARIES OF CERTAIN RETIREMENT PLAN

DISTRIBUTIONS. 12

(a) IN GENERAL.— 13

(1) QUALIFIED PLANS.—Section 402© of the

Internal Revenue Code of 1986 (relating to rollovers

from exempt trusts) is amended by adding at the

end the following new paragraph:

‘‘(11) DISTRIBUTIONS TO INHERITED INDI-

VIDUAL RETIREMENT PLAN OF NONSPOUSE BENE-

FICIARY.—

‘‘(A) IN GENERAL.—If, with respect to any

portion of a distribution from an eligible retire-

ment plan of a deceased employee, a direct

trustee-to-trustee transfer is made to an indi-

vidual retirement plan described in clause (i) or

(ii) of paragraph (8)(B) established for the pur-

poses of receiving the distribution on behalf of

an individual who is a designated beneficiary

(as defined by section 401(a)(9)(E)) of the em-

ployee and who is not the surviving spouse of

the employee—

‘‘(i) the transfer shall be treated as an

eligible rollover distribution for purposes of

this subsection,

‘‘(ii) the individual retirement plan

shall be treated as an inherited individual

retirement account or individual retirement

annuity (within the meaning of section

408(d)(3)©) for purposes of this title,

and

‘‘(iii) section 401(a)(9)(B) (other than

clause (iv) thereof) shall apply to such

plan.

‘

I am having difficulty finding an answer to what should be an easy question:

If a DB plan contains a PIA offset, is the protected benefit (in the context of Code sec. 411), the gross benefit (i.e., the benefit prior to application of the offset) or the net benefit (i.e., the benefit after application of the offset)?

A client wants to freeze its DB plan. The plan's benefit formula contains a PIA offset provision. As part of the PIA offset provision, the plan provides that it will estimate pre-hire wages using the method prescribed in the 401(a)(5) regulations unless a participant provides evidence that their actual pre-hire wages were less than the estimated wages using the prescribed method. Such evidence has to be provided to the plan within a reasonable time after (1) the date their employment terminates (by retirement or otherwise) or (2) the date they are notified they may commence payment of their benefit, whichever is later.

As part of the benefit freeze, the sponsor would also like to amend the plan to provide that unless such notification is made by a certain date, say December 31, 2006, your PIA offset will be based on estimated pre-hire wages and you will lose the right to provide evidence that your actual pre-hire wages were less.

It seems that if the gross benefit (i.e., the benefit prior to application of the offset) is protected, then this additional amendment can be done without violating 411(d)(6). However, if the net benefit (i.e., the benefit after application of the offset) is protected, then this additional amendment would, in a sense, eliminate a protected right. Any comments or thoughts?

Given the number of DB offset plans and the number of frozen DB plans I find it difficult to believe this is a novel issue. Any help is greatly appreciated!

News release from CCH this week stated, in part ......."As a result, under the (electronic filing) proposal, Schedules E (ESOP Annual Information), P (Annual Return of Fiduciary of Employee Benefit Trust), and SSA (Annual Registration Statement Identifying Separated Participants With Deferred Vested Benefits) would no longer be required to be filed as part of Form 5500. Also, the IRS has independently eliminated the Schedule P from the 2006 Form 5500 in anticipation of a move to a wholly electronic filing environment."

The Schedule P was discussed pretty well in another thread this week.

http://benefitslink.com/boards/index.php?s...32718&st=15

Does anyone have any thoughts as to how a plan sponsor and/or the trustee will insure the Statute of Limitations will be triggered annually if the "P" is no longer a part of the plan filing?

Is there any guidance on how to correct a situation where a participant is terminated so they can receive a distribution and immediately rehired?

We had a participant take out a loan in 2002. It was deemed a distribution in 2003, 1099 issued. participant has not had a break in service.

Does that loan carry from year to year (on the 5500) until it is either paid or participant terminates?

Gang,

Can salary deferrals in an Eligible 457(b) non-gov'tal Top Hat plan be 100% vested immediately? Or, must they be vested only when no longer subject to a substantial risk of forfeiture?

If deferrals are 100% vested immediately, yet 457(b) assets are subject to claims of an Employer's creditors, does the vesting take a back seat to the creditor's claims?

Please advise,

Espo, QPA

Appears this will be signed.

Here is a link to the Committee Explanation of the provisions:

http://www.house.gov/jct/x-38-06.pdf

Does appear, looking at page 181 of the Committee, that the high 3 year issue for 415 purposes is resolved in our favor (goes back to all service, rather than participation service).

Funding rules for 412 apply to 2008 plan years.

Any other observations at short notice?

Does anyone know the criteria that would need to be met in order to exclude a spouse's business? I believe there are 5 points that need to be met? Anyone know what they are or a link?

Thanks.

I have a plan that is top-heavy. The owner, who is over 50, would like to set up a 401(k).

Can we set up a SH 401(k), do the SH match, have the owner just put in catch-up for himself and then be able to do a NC allocation? This way he does not have to worry about if any employees defer or not and he can max himself out. Is this making sense? Can an owner just put in catch-up, no deferrals. Thanks for any insights.