I believe the answer to this question is a clear "yes", based on Treasury Regs and "Constructive Ownership". But added confirmation and input is appreciated...

If more than 5% of Employer Stock attributes to a particular ESOP participant in a lookback year, is that participant considered to be a "5% Owner" and thus considered a Highly Compensated Employee of the Employer sponsoring the plan?

Thanks,

Espo, QPA

We have a plan that uses the elapsed time method for eligibility and the service is 12 months with January 1st and July 1st as entry dates.

This plan has an employee who was hired 5/17/04, terminated 12/30/04 and was then rehired 6/5/05. If I read Sal's book correctly, because this employee came back within 12 months of her termination date, I need to count the 5 months she was gone as part of her service so she would enter the plan on 7/1/05.

Is this correct?

the Word file has 24 movies to identify. a sample is included above.

no, that is not me sitting at work by the file cabinet.

I'm outstanding. In fact, I'm out standing by the water cooler killing time.

seriously,

as luck would have it, I have found a web site with some more movie pictures in which the people have been 'zapped'. just the clothes show.

of course I guess you could find that web site too, but what fun is that looking up the answers. you people are suppossed to be the movie expert so go ahead and identify them without all that help.

download the file and I wouldn't read anyone elses responses as I suspect those will be the answers or at least gusses.

out to ruin WDIK's week. Ha, all in good fun.

We have a pension client that informed us that their plan had 120k in it after it's first plan year that ended 12/31/2004.

We never prepared a valuation for 2004 and it appeared that the 120k may have been a rollover after the plan year.

We later learned that the 120k was actually made or reported to be made on 12/31/2004 (though it may have actually been made after 12/31/2004) and that even though we never did a valuation they took it as a pension deduction on their tax return, thus indicating that it was on behalf of their pension plan.

They went on to contribute 185k for the 2005 plan year.

We are now preparing the 2005 5500EZ.

Any suggestions as to how to file this return given that it is the first return being filed and there should have been a return for 2004?

Thanks.

Gary

We have a plan that is converting from a DB plan to a DC plan. The 403(b) TSA is going to be controlled by the employer. IRC section 415(k)(4) says that the 415 limitation applies with respect to plans controlled by the employee, which is NOT the case here. Does that mean we can avoid the 415(k)(4) limitation or is that an overly cute reading of the Code?

Way too many questions on this topic in my office:

The proposed regs say if you have a 409A compliant plan that provides for a mandatory lump sum of a specified amount, then paying that amount out is fine. If the plan doesn't have a specified amount stated, the plan can be amended to provide a $10,000 threshhold that terminates the interest in all like plans.

Makes we wonder - couldn't you just amend the plan, at least this year, to put in any specified amount? Why the $10,000 limit?

Or, was this supposed to mean that you could amend a pre-409A plan to put in a de minimis amount without making the plan 409A compliant (which the language doesn't support)?

One man show profit sharing plan wants to invest in a LP. There should be no reason why he cant is there? There are no other EEs/Participants to harm with the investment. It is his money to lose if the investment falls flat on its face. Am I missing anything? He is not an owner... just an investor.

Thanks

We discovered that a plan has been incorrectly calculating the matching contributions. The matching formula is 50% up to the first 6% of compensation. The 6% of compensation was not been capped. In addition, the contributions were based on compensation over the 401(a)(17) limit.

To correct the issue, we will forfeit the excess match adjusted for earnings.

This has been done incorrectly for several years. How many years do we need to go back and make this correction?

Pension Plan currently permits alternate payees to elect an immediate, lum-sum distribution. Other forms of distribution, including various annuity options, are available at the earlier of participant's attainment of "earliest retirment age" under Section 414(p) or Participant's termination of employment.

1.417(e)-1(b) provides that a plan may not offer a paritcipant separating from service age age 45 an immediate lump-sum distribution or a QJSA commencing at normal retirement age. If it is going to offer an immediate lump-sum, it must also offer an immediate QJSA.

Under this logic, must the plan described above also offer an alternate payee an immediate annuity option?

Thanks!

Department of Law

120 Broadway

New York, NY 10271

Department of Law

The State Capitol

Albany, NY 12224

For More Information:

518-473-5525

For Immediate Release

June 13, 2006

NYSUT’S MEMBERS BENEFITS UNIT SETTLES PROBE

Settlement is Part of Ongoing Investigation of Retirement Products

Attorney General Eliot Spitzer today announced an agreement to resolve an investigation of the marketing of retirement products to members of the state’s largest teachers’ union.

Under the agreement, an arm of the New York State United Teachers (NYSUT) will adopt a series of reforms and pay $100,000 to the state to cover costs of the investigation.

The agreement follows a lengthy probe revealing that NYSUT’s Member Benefits unit accepted payments from an insurance company to promote the company’s retirement products to NYSUT members. The unit did not disclose this arrangement and, instead, took steps to conceal it.

"A simple rule that my office has enforced time and time again is that fiduciaries must place the interests of their clients first," Spitzer said. "Accordingly, an office set up to counsel union members on retirement alternatives should always provide objective advice and full disclosure of relevant facts. That did not happen in this instance. But as result of this agreement, reforms have been adopted to ensure that this standard will be met in the future."

The investigation revealed that a retirement product endorsed by the unit – a so-called 403(b) plan offered by the Dutch insurance giant ING and its predecessor, Aetna Life Insurance and Annuity Company– charged investors fees and expenses as high as 2.85 percent per year while delivering only limited benefits. The unit endorsed the plan (even though cheaper alternatives were available) in return for undisclosed payments of as much as $3 million per year.

The unit took pains to hide this "silent partnership" with ING/Aetna. The unit would urge union members to attend financial planning seminars, claiming that: "There’s no sales pitch - they [the seminars] do not promote specific products or services." But contrary to this claim, the seminars were used as a "foot in the door" to promote ING/Aetna retirement products.

In addition, the unit redirected calls it received arising from the retirement seminars to ING/Aetna employees, who answered the phones with their first names only. Callers thought they were talking to NYSUT benefits unit personnel when in fact they were talking to the insurance company’s marketing representatives.

In late 2004, after it became aware of the Attorney General’s investigation of insurance and retirement products, the unit drafted a new disclosure policy, which was described by officials in an internal e-mail as moving from a "try to hid[e] it" approach to a more open approach that included disclosing all payments from ING.

Under today’s agreement, the unit agrees to the following:

Conduct open bidding for future retirement plan endorsements;

Provide full disclosure of any and all payments from insurance companies;

Allow members an opportunity to roll over savings to a new endorsed plan at no cost;

Provide free and objective investment advice to members; and

Hire an independent consultant to oversee reforms and report to the Attorney General’s office.

More than 50,000 New York teachers and other school district employees bought into the retirement plan without having been told by the unit of the payments it received from ING/Aetna.

The investigation underlying today’s settlement was conducted by Assistant Attorneys General Peter Dean and Harriet Rosen, under the direction of David D. Brown IV, Chief of the Attorney General’s Investment Protection Bureau.

A broad investigation of the marketing of retirement products continues.

Attachments:

NYSUT AOD

Exhibits

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

I have a client that had two seperate plans - a Money Purchase and a Profit Sharing Plan. They elected in July 2005 to amend the MPP to have a 0% formula and terminate. There are two participants in each plan (the same two). They each have an individual account at AG Edwards for each plan. We had advised them to keep both accounts open (one that was the MPP money and the other that was the PSP money) at AG Edwards; we would roll the MPP into the PSP and leave the sources segregated (so now the PSP has two sources - PS and Old MP). The segregated MP $ would be subject to the J&S rules, but the PS $ would not. Well, I have just discovered that in February of this year, this client closed each of the MP accounts and rolled them into each PS account. So the PS and MP money has been mingled at AG Edwards, but I am still tracking it seperate in our software system. Would the PS money be subject to the J&S rules?

Thanks for your opinions!

I have heard that companies may have one type of welfare plan (with SPD) for all employees, while creating separate welfare plans (without SPDs) for the benefit of only highly comp'd employees. Are there any legal problems with this or reasons for employes not to create this type of arrangement?

Thank you.

Can an exspouse who receives employer stock from a qualified plan due to a QDRO elect to utilize NUA? If so where can I find this information in writing?

The DOL is saying publicly now that you can only use the DOL calculator if you file under VFCP.

However, we've had clients ajudited by the DOL, where the auditor goes so far as to fill out the interest calculator for us as an example of how to correct??

I'm curious what other people are finding. Is it just a few higher ups pontificating, or are the field investigators applying this stupid standard as well?

A 401(k) plan has a non elective company contribution (fixed percentage of pay) that goes to all eligible employees. In addition to that, there is an additional company nonelective contribution that is allocated weighted for service and compensation.

When testing for 410(b) and 401(a)(4), can/should both contributions be combined, or must each separate allocation method pass each test on its own? Does the answer change if the eligible group of employees who receive these 2 separate contributions differ?

I'm just starting to study Roth IRA's so please forgive me if this question is completely off the wall.

I've been told that it is possible to make the down payment on a home using Roth IRA funds... then after selling the home, (flipping it quickly for a profit) you can deposit both the original Roth IRA funds and the profits back into the Roth IRA without tax consequences. Does anyone know if this is possible? Thanks.

1.409(p)-1T has some definitions and examples that are confusing (to me anyway.) In the definition of disqualified person relative to the 10% test it refers to a person's deemed-owned shares. Relative to the 20% test it refers to the person and members of his family. It then goes on to repeat that expanded definition of family that we love. Under attribution rules it says the rules of 318(a) apply to determine ownership of shares including deemed-owned and synthetic, but in applying section 318(a)(1) the larger 409(p) definition of family applies. Finally, it shows an example where a husband and wife each own less than 10% but are determined to be DQPs because their combined ownership exceeds 10%. Their combined ownership does not exceed 20%.

In every seminar I've seen the 10% test is applied individually and the 20% is applied to family groups, with most of the attention focused on the groups. However, the reg example does not do this. Because their individual percents do not exceed 10 and their combined does not exceed 20, I think in days gone it's likely they would not be classified as DQPs (by me anyway.) I'm sure the percentages used in the example are no accident. Does the example mean that some sort of family aggregation applies to the 10% test? If so, is it 318(a) or 409(p)? If 409(p), it doesn't seem like the 20% test has much meaning.

I hope I'm missing something. Any help would be appreciated.

QUick non-plan-related question for securities law experts out there: can a labor union be considered an "accredited investor?" Looking at the definition in Rule 501(a) (particularly (a)(3)), it seems as though it only contemplates 501©(3) orgs (a labor org is a ©(5)), corporations, certain trusts or partnerships. Thanks

Anybody know if this has come out yet? I have a client asking me, since they are an off plan year.

I am thinking the answer is that we won't hear until the fall, but I wanted to make sure......

We are working on a typical small plan that offers actuarially equivalent annuity options along with a lump sum option that is subject to 417(e). In determining relative value, it seems clear that the annuity options are all 100% of the QJSA option using plan actuarial equivalence. However in determining the relative value for the lump sum, do you (1) take the lump sum value determined at 417(e) rates and divide by the lump sum valued at plan act equiv. and make the resulting pct. the relative value, or (2) take the lump sum value determined at 417(e) rates and divide this by the present value of the QJSA at payment date using 417(e) assumptions?

A strict reading of the IRS regs seem to support #2 but I though many practioners were using the approach in #1. Opinions are welcome.