In my research, it appears that when a PBGC covered plan terminates, it looks like in the year of termination, you can deduct the full amount of the contribution necessary to cover the plans benefit liability (with a few exceptions...of course!).

What happens if you make the contribution to make the plan sufficient in the year of termination, and something happens to delay the distributions into the next plan year. Let's say that the applicable interest rate in the new year causes lump sums to increase, and thus another contribution is required to again make the plan sufficient.

How does deductibility of these contributions work? Is it one of those 10 year amortization instances? Any ideas where I can begin my search? In my example, there are no majority owners, so no one is able to waive receipt of benefits, so they would have to make the contribution in order to terminate.

Thanks!

Dennis

A participant who has taken out a loan before getting a hardship withdrawal has now requested another loan? Does anyone see a problem with that? Particularly since the rule is that all loans must be taken before a hardship withdrawal is made.

Has anyone ever hear of a split dollar life insurance agreement between a NQDC plan and a plan participant? This seems very odd to me. Is this even possible? I have practically no experience with split dollar arrangements.

Are there any exceptions to the rules regarding taxation of life insurance benefits or other benefits for volunteer firefighters? Specifically, does the $50,000 limit still apply to volunteer firefighters? I know that there are a few bills in Congress right now that may exclude from income and employment taxes and wage withholding certain benefits, but is there anything else?

Thanks.

KETRA provides relief from the 10% early withdrawal penalty for individuals who resided in an area designated as eligible for Individual Assistance. Queries: does the relief (from the 25% early withdrawal penalty) extend to distributions to individuals who participanted in a SIMPLE IRA for less than two years? Does it matter if the employer no longer exists? (In this case, the employer is no longer in business.) Thanks for your input.

If a participant that is over age 70 1/2 (not an owner) terminates during the plan year, but is then rehired during the same plan year, are they required to begin receiving minimum distributions?

What if they are in pay status and then are rehired in a following plan year, do they have to continue to receive the minimum distributions since they are in pay status or can they opt to stop once they are rehired?

Am I reading the final 401(a)(9) regs properly in that minimum distributions from a cash balance plan (5% owner over age 70 1/2) cannot be made under the 1.401(a)(9)-5 rules for individual account plans but only in the form of an annuity?

With the language in A-1(e) of the proposed 1.401(a)(9)-6 now gone, it seems minimum distributions from cash balance plans could only be made in the form of an annuity.

The only key employee of a 401(k) PS plan is now responsible for 80% of the plan assets. His contribution level is 0% on deferral and therfore 0% on match. He does not make a PS contribution plan. He has no intentions of ever contributing or giving his ee's more than a 1% match. As long as this is a fact, he has no top-heavy contribution to make. Is there any reason to go to a safe harbor format. He has been approached by another TPA telling him that because of his TH situation, it would be better for him to go SH.

In a leveraged ESOP prior to the 415 limitation calculation a participant receives a contribution of principal only in the amount of $51,250. The shares released to him based on the principal/principal method is 2500. The value per share is $30 so the total value is $75,000.

If the 415 limit is $42,000 what is the number of shares can he receive so that he does not exceed the 415 limit? Is it $42,000/51250*2500?

Thanks.

Can an employer voluntarily offer COBRA even if it is not required (i.e., there has been no qualifying event)?

My employer is making a health survey a requirement for eligibility. If I refuse to complete the survey, I will not have fulfilled the eligibility conditions, and then cannot enroll in the plan. If I am dropped from coverage due to not fulfilling the eligibility requirements, it is not a COBRA qualifying event, but can my employer voluntarily offer me COBRA?

After filing Form 5500 for a client's health insurance plan, we received a correction from the insurance provider informing us that when they sent us the information for Schedule A, they overstated the commissions paid (they doubled them in error). How crucial is it to re-file Form 5500 correcting this error? I hate to incur additional expense for the client if the information is only used for statistical purposes. The plan has 200 participants and the actual commissions were $11,000 instead of $22,000 as reported.

We are seeing plan designs that cover 100% of HCE's and as few as 25% of NHCE's with the NHCE's chosen simply as those in a particular compensation band. For example, only NHCE's making less than $5,000 receive a contribution.

There are no other plans being aggregated with the plans in question, so clearly it is represented that "employees earning less than $5,000" is a reasonable classification under 1.410(b)-4(b). Otherwise, the plan would not pass the nondiscriminatory classification test of 1.410(b)-4 and thus cannot pass the average benefit test of 1.410(b)-2(b)(3). We of course cannot have a qualified plan if we do not pass either the ratio percentage test or the average benefit test.

Does anyone have any evidence one way or the other as to whether "those earning less than $5,000 this year" is a "reasonable classification"? I say it clearly is not, but ERISA attorneys in the Cleveland area allegedly say it is. Am I wrong or are they just lucky to be finding reviewers who are not familiar with one of the oldest and most fundamental rules of qualified plans?

Thank you.

I have a participant who is making extra loan repayments. As an example the amortization calls for payments of $60.00 and he is having payments deducted in the amount of $100.00.

If he were to make 4 payments, totaling $400.00 would I then take the balance of the loan per the amortization at 4 payments and reduce the balance by the difference (400-240). If I do this all the extra is principal. Is this the correct method of handling excess loan repayments?

In addition to all of the standard features built into Firefox, there are a large number of extensions that are available These extension ares small programs that do things like add more privacy, block ads more effectively, etc. You can find the list of the extensions at: https://addons.mozilla.org/extensions/?application=firefox

Ever since the board upgrade, my cookies aren't updating when I leave the board to show that I was here and read everything. Is anyone else having this problem? The only way I can get it to update is if I click the Mark all Posts as Read button, which I never had to do before.

Blinky!

Ziggy_112405.htm

A recent Ohio state appellate case held that a living trust can be the owner of an Merrill Lynch IRA for state law purposes. We have had several customers ask for this. We have been reluctant to allow it without the unhedged opinion of a tax lawyer we trust that this is not an assignment of the account which could trigger recognition of the income in it. Is this now settled that an IRA can be owned by a revocable living trust? Do other custodians allow this?

Is anyone aware of any DOL statements, positions, AOs etc which specifically address the issue of the "reasonableness" of the allocation of multi-employer plan expenses among the Funds and e.g. the Union or employer association. Such "shared" expenses usually include rent, payroll and similar common expenses when the entities share the same building or offices.

The issue continually comes up in EBSA audits.

Quoting a prior reply from previous post about a month ago:

"Years ago the IRS took the position that allowing 401k deferrals to continue after the 401(a)(17) compensation limit had been reached was in effect recognizing compensation above the comp limit and thus disallowed. This contradicts the conclusion I am reading on the replies here, does anyone have a site or other reference to support the allowance of 401k deferrals after the comp limit has been reached?"

As I understood the original question - seemed to be asking about very low deferral election in place throughout year - maximum deferrals reached before 402(g) limit exhausted because individual hit the compensation limit. Could this individual continue to make deferrals on compensation earned for remainder of year, even though that compensation is above the limit imposed by 401(a)(17)?

It would appear any subsequent deferrals for the remainder of the year are being made on compensation earned above the comp limit, unless it could be argued that the deferrals made thus far were not consistent with what the intended deferral election was to begin with...

Any comments?

Company A sponsors 401(k) safe harbor plan. To satisfy 401(k) safe harbor requirements, plan year must be 12 months; in this case, it is (7/1-6/30). Safe harbor satisfied by 3% nonelective contribution.

Company B intends to purchase the outstanding capital stock of Company A before the end of the current plan year. Company B sponsors a 401(k) Plan that is not a safe harbor 401(k) Plan and it is a calendar year plan.

If Company A does not terminate safe harbor plan prior to the date of the corporate-level transaction, then the Company B KPlan will be a successor plan, and distributions of 401(k) dollars (and safe harbor nonelective contributions?) cannot be made to former participants in Company A Plan that are current employees of Company B.

Treasury Regulations allow you to get around the 12-month plan year requirement if the safe harbor plan is terminated if the plan satisfies the 3% contribution through the date of termination and either --(i) the plan would satisfy the requirements of paragraph (g), treating the termination of the plan as a reduction or safe harbor matching contributions. other than the employees having a reasonable opportunity to change their cash or deferred elections and, if applicable employee elections; or (ii) the plan termination is in connection with a transaction described in Section 410(b)(6)© of the Code....

Can Company B elect to "terminate" the Plan as of the effective date of the corporate-level transaction and merge the full account balances of participants in Company A's plan (including other non-safe harbor contributions) into its 401(k) plan? or does Company A have to terminate its Plan before the stock sale and distribute account balances to Plan A participants?