CPA called me.. has a client that wants to invest in the following type of investment:

Plan invests $200K into a LLC and becomes a limited partner. LLC purchases senior life settlements. Plan will receive a K-1... only participant in the plan is the sponsor... no other participants.

There is no reason this investment will not fly.. correct? Am I missing anything. It is simply a limited partnership investment. NO risk to other participant $$ since there are no other participants.

Thanks for everyone's thoughts!

I have a friend whose husband is a participant in a multiemployer defined benefit plan. He had "4 1/2" years of active service, plus one year of service during which he was disabled. Now he is being notified that he is he has forfeited all benefit rights, even the rights to refund of his mandatory employee contribution account.

Is this legal? Can they do this to him? Any thoughts would be appreciated. And Happy Thanksgiving!

I know I saw an answer to this but I can't find it on my search. If a company has a SIMPLE in place in 2005 and implements a Safe Harbor 401(k) Plan in 2005, the only downside is the employer loses the deductability of his match to the SIMPLE plan. Is this correct?

We have a situation wherein several years ago (5+) a participant requested and was denied disability benefits because she had not attained the requisite age at the time her employment terminated due to the disability. A union trustee now wants to reopen the issue claiming there are new facts - these facts were known at the original meetings, but the trustee is claiming she was unaware and/or misunderstood the information. Are there any cases out there or can somebody guide me to information which states that the decision back over 5 years ago is final and binding on the trustees and that the case cannot be reopened? If the trustees can in fact reopen cases such as this, what prevents them from reopening and rehearing almost any other case?

Any guidance is much appreciated!

Thanks and Happy Thanksgiving!

Consider:

MVA=market asset value

AVA=actuarial asset value

t=0 is beginning of year 0

t=1 is beginning of year 1

A=MVA @t=1

B=MVA @t=0

C=Assets purchased during year 0 to 1

D=Assets sold during year 0 to 1

E/(E)=Appreciation/(depreciation) from 0 to 1= A-B-C+D

F/(F)=Appreciation/(depreciation) carried forward from 0 to 1

abs=absolute value operation

AVA @1 = MVA @1

+

Min{abs[(E)+(F)], Max(20% x abs[(E)+(F)], 1% x MVA @1)}

where the 80%/120% corridor around MVA applies

i.e., MVA is increased by an adjustment for net depreciation or decreased by an adjustment for net appreciation

In words, MVA is increased by the smaller of (i) 20% of the net depreciation, or (ii) 1% of the MVA @1, but the increase can be no larger than 100% of the net depreciation, with the overall result constrained by the 80/120 corridor.

Is this method reasonable under the asset valuation method regulation? Comments? Votes? Reasons?

Consider:

MVA=market asset value

AVA=actuarial asset value

t=0 is beginning of year 0

t=1 is beginning of year 1

A=MVA @t=1

B=MVA @t=0

C=Assets purchased during year 0 to 1

D=Assets sold during year 0 to 1

E/(E)=Appreciation/(depreciation) from 0 to 1= A-B-C+D

F/(F)=Appreciation/(depreciation) carried forward from 0 to 1

abs=absolute value operation

AVA @1 = MVA @1

+

Min{abs[(E)+(F)], Max(20% x abs[(E)+(F)], 1% x MVA @1)}

where the 80%/120% corridor around MVA applies

i.e., MVA is increased by an adjustment for net depreciation or decreased by an adjustment for net appreciation

In words, MVA is increased by the smaller of (i) 20% of the net depreciation, or (ii) 1% of the MVA @1, but the increase can be no larger than 100% of the net depreciation, with the overall result constrained by the 80/120 corridor.

Is this method reasonable under the asset valuation method regulation? Comments? Votes? Reasons?

I have a claim from an employee requesting reimbursement for an eligible medical expense however, the employee used gift certificates to purchase the over-the-counter medical item. The total cost of the expense is the same amount as the gift certificates. My question: are gift certificates treated like cash and can you be reimbursed for using them? Did the employee really have any out-of-pocket expense? Your help is always appreciated. thanks!

As I understand 401(k)(11)(B)(iii), if you have a Safe Harbor match in a plan for NCEs only, you cannot have ANY discretionary match which goes to HCEs only.

Another consultant is telling my client that you can do the basic Safe Harbor match for NCEs only and a discretionary match for HCEs only as long as it does not exceed 4% of pay. Of course they have not yet give the code/reg cite which permits this.

Is there another cite other than the one above to 'prove' you cannot do this? Or is it possible, and if so, where would I find the rules?

I know that the portion of a QMAC used to satisfy ADP testing cannot again be used in ACP testing. Is there a cross reference to this in the Safe Harbor regs I am missing?

Thank you.

Being an appraiser, my investment portfolio is heavily weighted to REITS. I just set up Roth IRA's for both my wife and myself. Somewhere I encounter some kind of a reference to certain types of income that have limitations on inclusion in IRA's. My first queston is are Reits, MLP's, and ??? problematic if included in a Roth?

My second question is more general. If you have general brokerage accounts, thaditional IRA's and Roth's, where do things like short term [5-30 day] trades, long term holdings, options, Reits and MLP's best fit.

These may be simple questons, but my mind is bogged down in the micro analysis. As background, my wife and I am mid 50's and 10 year from retirement. By background basically management in banking, real estate development/theater operations, construction and now government appraisal & tax administration.

thank you in advance........littleboymaker

one of the Q and As (#8) was as follows

Q. Based on Rev Proc 2005-66, is it the Service's position that an amendment to change a plan's testing method or HCE definition for a particular year must be adopted by the last day of the plan year?

A. Yes. Under section 5.05(3) this would constitute a discretionary amendment and must be adopted no later than the end of the plan year for which the switch is effective, and perhaps earlier to avoid 411(d)(6) cut back in accrued benefits. Particularly, HCE modifications must be carefully analyzed for 411(d)(6) anti-cutback issues.

opinions expressed by agents as such Q and A's do not necessarily reflect official position, but of course, they seem to be very good guidance. In other words, this seems to answer the question that has been debated for the last few years - or at least answer the IRS leanings.

What issues arise if matching contibutions to a 401(k) plan are made in a company's publicly traded stock; and this portion of a plan is chacterized as an ESOP, and the employer decides to allow all participants to diversify out of employer stock and into the other plan investment options?

Would it be a breach of fiduciary duty to "sacrifice" some plan participants for the benefit of the plan as a whole? For example, assume that in selecting funds to be made available under the plan, a plan administrator must choose one of two funds. One fund has revenue sharing and one does not. The fund without revenue sharing has a lower fee, but the fund with revenue sharing will reduce the adminstrative expenses of the plan as a whole. Would it be imprudent to select the revenue sharing fund even though the fees charged to those who invest in that fund will be higher than if the other fund was selected? Has the DOL commented on this issue in particular? I have seen the revenue sharing advisory opinions.

I cannot find regs or a post regarding the treatment of a QDRO for a key employee during the last 5 years for top heavy calculations. I am pretty sure that this balance needs to be added back in?

I assume that a QDRO would also be added back in for an employee who worked more than an hour during the determination plan year?

Thanks in advance.

Got it.

For all others:

Any distribution other than termination of employmnet, death, or disability should be added back in. Interesting position on coorective distributions relating to the failure of ADP/ACP Tests?

client wants to exclude fringe benefits, in this case a use of an automobile. this generates imputed income. they will eclude this from the definition of compensation. however, they also give the client a gross up to compensate for the taxes that result from the imputed income. is the gross up also excludable as a fringe benefit? plan document allows employer to exclude cash and non cash fringes from the definition of comp.

Things for Which to be Thankful

The spouse who complains when dinner is not on time, because s/he is home with me, not with someone else.

The teenager who is complaining about doing dishes, because that means she is at home & not on the streets.

The mess to clean after a party because it means I have been surrounded by friends.

The taxes I pay because it means that I'm employed.

The clothes that fit a little too snug because it means I have enough to eat.

A lawn that needs mowing, windows that need cleaning and gutters that need fixing because it means I have a home.

All the complaining I hear about our government because it means we have freedom of speech.

The space I find at the far end of the parking lot because it means I am capable of walking.

My huge heating bill because it means I am warm.

The lady behind me in church who sings off key because it means that I can hear.

The piles of laundry and ironing because it means I have clothes to wear.

Weariness and aching muscles at the end of the day because it means I have been productive.

The alarm that goes off in the early morning hours because it means that I'm alive.

What advice can you provide for organizations considering changing their health and welfare plans from a Church Plan to ERISA?

Can you declare a full termination of a profit sharing plan if the employer has not made a contribution since 12/03?

basically all the employees have left (in several waves) and we are left with a trust and some assets attributable to former employees.

the plan is basically an orphan plan at this point as the employer was sold to a foreign investor.

Admittedly, we are slackers with respect to this issue. There will be quite a few mandatory distributions that we should be doing automatic rollover to IRAs for, but we got started late. This post is not related to the issue of not amending; assume that the amendment is done by 12/31/2005 for a calendar year plan.

I have several questions regarding this:

1). Are we the only ones who aren't going to be distributing by 12/31/05?

2). What is the correction for not following the terms of the document? We should have done automatic RO distributions by 12/31/05?

3). I think we can self correct as an insignificant failure and distribute in Jan or Feb of 06. Assuming the self correction is done properly; does anyone see much risk in doing this?

Different, but somewhat related situation: Assume "Good Faith" amendment is timely done and automatic RO done before 12/31/05 for a participant. But, this participant terminated in 2003 and per plan document should have had a mandatory distribution prior to 2005. Am I correct in that the IRS relief for automatic ROs done by 12/31/2005, is only relief for distributions that should have been done some time after 3/28/05? What would you do in this case?:

4). EPCRS self correction?

5). Nothing, other than the distribution

6). Something else

Second different, but somewhat related situation: We took over a plan recently that had already done an amendment lowering the mandatory threshold from $5,000 to $1,000. But, this plan has several participants who have balances between 1,000 and 5,000 that should have had mandatory distributions in prior years based on the plan document in effect in prior years.

7). Is there a correction for this? The plan no longer allows mandatory distributions on balances over $1,000.

Thanks

If Plan Sponsor fails to make an RMD, must it notify Participant of Participant's excise tax liability? Or must Participant figure this out herself after she gets the 1099-R? If Plan Sponsor does have an obligation to inform Participant, where does this requirement originate--in the tax regs, or in ERISA's fiduciary rules? As I understand it, Participant must report the late RMD on Form 5329 and include the 50% tax; Participant may also include a request that the IRS waive the excise tax. Nothing in the Form 1099-R instructions, though, says that the sponsor has to characterize a distribution as a late RMD, even if that's what it is. I've looked at the 401(a)(9) regs, the 4974 regs, and the instructions for all the relevant IRS Forms--nothing in any of that about notifying the participant of her excise tax liability. Nothing in EPCRS about it, either (not even in the section on applying for a waiver of that same tax)--it just says to pay the late RMD, plus interest. I'd like to be able to point to a clear requirement that Plan Sponsor step up and disclose, but I'm just not finding one. Has anybody run across the rule?

Thanks!

We have a several clients with 401(k) plans that have pooled investments. We usually try to make distributions soon after an annual valuation. Our document provides for annual valuations and interim valuations if the plan administrator sees fit to do so.

Because of the new automatic rollover rules on mandatory distributions, we will be making quite a few distributions late this year. I would think that there may be a few others in the same situation.

If you are in the same situation; which of the following are you doing?:

1). Distribution based on 12/31/2004 valuation.

2). Distribution based on an interim valuation.

3). Something else (please specify)

Thanks