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?

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.