The IRS has issued a draft version of the 2005 form 8606. Still no mention of accounting for rollover of after-tax assets from QP.

d8606.pdf

I am a brand new attorney ( I have been sworn in for less than 24 hours) and I have a question about employer contributions to a NQDC plan. I am working on revisions of a plan that was redrafted earlier this year to comply with 409A. Are there any limits to employer contributions? (this is not a 457 plan). They use the title "Long Term Incentive Plan" for the employer contributions, but no explaination of what this means.

A guy wanted to purchase real estate from himself using pension assets from the plan he sponsored.

Told him PT, no direct sales with interested party and plan.

He then offerred to sell the real estate to a separate party for $1 then to have the plan purchase it for $1, thus avoiding the direct sale.

It does not seem reasonable. Perhaps it would be considered a PT by means of an indirect sale or some other reason.

Curious to hear them.

And finally, if the plan purchased this real estate for $1 then the plan would likely be severely overfunded for the remainder of the plan with surplus assets at termination if the real estate is worth say $500,000 for example, thus an insane high return on investment.

A signficant # of participants have been missed for passed few years. Will client have to redo the PBGC for each year and redo the FSA for all prior years that were effected? Would this also effect the prior corporate returns which would then have to be amended.?

Does anyone know of any reason that a governmental plan could not exclude part-time employees from the Plan? Obviously, this is unacceptable in a private-sector plan due to Section 410; however, because governamental employers are exempted from 410 and it appears that the pre-ERISA 401(a)(3) does not apply, would this be acceptable?

We generally think of welfare plans as being contract rights that can be transferred from one sponsor to another in an asset sale, although they are just terminated in most cases. What about health FSAs? Transferring one in an asset sale seems so much like a rollover of the unused amounts that I am cautious. Simple example would be an asset sale where all employees go over to purchaser and purchaser wants to assume all plans. Can the health FSA go over?

At what point do you value the assets for the exemption? Are receivables included? For example a single k has $80,000 as of 12/31/2004 and will contribute $40,000 for 2004 on 9/15/2005. Is a 5500 required to be filed for 2004? Is it the account value AT ANY TIME during the plan year?

Facts (names changed to protect the innocent)

--John owns Corporation A- 100 %- no employees

---Jim owns Corporation B- 100%- 1 employee who works more than 1,000 hours and had been with company for five years

---John and Tom owns Partnership-C- 50% each

---John established a profit sharing plan for Company A

Questions.

1) Must Jim be included in the profit sharing plan established by John for company A?

2) Must the employees of Company B be included in the profit sharing plan established by John for company A?

...if yes-any exceptions?

Thanks very much

Jane

Must an on-going plan always have one of its entry dates as the first day of the plan year?

Thanks.

Employer intends to terminate leveraged ESOP on June 30 and make final distributions upon receipt of IRS determination letter. Employer would like to make a principal prepayment prior to terminating the Plan. Is it necessary to prorate both the Section 401(a)(17) comp limit and the 415 limit when testing for excess annual additions? My research indicates that it is necessary to prorate comp under 401(a)(17) but not the 415 limit, but I would appreciate some further guidance. Thank you.

Client has a New Comp plan... has an EE who wants a hardship dist. Are hardship distributions only allowed from K plans?

The Employer deposited $125,000 in excess of the 415 limits into the ESOP a couple of years ago. This amount was never deducted on the Corporate 1120 and was never "allocated" to participants. It is just sitting in the ESOP. This is excess contribution subject to 10% excise tax, correct? Also, can the ER remove this money?

Okay, no one yell at me. I have had a bad day, and I have searched high and low, and I am not lazy!

If we have an ee sign a deferral for 401k participation, and mid year the ee receieves an increase; would the ee need to sign a new 401k deferral/ reduction agreement because the % is a new dollar amount?

Thanks.

We are the TPA for a plan in which a participant took out a participant loan a couple of years ago, but never made any payments on it. In addition to being taxable, does this now become a prohibited transaction, because it no longer complies with 72(p)? Or is that determined at the time the loan is taken? Major disagreement in the office, expensive lunch riding on the answer!

The scenario: An employer maintains a fairly standard 401(k) plan with a 100% match on deferrals up to 4% of compensation. Matching is done on a payroll period basis, and there is no true-up provision. The plan permits both percentage deferrals and specified dollar amount deferrals (each per pay period).

Question: How much of an obligation should the employer feel to explain to participants the fact that by front-loading their deferrals and/or making changes to their deferral percentages or discontinuing their deferrals during the year, they may end up with a total match that is less than 4% of their annual compensation? That there is no true-up provision?

Employer currently provides retiree medical coverage, but would like to remove the liability from its financial statements. One option being considered is offering a lump-sum payment to retirees to "buy-out" their medical coverage. In other words, for $X retiree agrees to waive the right to continued employer-provided medical coverage.

Has anyone seen such an arrangement? I can't think of any reason why the employer couldn't implement this proposal. I understand there are other options and that there are many nits that must be picked to proceed. At this point, I'm just trying to identify major roadblocks, not speed bumps.

Thanks.

I don't regularly work with 403(b) plans, but came across a situation facing a client....

Teacher is getting ready to retire and district will purchase 25% of unused

sick leave. He would like to defer this payment into his 403(b) annuity. (He

is absolutely positive that it will not force him over the deferral limits.)

My reading of the regs suggests this is not possible. Under 1.403(b)-1(b)(3) an employee is only allowed to enter into a single deferral agreement per year. In this person's case, he defers roughly 10% of his salary. My take is that the final

severance payment would be subject to the same 10% deferral already in place.

Am I correct???

The Governmental Plans Answer Book published by Aspen Publishers states that federal law permits rollovers among 401(a), 403(b), 457 plans, and IRAs for any participant who has had a severance from employment with the transferring employer and who is performing services for the entity maintaining the receiving plan.

Is that right? Are rollovers only allowed into the accounts of "active" members in the plan? If federal law doesn't permit inactive members from rolling over money into the plan, please provide a cite. Thanks in advance.

The Governmental Plans Answer Book published by Aspen Publishers states that federal law permits rollovers among 401(a), 403(b), 457 plans, and IRAs for any participant who has had a severance from employment with the transferring employer and is performing services for the entity maintaining the receiving plan.

Is that right? Are rollovers only allowed into the accounts of "active" members in the plan? If federal law doesn't permit inactive members from rolling over money into the plan, please provide a cite. Thanks in advance.

Company has a PSP. Started a 401(k) in 04 with another administrator that we did not know about at the time. When we found out about the new 401(k) plan, suggested they merge the PSP into the 401(k). Became aware the PSP is top heavy (on its own). Therefore, top heavy will be an issue for 04 and 05 for the 401(k) if any keys are deferring and since both plans are in effect - but if PSP were to be terminated, rather than merged, distributed by the end of 05 and no one's account rolled in to the new 401(k), how long does top heavy remain an issue on distributed money (mainly for keys)? Is timing any different than a distribution with a active/ongoing plan - one year?