A plan holds real property as an investment. The sole participant in the plan improves the property with his own money. Assume that the participant does not benefit from the improvement in any way whatsover (other than from being a participant in the plan). Would the participant's improvement of the property be a prohibited transaction?

From what I hear, (thanks ABA Joint Committee), IRS guidance goes to press tomorrow.

How do you terminate a Govenmental 457(b)? and is this a distributable event?

Thanks for any info.

Years ago a multiemployer pension fund decided to allow the fund office employees participate in the db plan. None of these employees are highly compensated, nor are they members of the union. A new board would like to discontinue this practice for new hires.

What issues does this raise? Can the plan include some and exclude others? Does this cause any testing problems? I would to get a handle on the major issues that need to be examined before starting my research.

The Timeless Gift

By Harrison Kelly

Shopping for a Christmas gift can be the most nerve-wracking event of the year. Shopping for my wife can be a special challenge. Vacuum cleaners are too impersonal, football tickets are too impractical, and kitchen gadgets are downright impossible. I was at a loss, with Christmas fast approaching. In desperation, I asked my secretary, Sally, to help me pick out a present.

We walked side by side in a fast-paced walk, two blocks to the jewelry store. Working in the downtown business district had its advantages; being close to a lot of shopping places was one of them. However, there were disadvantages as well. On the way, our path crossed a couple of homeless men, huddled together by a vent from one of the nearby buildings.

I started to cross the street to avoid them, but traffic was too thick. Just before we approached, I switched sides with Sally to keep them from confronting her. They were surely going to beg for money, pretending to buy food, but any donation would surely end up as beer or wine.

As we got closer, I could see that one was probably in his mid-thirties and the other was a boy of school age - around thirteen or fourteen. Both were dressed shabbily, the older with a too-tight sport coat ripped at the sleeve, while the boy was without a coat at all, only a tattered shirt separating him from the blowing wind. A quarter or two and they'll leave us alone, I thought. "I'll handle this," I said with my best male bravado.

But Sally seemed undisturbed by the sight of the two beggars. In fact, she seemed comfortable in their presence. Before they asked, she offered.

"Is there anything I can do for you?" she directed her question to the two homeless men. I was in shock, waiting to pull Sally away from a dangerous situation, but she stood firm.

The two men looked at her with surprise until the older one spoke up. "Yes, ma'am. We do need something."

Here it comes - the hook, the gouge, I thought. The two panhandlers are looking for a handout, an easy mark. As I watched, I could tell the younger boy was shivering in the winter breeze, but what could I do?

"Could you tell us the time?" asked the older man. Sally glanced at her watch and replied, "Twelve-fifteen." He nodded his thanks and didn't say another word. We continued on our way to the jewelry store, and I had to ask Sally about the encounter.

"Why did you ask if you could help that man?"

"He was cold and in need, that's why," she replied in a matter-of-fact tone.

"But he's a bum. He could have tried to rob you or something."

"I take care of myself. But sometimes you have to take a chance on someone."

We arrived at the jewelry store, and Sally quickly found the perfect gift for my wife - a pair of diamond earrings. While she was there, she bought a man's watch, not an expensive one, but she was always thrifty. Probably a gift for her husband, I thought.

As we walked back to our building, the two vagabonds were still hovering around the sidewalk grate. Once again, I tried to come between Sally and the two, but she wouldn't let me. To my surprise, when we got next to them, she pulled the watch out of the bag and handed it to the older man.

"Here, I'm sure you know how to use it."

He was as shocked as I was. "Thank you, much obliged, ma'am," he said, trying the watch on his wrist. As we walked away, Sally had a gleam in her eyes, proud of what she had done.

"Why on Earth did you do that?"

Sally shrugged and said, "God has been so good to me, and I decided to do something good for him."

"But he didn't deserve it."

"Even the poor want something special, and besides, God's done things for me that I don't deserve - but He did them anyway."

"He's probably going to buy beer with that watch."

Sally just smiled at me and said, "Well, so what if he does? That's not my concern. I did something for good and that's all that matters. What he does with the watch is his challenge."

We arrived back at our building and went into our separate offices. I wondered about the encounter, and I thought about the two men. Surely they were at the pawnshop, getting ready for a hot time at Sally's expense.

The next day, I was going to lunch alone at a hamburger stand outside our building. As I walked down the street, I noticed the same two men that Sally and I had encountered. They were both still hovering around the heater vent. The older man recognized me and said, "Excuse me, sir. Could you give me the time?"

Aha! I had caught him. Sally's watch was nowhere to be found. Exactly what I thought.

"Where is the watch my secretary gave you yesterday?" I asked, hoping to stir his heart.

He hung his head down and admitted his guilt. "Sir, I'm sorry but I had to do something." It was then I noticed the new parka around the shoulders of his young companion. "Wouldn't you do something for one of your own?"

Speechless, I handed him a quarter and continued on my way. As I walked, I started thinking about the incident. He had sold the watch all right, but he bought a coat, not beer, with the money. Sally's act of kindness did have meaning. So did her words: The challenge was answered.

As I arrived at the hamburger stand, I suddenly lost my appetite. I turned around and headed back to the office. The two men were still by the grate. I tapped the older man on the shoulder and he looked up at me, obviously freezing. I took my long, gray overcoat off and draped it over his shoulders without saying a word. As I walked away, I knew that my own challenge had been met. The few steps back to my office made my teeth chatter. But, you know...it was one of the warmest trips I have ever made in my life.

I seem to remember IRS commenting on the following situation but can not find the response. The comment was generally that IF there are NO active participants the deduction of the difference between the present value of benefits and the assets is NOT reasonable. Therefore, I will ask the learned members of this forum what they think.

We will make the first case 'simple'. This is a one man plan where the participant reached normal retirement age (sometime prior to the valuation date). The valuation is performed at the beginning the plan year.

Valuation 1/1/2005

Is it legal to value the participant's actuarial increased benefit and develop a contribution equal to the difference between the present value of this benefit and the assets at 1/1/2005??

Can this method be maintained when the participant does not retire but continues working and a new valuation is prepared at 1/1/2006?

Is the answer any different IF there is more than 1 participant (all inactive)??

Thanks for any and all responses.

Plan is covering school bus drivers. They are paid for 38 weeks and not paid during the summer. Plan sponsor would like to limit loan repayments through payroll deduction. Does anyone have a suggest as to how to setup loan repayments for these employees?

Thanks

My wife enrolled in a 403(b) with her employer on 17Nov04 with the agreement to have all of her last 3 checks of the year deducted and contibuted to the TSA.

No deductions where made from the 27Nov04 or the 11Dec04 check.

The deduction calculated by the custodian's representative for was too high (there was not enough money left after normal deductions) so the employer took nothing out.

The Custodial agent and the payroll supervisor say that nothing can be done to correct the situation. The agreed total figure was in the area of ~$7500 and this failure will force us to re-characterize some investments.

The IRS said that I should tell the agent and the employer that a correction can be and should be made via rev. procedure 2003-44 and done as soon as possible.

I did mention the procedure but do not believe that anything will be done and that we will loose the benefit entitled to us.

My Question is, "Is there anything we can do to get the Custodian or the Employer to become enthusiastic about making a timely correction?"

I have a defined benefit plan that permits lump sums as a distribution option. The plan will be terminating shortly. Since a lump sum is not normally available until the participant terminates employment, can we offer actively employed participants the choice of receiving an annuity contract from the insurance company (which would have a lump sum option upon termination from employment) or a direct rollover to the company's 401(k) plan (which would allow a lump sum upon termination from employment)? OR, does the fact that a lump sum is an option under the plan mean that we must offer a lump sum upon plan termination, even though participants selecting annuities won't be payable under the contract until normal (or early) retirement date?

I'll shorten a prior posting.

Does anyone see a problem with a TPA reimbursing participants for prepaid fees?

The proposed reimbursement is due to a client's decision to use the investment company's system for administering loans. Our practice has been to charge all expected maintenance fees at time of loan issue.

If you have a profit sharing only calendar year 2004 plan, can a participant who is over 50 have an emploer contribution of $44,000? They are over the 415 limit, but do you need deferrals to get the catch up?

Several years ago, an international chess tournament was being held in a swank hotel in New York. Most of the major stars of the chess world were there, and after a grueling day of chess, the players and their entourages retired to the lobby of the hotel for a little refreshment. In the lobby, some players got into a heated argument about who was the brightest, the fastest, and the best chess player in the world. The argument got quite loud, as various players claimed that honor. At that point, a security guard in the lobby turned to another guard and commented, "If there's anything I just can't stand, it's chess nuts boasting in an open foyer."

We are converting a MP Plan to a P-S Plan as of 1/1/2005. On 4/1/2005, we are then adding a S-H 401(k) feature using the 3% NEC. We are defining compensation from the beginning of the year (rather than date participant entered the plan). Here are my questions:

Can we state that the S-H contribution starts on 1/1/2005, even though the ptps will not be able to defer until 4/1/2005?

When is the S-H notice due to the ptps?

If we start the S-H conts on 4/1/2005 and the plan is top heavy, will the employer be responsible for the T-H min conts for 1/1/2005 – 4/1/2005?

Can we make catch-ups eligible on 4/1/2005 as well?

Any help is greatly appreciated.

Strange situation here. Any insights, or suggested resources much appreciated.

A CEO of a company had a misunderstanding with the board of a company, and resigned. The board talked him into staying for a while (a couple of years), but at reduced compensation and with reduced CEO obligations.

As part of this arrangment, the board is reducing his compensation by $X0,000 per year, which happens to be the same amount that they would have contributed on his behalf to a profit-sharing plan, per year.

The CEO apparently is accustomed to his nice salary, and states that he can't afford to have his compensation directly reduced by $X0,000 per year.

So, the Board is looking at other ways to trim $X0,000 from his total compensation. We already know that the board can't just eliminate the profit-sharing contribution, since the profit-sharing plan is a qualified plan that requires any opt-out to be performed before at the beginning of the year, and not now (late in the year).

The CEO also has an undfunded Non-qualified deferred comp arrangement. Under the arrangement, the CEO may elect, prior to each calendar year, to elect compensation to the Plan, which is credited to his "account" during the February following each calendar year, but which is not payable until his termination. According to the agreement, CEO has an unsecured claim against the assets of the company for the credited amounts, and has no right to receive the amounts. There is a mere promise, by the company, to pay the amounts.

Here's my question. Assuming the CEO has already elected, prior to 2004, to defer money for 2004, can anyone think of any reason why it would be problematic for the CEO and Board to negotiate that now the CEO's 2005 nonqualifed plan credit (for work performed during the 2004 period) will be reduced by $X0,000 of the 2004 deferral? (I also wonder if this would be a material modification under ACJA).

I'm thinking there could be a possible contructive receipt issue - i.e., that the IRS might say he can't turn down that money. On the other hand, he doesn't, it would seem, really have a right to it, and I don't know why the CEO and Board couldn't "settle-up" their new compensation reduction in this way.

(Unless, of course, such agreement would be a material modification, which might trigger income inclusion, etc.)

Help.

I'm trying to convince someone that the prohibition on restructuring of 401(k) plans does not apply to the testing of a profit sharing allocation in a plan with both profit sharing and 401(k) features.

I know the answer is that the testing is completed after the PS and (k) portions are mandatorily disaggregated, that they are for testing purposes two different plans, but I am having trouble finding anything in print that says that in plan English. Certainly in-depth analysis of the regulations would lead you to that conclusion, but plan English in one sentence or paragraph is not easily found.

Tom, maybe you can add that to the next edition of the Coverage and Nondiscrimination Answer Book. It's implied in many places, but .......

Any suggestions?

Our pre-approved Volume SUbmitter plan has the language in it that allows for the selection of "each participant being their own allocation group" (often used in conjunction with cross-testing). Now, if in a given year if client just wanted to do a regular integrated allocation (which normally is a safe-harbor formula) do my allocations have to be general tested given the afore stated plan doc structure (each participant their own allocation group) or can I claim it's still a safe-harbor contribution not subject to general testing ?

I guess the issue is whether the plan doc specifically needs the integrated formula specified in the plan doc in order for the integrated contribution to avoid the general test and be deemed a safe-harbor contribution/formula. Since I can "impute" permitted disparity into the general test, maybe the whole issue is a moot point if the general test (w/imputed permitted disparity) pretty much guarantees me to pass anyway using standard permitted disparity contributions. Thoughts ?

Ok, the other one I have had for years. I found this one out on the internet, haven't even looked at it

Christmas Song Puzzle:

Below are possible original titles of 40 well known Christmas Songs. To get you started, the answer to the first one is "I'll Be Home For Christmas" . (Don't ask me for the solutions!)

Expect My Arrival At My Domicile For Yuletide

The Primary Carol

Tinkling Chimes Stone

My Singular Desire For The Impending Yuletide Season Is A Pair Of Central Incisors.

Precious Metal Inverted Cups With Clappers

Righteous Darkness

Celestial Messengers From Splendid Empires

The Yuletide's Dozen 24 Hour Intervals

I'm Fantasizing Concerning A Celebration Day Without Color

The Event Manifest Itself At the Onset of a Transparent Day

The Diminutive Male Of Less Than Adult Age Who Plays A Percussion Instrument

The Seasonal Tall Coniferous Plant (Woody?)

Proclaim It To the Hills

Diminutive Nazarene Municipality

During The Dark Hours When Herdsman Supervised Their Charges

Are You Listening To What I Am Listening To?

The Mannikin Of Crystalline H2O

The Event Occurred At One Minute After 11:59 PM, Visibility Unlimited

Tinkling Cup Shaped Metal Pieces

Loyal Followers Advance

Are You Detecting The Same Aural Sensations As I Am?

I Apprehended My Maternal Parent Osculating With a Corpulent, Unshaven Male In Crimson Disguise

Delight For This Planet

Please Permit Crystalline Formations To Descend

Aged Matriarch Plowed Under By Precipitous Darlings

Our Desire Is Your Yuletide Cheer

Casteneous Colored Seed Heated In a Conflagration

Season Without Color

Listen, The Heavenly Messengers Harmonize

Caribou With Vermillion Olfactory Appendage

Soundless Nocturnal Period

Happy Elderly Martyr Without Five Cent Pieces

Bipedal Traveling Through An Amazing Acreage During Mother Nature's Dormancy

Omnipotent Supreme Being Tells Happy Males To Relax

In Another Place Meant For Bovine Storage

Tranquillity Upon The Terrestrial Sphere

The Approach Of The Holiday Commemorating The Birth Of Christ Is Becoming Evident

What Offspring Abides Thus?

A Visitor Is Coming To The City

Embellish The Corridors With Large Sprigs Of Berry-Bearing Evergreen.

Can a participant assign as the secondary beneficiare his children and literally put on the form "divided equally between my surviving children" or should s/he spell it out with each of their names ... i.e. "in equal shares to Bobby T. Jones, Suzie Orman, and Tom Brokaw"

What is commonly meant by a "cash-back deferral" when someone is talking about a Nonqualified deferred comp plan?

Employees in our I.T. dept. (both exempt & non-exempt), at a small private university, is now being expected to be "on-call" over the holidays. We receive holiday pay from 12/24-1/2. We are trying to determine how these employees should be compensated, besides receiving their normal holiday pay. Has anyone else run into this problem? Any suggestions? Any other companies doing this?