I realize this has been discussed many times, but I couldn't (easily) find a full, definitive answer to how this works. (I have not worked with small plans before.)

A PBGC-covered plan only has the owner left (closing down business at retirement, everyone else has been paid out at termination of employment). It is underfunded and doesn't want to contribute anything.

I understand they can sign some type of waiver. Who is this going to? Isn't this just to let the PBGC know that all benefit liabilities have been satisfied? What happens when the IRS finds out the plan was terminated and not all accrued benefits were paid?

I am confused as to what i has been dotted and t has been crossed (or not dotted and not crossed), with open liability (to the actuary or TPA) still hanging out there.

This is more in the realm of executive compensation than some of the other posts with regard to Notice 2005-1 but I am curious about everyone's thoughts on curing discounted stock options. I cannot say I found the broad definition of deferred compensation or the lack of grandfathering for previously granted but unvested discounted options a surprise given earlier IRS discussions but I think it is unfair to loop in unvested discounted options granted before 2005. Okay if you want to do away with that going forward but rewriting the rules for previously granted options raises a lot of questions and concerns.

I also appreciate the IRS allowing us to cure this by letting companies reissue options as fair market value options and giving us until the end of 2005 to get that done but am curious if others have thought of other alternatives that cure this problem without setting a fixed exercise / distribution date. Also, is there any variation on the general rule in Q&A-18(d) where the current stock price is less than the FMV of the shares at the time of grant? Is there any consideration for discounted options held by executives in very thinly traded companies that are not able to immediately sell all their shares received from options, etc?

I see the distinction the Service draws between stock-settled SARs and discounted options but it seems highly unfair for individuals with discounts on options (some not that great) to be so heavily penalized compared to SARs that in many ways equate to 100% discounted options.

A DB plan was terminated in mid-2004 and the lump sum distributions were calculated as the present value of accrued benefits as of November 30, 2004 (the assumed distribution date) using an interest rate of 5.07%.

One participant has not signed the application for benefits and that person's distribution is going to slip into 2005.

Question: Will that person's lump sum distribution change? If so, how? In particular,

(a) Will the interest rate used to calculate the equivalent present value change? If so, how will the new rate be determined?

(b) Will the assumed date for distribution change?

© That person's benefit at retirement was at the allowed maximum of $165,000. Will the distribution in 2005 be adjusted to reflect the increase in the allowed maximum of $170,000?

(d) Are there any other changes?

Thank you.

Just checking...the fact that a participant defaulted on a 401(k) loan does not impact his ability to take a hardship withdrawal. Any feedback?

I have always understood from all the books I have read on the topic, that the beneficiary may aggregate RMD for inherited IRAs from the same decedent...But a poster at another forum indicated that one financial institution has indicated that the aggregation rule does not apply if the IRA owner dies on or after the RBD. §1.408-8 Q&A 9 seems to suggest that this is correct, as it states in part “…However, amounts in IRAs that an individual holds as a beneficiary of the same decedent and which are being distributed under the life expectancy rule in section 401(a)(9)(B)(iii) or (iv) may be aggregated, but such amounts may not be aggregated with amounts held in IRAs that the individual holds as the IRA owner or as the beneficiary of another decedent.”

The question then becomes, “ why does it appear that aggregation is limited to 401(a)(9)(B)(iii) or (iv), which applies to the life expectancy option when the participant died before the RBD? And does not appear to include 401(a)(9)(B)(i) which applies to when the participant died on or after the RBD?”

Am I missing something?

Clients often like to use pension assets to purchase real estate. They ask whose name can be put on the loan application, since they cannot get a loan to the pension plan.

Is there any reason why a participant/owner/trustee cannot use his name on the loan app., assuming the investment is otherwise purely for the pension plan?

Same question for an employee/non-owner/participant?

Thanks.

ABC Construction is a Chapter S Corporation formed by two brothers.

They also have 50/50 ownership in an LLC with several holdings:

An Equipment Leasing Company that leases to ABC.

A Holding Company that handles management of their 65% ownership in a product they import and that holds 100% interest in the trademark for that product.

A Distribution Company that handles the distribution and sales of the import.

Would the employees of the LLC have to be included in the Profit Sharing Plan of ABC?

Can they establish a separate profit sharing plan for the LLC?

I am seeking confirmation on the following:

Part 1.

A DB plan offers a disability benefit to a participant who

has not yet attained NRA. This benefit is "auxiliary" meaning

the receipt of the disability payments do not affect the participant's

right to his vested, accrued benefit at NRA. In other words, the

normal retirement benefit will be the same regardless of

whether he received a disability benefit or not.

As an auxiliary benefit, my understanding is that the

plan is not required to make payment in the form

of a QJSA. The spouse of the disabled participant is

protected by the QPSA rules. Is this correct?

Part 2.

(Same facts as above except that participant is single when he

becomes disabled.)

If a single participant marries while receiving an auxiliary disability

benefit, the spouse can earn a right to the QPSA or QJSA

by being married for 1 year prior to the annuity start date.

Is this correct?

In some states, divorce automatically revokes a beneficiary designation, where the former spouse was the designated beneficiary. I think CA and Illinois are two such states.

…anyone know the rules for Pennsylvania?

For an non-Gust amended plan, that wants to "terminate" and distribute the assets, how do you report the distributions now that it is disqualified? The IRS has provided no guidance at this time.

Is it permissable for an employer to invest money 'collected' from employees for their FSA's in an interest bearing account?

Thanks,

Fred

ESOP terminated two years ago. Stock "distributed". Participants put stock back to company. Particpants received partial payment and notes. Most participants rolled proceeds and notes over to IRAs. Balance on notes was paid a year later by a new company that purchased the former ESOP company. ERISA and state securities litigation about the purchase price of the stock from participants. Settlement reached with additional proceeds from sale to be made. Payment will come from a former party in interest. The ESOP and trust no longer exist. Can payments be made directly to IRAs and participants according to their original elections? If no, who issues the elections? Will new 1099-Rs be required? If yes, who issues the 1099-Rs? Thank you.

ESOP terminated two years ago. Stock "distributed". Participants put stock back to company. Particpants received partial payment and notes. Most participants rolled proceeds and notes over to IRAs. Balance on notes was paid a year later by a new company that purchased the former ESOP company. ERISA and state securities litigation about the purchase price of the stock from participants. Settlement reached with additional proceeds from sale to be made. Payment will come from a former party in interest. The ESOP and trust no longer exist. Can payments be made directly to IRAs and participants according to their original elections? If no, who issues the elections? Will new 1099-Rs be required? If yes, who issues the 1099-Rs? Thank you.

What is the deadline for making a deductible DB plan contribution? Is it the same as DC.....due by tax filing date, including extensions? I know nothing about DB plans. (I'm not sure I ever want to know much about them either. Yuck) THank you.

I know this subject has probably been beaten to death and I have read some of the other posts. I just want to make sure I am understanding correctly.

Client has a 401(K) plan. In 2002 beginning of year participant count (Form 5500 line 6) was 82. Client filed Schedule I. In 2003, beginning of year participant count was 173. Is it correct that they have no choice but to file Schedule H (with audit) since the participant count is greater than 120?

Thanks.

Doc (of course) currently sponsors a PS Plan through his medical practice. He would like to direct his own investments, but does not want the "hassle" of offering this option to other Plan participants.

Doc is also an owner in a separate business venture, totally separate from his medical practice, consisting of Doc and his business partner (no common law employees).

Doc wants to know if his "other business" can establish a PS Plan, to which he would rollover his balance under the medicla practicie's Plan (via an in-service distribution) and then be able to self-direct the investment of his account?

He would roll his balance over to an IRA but wants the added ERISA protection of having his money in a qualified plan.

Other than possible controlled-group issues and not intending to make "recurring and substantial" contributions to the "other business" PS Plan, are there any other issues (pro or con) to consider?

Please weigh in! Thanks!

A plan excludes overtime/bonus from the defintion of compensation. The comp ratio tests fails because the disparity between HCE and NHCE is 5% - more than a deminimus amout. The only contributions are 401(k) and discretionary match, no profit sharing.

The ERISA outline book (chapter 9 page 9.12) states that if the comp. ratio test is failed the employer has 2 choices:

1. Amend the definition of comp. to satisfy section 414(s) and continue to rely on the design based safe harbor.

2. Allocate the contribution under the plan's definition of compensation and satisfy 401(a)(4) under rate group testing.

I could understand #2 for a profit sharing allocation but can you rate group test a 401k and match contribuiton?

If the plan is amended - under #1 above - does the plan just have to run the ADP and ACP testing using a safe harbor comp. definition? Does the employer have to make some sort of additional contribution?

Hello and Happy Holidays!

I have been on this forum off and on for the past couple of months. I am 5 months into my first job out of college and am ready to initiate my Roth IRA account. Right now, my girlfriend and myself are looking at putting in the full $3000 into Roth accounts and count them for this year, 2004, as from my understanding this is possible as long as we declare it by April of next year.

Right now, we are trying to decide on whom to setup the account through. The names that we have been thinking about are Vanguard, Ameritrade and SiebertNet as some options. The problem we are having right now is trying to sift through all of the hidden fees.

To make it short, we are looking to atleast setup a no-load fund (probably index) to start off with for our individual accounts. She just turned 26 and I will be 26 in February. Of course we plan to continue maxing out on contributions for years to come.

Any suggestions on companies to consider as well suggestions to determing fees that will be applied? Any suggestions would be great.

Take care and thanks.

Eric

I am not sure where to post my question, but it is:

My employment ended with a company and I received 15 months worth of severance pay, which is great. However, when my employment ended, all company contributions to the pension plan and to my 401K ended as well as my contributions to my 401K. Can I pay a percentage of my severance pay into some sort of retirement plan I establish, i.e., an Individual(K) plan and something similar?