What are the regulations re: Bank Owned Life Insurance (BOLI) on the Officers and Directors of Regional Banks.

What Insurance Companies are offering a product in this area?

Can a company have two dc plans covering identical employee group and thereby increase deduction limit for employer to 25%? not using mp/ps combination?

ex.

PS plan 001 contribute 15% of eligible comp.

401k/match plan 002, match and deferral = 10% of comp.

If so, why not the design of 2 ps plans vs. typical mp/ps combo?

G

Company A acquires Company B (asset sale). Company's B's employees become employees of Company A as a result of the sale. Company A sponsors a 401(k) plan. Company B had no plan. Company A wishes to grant the new employees coming from Company B credit for service with Company B for eligibility and vesting purposes under the Company A 401(k) plan. Any problems or issues in doing do?

I have an interesting situation: a client has two employees that cannot be reached to find out if they would like to make elective deferrals. Both participants entered the plan 7/1/00. One is in the hospital and the other is in the military. Both are still receiving pay (I don't know how, maybe direct deposit, but the client says they cannot be reached). What must be done? Can it be assumed that they will not defer? If not, what legal steps must be taken to give them the option to defer? Please cite any sources I can use. Thanks.

Would a Defined Benefit or Defined Contribution plan with Life Insurance features ever show Code 4B on Form 5500 Line 8? Because 4B is a Welfare Benefit Feature, I would think no. But I seem to recall hearing Janice Wegesin (speaker for the ASPA Form 5500 Webcast) say that 4B possibly should be used for DB and DC plans. Did anyone else hear that? Has there been any decision?

I have a client who has a safe harbor 401(k) plan giving the 3% non-elective contribution to all eligible participants. currently, employees must wait 12 months to enter the plan. they would like to allow employees in immediately for deferrals but restrict the 3% non elective to those with 1 year of service.

can they have this dual eligibility with a safe harbor 401(k) plan?

On Form 5500 Schedule T, is there any requirement or preference as to which disaggregated part of a plan is shown on lines 4c and 4d? What are others using most commonly and why?

401(k) Plan A is merged into 401(k) Plan B. 401(k) Plan A permits recalculation of minimum distributions to be made monthly and provides for monthly installment. 401(k) Plan B permits only annual recalculation and provides for annual installments.

Minimum Distribution Recalculation. Under Code Section 401(a)(9)(D), recalculation is permitted no more frequently than annually. Thus, it appears that monthly recalculation is illegal and annual recalculation can be permitted going forward.

Anti-Cutback Rule. The tricky issue is this: the current final anticutback regs permit an amendment to an optional form of distribution affecting timing only to no more than two months of the timing of a pre-amendment distribution form (6 months for in-service distributions). Thus, it appears that 401(k) Plan B would be permitted to change the availability of minimum distributions to former 401(k) Plan A participants to quarterly installments. My question is, can this amendment also apply to participants currently receiving minimum distributions?

Can a participant take a total distribution without paying federal and state taxes even if they are not rolling it over? They want to pay the taxes at the end of the year.

We are a 580 employee company. We have sights in about 7 states. We are having problems with our EAP plans. We pay a lot of money and do not see the employees using this benefit. Do you know of any EAP's that go fee for service? Is this a good idea?? ANy other options out there?

Can a participant of a Nonqualified Deferred Compensation plan purchase/invest their assets under the plan in individual stocks?

Link to the opinion is at http://www.benefitslink.com/links/20000801...01-006422.shtml

Anybody think the Tax Court got anything wrong, in its reasoning or result?

Can a 457 Governmental (or non-governmental for that reason) hold individual stocks in a brokerage account?

Our plan makes everyone over 21 eligible on date of hire. We have 7 employees who choose not to participate. We match $ for $ up to 3%. There were some forfeitures last year, and the TPA allocated the forteitures to all eligible participants which included the 7 who do not participate. I questioned this and was told that the definition of participants is the same as eligible participants as our plan does state in the prototype that I neglected to read thoroughly that "an eligible employee who has become eligible to be a participant shall become a participant effective as of the day specified in the adoption agreement." Notwithstanding this, I still protested that allocating forfeitures to employees who choose not to be in the plan is illogical and absurd. We could have elected to use forfeitures to reduce the match. If so then these 7 would have gotten nothing. Can someone help me with this as I have a real problem setting up an account and allocating dollars to individuals who consciously decide not to participate. Any ideas other than using forfeitures to reduce match?

The following article is from Sal Tripodi's TRI Pension Services web site ( http://cybERISA.com ) and is reprinted here with Sal's permission. Copyright 2000 TRI Pension Services, all rights reserved. Post a reply to this thread if you would like to discuss comments or questions about this article with other users of BenefitsBoards.net!

Final Regulations Issued: Repayment of Previously-Taxed Participant Loan

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Repayment of previously-taxed loan. If the loan is repaid after the deemed distribution has occurred, the repayments (including repayments of interest) are treated as tax basis. See http://www.benefitslink.com/taxregs/72p-final.shtml#QA21 . To the extent a previously-taxed loan is repaid, that portion is no longer a receivable, but reflects part of the non-loan assets included in the participant's account balance (or accrued benefit, in the case of a defined benefit plan). That portion is part of the reportable gross distribution, so the tax basis generated from those repayments is taken into account to determine the taxable portion of that gross distribution. Note that loan repayments are not treated as employee contributions for purposes of the nondiscrimination test under §401(m) nor for purposes of the §415 limits, even though tax basis is generated by such loan repayments. See the last sentence of Q&A-21(a).

<UL>Example. Suppose in the earlier example; click that Bill recommenced loan payments in 2002. By the time the plan makes the lump sum distribution to Bill, the loan receivable balance is only $10,400. The total loan payments made by Bill after the deemed distribution totaled $5,920, which included additional interest. Now Bill's account consists of $10,400 loan receivable and $69,115 cash. The cash consists of the $61,300 assumed in the prior example, plus the loan repayments of $5,920, plus an additional $1,895 of investment earnings that were generated because of the loan repayments made by Bill. The plan reports a gross distribution of $69,115, but the taxable portion of that distribution is only $63,195. Bill has tax basis of $5,920, which represents his total loan repayments following the deemed distribution of the loan.</UL>

The following article is from Sal Tripodi's TRI Pension Services web site ( http://cybERISA.com ) and is reprinted here with Sal's permission. Copyright 2000 TRI Pension Services, all rights reserved. Post a reply to this thread if you would like to discuss comments or questions about this article with other users of BenefitsBoards.net!

Final Regulations Issued: Crediting of Tax Basis on Defaulted Participant Loan at Time of Offset

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Effective date. The regulations are effective for loans made on or after January 1, 2002. See Q&A-22(B) [click]. (The 1998 proposed regulations clarified that the effective date would be no earlier than the January 1 which is at least 6 months following the publication of final regulations.) The plan year of the plan is irrelevant. In other words, all plans become subject to the regulations as of January 1, 2002, even if that date occurs in the middle of a plan year. This effective date does not mean that plans may ignore IRC §72(p) before January 1, 2002. The statutory effective date of §72(p) was for loans made after August 13, 1982 (although the quarterly amortization rule and some changes to the principal residence loans did not apply until after 1986). Between the applicable statutory date of any provision of §72(p) and the regulatory effective date, plan administrators must apply a reasonable, good faith standard of compliance. Compliance with the proposed regulations, or any provisions of these final regulations, before the regulatory effective date would be treated as satisfying the good faith compliance standard. The final regulations follow the proposed regulations very closely, so a detailed analysis is not provided in this summary. Here are some highlights.

* * *

No basis credited because of deemed distribution/reporting rules when defaulted loan is later offset. When a loan becomes a deemed distribution, the amount taxed is not credited as tax basis. However, see the transition rule in Q&A-22© [click], where accrued interest that was taxed as a deemed distribution is treated as tax basis. When the plan offsets the loan receivable, the offset amount is not reported again as part of the participant's gross distribution. In other words, the prior deemed distribution of the loan is treated as the distribution of that loan for reporting purposes, so the cashless portion of the distribution that represents the loan offset is not reported. Since the loan receivable is not reported when it is offset, there is no need to credit basis for that loan. Interest that accrues after the deemed distribution is also not reported as part of the gross distribution when the loan offset later occurs, even though the accrued interest was not previously subject to taxation.

Example. Bill defaulted on a participant loan in 2000. At the time of the default, the plan deemed a distribution of $12,150. That was reported on Form 1099-R for the calendar year in which the default occurred. The loan receivable remained an asset of the plan because there was no distribution event with respect to the defaulted amount. The plan posted accrued interest, but did not report it as a deemed distribution. In 2003, Bill terminates employment and requests a lump sum distribution of his account. At the time of the distribution, Bill's account consists of $61,300 cash and $15,250 loan receivable, (which includes the $12,150 initial default amount and $3,100 accrued interest). The plan offsets the loan receivable and the accrued interest and distributes the cash (20% of which is withheld for federal income taxes). The Form 1099-R should report a gross distribution of $61,300, which is the cash portion of Bill's account, and shows the same amount as the taxable distribution because Bill does not have any tax basis. He does not get tax basis for the previously-taxed loan because the loan offset is not reported as part of the gross distribution. Since the loan receivable and the accrued interest are not treated as part of the distribution, the 20% withholding liability is calculated only on the cash portion of $61,300.

The following article is from Sal Tripodi's TRI Pension Services web site ( http://cybERISA.com ) and is reprinted here with Sal's permission. Copyright 2000 TRI Pension Services, all rights reserved. Post a reply to this thread if you would like to discuss comments or questions about this article with other users of BenefitsBoards.net!

Final Regulations Issued: Accruing Interest on Defaulted Participant Loan

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Effective date. The regulations are effective for loans made on or after January 1, 2002. See Q&A-22(B) [click]. (The 1998 proposed regulations clarified that the effective date would be no earlier than the January 1 which is at least 6 months following the publication of final regulations.) The plan year of the plan is irrelevant. In other words, all plans become subject to the regulations as of January 1, 2002, even if that date occurs in the middle of a plan year. This effective date does not mean that plans may ignore IRC §72(p) before January 1, 2002. The statutory effective date of §72(p) was for loans made after August 13, 1982 (although the quarterly amortization rule and some changes to the principal residence loans did not apply until after 1986). Between the applicable statutory date of any provision of §72(p) and the regulatory effective date, plan administrators must apply a reasonable, good faith standard of compliance. Compliance with the proposed regulations, or any provisions of these final regulations, before the regulatory effective date would be treated as satisfying the good faith compliance standard. The final regulations follow the proposed regulations very closely, so a detailed analysis is not provided in this summary. Here are some highlights.

* * *

Accruing interest on defaulted loans. addresses the treatment of accrued interest following the taxation of a loan as a deemed distribution, adopting the rules as they were stated in the proposed regulations. After a loan is deemed distributed under section 72(p) (e.g., the plan goes into default, as described in Q&A-10), interest that accrues thereafter is disregarded for section 72 purposes. That means the accrued interest is not taxable, neither at the time it accrues nor at the time the loan receivable is later offset. However, until an offset occurs, the accrued interest is taken into account to determine the maximum amount of any subsequent loan to the participant. (Note that the offset is an actual distribution event and cannot be permitted before an actual distribution is permitted under the plan. Until there is an actual distribution, the loan is not treated as a distribution for qualification purposes, only for tax purposes.)

Example. Lynn borrows $10,000 from her employer's profit sharing plan. The loan is not repaid through payroll withholding deductions. Instead, Lynn must make monthly installment payments by writing a check to the plan for each payment. As of December 31, 2002, the outstanding balance becomes a deemed distribution because of a monthly payment missed on September 30, 2002. (Lynn makes no payments between September 30, 2002, through December 31, 2002, that can be treated as covering the missed payment.) The outstanding balance as of December 31, 2002, is $8,250 (which includes accrued interest through that date). That amount is taxed as a deemed distribution under section 72(p). Under the terms of the plan, distribution is not available to Lynn, so the loan amount cannot be offset at the time of default. After December 31, 2002, interest continues to accrue at $200 per month. The post-2002 accrued interest is not included in Lynn's income. However, the accrued interest is added to the deemed distribution amount ($8,250) to determine whether any subsequent loan made to Lynn satisfies the limitations under section 72(p). As a non-401(k) profit sharing plan, the plan could be written to treat default as a distribution event, which would trigger a loan offset, i.e., an actual distribution, coincident with the default. The example assumes the plan does not contain this provision. If such a provision were in the plan, Lynn's account would be offset by the unpaid loan balance, and would be reported as an actual distribution, rather than as a deemed distribution. No interest would accrue and there would be no outstanding loan to Lynn if a new loan were to be made to her. Note that proposed regulations also issued today (see separate summary above) would impose additional conditions if another loan is made to the participant before the defaulted loan is offset. These conditions are designed to ensure that any subsequent loan is more likely to be repaid.

I have two companies A and B.

A is owned by 4 equal partners. B is owned by 5 individuals. 4 of them are the owners of A. Their ownership in B is 56%. I have determined they are not a controlled group based on this information.

I need to know how I go about figuring out if they are an affiliated service group.

The following article is from Sal Tripodi's TRI Pension Services web site ( http://cybERISA.com ) and is reprinted here with Sal's permission. Copyright 2000 TRI Pension Services, all rights reserved. Post a reply to this thread if you would like to discuss comments or questions about this article with other users of BenefitsBoards.net!

Final Regulations Issued: Guidance on Electronic Media in Connection With Participant Loans

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Effective date. The regulations are effective for loans made on or after January 1, 2002. See Q&A-22(B) [click]. (The 1998 proposed regulations clarified that the effective date would be no earlier than the January 1 which is at least 6 months following the publication of final regulations.) The plan year of the plan is irrelevant. In other words, all plans become subject to the regulations as of January 1, 2002, even if that date occurs in the middle of a plan year. This effective date does not mean that plans may ignore IRC §72(p) before January 1, 2002. The statutory effective date of §72(p) was for loans made after August 13, 1982 (although the quarterly amortization rule and some changes to the principal residence loans did not apply until after 1986). Between the applicable statutory date of any provision of §72(p) and the regulatory effective date, plan administrators must apply a reasonable, good faith standard of compliance. Compliance with the proposed regulations, or any provisions of these final regulations, before the regulatory effective date would be treated as satisfying the good faith compliance standard. The final regulations follow the proposed regulations very closely, so a detailed analysis is not provided in this summary. Here are some highlights.

* * *

Guidance on electronic media. The regulations require that the loan be evidenced by an enforceable agreement that sets forth: the amount of the loan, the date of the loan, and the repayment schedule. See Q&A-3(B) [click]. The enforceable agreement may be in the form of a written paper document or in an electronic medium. The principles set forth in Treas. Reg. §1.411(a)-11(f)(2), regarding the use of electronic media to obtain participant consent to a distribution, are applied here as well. The electronic medium must:

1. be reasonably accessible to the participant,
2. be reasonably designed to preclude any individual other than the participant from requesting a loan,
3. provide a reasonable opportunity for the participant to confirm, modify or rescind the terms of the loan before the loan is made, [and]
4. provide confirmation of the loan within a reasonable time after the loan is made.

Confirmation may be provided in a paper document or electronically. If the confirmation is provided electronically, it must be designed in a manner that is no less understandable than a written paper document, and the participant must be advised that he or she may request a written paper document at no charge. An agreement does not have to be signed by the participant, so long as under applicable law, the agreement is legally enforceable without a signature. The purpose of this clarification in the final regulations is to enable plans to process loans electronically without a signature, if such procedure does not compromise the enforceability of the loan agreement. The IRS had taken this position in an informal ruling issued on June 26, 1997, which was reprinted in CCH Pension Plan Guide, ¶17,396L.

The following article is from Sal Tripodi's TRI Pension Services web site ( http://cybERISA.com ) and is reprinted here with Sal's permission. Copyright 2000 TRI Pension Services, all rights reserved. Post a reply to this thread if you would like to discuss comments or questions about this article with other users of BenefitsBoards.net!

Final Regulations Issued: Cure Period for Defaulted Loans

, Q&A-1 through Q&A-19, and Q&A-21 through Q&A-22, 65 F.R. 46588 (July 31, 2000), provide guidance, in question-and-answer format, on the tax issues relating to participant loans, as set forth in IRC §72(p). A loan is taxed as a distribution unless it satisfies the requirements of §72(p)(2). The regulations finalize two sets of proposed regulations, one issued in 1995 and the other issued in 1998. The 1998 proposed regulations supplemented the 1995 proposed regulations, to provide guidance on the treatment of accrued interest after a plan loan is deemed to be distributed under section 72(p), tax basis issues relating to a deemed distribution, and the effective date of the regulations. Along with these final regulations, the Treasury is issuing a new set of proposed regulations [click] ... to address refinancing transactions, the tax treatment of multiple loans, and military service leave.

Effective date. The regulations are effective for loans made on or after January 1, 2002. See Q&A-22(B) [click]. (The 1998 proposed regulations clarified that the effective date would be no earlier than the January 1 which is at least 6 months following the publication of final regulations.) The plan year of the plan is irrelevant. In other words, all plans become subject to the regulations as of January 1, 2002, even if that date occurs in the middle of a plan year. This effective date does not mean that plans may ignore IRC §72(p) before January 1, 2002. The statutory effective date of §72(p) was for loans made after August 13, 1982 (although the quarterly amortization rule and some changes to the principal residence loans did not apply until after 1986). Between the applicable statutory date of any provision of §72(p) and the regulatory effective date, plan administrators must apply a reasonable, good faith standard of compliance. Compliance with the proposed regulations, or any provisions of these final regulations, before the regulatory effective date would be treated as satisfying the good faith compliance standard. The final regulations follow the proposed regulations very closely, so a detailed analysis is not provided in this summary. Here are some highlights.

Cure period for defaulted loans. The final regulations retain the rules for correcting missed loan payments before a deemed distribution, due to default, must be triggered. The proposed regulations had referred to this as a "grace period," but the final regulations call it a "cure period." Q&A-10(a) of the regulations permits the cure period to run through the end of the calendar quarter that follows the calendar quarter in which the missed installment payment was due. When the loan is in default (taking into account any permitted cure period), the entire balance due is taxable, including accrued interest through the date of default.

Example. A participant is making monthly installments on a loan from the plan. The participant misses the payment due August 31, 2003, and subsequent monthly payments. The provides a 3-month cure period. The cure period for the August 31, 2003, payment ends November 30, 2003. The amount is not paid by then. The taxable distribution is $17,157, which represents the participant's outstanding loan balance, but interest accrued through November 30, 2003. In an alternative scenario, the regulations provide that the plan's cure period ends on the last day of the calendar quarter following the quarter in which the installment payment is missed. In that case, the cure period would not end until December 31, 2003, so there would be an additional month of accrued interest. In the example, the taxable distribution is increased to $17,282.