What are the pros and cons of a governmental employer utilizing IRC section 420 to transfer assets out of a defined benefit plan to fund retiree health insurance costs? Traditionally employer has funded health costs on a pay as you go basis and subsidized some retiree health costs. Employer wants to begin subsidizing the costs of survivors of annuitants and is looking at IRC section 420 as a possible funding mechanism. Annuitants and their dependents currently receive some employer subsidy. Has any one’s clients attempted such a transfer. What was the experience like? Are there difficult administrative burdens? Is the immediate vesting requirement under IRC section 420 expensive actuarially? If this is generally a win-win situation, why hasn’t there been a rush for employers to use? Are there any good materials available either in print or on the web?

Things to consider:

if amount of contribution is never going to be a problem, the money purchase is probably the way to go.

Based on the comp figure provided, they could never get 30,000 a piece in a ps plan due to 15% limit.

since plan is top heavy anyway, consider a 3% Money purchase, and a profit sharing plan by group.

if doctors get 30,000 with 160000 in comp, they have received 18.75% of pay.

if you allocate 7% contribution to rank and file, a 10 year difference in ages between them and the docs is needed.

e.g. 1.085^10 = 2.26

2.26 * 7% = 15.827

with permitted disparity the value would come close to 18.75.

By the way, if you have a 20 year difference in ages, a 3% contribution usually works.

Confirm valid IRS Distribution Code Combinations based on IRS PUB 1220:

1 A, 1 D, 1 L, 1 P, 2 A, 2 D, 2 L, 2 P,

3 A, 4 A, 4 D, 4 G, 4 P, 7 A, 8 1, 8 2,

& 8 4.

I am trying to understand IRS Notice 89-110, which states that for plan years ending on or before December 31, 1991, dependent group-term life insurance cannot be included in a cafeteria plan without violating 1.125-2 Q&A-4(d)if such benefit would also be eligible for exclusion under Section 132 if offered outside a cafeteria plan. Does this mean you may never include dependent life insurance coverage in a cafeteria plan? Or, does it mean that you can include dependent coverage if it does not qualify as a de minimis fringe benefit under 132(e)? All opinions are greatly appreciated.

Can a plan trustee limit successor alternate payees (who are named in the QDRO as being entitled to receive benefits if the alternate payee dies before they are fully distributed) to the dependent children of the plan participant?

Currently I don't have any IRA savings &

I plan to save in Roth IRA. Isit possible & where can I get the info needed.Also, does my employer need to know about this? Can I transfer my savings from 401(k) to Roth IRA?

Please help!

My company makes a SARSEP contribtuion for me each year. Does this have any effect on my ability to make a Roth contribution?

Does anyone have experience with retroactively amending plan document to reflect plan sponsor's intent and actual operation of plan -- plan document states eligibility condition is 3 months of service, but plan sponsor intended 1 year of service and has consistently administered plan accordingly. I would generally recommend going through Walk-in CAP to amend plan document back to effective date (1/1/97) to provide for 1 year of service, but am concerned that IRS would not approve proposed amendment because it is not "most beneficial to plan's participants". Any thoughts?? Thanks.

I worked for about 3 years for the feds under Civil Service when I was a kid. So I took the CS cash when I went private. Then 15 years ago I put in about 8 years under FERS. I'd like to buy those extra years of service (when I was covered by CS)...no one can tell me what I get if I do, how much it will cost, etc. ANy help?

I contributed $2,000 to a traditional IRA a couple of years ago and converted that account, now over $4,000, to a Roth IRA last year. Soon after making the original contribution I lost my job and decided to return to graduate school. I am now finishing school and would like to pay off some of the bills I accumalated while studying. Can I make a withdrawl of the original $2,000, the whole $4,000 or nothing for five years without incurring the 10% penalty?

Two Controlled Groups of Corporations of 55 an 60 Participants ( Auto Dealerships)erronousley ommited a smaller controlled group 10 Employee Bank from the Nationally Sponsored Plan they adoped under seperate lines of business. Provided the Plan passes coverage is there a problem with the exclusion of the Bank? If the Bank were to sponsor a Plan could it be tested seperately?

Our non-standardized plan's definition of compensation excludes overtime. This definition is used for allocation purposes and the inclusion test is passed demonstrating nhces are not being discriminated against. For ADP/ACP testing purposes, can this definition of compensation also be used or must total compensation be used for the ADP/ACP testing?

Our client is on a fiscal year which ends on September 30 and which also corresponds to the year end for their defined contribution plan. The plan defines compensation as "all amounts paid during the plan year." However, in practice, they have included bonuses which accrued during the plan year but which are not being paid until after the plan year. We would like to amend the plan document to reflect what is being done in practice, but I was told that accruals not paid until after the end of the plan year cannot be included in the compensation definition for allocation purposes. Is there any reason that the amendment can't be made?

Maybe. The total amount an individual may contribute to IRAs for a year is the lesser of earned income or $2,000. Anyone who is under 70 1/2 and has earned income may contribute to a traditional IRA. Anyone who meets the income restrictions (MAGI under $150,000 for a married couple filing a joint return or $95,000 for a single individual) may contribute to a Roth IRA. You may contribute $1,000 to one and $1,000 to another or any combination which falls within the limits mentioned above as long as the total does not exceed the lesser of your earned income or $2,000.

Some people who are covered by a qualified plan at work and whose income falls with in the phase out range for deductibiltiy contribute up to the deductible amount to their traditional IRA and the rest of the $2,000 to a Roth. Some people who are in the phase out range for a Roth (between $150,000 and $160,000 for a married couple filing a joint return) contribute the maximum allowed to the Roth and the rest of the $2,000 limit to their traditional.

Again I say, aren't all the options great!?!?!?!?!

If Joe is a 5% stockholder and his "son-in-law" works at the company is he a Key Employee or HCE? Likewise with Joe's "mother-in-law" is she a HCE or a Key under IRC Sec. 318.

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If a plan allows a dependent care election change based on the participant's relocation of residence (where this is only a legitimate change in family status for purposes of changing health/accident/life insurance) are the only consequences to the particpant e.g., loss of income exclusion) or are there potential plan-wide consequences? I thought that only violation of nondiscrimination rules conduct could disqualify the entire plan. In this particular instance the relocation is only by a few blocks and does not impact availability of dependent care.

I started a traditional IRA a few years ago and would like to get into a Roth account. Is it possible to just start a Roth IRA and have one of both? (I don't want to pay taxes on what's in my traditional even though I know it would be better in the long run!)

Would appreciate any comments.

I am seeking information on general coverage testing where an employer may have a controlled group or eliminate coverage for employees in a separate line of business. Are these normally included in a full service program. If so what is the cost?

Would a former Trustmark client be willing to share their conversion experience and present level of satisfaction with Quantech? Specifically, anything you'd do differently if you had it to do again? ease of the conversion? time frame from time the decision was made to the day you went live on Quantech? training and support from the folks at Corbel? Thanks.

My husband is 52. He is being recruited by a firm where the substantial financial appeal is in the alleged defined benefit pension. Since he is talking to a CEO type, he doesn't have more than generalities to offer("our objective is to provide sr. execs with 80% of their pay in retirement). It is a service business, all the stock held by about 20 people. What specifically do I need to get from these people to be able to confirm the financial soundness of the plan, and that he will qualify with only 13 years working before retirement? Or do I hire an actuary?

gin gin