a plan has an illiquid asset allocated proportionately to all participants. when participants terminate it wants to pay out the liquid portion of their account balance but retain the illiquid real estate until it is sold. in researching this i determined that these distributions wouldn't constitute lump sum distributions. can anyone tell me what that would mean to participants and whether this is a problem?

an advisor for a small MPP plan is considering adding new annuity investment options to the plan. The document currently allows for annuities and there is an old one being used as an investment. Assets are currently trustee directed and advisor wants to provide more flexibility and options to some participants who are getting older by introducing newer annuity products. Is there anything that would preclude a frozen plan from doing so? The plan may need to be amended to self direct?

Anyone have a checklist they run through when processing plan amendments? For example, cut-back issues, BR&F issues, audit concenrs (if liberalizing eligibility)

Effective 1/1/2012 the eligibility for both the DBP and the PSP was changed to 2 years (and 100% vesting). This brought up two issues this year:

(1) The 2 year requirement in the PSP cannot apply to deferrals or safe harbor. An employee hired in 2010 entered the PSP on 1/1/2012, and gets the 3% safe harbor. For testing purposes in 2012, the combined GW turns out to be 7.5%. By virtue of receiving the 3% SH, doesn't this trigger the TH and GW contributions, and thus this participant must receive 4.5% PS contribution to get to a total of 7.5%? (Because of the two year requirement he is not in the DBP for 2012 so received no accrual).

(2) The amendment does not specify the 100% vesting applies only to PS contributions made after the effective date of the amendment. So, what about a participant who terminated in 2011 that was 40% vested, and has not taken a distribution yet? Is he now 100% vested in his PS contributions, or still 40%?

This is purely idle curiosity, so please don't waste any time if you don't know this off the top of your head.

Just wondering why the regs were written to make non-deferrals eligible for pre-59-1/2 in-service from an annuity contract, but not from a custodial account (other than hardship).

Intentional? Oversight? One of those items lost in antiquity in the days when 403(b)'s were all annuity contracts?

Again, doesn't matter - just seems odd.

We have a 403(b) plan in which there is one participant who took out a 5 year loan in May 2008. It was scheduled to be paid off in last month.

Lots of potential issues here and I'm looking for other's thoughts.

A commercial real estate broker contacted me about setting up a 401(k) plan. He is the only employee of the business. He wishes to fund a DC plan with $51,000 (comp is high enough to support the contribution) and then purchase a building with the money in the DC plan from a third party. $51,000 isn't enough to purchase the entire building so the remainder of the purchase will be by him personally.

My initial feeling is that this is not a prohibited transaction because he and his plan are each purchasing a portion of the building from a disinterested third party. They will own 100% together once the transaction is completed.

Yet I feel a little strange once the purchase is completed and he is now personally an owner of an investment that his plan is also an owner of. Presumably this building will be collecting rents (which I believe there is an exemption for rents with the UBTI issue)

Now owning an asset personally that your plan also owns seems ok if it is a publicly traded stock or mutual fund. Is it different with a building that you own 100% of?

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If the above is a problem then could he just set up an LLC (or must it be a C-Corp and issue shares of stock?) and give partial ownership to the plan in the amount of $51,000?

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Any other creative solutions?

In 2012 a participant had a 3% pretax election however ony 1% was withheld so a an additional $50 needed to be taken to true it up.

Two pay periods later an additional deferral was taken and made to the trust however it was $4 sort.

Not that his has been now discovered in 2013 my question is if this is de minimus or should 50% of the missed defferal be made and a corresponding lost earnings correction?

Thoughts?

A question concerning the taxation of long-term care (LTC).

Assume a C corporation, with shareholder-employees (in this case, law firm "partners"). At the beginning of the year, the law firm pays a LTC premium on behalf of a few partners in the amount of $5,000 each. At the end of the year, each partner is entitled to a $100,000 bonus. Instead, the law firm books each partner a $95,000 bonus, conducts the requisite withholding, and gives the balance as bonus to the partner.

The employer is not ultimately paying the premium. The employee is. The employer not deducting anything in connection with this LTC premium. If it did, I understand certain requirements come into play to permit the deduction, and that the this coverage isn't includable in the gross income of the partner. I also understand that any premium paid by the employee is after-tax and can be treated as unreimbursed medical expense (limited to an amount no greater than the eligible LTC premium). However, in the example above, the reduction in bonus is de facto pre tax, and that isn't allowed when an employee is paying the premiums. However, brokers are saying that this is a common arrangement, that everyone uses it, and that it's been done for years. One lone broker we've spoken with says you simply can't "pre tax LTC."

Who is right? Does the law firm have to give the employee $100,000 (minus withholding), and then reduce that amount by $5,000? Is there tax revenue the IRS is missing if the firm continues to do what it's been doing? Any thoughts will be appreciated.

I'm working on a calendar year balance forward profit sharing plan with pooled investments. An interim valuation was done as of 9/30/12 on behalf of one terminated participant (physician) because he had a very large balance. This was in accordance with the plan's written policy. He received a distribution in October 2012 based on the 9/30 valuation. The other plan participants are unaware of the interim valuation and were not given statements reflecting their balance as of 9/30. The physician will be receiving an additional PS contribution for 2012 due to retirement.

I assume the physician does not deserve any additional gain for 2012. Naturally, most aspects of the report (i.e. testing, Form 5500, etc.) will need to reflect the full year. Should the valuation reflect the period 1/1/12 - 12/31/12 with an override of the physician's gain? Or is it more appropriate to split into two parts and have an allocation report from 1/1 - 9/30 and a second portion from 10/1 - 12/31? I have never done an interim valuation like this and I guess I am uncomfortable overriding the gain.

My new employer has thrown some 403(b) plans at me - what testing is required for them? The plan I am currently trying to work on is deferrals (traditional and Roth) only. thanks for your help - I can't seem to access our online version of the EOB, so i gave up and came to the experts!

A law firm partnership has just discovered the 'deemed CODA' rules and is in a panic. My assurances that this has not been challenged, even with named partner groups, since the 1993 regulations doesn't seem to hold much water with them.

So I have been requested to find anything 'official' to give them solace.

I have looked at the ASPPA Q & As for 09, 11,12 and did not see anything. Anyone have something in any of the ASPPA Q &as?

How about the ALI-ABA Q & As?

My search here for deemed CODA and the like come back with the same result - IRS has not attacked any of these, but I am dealing with attorneys.......

Thanks for anything you find.

I'm having a brain cramp. Employee age 70.

High 3 consecutive comp is years for participant is 99, 00 ,01

Actual comp 230K, 240K, 240K

401(a)(17) limit for years 160K, 170K, 170K

If Eggtra amendment so provides comp limit 200K for each year.

For purposes of the 100% of comp limit is his high 3 (230 + 240 + 240) / 3 = 236K

is it (160 + 170 + 170) / 3 = 166K

is it 200K if egtrra amendment allows for "walk back" of 200K comp limit?

Company A has a 401k plan. Let's say they want to terminate the plan 12/1/13. They plan on paying everyone out by 12/15/13. The following questions are posed:

- Can the 401k be aggregated with their Cash Balance plan for the 2013 plan year due to the 401k having a short plan year?

- The company will be starting a new 401k plan. When can the successor plan be started? Is it 12 months from plan term (12/1/14) or final distribution (12/15/14)?

In an LLC taxed as a partnership, is the following correct?

The elective deferral can be contributed up until the tax filing deadline -- with deposit coming from the K-1 income of each partner.

Thanks for all responses.

I'm finding it hard to believe that I haven't had to deal with this issue before, but here goes.

Eligibility requirements in a profit sharing plan = Age 21 and completion of 6 consecutive Months of Service during which the Employee completes at least 500 Hours of Service, or completion of One Year of Service, if earlier.

Entry Dates = 1st day of month following completion of eligibility requirements

John Doe is age 22 and completes 450 Hours of Service in his first 6 Months of Employment.

The plan's subsequent Eligibility Computation Period is the Plan Year.

So, now we look at the overlapping Plan Year for John Doe.

Question: does it matter how many hours John works in the first 6 months of his SECOND eligibility computation period? Or do we just test for 1,000 hours worked in the full 12 months of the second eligibility computation period?

I'm amazed that I can't find an answer in Sal Tripodi's ERISA Outline Book. Maybe I'm just blind?

One of my 401(k) Safe Harbor plan sponsors has elected to send the SH contributions to a ESOP they also have. Both have the same plan year. And both plans have existed for several years. And this will be effect for the first day of the 2014 plan year.

Which plan should have the SH employer contribution formula provision? Or should both have it? Both Notice 89-52 and 1.401(k)-3(e) are not 100% clear. We did one plan with the ESOP only have the formula, but now I am not so sure and having second thoughts.

Thank you.

Does anyone know of a work around on Relius to test coverage separtely for 401(k) and 401(a)? We want to use statutory exclusions for the 401(a) coverage testing and nondiscrimination testing, but we do not want to do it for 401(k) coverage testing and ADP testing. The client uses prior year testing and statutory exclusions were not used last year.

As wel know, the Central States Pension Fund Trustees have adopted a hybrid method for calculating withdrawal liability which for current contributing employers, allows them to pay their liability now and switch to the direct attribution method. I am familar with this change. However, it is my understanding that the Trustees amended their hybrid method at the end of November 2012 to provide some new rules as to how a mass withdrawal event impacts those employers who have elected the hybrid method, Is anyone familar with this change. I assume it is a favorable result, in line with the Trustees' desire to encourage employers to switch to the direct attribution method. Any help would be most appreciated.

Employer has two 403(b) plans. Don't ask me why, I don't know.

Some participants want to change their investments, and transfer the funds from one plan to another. The "other" plan apparently offers different investments.

The regs under 1.403(b)-10 generally permit this, but I have a question on one item in the reg. If you look at the section I underlined, I'm concerened that if the investment in the transferor plan, let's say an annuity with TIAA, has a surrender charge, then the accumulated benefit immediately after the transfer won't be at least equal. If read literally, this would prevent ever transferring any investment with a surrender charge, which seems crazy. Any thoughts on this?

(3) Requirements for plan-to-plan transfers —(i) In general. A plan-to-plan transfer under paragraph (b)(1) of this section from a section 403(b) plan to another section 403(b) plan is permitted if each of the following conditions are met—

(A) In the case of a transfer for a participant, the participant is an employee or former employee of the employer (or the business of the employer) for the receiving plan.

(B) In the case of a transfer for a beneficiary of a deceased participant, the participant was an employee or former employee of the employer (or business of the employer) for the receiving plan.

© The transferor plan provides for transfers.

(D) The receiving plan provides for the receipt of transfers.

(E) The participant or beneficiary whose assets are being transferred has an accumulated benefit immediately after the transfer that is at least equal to the accumulated benefit of that participant or beneficiary immediately before the transfer.

(F) The receiving plan provides that, to the extent any amount transferred is subject to any distribution restrictions under § 1.403(b)-6, the receiving plan imposes restrictions on distributions to the participant or beneficiary whose assets are being transferred that are not less stringent than those imposed on the transferor plan.

(G) If a plan-to-plan transfer does not constitute a complete transfer of the participant's or beneficiary's interest in the section 403(b) plan, the transferee plan treats the amount transferred as a continuation of a pro rata portion of the participant's or beneficiary's interest in the section 403(b) plan (for example, a pro rata portion of the participant's or beneficiary's interest in any after-tax employee contributions).

(ii) Accumulated benefit. The condition in paragraph (b)(3)(i)(D) of this section is satisfied if the transfer would satisfy section 414(l)(1).