katieinny

Thanks. I think I'll have more faith in my subconscious mind from now on.

I'm trying to finalize a document for a non-electing church plan and I'm tempted to get rid of the Top Heavy language. Every time I start to hit the delete key, I pull my hand back. Maybe because something in my subconscious is screaming don't do it. Your help would be appreciated or I'll never get to the end of this document.

Kevin: Thank you for your reply. I'm very glad to know there is another plan out there like this one, and it received a determination letter besides. I agree with you about the matching contribution going into the 403(b), but in this case, we need to stay with the MP.

Can I amend a church's money purchase plan to accomodate a match formula rather than a fixed percentage to all eligible employees? Can the term "eligible employee" be defined as one who makes salary deferrals into the church's 403(b) plan in addition to the usual age and service requirements?

Danny: Thank you for your reply! I had given up after not getting a response within a few days, but happened to check today. We have continued to struggle with this issue all these weeks, looking for whatever tidbits of information we could find. At least this gives us something to go on.

I've been told that the owner is the only person with an insurance policy. The other participants are all funded by annuities.

Sounds reasonable. We'll check the plan language and amend if necessary to permit such a transaction. And we need to make sure the policy doesn't have a springing cash value. Thanks for your help.

I want to resurrect this topic because I also have a client terminating a safe harbor plan before the end of the year. However, in this case, the employer ceased being a sole proprietor, set up a PC as 100% owner in which he hired one person who will likely be an HCE, and also set up another company in which he is a less than 50% owner. The employees were moved from his sole proprietorship to this 3rd company. The owner is taking a break and will not be working for either company he owns. I don't think this comes under business hardship or merger and acquisition. He wants to terminate the plan as of the date the sole proprietorship ended. I'm wondering if he needs to keep the plan going until the end of the year, although he's already stopped employee deferrals. He should probably make the 3% safe harbor until the end of the year (although I doubt that he will). The one employee in the PC won't meet the eligibility requirements, but the employees in the other company probably come under the affiliated service group rules.

A fully funded DB plan was supposedly terminated last year, but nothing was filed with the PBGC (Form 500). I was told that fully funded plans don't need to file with the PBGC. I've since learned that that's not the case. The filing of Form 500 is required. Since the assets have not been distributed, the plan will be frozen and terminated properly at a later date. The owner would like to get his life insurance policy out of the plan, but he wants to keep the coverage. I've heard that he can simply swap the policy for it's cash value. That way the policy comes out of the plan and there is no taxable event. Is it really that simple?

A current plan document says the definition of compensation includes all comp. It's been that way for at least a couple of years. The employer says that was a mistake -- certain compensation was supposed to be excluded. In fact, they've been calculating contributions on what they thought it was, not what it says in the document. I'm worried that changing the definition now, even if we only go back to the beginning of the current plan year (1/1/08), would be a cut-back. Does the change need to be prospective? I also think they need to go back and make additional contributions for those couple of years. Your thoughts would be appreciated.

I found information that relates to IRAs, saying that "After an IRA owner's death, his or her estate generally is unable to make a deductible contribution on his or her behalf (e.g., for purposes of the decedent's final income tax return), because an estate is not included in the list of persons eligible to establish or maintain an IRA. Thus, a decendent's final income tax return cannot show an IRA deduction unless the decedent actually had made such a contribution in the decendent's last taxable year." I'm thinking that since a SEP is funded through an IRA, the same rule must apply.

A sole proprietor passes away and now the spouse is trying to get the finances in order. A question came up about setting up a SEP based on the income from the business before he died. I'm pretty sure that can't be done, but just in case, I thought I would get some back-up from other practitioners. Thanks for your help.

An not-for-profit employer has a Non-ERISA 403(b) and an MP plan for ER contributions. They've decided to go the 401(k) route going forward. It's a church plan, so they can avoid the nondiscrimination rules, etc. Rather than terminating the 403(b) plan, it seems to me that it makes more sense to stop contributing to the 403(b) and let it die a natural death. Does anyone think that plan termination is the better way to go?

The information I have so far seems to indicate that the brokerage firm knows they made a mistake, but they don't seem to know how to fix it. Like you, I thought that either reversing the transaction, or recoding the account would do the trick, but the message I'm getting is that it's not that simple. I suppose they could do a conversion from what is now a traditional IRA to a Roth IRA -- as long as the brokerage firm is willing to pay the tax on the distribution!

Jim has a Roth IRA that he moves to another brokerage firm. Two years go by before he discovers that the brokerage firm put the money in a traditional IRA. Now what?

I originally posted this question under the 403(b) heading, but then decided it should go here. I've been studying sections 414(e) and 3121(w)(3) to determine if a seminary that sponsors a money purchase plan and a 403(b) plan is exempt from non-discrimination testing. I've determined that the seminary's money purchase plan qualifies as a church plan and is exempt from nondiscrimination testing because 414(e) applies. However, it seems that 403(b) plans use the section 3121(w)(3) definition so that plan would be subject to nondiscrimination testing. First, I'm wondering if my thought process is on target; and Second, I'm wondering if anyone else has experience with a plan or plans maintained by a seminary.

I've been studying sections 414(e) and 3121(w)(3) to determine if a seminary that sponsors a money purchase plan and a 403(b) plan is exempt from non-discrimination testing. I've determined that the seminary's money purchase plan qualifies as a church plan and is exempt from nondiscrimination testing because section 414(e) applies. However, it seems that the 403(b) plan uses the section 3121(w)(3) definition and that plan would be subject to nondiscrimination testing. First, I'm wondering if my thought process is on target; and Second, I'm wondering if anyone else has experience with a plan or plans maintained by a seminary.

Good grief! I think that because students pay tuition to attend the seminary, we can't get by with calling it a church plan. Would have been nice, though. Thanks for putting in the sections.

Actually -- this plan is for a seminary. Does that make it a church plan?

Thanks for the reminder -- I think this would come under the heading of a church-controlled college, so maybe I'm stressing over nothing.

A small college has sponsored a 403(b) plan for many years. The ER contribution was quite generous a few years back, but they have since amended the plan to reduce the employer's contribution percentage. When they did that amendment, they grandfathered everyone at the higher contribution percentage who were hired prior to X date. A few of those grandfathered employees are still working at the college. One of them is an HCE. There is another HCE getting the lower ER contribution. Does the fact that one HCE (out of 35 participants) gets that higher grandfathered contribution amount blow everything up?

At this point I don't have all the details regarding who paid what. As often happens, we were simply asked the first question -- can I sell my house that's in my DB plan to my child? You know how it goes -- suddenly you're faced with Pandora's Box.

A client has a one-man DB plan. He decided a few years ago to contribute his home to the plan. Now he wants to sell it. Can his adult child purchase the house from the plan, or would that be a prohibited transaction?

Document currently says that the shares in the unallocated shall not be voted -- by anybody. Remember, we're planning on amending the document so that those shares can be voted -- by the Trustee.

Just to be clear -- can the Trustee vote these shares as he chooses and not as an extension of how participant shares are voted?