RayJJohnsonJr

Corporation A has no Plan, and buys Corporation B which has a 401(k) in a stock purchase. Corporation A wants to keep the plan. What is the simple list way for them to do that? Change plan name and tax ID? Thanks

I HAD POSTED THIS ON THE DB MESSAGE BOARD WITH NO RESULTS, SO I THOUGHT I WOULD GIVE THIS BOARD A TRY. NOTHING VENTURED, NOTHING GAINED I GUESS. HI ALL. I AM LOOKING FOR 412(i) PLAN TPA FOR 1 PERSON PLAN. THE PLAN WOULD BE FOR ME. THANK YOU, RAY J. Jr.

My apologies, Effen. I have been highly distracted. Super busy with work, rental properties, and my first overseas trip. 2 weeks in France: Paris and Normandy. I cannot overstate the awesomeness of seeing Omaha and Utah Beaches and surrounding DDay history. The American Cemetery where over 9,000 of our countrymen, and women, lie. Sorry, I just cannot say enough about the experience. It seems I have not found a 412(i) TPA here, so I'll begin the dialogue. First, some overriding facts must be stated and since I have been heavily involved in 412(i) Plans since 1977 (when they were called ERISA Fully Insured Plans), I feel I am qualified to state them: 412(i) Plans are for the wealthy and no one else, with few exceptions. Most of what people know about 412(i)s are the abuses because that is pretty much all that gets published. I concur that there was (and maybe still is) institutional abuse promulgated by insurance companies who only want a big life insurance sale. I abhor them as I suspect you do. But, always beware judging ALL by the actions of a FEW. I'm reminded of something a man I consider wise once told me about forming opinions without all the information: "Ducks are white, I know, I saw one, one time." Not everyone wants to play the stock market. Many of the wealthy clients who employ me have little use for the stock market. They have no interest in the risk and no need for the reward, although some have some of their money in the market. Also, as people age they become more conservative and want safety above all else. It is multi-generational wealth they are most interested in. Preservation of wealth comes first, growth comes second. Only about 25% of the 412(i)s I handle have life insurance in them. And these were because their CPA or Attorney (often Estate Attorney) recommended it. I only mention it in the initial description of the 412(i) where I convey that there are only 2 things 412(i) contributions can go into are: an Annuity, or a combination of an Annuity and Life Insurance. Next time I will get into the details of the Annuities and the Life Policies. Judging by the comments I read and hear, there is much to learn. NONE OF THIS CHANGES THE FACT THAT I STILL NEED A TPA WHO IS INDEPENDENT OF AN INSURANCE COMPANY. Thanks all, Ray J. PS. In the attached picture of one of only four of the Nazi's big guns left intact, to appreciate it's size, look at the little white square in the window of the turret. It's a pack of cigarettes. The Nazis (Rommel) took this gun off of a battleship to enhance their "Atlantic Wall." It has a range of 12 miles and gave the allied invasion fits. Our command ships had to back away to get out of it's range.

Meaning they will be a TPA only? I'm a producer, so I do not want to work with a producer who is also a TPA and is in the TPA business for annuity and life commissions. Otherwise, that is a good price. Thank you for your reply. P.S. To all who are knee-jerk 412(i) detractors: You need to hear the reason's why one-participant small business owners do these. But you have to be open minded and I will be happy to explain. It may be helpful to you since everyone who knows, shake their heads when the pervasive, "412(i)'s are bad" assertions begin to flow. Here are some other things that are all bad: Mutual Funds are always bad. Annuities are always bad. Any life insurance that's not term insurance is bad. The list of "bad" financial arrangements and products goes on and on. It's always good to hear the other points of view. Thanks again, Ray J. Jr.

HI ALL. I AM LOOKING FOR 412(i) PLAN TPA FOR 1 PERSON PLAN. THE PLAN WOULD BE FOR ME. THANK YOU, RAY J. Jr.

Section II(a) are conditions for selling a policy to a trust pursuant to 1(b) above. She's an ex-spouse and that's not on the list of who is a relative. I've been the pension business and the life insurance business over 30 years. I know how to roll life policies out of Plans. The Trust borrows the max loan on cash value we've done dozens of times. Keep in mind, someone has the pay the loan interest every year, in this case about $5,000/yr. Some policies have large enough annual dividends to pay the interest which is a better situation. This policy has no dividends. The ex-wife is loaded with cash so buying the policy out for cash is best in this case. The second part of that transaction has to ne the Trust distributing to her in cash the amount she paid for the policy. She elects to roll that cash distribution to an IRA. So, nobody pays any taxes until she has to take RMD's. The policy pays off 100% tax free. I'm wondering if the Plan distributing the cash to her is OK? For those wondering how things got this way, its what happens every time lawyers thing they know what they're doing. Briefly: In divorce mediation it was agreed the wife (now ex) would get the policy at sole participants death. So, the decree says he has to make her beneficiary of the policy. He's 16 years older and not well. There are so many things wrong with doing that in a decree you can't name them all. For starters it should have been in a QDRO (all ERISA attorneys agree) and second, what if he marries again, which he is. New wife has 1st dibs on the policy, right? To be fair, the atty's didn't know any of that. We have agreement from all parties concerned, new wife will waive her right to the policy and it's cash value. Thanks everybody, I know I'm learning a lot from this lively exchange. Thank God, I'm not too old to learn new tricks.

I have reviewed PTE 92-6 (which amended PTE 77-8): https://www.gpo.gov/fdsys/pkg/FR-2002-09-03/pdf/02-22376.pdf and I think this is dealing with special exemptions to the rules governing prohibited transactions. Selling a Plan asset to a related party (a participant, relative, etc.) is prohibited for obvious reasons. But 92-6 and the amendment in 2002 are saying that, when it comes to a life ins. policy, we're going to waive the prohibited transaction penalties if the policy is sold to these specific exempt individuals, like a plan participant. And the the amendment expands the exemptions to include a Trust"established by or for the benefit of an individual who is a participant in the Plan." So, this is all about exemptions from prohibited transaction treatment for selling Plan owned life insurance specifically. In my case, the buyer of the policy (the ex-wife of the sponsor/trustee/sole Plan participant) meets none of definitions of a disqualified person. There's no prohibited transaction so no exemption is needed. Thank you for pointing me to this 92-6 etc. It's all clear now. The Plan can sell her the policy any time it wants and she can buy the policy any time she wants if the Plan is willing to sell. And the Plan IS willing to sell.

So, Larry, you're saying a Trustee can sell a policy at will? Even if the Trustee is an insured?

This solution came to mind and I found out the ex wife can afford it. 1. At the sole plan participant's death, the ex purchases the policy from the Plan for it's cash value, right now about $115,000. She writes a check to the Plan for the $115k and the Plan Transfers ownership to her. The Plan still owes her $115k, so she elects to have that rolled over to an IRA. That method works in every respect. A new agreement would need to be written, but it would be simple. 2. Can anyone think of a way for her to buy the policy out now? and get it over with?

Here goes: Others: When I said $1.2 million to others, I meant other beneficiaries, other than the ex wife. She only gets the ins. policy. The sole participant has not remarried so the other beneficiaries are his grown children. In reading the Trust, it says after the death of the participant, a beneficiary may take distributions in any form that was available to the participant upon participant's retirement. One of the choices the participant has is "in a non-recurring partial payment." However, sole participant age 73 has taken RMD's therefore ex-spouse beneficiary mu begin RMD's over her life expectancy, she is age 65, expectancy is 84.3. 19.3 years. The Trust also says a beneficiary has to submit a written request for their benefit. What if she never does that? Larry, I'm with you on the pension rollout of the policy, I've done quite a few. The loan of $112k using 5% interest would cost about $5,600 annually. Maybe she could pay that or take it out of the IRA rollover account. Still worth considering. I'd still like to see if we can get the ex a little company where she could make a little money, sponsor a PS Plan, contribute a little and roll the policy into it. Thanks all for your comments.

Very sorry, when I said "The Plan pays out everything except the policy (about $1.2 million)" I meant the $1.2million goes to others, not to the ex. The only gets the policy currently having a cash value of $120,000.

I failed to communicate well, Bill. The 1.2 million is the assets being paid out exclusive of the ins. policy. The ins. policy cash value is $120,000.

FGC and jpod, I guess I learn something new every day. A beneficiary is subject to RMD's? Oh, maybe I should have said the life ins. policy is not in her account. She never worked, so she has no account. PS Plans allow a participant to purchase life ins. on spouse or children. So the sole participant purchased the policy covering her while they were still married. I'm thinking maybe when the sole participant dies, The Plan pays out everything except the policy (about $1.2 million), the next year files the 5500EZ marked "Final" since the Plan is below $250k, and see how things go thereafter. An optimum scenario might be that she starts a little corp. and does something to make a little money, puts in a PS Plan and contributes a little money. Then, when the participant dies, transfer the policy to her PS Plan.

OK. I knew I was going to have to elaborate. The plan owns a life ins. policy on the ex-spouse and it has been agreed that at the death of the sole participant, her policy would go to her by beneficiary form saying so. When she receives the policy, she will owe income tax on the $120,000 cash value which is not desirable. Life Ins. policies cannot be rolled over to IRA's. Several options in the future may be much more attractive: 1. Her situation may change and she no longer wants the life ins. Then she tell the plan to cash it in, and she could roll the cash over to an IRA. 2. She leaves the life ins. policy in the plan until she dies. In that case, the amount of the cash value would be income taxable to her estate, which is less painful than paying the tax while she is alive, and the portion of the death benefit minus the cash value is tax free to her estate. Pretty much any way we slice it, she's better of not taking the policy out when the sole participant dies, which will likely be soon given his health. I guess that qualifies as elaborate?

That would make sense to me. In this unique case, an ex-spouse is a beneficiary of a portion of the PS Trust holdings. What is unique is that she would be better off not collecting on what she is due. I'm wondering if she took no action to collect what she's due, and in fact would not sign anything that would be needed to distribute the asset to her, how long can the asset sit in the Trust? How long can the Trust continue? I'm talking possibly for decades.

Can a 1 participant plan (or just the Trust) continue after the death of the sole participant?

Thanks, Luke, sounds like good advice. RayJ

Yes, he started filing 5500's when he went over $250k in assets. I felt to amend and restate to a PS currently was what I was leaning toward, so I'm going to recommend that Thanks, Belgarath

Hi all. A new client has a 1 participant MP Plan since 1999 but has treated it like a PS Plan. The MP Plan Adoption Agreement is marked 25% of pay, but he has always varied contributions and skipped years sometimes making no contribution. He self-administered and thought he was doing things correctly. There's a signed PS Plan Adoption Agreement in his filed but it's marked "not used" which I know matters not. I think whoever was advising him screwed up and got things backwards. He has never had any employees. Then I discovered a section of the Adoption Agreement which says: Benefit Adjustments(Optional) _X_ Notwithstanding the above, $0.00 is the minimum contribution for any Participant. (If Forfeitures are reallocated, any such reallocation shall be in addition to this amount.) ____Notwithstanding the above,$________ is the maximum allocation (including the allocation of any Forfeitures) for any Participant. Any ideas on what should be done now? Or if anything should be done about the past? Thanks, RayJ

One is and one isn't. I think I can convince the big one to move. Thank you, Buffy Redrum (cool name) Rene

RE: my company has sponsored a 401(k) Plan for a long time, and in recent years I have downsized my company by subbing work out and reducing employees. Now, I'm down to only 1 part time employee, less than 1,00 hours per year. But, the part time employee and one ex-employee have never moved their account balances somewhere else. Can I start filing a 5500EZ? It would be so much EZer.

Thanks all, I'm advising the client to ask his wife-to-be to waive her right to the Life Policy in a spousal consent. She'll probably accept that. So the divorce decree can remain intact, even though there is no QDRO for the ex to get the policy.. Thanks again all!

Thanks all!

Thank you Lois and Mike. Y'all are a big help.

THANK YOU RatherBeGolfing for posting these recent updates, especially the DB post Effens Thread on Funding Relief for DB Plans (Notice 2017-49) . Does anyone know? An employer with a DB Plan who qualifies for funding relief would normally have to make his DB contribution by 9/15/17, the deadline for filing his S--Corp return. Both the employer and his TPA are in FEMA disaster zone, without electricity, internet, etc. Does the relief for funding the DB extend the tax deductibility of his contribution?