JAY21

If you have a corrective amendment completed after the IRC 412(d)(2) election period (2.5 mos after PYE), you cannot use the corrective amendment on the Valuation for funding but can still/must correct the discrimination testing by the 11(g) deadline (9.5 mos after PYE). On the Form 5500 if the corrective amendment brought in an additional participant to pass testing do you show a different higher participant count on the Form 5500 than you do on the Schedule B ? Any problems showing a different participant count on the Form 5500 than the Schedule SB ? Thanks in advance.

I think Bird nailed the reason right on the head. We are seeing this a lot.

I had received some mix feedback on this one. Some people said their ERISA attorneys said "no need" and some felt like it was needed. We have tried to error on the side of caution so we have been filing them (one 5310-A for each plan).

I guess I was trying to see if there was a way to take the first year 415 limit payment in a manner that would make it eligible for a lump sum rollover (client really doesn't want the taxable income) instead of taxable annuity payments, but by taking ONLY the amount that would be equal to the annuity amount. Probably can't have the best of all worlds here I suppose.

If a participant must receive payments at NRA to avoid an impermissible forfeiture of their benefit (say they are hitting the high-3 415 compensation limit) must these payments be considered "annuity payments" that are taxable -OR- can these payments be considered a partial lump sum eligible for rollover (non-taxable) status ? Thanks for any opinions.

Is there any consensus or opinions out there on whether Hatfa liabilities can be used on a restricted HCE distribution calc ? (110% funded after proposed distribution).

A CPA is insisting that the one of the partners in a husband/wife partnership share of k-1 income on line 14a, which is less than the Guaranteed Payments shown near the top of the k-1 statement (forget the line item) should NOT be used for the pension calcs and further should not be split between compensation and contribution. Essentially he seems to be saying that the guaranteed payments would be treat like unto w-2 wages for a corporation in that they are not reduced or split by virtue of the contribution made on behalf of the owner. I did not have that understanding, but I learn new things from time to time, and would appreciate any others' opinion on this. thanks in advance.

Be prepared to find it difficult to find an insurer that will offer this on a 1 life plan. I had a similar situation recently with 3 participants recently who had total benefits with a present value of around 200k and we were working through a broker that specializes in pension annuity purchases and even with all insurers available to us we could find only 1 insurer that would bid on it and the price was about a 50% premium over the aggregate 417e lump sum amounts under the plan. Boutique market commands Boutique prices. I agree with Andy that this may be the only approach but it's real unfortunate when this happens.

I have some news plans coming in with insurance and though we do not sell products ourselves we're try to accommodate the client and make sure the insured death benefit is within the incidental benefit limits and constitute definitely determinable benefits. I did a google search on IRS LRMs for DB plans and found their language. If I'm interpreting it correctly a plan using the 2/3rd ILP method for the maximum insurance would provide the following maximum benefit (please confirm or correct): QPSA + Incidental Reserve (if Incidental Reserve is a positive value). Incidental Reserve: Proceeds from Life Insurance plus Theoretical ILP reserve minus (CSV of policy + QPSA). Does this sound correct ? I'm not promoting life insurance just trying to deal with it correctly. Thanks for any help.

I don't do many permitted disparity plans these days. On a takeover plan a participant will be getting a lump sum distribution. The excess benefit % uses the maximum permitted disparity % (0.75% for SSRA of 65; reduces to 0.70%, for SSRA=66, and .65% for SSRA = 67). The Actuarial Equivalence for the excess portion for purposes of calculating a lump sum distribution uses standard interest rates (7.5%) and a standard mortality. Does applicable of 417(e) rates have any impact on the excess benefit % ? Is there any adjustment/normalization due to 417(e) I think I remember that you didn't have to make any special adjustment just for 417(e) lump sum purposes to the excess benefit %, but I'm not positive on that. Appreciate any feedback.

Last I checked on this if we used the various proposed reg options to credit theoretical accounts with an interest credit equal to actual rate of return on plan investments, you had to use that annual rate (not an average) in your DB/DC combo testing. Is that still the case or has there been anything new on this that would allow an "average" of multiple years' returns to be used instead of each year's ? Thanks.

Has anyone had the situation where they went down the PBGC standard termination path and got about 90% done with all distributions and then the client discovered unanticipated losses on the final assets that will require some extensive time in order to come up with the money. Plan has already been on 2 extensions of time for different reasons and now the surprise losses will cause some extensive and unknown delays. What are the mechanics here ? Does the PBGC have you revoke the plan termination ? Any special rules or unique situations that arise when the plan term is revoked after 90% of the people have been paid out ?

Anyone have some insurance company names that WILL offer the lump sum based upon the floating 417(e) rates in addition to all the other usual annuity benefit options ? Thx.

My 2 Cents, thanks for the informative response. So the insurers that you have seen have been willing/able to do the 417(e) calcs on the lump sum for plans that offer that ? I realize this is probably what makes it unattractive to insurers. I don't suppose that calculating the present value as of the purchase date using the 417(e) interest rates in effect at that time, and then having the insurance company provide a reasonable rate of return on "that" lump sum amount after that date, would satisfy the rules would it ?

We work with small DB plans so It's been a while since someone has chosen an annuity as part of a plan termination. I now have a few such elections on a plan termination where none of the participants are at ERA or NRA yet but want a deferred annuity. Can you remind me under a PBGC covered plan what the annuity structure must be to relieve the plan of it's liabitlies to the participant. I know it has to be an individual contract in the participant's name, and I believe since the annuity payments will start way after 90 days that their election as to the form of deferred annuity benefit will be null and void after 90 days, so does the deferred annuity essentially have to contain ALL optional forms of benefits under the plan ? Thanks for the help and reminder.

We're in the process of responding to the IRS on this one. I'm thinking of making that case that the form was not required in the first place though obviously we chose to file it so we're kind of arguing against ourselves. I'll let you know how it goes.

Interesting analysis chc93, and it makes sense to me. I've previously filed these but recently got burned on one where the client jumped the gun and distributed before the 30 days was over so the IRS is proposing $25 late filing penalty on the 5310-A filing, so no good deed (conservative filing approach) goes unpunished and I'm not even sure the filing was needed in the first place. Got burned playing it safe. Guess we'd better play the game better or decided there is an argument to not file at all.

Any opinions on whether if you want to transfer excess assets from a DB plan to say a profit sharing plan under IRC 4980(d)(2) do you need to file a Form 5310-A (advance 30 day notice of transfer or assets or liabilities) with the IRS ?? It's not clear to me from the instructions for this form if this type of the transfer is of the type that triggers this kind of filing requirement.

I'm no help on this one, but I must say I'm seeing more and more of this fact pattern you mention and have the same question. Is an entity set-up primarily for scheduling and negogiating contracts an Affiliated Service Group trap for the unwary ? It very well may be. Maybe we all contribute a few dollars to a collective fund and see if we can have Derrin Watson opine on this. He probably already has somewhere, though I don't see it in his "Whose the Employer" book version I have, but it's likely out there somewhere (for a price).

IRC 414(o) has some minimal language about further regulations being issues to present the avoidance of providing employee benefits through use of Separate Orgs, Leasing arrangements, and "other" arrangements. That's it. Proposed regs under 414(o) that would include rules for shared employees were withdrawn. I understand there are some old pre-ERISA Revenue Rulings (Rev Rul 67-101,Rev Ri; 68-391, and Rev Rul 73-447. Before I spend time reading all these old pre-ERISA Revenue Rulings do you feel these Revenue Rulings are binding at this point ? Is the IRS likely to point to them upon an audit ? I have a new potential DB plan client that we're going to discuss the shared employee issues and want to make sure I know what is binding and what is open to any good faith "reasonable approach". Thanks.

To me they are separate issues. In the old actuarial audit cases of the late 1980s the IRS tried to take a similar position with spouses of owners who did not have compensation but had the 10k de minimus benefit under IRC 415. I believe they lost the issue (no comp required) but you had to be able to show other supportive facts that they worked the hours. That's probably not too hard to do if others can confirm the boss shows up every day to work. I think "compensation" is probably the best supportive fact, but not the only one.

What directions are the prevailing winds blowing in with regards to using the MAP-21 interest rates for the HCE lump sum restrictions (110% funded test). I attended the ASPPA conference in LA in January and it was mentioned that "some" practioners felt it may not be unreasonable to use these rates. I know we have no guidance but what are the opinions on how aggressive this would be to use them for this purpose ? A. Go directly to Jail. B. Go to Jail but only after a good meal. C. Probably no prison time just probation D. No harm no foul. E. Other - name it ________ In all seriousness I would appreciate some opinions as I have a client who might be considering the pros and cons of this "potential" option.

Anything new on this topic ? I have the exact situation that AndyH posted initially, I have an Annual Funding Notice due for the plan year that follows the plan year in which the plan terminated (Due to long wait for IRS DL), so I have no required Valuation for funding purposes. Do I need to run a special "Valuation" just for an AFTAP purpose for the year following the plan term year ? so I can then also show the FTAP on the Annual Funding Notice ?

Can you even find a company to do the bonding these days on this type of distribution ?

Is there any flexibility in the restricted distributions to HCEs in a plan that would be LESS than 110% funded after a proposed distribution to an HCE if there are no NHCEs in the plan and never has and never will be. For example if you had a permissively aggregated DB-DC combo plan arrangement and only HCEs are in the DB plan (pass 401(a)(26) due to high volume of HCEs) does the DB plan still need to be 110% funded after a proposed distribution to an HCE in order to be able to do the HCE distribution ? Does the 1.401(a)(4)-5(b) restrictions ALWAYS still apply in this situation ? Any way for all the HCE or Employer to elect not to impose them since there are no NHCEs to discriminate against ? Thanks for any thoughts and opinions.