Randy Watson

When does the PPA restatement cycle begin? Does it begin immediately after the Cycle E for EGTRRA?

A terminating plan is scheduled to distribute assets by the end of the year and we just received notice that a participant is in divorce proceedings and that a domestic relations order will be forthcoming. Could the pending order hold up distribution of assets when those assets must be distributed by date X to comply with PBGC and IRS distribution timing rules? What can we do with this participant's benefit?

Can an ACA commence the automatic deferrals 60 days after a participant enters the plan as opposed to the first payroll period after entry? For example, assume a plan has a 6 month eligibity requirement. After 6 months, a participant enters the plan. The participant has the opportunity to elect to defer, but does nothing. If the participant has not elected to make deferrals during the 60 day period, then the plan's ACA provisions would kick in and automatically defer 2% of compensation. The participant would be able to change that autmatic election at any time. I can't find anything that would prohibit this.

Can a majority owner who is in pay status "forego" benefits in connection with a defined benefit plan termination?

What would be the basis for an autorollover?

We have a DB plan with 2 participants. One participant has terminated employment. The owner is trying to termiante the DB plan and get the terminated participant's benefit out of the plan. The problem is that the terminated participant is being "difficult" and claims they will not accept a distribution. I believe the employer can simply purchase an irrevocable annuity for the terminated participant, but I have two distribution questions: (1) Could the employer distribute a Lump Sum to the participant (assuming the plan allows for a lump sum upon the plan's termination)? (2) Alternatively, could the employer unilaterally transfer the "difficult" participant's benefit to the employer's profit sharing plan without the participant's consent? Of course, the benefit would retain the same distribution features of the DB plan and would be tracked separately within the profit sharing plan.

The cost/time of having someone prepare the amended return.

It was discovered that the participant counts on a fairly recent Form 5500 for a small employer are incorrect. The numbers are significantly off (37%), but this doesn't change their status as a small employer. What's the realistic harm in letting this go and not amending the inaccurate filing?

LOL. I guess they were aware. Do you know of any authority or informal commentary approving that? Has anyone else done the same as Sieve with regard to multiple majority owners waiving benefits?

When you say that niether the PBGC or IRS contested it, does that mean they were well aware of the fact there were no majority owners?

Can an IRA LLC (the sole member of which is the IRA custodian for the benefit of the taxpayer) receive a rollover of the taxpayer's qualified plan benefit without violating the prohibited transaction rules?

I agree...this was payable upon retirement/termination, so the annuity starting date has passed and the elimination of the QJSA for this particular individual would be a prohibited cutback. The MRD provisions were changed when the lump sum provisions were added. Essentially, 401(a)(9) is satisfied through lump sum distribution. As you noted, consent is not needed after the later of NRD or 62. Good point on MPPP....wasn't thinking about them! Thanks for your help!

[quote On the other hand, if, also, only lump sum MRDs are now permitted, I would argue that the revision does not apply to this individual because his/her annuity starting date already has occurred as per IRC Section 417(f)(2)(A)(ii) (which also is the definition applicable to IRC Section 411(a)(11) -- see introductory phrase to 411(f)). It seems to me that the determination of whether the annuity starting date has passed for purposes of eliminating QJSA this participant would be based on 417(f)(2)(A)(i) instead of (ii), because at the time the plan was amended to eliminate the QJSA the normal form of distribution for the participant was a QJSA. As far as 1.411(d)(4) goes, I believe the question boils down to whether the annuity starting date under 417(f)(2)(A)(i) passed if MRDs have commenced. If the commencement of MRDs means the annuity starting date passed then we cannot eliminate QJSA for this participant. Any thoughts on that???

Defined contribution plans are permitted to eliminate "optional forms of benefits" as long as the right to those benefits have not accrued and they receive an amount that is at least the actuarial equivalent of the benefit at normal retirement age. The rules are contained in Treasury Regulations Section 1.411(d)(4).

A plan provides for QJSA as the normal form of distribution. A participant retires, but never consents/elects distribution of his benefit. RMDs commence. The Plan is then amended to eliminate the QJSA and provide for lump sum distributions only. I don't believe the retiree's annuity starting date has commenced as distributions were made under 401(a)(9). So I believe that the amendment to eliminate optional forms is in effect for this participant's benefit and the Plan is permitted to pay the retiree a lump sum distribution of the remainder of his benefit on the next RMD date. Anyone agree/disagree? Thanks.

This issue relates to Indian Tribes and the controlled group rules. Assume an Indian Tribe directly owns a number of entities (corporations, LLCs etc...). The parent-subsidiary controlled group rules apply to corporations, partnerships, sole proprietorships, trusts and estates. The Tribe is none of those, so it seems like an Indian Tribe cannot be the parent in a parent-subsidiary controlled group. Similarly, a Tribe is not an individual, trust or estate, so it cannot be the common owner in a brother-sister controlled group. The recent tax exempt entity controlled group regulations do not apply to government entities and IRS Notice 95-48 states that Tribes are treated as government entities. It certainly seems reasonable to conclude that entities owned directly by an Indian Tribe would not be considered to be a controlled group as to the Tribe. Does anyone disagree with this logic? Although this post deals with non-governmental plans and this might not be the best board for this topic, I figured those who deal with governmental plans might have a good deal of knowledge about tribal entities and how the controlled group rules apply.

Can you "re-offer" a lump sum to those in pay status?

The PBGC Regulations permit "majority owners" to forgo receipt of their benefits in connection with a distress termination. The regulations generally define a majority owner as an individual who owns 50% or more of the entity, taking into account the constructive ownership rules of 414(b) and © of the Code. Assume 5 family members collectively own 50% of an entity and their ownership interest can be attributed to each other under 414 of the Code. Does that mean that they are all considered "majority owners" and each can forgo receipt of their benefit?

Good answer! Thank you.

A plan sold a piece of real estate and received cash and promissory note in exchange. The plan is now terminating and the sole participant will roll the vast majority of the benefit into an IRA. The participant will also be assigned the plan's interest and rights in the promissory note. How is the value of that interest in the note determined for reporting and income tax purposes? Is it simply the amount of the outstanding principal and interest owed on the note? Should the value be something less than that since a default is always a possibility and there's no guarantee that the participant will receive the full amount?

According to Revenue Procedure 2009-36, individually designed gov't plans can elect to use Cycle E as their EGTRRA remedial amendment cycle. When submitting for a letter, I believe they would need to include plan document changes for Cycles C and D cumulative list changes. Does that mean the Cycle C and D cumulative list changes just need to be adopted by the end of Cycle E or should they have been adopted already? HELP!!!!

Any reason why a plan's attorney who received in excess of $5,000 of direct compensation from the plan would NOT be identified on Schedule C?

When does this have to be made for a plan with a Sept 1 plan year commencement date? By September 1, 2011? It seems to me that you don't actually have grandfathered status until the regs apply (in this case until September 1, 2011), so the disclosure should be made by then.

Can you avoid the implications of Section 409A(b)(3) if the NQDC plan is sponsored by an entity that is in a separate QSLOB than the sponsor of the pension plan which is "at risk"?

A collateral assignment split dollar agreement is terminating due to termination of the employee's retirement. The employer is going to forgive the debt owed (for the premium payments) and release the collateral. I assume a simple document releasing the collateral and forgiving the debt is appropriate, but isn't the collateral assignment filed with the insurance company? Would something need to be filed with the insurer? HELP!