Bird

Does anyone know if creditor protection generally extends to federal non-tax penalties and fines? I've already recommended an ERISA attorney (although it's not an ERISA issue). And I know that IRA protection varies by state. Just curious.

Following up on my comment above, what do others think about the deductibility of contributions made under an -11(g) amendment? As I said, I thought they were not deductible for the prior year. Yesterday, Sungard had a technical update that says they are deductible: Is the 11(g) retroactive corrective amendment effective for other requirements? Yes. The amendment is taken into account for the permitted disparity requirements, the deduction rules and the minimum funding requirements. But the regs say (my emphasis): (5) Effect under other statutory requirements. A corrective amendment under this paragraph (g) is treated as if it were adopted and effective as of the first day of the plan year only for the specific purposes described in this paragraph (g). Thus, for example, the corrective amendment is taken into account not only for purposes of sections 401(a)(4) and 410(b), but also for purposes of determining whether the plan satisfies sections 401(l). By contrast, the amendment is not given retroactive effect for purposes of section 404 (deductions for employer contributions) or section 412 (minimum funding standards), unless otherwise provided for in rules applicable to those sections. I'm not sure if there is an "otherwise provided for" rule but that sure seems to say they are not deductible in the prior year.

I think the typical thing would be to retitle the account, indicating that it is for the benefit of the beneficiary. If you've confirmed that someone is in fact the beneficiary, I would allow them to access the account to make investment changes; it is their account even if the retitling hasn't been completed. And yes, I think most plans will allow a beneficiary to designate beneficiaries. Contingent is for when the beneficiary dies before the participant.

I agree; just reissue. Revising reporting just because someone lost (or intentionally didn't cash) a check is...well, it's not good.

And I'll bet there are surrender charges too. Your options are 1) to muddle along and maybe allow new people to own brokerage accounts. It sounds like you are the agent/broker and not the TPA, and the TPA is not going to like this, or at least is going to have to charge more. You are going to have a hard time finding individual annuity contracts that will work. 2) Bite the bullet and surrender all of the contracts and pay the surrender charges and move the money to a platform that works for small plans, like the American Funds.

If they admitted it was their mistake then they should fix it. I don't think there's a need for a lot of further discussion or asking the IRS for help. FWIW I don't see any box on a 5498 that says "contributory IRA", unless they changed the form, and I don't think so. Something is a little "off" about this whole discussion...

I agree with you. I don't think it is that easy. I can't say I handle these but am inclined to think that the IRS wouldn't really object to leaving it as is; try to sell it on the intention of the same percentage for all and no one else being harmed as the contribution would have been that much lower.

Doesn't that depend on if it is a publically traded or not? There are plenty of traded REITs whose FMV is very determinable. Yes. I should have probably said "some" instead of "most or all." Thanks.

I don't think so. Most or all don't have a readily determinable fair market value.

I'm not sure how you reach that conclusion. I don't know about the idea of running two SEPs with two sets of contributions at the same time, but I do feel that eligibility is not a protected benefit in the SEP environment.

I think you could take the viewpoint that the subparagraphs under 408(k)(3) spell out how you can not discriminate in favor of HCEs, and since changing eligibility is not there, you can do it. FWIW.

I'm not Gary but you are correct; employees can't contribute to a SEP IRA. But the employer could make contributions throughout the year, as long as they are ultimately proportionate to income. Is that not enough, or are they wanting to contribute different amounts? To do exactly what you have described, they would need a 401(k). But I wonder if they they can't come close enough with a SEP.

I wouldn't be overly concerned with the diversification and potential risk/return factors. Liquidity, yes; it's easy to think you're going to sell this in 5 to 7 years but selling a property is not always that easy. Also someone also has to put a fair value on this each year. And you can't file a 5500-SF. I think with real estate, you can go through a checklist and determine "yes, this is a fine investment for a retirement plan" but on a practical level, it's a (royal) pain in the butt at best. And for what...they're going to make above-market returns?...which simply reduce future contributions in a DB environment. I don't see the upside. Maybe I have a bias because on my end (as a TPA) everything just grinds to a halt when you have stuff like this in a plan.

At least we said the same thing...

Section O of the general instructions: http://www.irs.gov/pub/irs-pdf/i1099gi.pdf I think the reference to "information return" is any of the various forms. Oh, BG beat me to it!

Not here. We have regular deferrals, Roth, PS, SH, etc. all commingled.

I agree - for insurance company payments, not mutual funds. (Also agree that it's odd...probably based on some way-back distinction that isn't very relevant any more.)

OK, I don't think it is a rider. It sounds like they are going to make additional contributions based on the rate of pay...unusual, yes, but Kevin's cite shows it is ok.

10% of what compensation? Anyway, my guess would be that this is some kind of rider built into the contracts. Hard to imagine extra contributions being made.

I think it is a different issue with a standardized prototype and ultimately it is a cutback. I see/remember now about the IRS confirming that you don't have to have a testing failure, but in this scenario it is just too much for my blood. Also, if I'm not mistaken, contributions made under an -11g amendment are deductible in the year deposited. I don't know if I can prove it but I didn't make it up. That pretty much blows this up.

Attempting an -11g amendment definitely takes it out of prototype status, which actually bothers me less than the issue of a prohibited cutback. I (still) say that once someone has 501 hours of service, they have earned the right to an allocation as determined under the plan formula in place at that time. And, for whatever it is worth, maybe I wasn't paying attention when it was posited that you don't need a testing failure to use an -11g amendment, but I don't see how you can ignore the language from the regs below that talks about the purposes of a permitted amendment. Maybe you don't absolutely, positively have to prove a failure, but I don't see how you can blindly ignore the language below about the scope of an amendment, especially in a standardized prototype scenario (some emphasis added by me). I can begin to understand the argument when you have a plan that might have a testing failure under the allocation formula in place, but not in a situation where you simply cannot have a failure, as in a standardized prototype. For purposes of satisfying the minimum coverage requirements of section 410(b), the nondiscriminatory amount requirement of §1.401(a)(4)–1(b)(2), or the nondiscriminatory plan amendment requirement of §1.401(a)(4)–1(b)(4), a corrective amendment may retroactively increase accruals or allocations for employees who benefited under the plan during the plan year being corrected, or may grant accruals or allocations to individuals who did not benefit under the plan during the plan year being corrected. In addition, for purposes of satisfying the nondiscriminatory current availability requirement of §1.401(a)(4)–4(b) for benefits, rights, or features, a corrective amendment may make a benefit, right, or feature available to employees to whom it was previously not available.

I agree. Use the comp limit for the lookback year.

I think you have to read the 242(b) election and see what it says about how distributions must or may be taken and what could effectively revoke it. It's probably going to eventually result in a judgment call; like a lot of things, the basic concept was somewhat clear at the time but no one could predict all of the special situations and circumstances that could arise.

I think you have to read it literally - so the answer is yes.

I would ignore it. Not look for testing options, etc.