Bird

You can usually get a fidelity bond issued retroactively.

No, and that's the problem.

We're on it. Ed Snyder

Agree, the prior sponsor can't void the document but can discontinue sponsorship and thereby effectively make it an individually designed plan.

ASPPA sent an e-mail to all members that Doggett is working on a new proposal.

Not exactly on point, but for anyone who doesn't know, paying surrender charges is generally no worse, maybe better, than keeping something around waiting for surrender charges to expire. GICs aren't as transparent so I'll use B shares as an example. The surrender charge in year 2 is typically 4%. The additional annual expense for B shares is typically .75%. The surrender charges typically go to 0 after 6 years. 5 years of higher annual expenses @ .75% = 3.75%, just about the same as the 4% paid at once. It all depends, and GICs are a different animal, but generally speaking, the net cash surrender value after surrender charges is generally the best indicator of a contract's "true" value - that is, it's not like there is any extraordinary value being added just by holding on to something long enough to avoid surrender charges.

If the participant elects a non-QJSA annuity, then the plan must be offering a non-QJSA annuity. If the plan offers a non-QJSA annuity, then it must offer/default to the QJSA annuity, and also offer the QOSA. No?

Yeah, that. FWIW we do* typically add a sentence either changing the MP formula to 0% or otherwise saying that accruals are ceasing, and don't forget the 204(h) notice. *"did" - I think they're all gone now

Sigh. I must not have enough to do... I sell and administer cross-tested plans. That said, I always saw it as a temporary gift to my business, although it's lasted a lot longer than I thought it would. I don't believe that Congress has ever put anything in the Code authorizing cross-testing; I think the history is that the IRS first demonstrated that different types of plans could be "comparable" in Rev Rul 81-202, and then gave a road map for "new" comparability in the proposed and final 401(a)(4) regs. I'm actually kind of surprised that Congress hasn't acted already; I suspect it's just the uber-arcane nature of the discussion that has kept the status quo. Looking at the scales from a societal point of view, there are a lot of things to consider. Cross-tested plans probably have expanded coverage, I'd say definitely have, but if we're being honest, 3% or a little more, 5% tops, is not a gigantic contribution rate, especially when the owner is 55 or 60 and the plan is of limited duration, and claiming expanded coverage as a great victory is probably an exaggeration. And it does come at a cost, tax revenue - it is Congress' job, not mine, to determine whether that cost is worth the benefit of expanded coverage. I do feel that any argument that only considers expanded coverage is incomplete. Philosophically, "defined benefit" plans promise certain benefits and guarantee them. "Defined contribution" plans define the contributions going into the plan and let the benefit chips fall where they may. I do have to wonder about whether "comparability" analysis fully considers the guaranteed nature of DB plans. Target benefit plans had a certain logic in that the contributions, while based on projected benefits, were at least required. I don't mean to argue against cross-tested plans, because I'm sure at least some plans wouldn't exist without that feature. But I can't get too indignant about it. And, the gorilla in the room being federal budget deficits, I have to think there will eventually be a tidal wave washing out a lot of "tax expenditures" and as far as the greater picture, this one will be like a flea on a rock at low tide. FWIW.

Company name is Fort William LLC but almost all communication is done as ftwilliam.com. (No "s.") Since it's come up, my experience with them has been excellent.

The requirements are here: IRS Pub 590 The relevant part is: The IRA trustee, custodian, or issuer has been provided with either a copy of the trust instrument with the agreement that if the trust instrument is amended, the administrator will be provided with a copy of the amendment within a reasonable time, or all of the following. 1. A list of all of the beneficiaries of the trust (including contingent and remaindermen beneficiaries with a description of the conditions on their entitlement). 2. Certification that, to the best of the owner's knowledge, the list is correct and complete and that the requirements of (1), (2), and (3) above, are met. 3. An agreement that, if the trust instrument is amended at any time in the future, the owner will, within a reasonable time, provide to the IRA trustee, custodian, or issuer corrected certifications to the extent that the amendment changes any information previously certified. 4. An agreement to provide a copy of the trust instrument to the IRA trustee, custodian, or issuer upon demand. The list is a little incomplete because the trust must also dictate that income be distributed for the trust beneficiary to be treated as the bene for RMD purposes.

I agree that forfeitures can "reduce" a contribution such that the net employer deposit is $0, so 2009 is ok. Your first post said it was frozen 12/31/07; that was/is contradictory to your later posts.

It was informal guidance to ASPPA, noted in asap 10-06, and Fort William, that we know of. Nothing official.

I'm not aware of any guidance; for me, any employment income is sufficient to not be "retired from employment." I haven't seen $100/year of something like that yet so haven't had to think about it that carefully. Not sure about the second Q...I'm inclined to think that once you have retired from employment and established a Required Beginning Date that distributions must continue, even if re-employed.

As to the issue of the plan being frozen and able or unable to reallocate forfeitures - I think it is ok to do so, with no special action or language being needed. It seems unlikely that the action to freeze the plan said "no more contributions and oh, by the way, no more forfeiture allocations." The ultimate answer would probably hinge on whatever language was used to "freeze" the plan or otherwise cease contributions. It's not clear but these are 2008 forfeitures, yes? Just because we seem to like to look for trouble in this business, I have to wonder if the "freeze" as of 12/31/2007 didn't directly or indirectly lead to a partial termination that should have resulted in 100% vesting and no more forfeitures? That's not necessarily the case, but...that leads back to your initial post, where you say "I assume the amendment did not address forfeitures ..." - I don't really know how far you can go with this without having that amendment in hand.

Ha! This petty and small-minded consultant (me) is looking forward to it. Imagine your worst clients all rolled into one - late info, wrong info, missing info, unresponsive, and he apparently hires the cheapest accountant in the area, who is also inattentive and unresponsive, and is actually the direct cause of this result (long story). Poetic justice.

As always, the ability to bounce ideas here is appreciated. Here's the scenario: Plain profit sharing plan has a limit of the amount deductible under Code Sec 404. For 2008, the plan receives more than 25% as a contribution (FWIW, this is totally and completely the accountant's fault) and we allocate the 25% and carry over the rest. (Yes, the client and accountant were advised of the need to pay a penalty on the overcontribution.) In 2009, the plan was restated onto an EGTRRA document that has no limit, other than 415 limits for the participants. No additional contributions were made. The carryover is less than the combined 415 limits, but more than 25%. I think from the plan's perspective, we can (must) allocate that carryover contribution in 2009 (it happens to be going to one NHCE; the owner had no comp)...and get on with the plan termination, which is next. There would be an additional penalty in 2009 for the remaining overcontribution, and honestly I'm not sure if that theoretically hangs on forever if the plan goes away or what, but I don't see it as my problem. Does anyone see problems for the plan and its qualified status if we follow this path?

Mike, RMDs for 2009 were waived, so if we are talking about a first RMD due 4/1/2010, that's for 2009 and was waived. pmacduff, if the divisor was 26.5 for 2009 (age 71) then it is now 25.6 (age 72) and also you use the 12/31/09 balance, not 12/31/08, so both numbers are different.

If the plan said forfeitures can be used to reduce (unspecified) future contributions, then yes, I think you could do a non-elective allocation now (or even for 2009?). If it was more rigid then you might have to consider opening a prior year(s) and fixing it. When you say the plan was "frozen," do you mean action was taken to not allow any future contributions, including deferrals, or did they simply stop making contributions?

I think that's it (move to pre-tax).

Never mind on this; i didn't read it carefully enough. It's double taxation. But... But the point is, if it's not reported to the plan, then it stays as Roth money, and there's just no way that it is caught. I'm not advocating it (not reporting), and I don't see Buckaroo advocating it, Buckaroo is just trying to get a handle on the tax effects.

Are you sure? I think that would be triple taxation. I'm not sure it bothers me, but it seems an unlikely result.

I think if you try to do this "right" you will have to address the issue of not offering the 401(k) deferral part of the plan to the employees, and make up for those potential lost contributions and matches associated with them. Not pretty. As noted, if no one knows the plan exists, than maybe it doesn't exist...

R-6, at least for the American Funds group, is the lowest-cost share class available. It has absolutely no advisor compensation (commissions) built into it. It might mean that plan costs are very low...and it might not. This class could be used by a plan that has a Registered Investment Advisor who is being compensated on a percentage of assets in the plan, or on some other fee basis, and those costs could be paid by the plan or by the employer. And the TPA is getting absolutely nothing on this share class either. So to evaluate whether it is "good" or "bad" you have to be able to ID all of the costs and fees, and also determine who is paying them. It could be that it's a low-cost plan to the participants, if the employer is picking up some costs directly, or it could be that the plan is paying costs, just not through the fund expense ratios. But to answer your question, the only difference between R-1,2,3,4,5 and 6 is the expenses (and for that matter, A,B,C, 529, etc.). The money is all in a big pot.

Just reading what Kathy posted, I think you are correct that there are no immediate tax implications for failure to return the excess deferrals by 4/15. But, again just reading from the cite, I think that the excess deferrals (and earnings) are supposed to be tracked somehow and taxed when distributed, whether the distribution was otherwise qualified or not. On a practical level, if the participant doesn't tell the plan that they are excess deferrals, the plan doesn't know, and the plan would eventually pay out the deferrals as Roth deferrals (i.e. not taxed), and the earnings as well, if qualified. This is different from regular excess deferrals, where the excess would pretty much be assured of being caught on the current return and taxed in the year of deferral; then it doesn't matter if the plan knows about the excess or not from a reporting standpoint because it is all properly taxed at distribution.