Bird

Um, this is pretty lame but my point was that the term "trustee-to-trustee transfer" is used in the Internal Revenue Code (it's not just "computer code") and I happened to find it in that section. But yes, it does appear that the term is not unique to transfers between IRAs, although I'm still not sure when it would apply in a qualified plan environment.

Austin, I agree with you, but this is being done all the time, and not as a mid-year change. It's easier for the accountants and partners to run their withholding through a payroll system than it is to make quarterly tax payments, or at least that's what I was told once, and that's the motivation.

I've seen "trustee transfer" as a source or transaction in plan recordkeeping systems, but I don't think that's what we're talking about here. "Trustee-to-trustee transfer" is in the Code - 402©(2).

Boy do I know that feeling. I'm not sure about anything new, but as far as I know, the only time this would be permitted not as a contribution would be in the case of a trustee breach (I'm not sure if that's the right word but the idea is that it's the trustee's fault that there is a surrender charge).

I don't think there's any doubt that you have to net the comp. I guess you could make an argument that if they paid FICA taxes on their W-2 comp, and can't and/or don't get that back as a result of the loss, that they should be entitled to make plan contributions on that basis. (But I don't think so.) This whole business of paying partners on a W-2 is an irritation. Here's a thought; maybe the W-2 "wages" shouldn't count anyway...most plans will have a provision something like this: For any Self-Employed Individual covered under the Plan, Compensation will mean Earned Income. If the LLC partners are indeed Self-Employed Inidviduals, are the W-2 wages "Earned Income?" I'm not sure where I'm going with this...

My definition would be that a spin-off is an employer-initiated transfer of assets from one plan to another; I think it could be a single plan splitting into two plans where one is new, e.g. when a business splits into two businesses, or I think it could be from one existing plan to another existing plan, e.g. when a division or piece of business changes hands. That is accomplished by transferring assets from one trustee to another, but I think the term "trustee to trustee transfer" is reserved for the transfer of assets from one IRA to another without passing through the owner/beneficiary's hands, as opposed to a rollover where the owner takes possession of the money and must roll over within 60 days, and is limited to once per 12 months.

Bill, not to make you feel bad, but they incorrectly rejected some that were mailed by 12/31 and received after; it might have been resubmitted as is...there was an asap on it. Ed

I'd think it would go back in as basis. So, when a default occurs, the contribution portion is not taxed, but basis is reduced. So when/if it is repaid, it would increase basis.

You can't default to a pro-rata allocation if the plan doesn't allow for it (but it probably does). But you can test whatever allocations you arrive at on a contributions basis, and if the "arbitrary" allocation turns out to be pro-rata then it will pass. In fact you can impute permitted disparity and give those above the SSWB additional contributions and still pass; if the plan formula allows it, you should be able to come up with an allocation identical to that under an old-fashioned integration formula using the SSWB and 5.7%.

FWIW, I stumbled across this in an article about baby boomers recently: No pension. Living longer means more retirement years that will need to be financed. Most private-sector workers won't get a monthly check from their former employer in retirement or retiree health benefits. While 40 percent of private-sector workers received a traditional pension in 1975, that number declined to 17 percent by 2006, according to the Employee Benefit Research Institute. More employers freeze their pensions every year and replace them with 401(k)'s. From 40 to 17 percent, wow...that may not be new news, and most of us sensed something like that anyway, but that's pretty dramatic. I still don't think DB plans are "better" - if employers pumped 5% or more into DC plans annually most of us would be in decent shape, but we know that's not happening, on average. You really have to wonder how many of the 83% are totally unprepared. (The rest of the article is here if you care.)

If each participant is in his/her own class, it doesn't matter how you come up with the number, as long as it passes non-discrimination testing. It does make me wonder why an employer would be that obsessed with "matching" contributions when they can just do whatever they want (subject to testing), but...whatever.

I strongly disagree with you being not sure about agreeing with me . Seriously, lack of savings IS the issue; everything else is an unfortunate distraction. I think the closest thing would be TIAA, and of course there is limited access. I worked with one or two people who had TIAA accounts and was impressed with the payouts they offered.

I agree 100% (with you). This article article states the case against annuities perfectly. The most significant point, I think, is this: 4) The real issue isn’t annuities, it’s a lack of retirement savings – Griffeth’s concern about bad behavior really emphasizes the greater issue of investors not saving enough to begin with. Paul G Escobar, Managing Director, Retirement Planning, US Wealth Management says, “Annuities don’t actually address the issue – namely that most baby boomers don’t have enough saved. This is a combination of factors from not having had a 401k plan to not having participated at all or not having participated enough.” In addition, Escobar cites “withdrawals for loans, hardships and cash outs at job changes” as other reasons for participants not having sufficient savings to retire. Everyone wants an easy answer, so annuities are the next bandwagon "because you can't outlive the income." BFD - if you have $50,000 at age 65, annuitizing it for $200/month or whatever doesn't accomplish much.

We've started using AF's PlanPremier TPA platform and I need a reality check - after using Nationwide, John Hancock, MFS, and AF Recordkeeper Direct with few problems, we've run into a lot of minor irritations and now, one preposterously stupid thing that has me shaking my head. I need to know if this is just a very powerful system (I guess it is FAScore behind the scenes) that gives us enough rope to hang ourselves, or if it really is not ready for prime time (or decrepit and over-the-hill). The irritations are: after money is transferred in to a plan, it doesn't show up on the main screen showing total assets until some time later; maybe each month or so that gets updated, but in order to see transferred money you have to drill down to the participant level. That seems dumb. And, to look at a contribution roster that has been submitted, you can't just go to a list of rosters and view one; you have to go to extra trouble to run a report. And, to refresh your memory on how to do something, like run year-end report, there is no printed documentation, so you have to listen to a dumb audio training session for up to 20 minutes to get information that should take a minute to find. The stupid thing is that if the plan uses a stable value fund instead of a money market, you are screwed in terms of handling forfeitures. There is no "cash" account; forfeitures must be held in one of the plan investments. So we had them go to the stable value fund because it was the most conservative of all the investments. Well, after carefully calculating and allocating the 2009 PS contribution plus forfeitures, we find that not only has there been a slight loss in the stable value fund in the two weeks since it went in, but we're only allowed to use 95% of the money in that fund since it is subject to fluctuation (ahem - "stable value"?!). So now we have to waste a lot of time either recalculating the contribution, or telling the employer to come up with more money (how much? who knows, it is now a moving target). We've certainly learned to insist that plans have a MM fund when using this system in the future, but it seems rather "unfortunate" (mild understatement) that a relatively innocent decision by a broker (it's worth noting that brokers can mess things up, even when they're not trying) can lead to this situation - it's only a few hundred bucks but I resent having to spend even an extra minute dealing with it, and it's going to turn into hours. Sorry for the long-winded rant (yeah I feel a little better) - any thoughts on just how good this system is?

Not to my knowledge. I can see the potential for doing it in an IRA, at least from the perspective of how an account could be titled (although I still don't think it is possible), but I'm pretty certain that it couldn't be done in a plan - as a TPA, I can't really imagine creating a new source called "QDRO rollover" that would retain the penalty-free nature for an early withdrawal. It's just a rollover.

I don't think so. It sounds like two events - 1) a direct rollover to the AP's plan, and 2) a distribution from that plan. It is unfortunate, to understate the case, that it happened that way.

I think it's worth noting that most SDB options within a platform have fees that are absolutely horrific, at least the ones I've looked at, and I would not consider using one a viable option. That said, I agree that you don't want to have the employees on a platform and the owner doing something else - there are ways to make it "ok" but it never does look right, IMO.

Yes. Deductibility will depend on income and/or whether the 2008 contribution was treated as 2009 for this purpose (participation in a qualified plan). No.

That should do it, if they really do have that option - I would create some kind of form where they elect which account they want to use. The "other issues" that arise are the extra hassle of creating the form and making sure participants make an election, and then keeping track of things on multiple platforms, and costs associated with that.

I'm not sure about the Sch C issues but you do have until March 31 to file electronically; there was an automatic extension for returns otherwise due by 12/31 and I think it would apply in this case.

5500 and SF were officially released some time ago and 2009 forms are being processed. We have not done any.

It's kinda like this, IMO- -if you know enough about plans to keep your document updated, then you don't need your own FDL, -if you don't know enough about plans to keep your document updated, then you need an FDL, but then you probably don't know enough about plans to get one.

I was afraid you were going to make that distinction (not an "employee"). Honestly, I don't know, and I'm not sure I care; by the time I get to all two of my large plans I expect this to be ironed out. But, even in the alternate universe in which the DOL resides, I cannot imagine that they want that particular information or expect anyone to provide it.

As a "TPA" I don't like the idea of saying "your TPA will provide..." We assist Plan Administrators with their duties but don't do anything directly. This is what we use (permitted disparity language will vary by plan and is omitted if not applicable): XYZ 401(K) PLAN SUPPLEMENTAL BENEFITS STATEMENT The Pension Protection Act of 2006 contains new requirements for information to be provided in your plan’s participant statements. Some of the new requirements are covered in the statements you receive from XYZ Investments, Inc. or other brokerage firms. The following information is not included on the brokerage account statements and is provided to you as a supplement to complete the reporting requirements. Investment principles and Department of Labor web site To help achieve long-term retirement security, you should give careful consideration to the benefits of a well-balanced and diversified investment portfolio. Spreading your assets among different types of investments can help you achieve a favorable rate of return, while minimizing your overall risk of losing money. This is because market or other economic conditions that cause one category of assets, or one particular security, to perform very well often cause another asset category, or another particular security, to perform poorly. If you invest more than 20% of your retirement savings in any one company or industry, your savings may not be properly diversified. Although diversification is not a guarantee against loss, it is an effective strategy to help you manage investment risk. In deciding how to invest your retirement savings, you should take into account all of your assets, including any retirement savings outside of the Plan. No single approach is right for everyone because, among other factors, individuals have different financial goals, different time horizons for meeting their goals, and different tolerances for risk. It is also important to periodically review your investment portfolio, your investment objectives, and the investment options under the Plan to help ensure that your retirement savings will meet your retirement goals. For more information on individual investing and diversification, visit the Department of Labor's website at http://www.dol.gov/ebsa/investing.html. Explanation of permitted disparity Your plan’s allocation formula for non-elective contributions uses a method known as permitted disparity. The following describes how contributions are allocated. Non-Elective Contributions The Employer may also make other discretionary contributions to the Plan. These contributions are called Non-Elective Contributions. In any Plan Year in which Non-Elective Contributions are made and in which you are an eligible Participant, an allocation will be made to your Non-Elective Contribution Account in the following manner: First, an amount up to 5.4% of your Excess Compensation, if any, will be allocated to your Non-Elective Contribution Account; next, after an allocation has been made to all Participants who have Excess Compensation, a portion of the remainder of the contribution will be allocated to your Non-Elective Contribution Account in the ratio that your Compensation bears to the total Compensation of all eligible Participants. Non-Elective Contributions Your Employer may make contributions to the Plan which are called Non-Elective Contributions. These contributions are totally discretionary, including the discretion to forego a contribution for one or more Plan Years. In any Plan Year in which a Non-Elective Contribution is made and in which you are eligible to receive a share of that contribution, an amount will be allocated to your Non-Elective Contribution Account in the following manner: Step 1: First, an amount will be allocated to your Account in the ratio that your Compensation bears to the total Compensation of all eligible Participants, but the maximum amount of this allocation will not exceed 3% of Compensation. Step 2: Second, an amount will be allocated to your Account in the ratio that your Excess Compensation (if any) bears to the total Excess Compensation of all eligible Participants, up to a maximum allocation of 3% of your Excess Compensation. Step 3: Third, an amount will be allocated to your Account in the ratio that your Compensation and Excess Compensation bears to the total Compensation and Excess Compensation of all eligible Participants, up to a maximum amount allocation of 2.4% of your Compensation plus Excess Compensation. Step 4: Finally, the balance of the contribution will be allocated to your Account in the ratio that your Compensation bears to the total Compensation of all eligible Participants. This means that the amount allocated under this step to each eligible Participant's Account will, as a percentage of Compensation, be the same. For Non-Elective Contribution purposes, your Compensation is the total remuneration you receive from us during the Plan Year, excluding any amount in excess of the annual dollar limit. The current annual dollar limit is $245,000, but this dollar amount may be changed in future years to reflect the cost of living as permitted under federal regulations or to reflect changes in the law. Your Compensation for Non-Elective Contribution purposes will also exclude any amount you receive prior to becoming a Participant or while you are a member of an ineligible class of employees. Your Excess Compensation is the portion of your Compensation that exceeds 81% of the Taxable Wage Base. The Taxable Wage Base is the maximum amount of Compensation which is subject to Social Security withholding based on the Social Security withholding table in effect on the first day of the Plan Year. For the Plan Year beginning in calendar 2009, the Taxable Wage Base is $106,800. The Taxable Wage Base is automatically increased each calendar year for increases in the cost of living as required by federal law. Please refer to your Summary Plan Description for other information on contributions.

According the Sungard's Pension Technical Update, none of those employees needs to be reported, as long as the primary relationship to the fund company is reported, and the employee gets no direct or indirect compensation from the plan.