Bird

Question remains, if you didn't defer an extra $4k ( 2005), do you get $46K or something less?

I think we'd need to know how much of the deferral was calendar and how much was fiscal...I'm not sure that I'd be able to figure it out, but that's required information. Leopurrd's right that the limit is $46,000. And, yes, you could simply start with $46,000, subtract the fiscal year deferrals, and get your PS contribution.

If the adoption agreement said that it was a SH plan...and that the employer would make a 3% contribution, then I'd say that contribution is required until the plan is amended to say otherwise, before the beginning of the year for which it is effective. If the adoption agreement said that it was a SH plan...and that the employer could issue a maybe notice and could amend the plan to make the SH contribution, etc., etc. then you'd have that flexibility. It sounds like you described the former but I'm not sure. If that's the case, then the notice shouldn't have been a "maybe" notice, it should have been a "we will..." notice. Nevertheless, I don't think the IRS would care too much about the content of the notice, especially given the uncertainty about these plans, as noted. But the document issues appear problematic.

The surviving spouse may elect to treat the IRA as his or her own, in fact it is deemed to occur (the election) in certain circumstances. So distributions may stop, or will be calculated using the Uniform Lifetime Table as long as the spouse has a designated bene. Reg § 1.408-8.Q-5

Thanks. I also talked to an accountant who is familiar with this stuff and he agreed; that is, trust income is generally dividends and interest, although cap gains might be included as permitted by state law and/or the trustee's discretion. So, it seems that the plan administator would have to provide a breakdown of the gain/loss.

Clarification, er, really a correction to what I posted recently- it appears that "financial advisor" is an acceptable term in the brokerage industry for a broker. It's "investment advisor" that gets you in trouble (with the SEC if you're not properly registered as one, and with fiduciary status implications in the plan arena).

Commissions represent compensation for sales activity, not financial advice. I know the line gets blurred when the payments are trail-only (a percentage of assets rather than a percentage of sales) and a lot of reps are probably guilty of giving "advice" (I think it's a mistake on their part ot hold themselves out as "financial advisors"), but I think that the SEC is the agency that would be more concerned than the DOL. If anyone knows of any actions by the DOL in which a broker was treated as a fiduciary because he gave "advice" even though he was paid a commission, please tell us about it. I DO think HOW you receive compensation IS relevant. I would say it defines the relationship, unless other actions override it. Holding oneself out as a financial advisor when he or she is really a broker is probably foolish, but not necessarily enough to change the relationship. Educating participants about the investment options is definitely OK (that is, part of the broker's job), but making investment choices and making changes for the participants without their consent is almost certainly going too far.

The SEP (plan) is the vehicle that gets money into the IRA. The IRA may say "SEP-IRA" or something like that on it, but it's an IRA. You'd typically be allowed to do rollover contributions into it, and maybe "regular" IRA contributions. You would definitely need a new SEP document to allow your business to contribute to the existing IRA. But, the existing IRA might have some limitations, so you really need to check with the investment company. (Something tells me they aren't likely to allow it, especially if the existing one says "OLDCO SEP-IRA" in the titling. I wouldn't fight too hard; just open a new account and then roll the old into the new.)

If a participant has a trust as bene of his plan account, and part of the trust is a QTIP trust, and the trust says "income" must be paid to the spouse...let's further assume that the plan account is the only asset of the trust...how is "income" determined and how do RMDs come into play? Let's further assume that the plan uses a pooled account, so there is no reasonable way to look through to the underlying assets. The participant (or bene) receives a statement once a year showing beginning balance, gains or losses, contributions (there shouldn't be any!) and distributions. If the account has gains of $20,000, and the RMD is $5,000, what does that mean in terms of the amount that must be paid to the spouse from the trust? Conversely, if the plan has a loss of $20,000, and the RMD is $5,000, what does that mean? I'm looking at a book by Noel C. Ice, who I just noticed is the moderator of this forum (!), and I think it says that annuity payments are considered income. I don't see anythinbg that says RMDs are treated as annuity payments for this purpose.

Huh? Oh, "There is no cite saying you can, therefore you can't." OK, we agree. I'm not so sure I would agree that Congress thought it through that carefully...

I'm not so sure that double taxation (or triple taxation) is relevant to this topic. Money is money; OK, plan or IRA money isn't as valuable as money in your pocket, but the money in your pocket could represent after-tax earnings, tax-free income, gifts, whatever (stolen? ). As for Roth loans...I'm not sure, but I guess a Roth loan default would come from contributions first, so would effectively be tax-free. Jost think of the loan payments as Roth contributions and decide whether or not you want to make those contributions.

That cite is for Eligible Rollover Distributions - going out of a plan - so I don't see how it applies. The code does permit plan to plan and/or plan to IRA rollovers of Roth accounts (402A©(3)). Now I'm convinced that you can't do a Roth IRA to Roth 401(k) because there is no cite saying you CAN, not because there is a cite saying you CAN'T. FWIW.

We haven't decided yet but are leaning towards a flat fee. I can't imagine trying to charge participants for using a particular source; is that what the attorney is suggesting? I can see saying "Costs are escalating and we have to charge each participant $X." But doing it by source is silly (IMO), regardless of what DOL might or might not say. I am a little concerned about distribution processing and the increased hassle. We have a fair number of self-directed plans that aren't on a recordkeeping system, and if someone elects a rollover, we won't be able to just say "OK, roll everything over." We'll have to step in and do an interim val for that account to determine the Roth part vs. the fully taxable part.

No. I think there was a recent thread on this; don't remember if it had a cite or not - it's probably a case where there simply is no cite permitting it.

This is from RIA, but it's pretty much a quote from the regs ( Labor Reg. § 2520.104-46(b)(1)(ii)(A) ) ______________________ For purposes of the rules on obtaining a waiver of some of the annual reporting requirements for small plans, “qualifying plan assets” are defined as any of the following: ... (3) any assets held by: ... a bank or similar financial institution, as defined in Labor Reg. § 2550.408b-4© ; ________________________ I don't think a CD is typically held in one's hand like a bearer bond (I guess I'm disagreeing with Janice, which is a little scary), so I'd have to think it is generally an asset held by a bank and therefore a qualifying plan asset. I can't imagine how a checking acount wouldn't be a qualifying plan asset unless it wasn't in the name of the plan, in which case it's not a plan asset at all!? Israel Bonds might/probably (?) be physically held; I know I have a couple of plans with them and think we generally report them as NOT qualifying plan assets. But, it might be possible that they could be held in an account so I don't know for sure that that's always the case. A similar example might be a dividend reinvestment plan - I've seen them where the initial shares purchased are physically held (and are not qualifying plan assets), but the reinvested shares are held by a transfer agent (e.g. Bank of NY) and IMO are qualifying plan assets. Sometimes the initial shares ARE held by the transfer agent and therefore would be qualifying plan assets. It depends on how the asset is held, not what the asset is.

Your response does not address Stephen's concern. Something doesn't sound right. Is this a self-directed or pooled plan? If it's pooled, is the loan part of the pooled account or does it effectively become a self-directed account? Could you describe the progression of the participant's total account balance and loan balance since you've handled the plan?

I think there are documents that say something like "if someone with a deemed loan distribution satisfies a distribution requirement of the plan [e.g. age 59 1/2, and the plan permits distributions at 59 1/2] then the deemed loan distribution is considered a regular distribution." Some people may think that you can read that into a document that doesn't explicitly say that, and some people may think you can do it even if the document doesn't contain a provision at all that would be statutorily permitted. I disagree.

Start by asking the agent when it would be appropriate to terminate the plan. The longer it stays around, the worse the problem gets. You might have to "remind" him that if the insured dies while the policy is in the plan, only the "at-risk" portion is tax-free, and that decreases each year. Seriously, ask him for a game plan.

Brenda, FWIW I share your skepticism about the form's worth. As noted in other messages in this thread, it apparently protects the trust from taxation if it is disqualified. But I think there is a misconception that it protects the employer's deductions. I asked an IRS person about this within the last couple of months and he said "oh yes, we always look for the sched p first to determine when the statute of limitations expires" (with the implication, from the context of my question, that it DID protect the employer's deduction). So they apparently think it serves that purpose...or at least he does.

I think you'll find that Treas Reg 1.408-8, A-9 says you may calculate IRA minimum separately but take the total from one. You won't find a similar reference for qualified plans so you can't do it. It's not clear if RMDs have begun already. If so, and if the 2005 RMD hasn't been paid yet, it goes to the beneficiary. In that case, I think the bene is determined as of the date of payment, so the kids would have a chance to disclaim the 2005 RMD. You haven't said if the parents are still alive, but I get the feeling they're not, so that would send the distribution to the estate. For the death benefits, if RMDs have begun already, the bene is determined as of 9/30 of the year following death and death RMDs must begin by 12/31 of the year following death. If the kids disclaim, then following the assumptions above the estate becomes the bene. Whether the 11th child, who predeceased the father, is entitled to a share should be described in the plan. What's the exact language?

I haven't had the misfortune of having to deal with life insurance in a large plan, but since you're not getting a lot of action here I'll offer my opinion, in which I don't have great confidence: If they are regular whole life contracts, I think they are reported on line 1c(14). I thought that unallocated contracts are those that contain assets that are not separated from the insurance company's general assets; i.e. they are subject to claims of the insurance company's creditors (and regular whole life contracts fall in this category). Anything with sub-accounts, e.g. variable life or a group variable annuity, is, I think, a pooled separate account. I never thought much of the idea that insurance contracts aren't included in the assets. That means that you have to expense the premiums, which I don't think is correct. (Also raises the question of how to get the money back in the plan for reporting purposes if the contract is surrendered.)

I haven't heard anything new or expected since the proposed regs were issued March 2.

In these situations, we usually set up the plan as a non-safe harbor in the first year, but use the prior year testing safe harbor where the NHCE ADP is deemed to be 3%, so the HCEs can average 5%. Then go SH in the next year.

Two solutions come to mind. First, you can do a corrective amendment and throw some money at the terminees to help pass the test (or at some of the existing employees). This contribution would be deductible in the year in which it was made. Or, if the plan has failsafe language, it should spell out the corrective mechanism and no amendment is needed. (I do not agree that failsafe language would allow you to execute an amendment effectively reducing the son's contribution.) Second, you could break the plan into two pieces for testing purposes: The son and a few NHCEs in one group, tested on a contributions basis (if all get the same % of pay you'll pass) and the parent(s) in another group with the rest of the NHCEs tested on a benefits (cross-tested) basis. I'm straining myself a bit here without any reference materials, but each group has to pass 410(b), and then if each rate group ratio within the plans is greater than 70%, you're done, otherwise you have to do the average benefits test.

Yes, include the accrued contribution in the total contribution amount. To my knowledge, the 5500-EZ instructions don't specify whether you can/should use an accrual or cash basis for reporting. The "regular" 5500 instructions say you can use either, as long as you are consistent, and I would be comfortable extrapolating that to the EZ, so I'd say either way is OK. I always show accrued contributions because that is consistent with any other reporting I would be doing. FYI, the beginning assets plus net income reported on the form will not necessarily equal the ending assets, since you're not supposed to report unrealized gains/losses.