Bird

Maybe (OK, yes). You have to make sure that there is no cutback in benefits, and since "BRF" was used in a preceding post I used it casually...but no, I suppose not every BRF is subject to anti-cutback.

The plans should have identical BRF otherwise you have to amend the receiving plan to permit whatever was permitted (e.g. distribution at a particular event/point in time) to prevent a 411(d)(6) cutback. No, no sign-off. It's a sponsor action, not an employee action. No 5310 needed if it's a DC plan with certain conditions, which you probably meet (see details in the instructions - don't remember off the top of my head but basically if the individual accounts before and after the merger are the same you're OK.)

The gross outstanding loan of $59,000 isn't relevant, IMO. I think the issue is that he effectively took a distibution from the plan, some time ago, for $35,000 and didn't report it. Then he made an after-tax contribution to the plan of $2,000 that probably wasn't permitted. The surrender of the policy and loan offset, with receipt of $1,000, is not a reporting/triggering event of any kind, except in his mind. If he wants to feel better about it he could report $33,000 now. It wouldn't be right, except that if he looks at what should have been reported over the last "x" years vs. what is actually reported now, it will balance out - sort of. (Not counting the time value of money and/or premature distribution penalties, if applicable.)

The fees are fees and the "paying back by the employer" deposits are contributions. If the investment company bills the employer outside the plan and the employer pays the fees directly, that's another matter. But deposits to the trust, whether they are considered reimbursement or whatever, are contributions.

You're right, 14a should be the gross amount. I'm not an accountant, so don't know what my opinion is worth, but I've seen a bunch of these and talked to a lot of accountants...have seen it done wrong a lot too. Maybe the CPA is thinking that the numbers on the K-1 are supposed to add up? If I understand correctly, they are just a bunch of numbers that are calculated independently.

Ugh. Sounds like this is FUBAR'd. But, this board is about helping each other out, so I'll try. For the record, I object. He made profit sharing contributions that were deductible and chose to invest them in a life insurance policy. Mmm, you mean he personally borrowed from the policy? (i.e. the money didn't just go to another investment in the plan - it doesn't sound like it.) That's a plan loan; I wonder if it exceeded the limits at the time and was documented (ha-fat chance!). In any event, it sounds like it defaulted for lack of repayment. Oh, it gets better! Are these loan repayments (on a defaulted loan) or after tax contributions (permitted by the plan?). I think I have changed the definition of the problem (improper loan and/or default - a long time ago). If I misinterpreted, I'm sorry. Setting that aside for a moment, the surrender of the policy by the plan (with proceeds going back into the plan) is not a taxable event. It's really just like any other asset of the plan (if you sold XYZ mutual fund there would be no consequences either). It's only when money leaves the plan that taxes are incurred. But in this case, it sounds like they left the plan a long time ago.

I'm surprised that ML doesn't have their own document, but if that's the case I would imagine that if you went to them and said you wanted to start a SEP that the IRS version would be part of the kit. Anyway, I would adopt the IRS document. The "any" service can be limited to those who earned at least $450. You can't be more restrictive.

I agree. Having a designated bene under the distribution rules is generally a matter of being able to identify an individual(s) to whom the money flows.

Follow up question - the proposed regs say that distributions upon termination are permitted if the employer does not maintain another 403(b) plan in the 12 months before and after the termination. Does that mean participants would have to wait 12 months after the termination before distributions are permitted (on further thought I don't know what else it could mean but I'll go ahead...) or can distributions occur immediately at risk of being disallowed (don't know how that would work)?

Thanks for the comments; that's exactly what I was looking for - especially about the ADP testing, which I forgot to mention in my initial remarks when they first brought up the idea. They're currently using annuities, so this isn't an issue, but out of curiousity, does this mean that someone has to track down each participant and force a transfer? What if someone refuses? Does the plan "exist" indefinitely in that scenario, for purposes of 5500 filing?

I've sort of fallen into handling a 403(b) plan; some questions came up and I'm looking for some guidance, since this is not really my area of expertise. Client is unhappy with investments, and is considering amending their existing PS plan to a 401(k) and getting rid of the 403(b) (the 403(b) has a match if that makes a difference). My initial reaction was "why not just add a different investment choice?" and I'm not sure I got a good answer to that, but if anyone has any general comments on whether or not this is a sound idea I'd like to hear them. If they decide to go ahead, is there anything special about terminating a 403(b)? Do you just say in a resolution that it's term'd and that's about the end of it? Or does the existence of the contracts mean that the plan goes on indefinitely, even if no new money is added? Thanks for any feedback.

No, a non-spouse IRA bene cannot roll over to his or her own IRA. The beneficiary must continue to take, or start taking, minimum distributions. As an aside, the bene isn't necessarily "stuck" with the existing IRA and its investment options. Some (maybe all) investment companies will allow the bene to transfer an existing IRA into a beneficiary payout account, which for all intents and purposes is a rollover on behalf of the decedent.

I don't think it's a problem. MM returns are very low; that's just the way it is. But - I'm looking at something that shows a yield of 1.76% for that fund as of Jan 31. Where did the .35% come from?

Fair 'nuff...

Mmmm, I'm not sure that quoting from your own book counts as a cite, but I'll bite. [ It counts - gsl] As I read it, 408(k)(3) is directed at the allocation of contributions in a year (i.e. pro-rata or integrated is OK). Subsection (A) would have to be the place that you're saying is a catch-all for non-discrimination, but my argument is that there is no place in the Code or Regs addressing SEPs that is as clear-cut about prohibiting an amendment or series of amendments as there is in the 401(a)(4) regs (I don't remember the exact cite). I don't follow the references to 414(m) and 414(n)(3); sorry if I'm dense.

I agree with WDIK. I seem to remember scrambling to get EGTRRA amendments in place so that we could take advantage of the higher limits in situations similar to the once described.

I seriously doubt that an auditor doing a personal return will ask - "Oh, and did you file a final 5500-EZ?" As noted, we do prepare the filings as required, and am not advocating non-fling, but I would love to hear of just one instance where someone got caught and actually paid a penalty for non-fling. The department that would assess non-filing penalties has absolutely no way to know of the non-fling "event." (What's a "bank audit"?)

We've prepared filings in the few cases where this has been applicable. I'd bet that there is widespread non-compliance (without consequence) considering all of the broker-sold prototypes out there.

Is "operational discrimination" a potential issue for SEPs? (I don't think so.) I believe you can change eligibility with impunity. I'm not saying I like to see it.

I don't know that you'll find anything definitive. I just do the calculation consistent with the way I'm reporting the assets - cash or accrual (I always do accrual). I don't think they do anything with the info anyway so I wouldn't worry about it too much.

I think you're right about the 25% rule. When you say he wants to pay a premium of $10,000 to the "Plan" I assume you meant "policy." It should be OK to use accumulated plan money for this, subject to the 25% limitation as you note. It's a very expensive way to self-direct, if that is the motivation.

Maybe only one that's worth anything, and that has limited use. An annuity plan can be written so that you can name someone other than your spouse as beneficiary for half of the account, without getting spousal consent.

Yes, if J&S is an option, spousal consent is needed. Designating one form of benefit, e.g. a lump sum, as the "normal" form doesn't mean much of anything, IMO. There are pros and cons to having annuities in a plan that doesn't have to have them, but for the most part I agree that they are a nuisance and write new plans with lump sums only. We'll look at removing annuity options in the next restatement go-round.

No, it's not a fix. It's a distraction. The real problem is an out-of-control operating deficit, which has been masked by the SS surplus.

It's generally understood that filing the Sch P starts the running of the statute of limitations for a plan. However, I've wondered before (and I'll repeat it here) whether filing the plan return (with a P) really is significant in protecting deductible contributions, or whether the business return on which the deductions were taken is the significant filing for most issues. By implication, if you don't file the P, all years are open. I'd be curious to hear if anyone has had more than 3 years open because of an unfiled P. (I honestly don't know and I'm just thinking out loud.)