E as in ERISA

THANKS!!

Okay. I realized afterward that I was wrong in referring back to your example. But my basic question is whether it is more likely DB plans than DC plans that will likely be disqualified from the delay?

But does this extension allow that? Isn't there a risk that some of them are less valuable than the QJSA, if the formula is 95% of normal form, etc. So the delay wouldn't apply? But the delay does apply to DC plans -- even if they have only lump sum and QJSA -- if they are almost always considered equally valuable. So is the effect the opposite of what is intended. Is it DB plans with lots of options that are more likely to have some less valuable options -- so they will have to comply with the 10/1 rules -- while most DC plans will be allowed the extension? Or do I have it backwards?

So who gets the benefit of the extension? Would most DC plans? Aren't all forms generally considered equally valuable? Or does the employer really have to consider the particular participant (if he comes from a family with long life span, the QJSA might be more valuable)? I assume it would be some DB plans - with a variety of options, some of which are less valuable -- that would generally be stuck with the 10/1 annuity starting date?

Its now out on the IRS web. See today's Benefits Buzz. See document at http://benefitslink.com/IRS/ann2004-58.pdf .

In a multiple employer plan, you perform coverage testing at the employer level -- not plan level. Under the transition rule, you're basically deemed to pass if you passed before the acquisition or disposition.

Not automatically. 410(b)(6)© doesn't change plan terms. It just fixes demographic problems, not problems with plan terms. If the plan says that it covers all companies in the controlled group and M leaves the controlled group, then M's employees should no longer be part of the plan. All that 410(b)(6)© would do in that situation is to give M a free pass on coverage if M can't pass on its own following the disposition. It doesn't automatically allow M's employees to continue to participate. You would have had to amend the plan to include M if you wanted the employees in. But if the plan says that it covers A's and M's employees, then it might now be a multiple employer plan and M's employees might still be covered.

It's just a coverage testing rule -- that essentially allows you to skip coverage testing for a year after a transaction -- in order to give you time to re-design the plan as necessary to pass coverage.

You can't have in-service distributions of 401(k) money unless they meet one of the requirements (59-1/2, termination, etc.)

Do you have any out, based on deferral election forms? The plan may say that the word "Compensation" means total compensation -- which means that total amount can be used for calculating profit sharing contributions, deferrals and match. However the standard deferral election form doesn't form doesn't always use the same definition. The form may just say how much they want taken out of "regular" compensation or earnings -- as opposed to the formal definition of "Compensation." Accordingly, employees could possibly be considered to have only elected to have deferrals taken out of their regular payroll. (You could have a separate election form with respect to bonus amounts.) Technically, the formal definition of "Compensation" only says "how much"; it doesn't say when its taken out. So you could potentially create a form that allows you to spread the deferral on bonuses out over other payrolls. I'm not saying that is a good way to do it. But its an arguable solution when a mistake has been made. Do you have anyone who is complaining? If a bonus is announced, most aren't expecting to have any deferrals taken out and would actually be disappointed if their checks would be reduced. The primary ones who might be concerned are HCEs -- e.g., if they want to maximize contributions but are limited to what percentage they can elect. You could still provide the mechanism for them (and any other employees) to defer their maximum percentage for the year by spreading out their deferral over the remainder of the year. If you amend the plan then you limit what HCEs can contribute.

An employer can always provide 105 and 106 benefits tax free, without any need for a 125 arrangement. There only needs to be a 125 arrangement if there is a choice between a taxable benefit (cash) and the nontaxable benefit.

Yes. First I would note that the distribution must generally be made prior to 4/15 (of the following year). However, if the plans are related, then there is potentially a disqualification issue. So ERCRS can be used to correct the violation after 4/15. If the plans are unrelated, then there is no qualification issue. EPCRS does not apply. No correction after 4/15.

http://www.accountingweb.com/cgi-bin/item....659&h=660&f=661

I believe that the labor regs under 103 suggest that the Plan Administrator is the one responsible for making sure the report is "submitted." Since the instructions indicate that the plan administrator may not be the party whose name is on line 5, that suggests that they are looking for a different answer. The form itself indicates that a firm's name may be entered. I think that also suggests that they are anticipating outside service providers to be named here. From a positive standpoint, it is possible that the information may be used in order to allow the preparer to discuss the return with the government without having to first get a power of attorney from the client. (I don't know if that's true. But I do know that in some cases they will discuss tax returns with the person who signs the paid preparer line of the return without a POA.)

I think that some are concerned that if the DOL finds major problems with one client's Form 5500, then it may use the information on Q. 5 to look for other forms by the same preparer and audit all of them. If you tell him that, will your client still want you to complete it?

If no notice has been received, I'd file them at the current "Where to File" address (even if it is EBSA). The information should eventually get forwarded to the IRS. I would not assume the letter would be read at that point. But if and when a notice is sent, someone will have the relevant information handy so that a timely and complete response can be provided. (Which may be additional proof in and of itself that someone is being proactive and things are running smoother now). If a notice has been/is received, use the address provided.

There has to be a court order, it has to relate alimony or property settlement, and it has to be pursuant to a state's domestic relations law. So it would most likely be at least a legal separation. You'd have to research state law to see what other circumstances would justify alimony or a property settlement.

dragonflier -- Note that I believe that Archimage is talking about how to fill out the Schedule A. The Form 5500 itself is always completed on the plan year basis, not contract year.

The risk is that on audit the IRS examiner may think that the situation smell a little funny, so if there are operational errors they may not be as successful in negotiating penalties, etc.

No. But if you actually plan to "play roulette" I would do everything you can to show good faith -- e.g., documenting how the error occurred, distributing the other $900 ASAP, updating procedures to ensure that this won't ever happen again, documenting your analysis of 2002-62 and conclusion that actual payments would have been greater than the amount you would have withdrawn if you had made the switch, etc. It doesn't guarantee abatement of penalties. But it's generally better to wear a "white hat" than a "black hat" into negotiations with the IRS.

If she does dispose of any of the shares, she will get a tax reporting stating what the proceeds are ($45,000) not the amount of the gain. It will be up to her to figure out what the "cost" is and subtract that before reporting the gain.

The ruling I'm thinking of is Rev Rul 2002-62. You might want to see if it helps.

What method was used to calculate the payment. Would the RMD method have produced a smaller distribution, especially with changes in value and changes in the mortality tables, etc.? I don't recall what the timing is to elect the method, etc. But it might be worth checking. The IRS issued a ruling on this last year I believe.

See 414® and the regulations. A lot of the rules are designed to make sure that benefits aren't designed in favor of highly compensated employees. The SLOB rules acknowledge that there may be variances in benefit designs based on differences in expectations about compensation and benefits among employees in different industires or geographic locations. So there may be a legitimate business reason for the differences in benefit design.

What do you mean by "cost"? Transaction costs? Are you considering the cost to other participants if the investment manager has to hold additional cost in a fund in order to provide liquidity for such trades? What about the cost to other participants caused by the dilution to their accounts when the participant redeems their shares while they are overpriced?