John Feldt ERPA CPC QPA

Good point Tom. I cannot see the IRS saying an easy "Yes" to this. Does the IRS ever really just say "Yes" without adding strings and caveats?

Are they a government employer? If so, the 5500 should not be required for the 403(b). Are they a church entity? If so, they have certainly not made a voluntary election under 410(d) to subject the plan to ERISA and then the 5500 should not be required for the 403(b). An election under 410(d) would be made as an attachment to the first 5500 filed (which you say they have filed) or alternatively, such an election could be made as a statement attached when the plan files for a D letter for the document (which you say they don't have). Be careful though, they might be church-controlled, which is different than being a church. A church (or a church school) would be considered a church and no 5500 is required. But, generally, any other church controlled entity would still have to file. I am not involved in cafeteria plans. Bummer about the plan document not being there.

How about where the document drafting peoples' boss is an attorney, but the attorney has no real significant document drafting knowledge or retirement plan drafting / design knowledge, and thus the attorney does not review any of the documents?

Yes.

To close this out: We replied to the IRS examiner and explained how 2002-42 applies to the merger of a money purchase plan, not a profit sharing plan, and further provided an example from 1.411(d)-3(a)(3), example 4(i), and included language from the conclusion after 4(ii) to support our position. For the 410(b) issue, we gently encouraged him to rely on the regulations to interpret the meaning of the code, specifically 1.410(b)-2 in this instance. We quoted 1.410(b)-2(a) and pointed out 1.410(b)-2(b)(1), which requires just one of (b)(2) to (b)(7) to be satisfied. We explained that 1.410(b)-2(b)(2) supports our position and we provided him with the definition of "ratio percentage" as found under 1.410(b)-9. The case then went to his supervisor, we received a 'no change' letter from the supervisor stating that they have closed the audit, accepted the returns as filed, and that no action was needed. At least we didn't have to get an ERISA attorney involved. Score! WDIK - correct zimbo - correct

Thanks!

We have a client that has a small amount of excess (over the 415 limit) in their 3 person DB plan - about $30,000 extra (all employees are at the 415 limit). They are a corporation - for profit (not a tax-exempt employer). They are still a functioning company and will have enough wages to support the allocation in the QRP. So, if they transfer 100% of the excess assets to a qualified replacement plan, according to 2003-85 it looks like they pay no excise tax, since no reversion occurred (and also avoid income taxes of course). Is this how you would read this? Is Revenue Ruling 2003-85 still the most current guidance for this?

Nice posting wsp!

Also, the place where the funds are invested may want a trust ID number for the plan's assets.

You may want to use one for reporting distributions, having a trust ID identify the trust of plan as the payor of the distibution, for forms 1099-R and 1098.

The new expectation is that the Final 403(b) regulations will be coming out this summer (2007).

I haven't looked up anything regarding #1, I assume you are talking about vesting service. I don't recall that would be a problem, unless one of the plans terminates with 5 years of the startup of the other or something like that (don't hold me to this answer, it is Friday the 13th). For #2, the dividend payments on the stock won't count as annual additions. Also, if this is a leveraged ESOP, then a portion of the allocation is payment toward principal and some is payment of interest on the loan, so only a portion of that entire allocation counts as an annual addition. I have not looked at the ESOP sections in the recent final 415 regs, though, so take the above response with caution.

I have heard that it has become a political issue. Certain companies are upset that their GICs or their money market, or [you name the fund type here], was not on the DOL's initial guidance and those companies/industries are placing a lot of pressure on the DOL to add their investment vehicles to the final guidance. The DOL probably does not want to add some of those because they do not feel that they are appropriate for long-term retirement investing. A standstill appears to be the result so far.

That's all good. Be sure to look out for any deferring employees who quit right after that one goofed up paycheck is paid, and thus they do not have enough pay in the next payroll to cover the double deferrals.

That means the 2007 Form 5500-EZ has a $250,000 threshold for requiring the Form to be filed. The 2006 Form 5500-EZ still has a $100,000 threshold.

Also on the board today: http://benefitslink.com/boards/index.php?s...c=34145&hl=

Thanks Tom, that is somewhat along the vein of what I was curious about.

Yes, the ebar possibility is what has caused the question. If no one on this board has been doing anything like this, that's fine. Perhaps a 50-year old owner with 5 years and a 51 year old NHCE (just hired) would be a better example, using age 50 and 5 years as the NRA. The owner gets tested using age 50, the employee gets tested projecting to age 56. Anyway, just wondering if others have gone there.

Yes, very lengthy, 397 pages in this pdf file, the actual regulations start on page 186. http://www.treas.gov/press/releases/reports/td9321.pdf Also this came out as well (very short): http://www.irs.gov/pub/irs-drop/n-07-34.pdf

Suppose a business owner (age 29) has 4 years of service by 12/31/2007 and starts a new DC plan (in this year, 2007). No other qualified plan. Suppose one employee (age 28) has just been hired (March 2007). Assume we do not go with 2 YOS for entry, so this ee would enter sometime in 2008. I would like to run the cross-testing for 2008 using a testing age equal to the normal retirment age, and I would like to use a normal retirement age equal to the later of age 30 or 5 years of service. What do you think? Issues?

Ok, after reading through some of 1.401(a)(4), I can see that. Now, suppose the plan covering the HCE contributed 20% of pay for 2005, and the plan covering the NHCEs contributed only 0.00% of pay for 2005. In this case, the 2005 contribution was actually deposited in 2006, so perhaps that amount can be recharacterized as a 2006 allocation/contribution (plus the 2005 tax return gets amended to show no deduction). Assuming they have not made any other contributions in 2006 (so the 415 limits are not exceeded), do you see any pitfalls with doing this, or do you see a better solution?

Here's an interesting prospect: Employer has 2 Profit Sharing Plans (no deferral provisions): Plan 1: Covers only the 1 HCE of the Employer, the document is a vol sub cross-tested doc Plan 2: Covers all NHCEs (7 or 8 ees), the doc is a NS prototype, allocation is uniform pct of pay To pass 410 coverage, plan 1 must be aggregated with plan 2 in order to pass (obviously). Then, for plan 1 to pass 401(a)(4) nondiscrimination, the prior TPA ran a cross-tested 401(a)(4) test including the HCE and all NHCEs. The contribution that is then decided upon for Plan 2 is at least equal to either 5% of pay or 1/3 of the pct given to the HCE in plan 1. 1. Doesn't plan 2 need to have gateway language somewhere in order to be in compliance (in form) so the plan can actually support its position that it really gave a "gateway"? or 2. Is the gateway language somehow not needed in plan 2's doc?

Mike: I think so, however the deadline is now too late for -11g, so it can't be included if contributed now for a 2005 calendar year plan, right? Austin3515 and Dougsbpc: Rev Proc 2006-27 Section 7, 8, and 9, and then Appendix A, section .02

Yes, that is a fine point - thanks!

Right. Benefits accrued under separate employers are not aggregated for 415 purposes. Be careful to understand what it means to be "separate" employers. Generally, if the owner of a business ever earned a DB benefit in a previous business that he also owned, then aggregation would be required to offset the current plan's 415 limit by the previous benefits earned under the old DB plan. When establishing a new DB plan it is important to ask the client if they ever had a prior DB plan or if they owned a business that maintained a DB plan. Then find out the details about how much ownership they had in the old business. In your case, the county was not a business that he owned, so no worries!