Calavera

Here is my understanding of PPA Sec. 501(d). PPA Sec. 501(d)(1) states that new notes will be required for plan years beginning after 12/31/2007 and eliminates the requirement for 4011 notice for plan years beginning after 12/31/2006. So calendar year plan does not require any notices for the 2007 plan year. Since the new notices have to contain FTAP for the plan year and 2 preceding plan years, PPA Sec. 501(d)(2) defines what to report for 2006 and 2007 instead of FTAP. I hope this is correct.

Andy, I agree with (1) but where is (2) came from?

I never said it is going to be an easy calculation. IRC 414(p(3) refers to a qualification of a DRO meaning "do not assign more than plan document said". Previous post stated that there are more generous early retirement factors (aka early retirement subsidy). It also stated that according to a QDRO, spouse is entitled to pro rata share of this subsidy. But you cannot calculate the subsidy and therefore pro rata of this subsidy until participant retires. And there is no subsidy if participant retires on his Normal Retirement Date or later. So approach was to start paying the actuarial equivalent of spouse's portion of Accrued Benefit (easy part). Adjust if needed upon participant's retirement without increasing the total value of benefits payable from the Plan (hard part).

I assume they do not have a minor child. Otherwise it is a controlled group anyway. Section 1563 deals with the corporations. I assume you came to 1563 from 414©, which says: "The regulations prescribed under this subsection shall be based on principles similar to the principles which apply in the case of subsection (b)." And subsection (b) refers to 1563. This is how 1.414©-4(b)(5)(ii)(B) describes this exception: Such individual is not a member of the board of directors, a fiduciary, or an employee of such organization and does not participate in the management of such organization at any time during such taxable year. Hope it helps.

I believe this is a correct approach. The place I worked in the past used this approach for years. If participant is active and AP would like to start her benefits, he/she will receive the actuarial equivalent of Normal Retirement benefits. If there is a subsidy at the time of participant's retirement, AP's benefit will be adjusted.

It does, and it refers to how benefits are adjusted for commencement either before 62 or after 65. Thanks Mike! I assume the valuation segment rates and not 417 segment rates are used for the discounting. Should we split the age 65 benefit limit times 5.5% factor/417 mortality into two pieces and discount one of them with 2nd segment rate and another one with 3rd segment rate? And if benefits paid in a form of lump sum are not limited by 415, we would value them as an annuity using 417 mortality table and valuation segment rates, correct? Muchos gracias in advance!

I guess I am confused by the last sentence of the following excerpt from Rev. Rul. 2007-67: In addition, for plan years beginning on or after January 1, 2008, § 417(e)(3)(B) defines the term "applicable mortality table" as a mortality table, modified as appropriate by the Secretary, based on the mortality table specified for the plan year under subparagraph (A) of § 430(h)(3) (without regard to subparagraph © or (D) of such section). In contrast to the phase in of the use of the segment rates with regard to the applicable interest rate, there is no transition rule with regard to the applicable mortality table. In addition, PPA ’06 left unchanged the mortality table which generally must be used for the purposes of adjusting any benefit or limitation under § 415(b)(2)(B), ©, or (D). Does the last sentence refer to GAR94 mortality table and what will it be used for?

So, what do we do for 415 calculations from distribution and from valuation perspective? Are we still using GAR94 mortality table and not a new 2008 lump sum mortality table (let’s call it PPA table) for 415 calculations? So, for the distribution purposes it is lesser of present value of accrued benefit under PPA table and lump sum segment rates and present value of 415 max benefit under GAR94 and rate which is greater of 5.5% and lump sum segment rates. Am I correct so far? Would you compare each segment rate with 5.5%? Now for the valuation purposes let’s assume person is age 55, retiring at 65, with assumption of taking lump sum upon retirement. What combination of mortalities (GAR94/PPA) and interest rates (5.5%/val segment rates/lump sum segment rates) should we used?

Let say one person plan is underfunded and the owner wants to terminate it since his income is substantially decreased. Is there an easy way for him to get money out of the plan before the IRS blesses the plan termination, since the IRS is sitting on the d-letter for over 6-9 months?

Does anybody see any problems with the following? NRA - Age 62 ERA - Whatever client wants Early Retirement Benefit - Accrued Benefit unreduced for early retirement and limited by 415 if needed Retirement assumption - 100% retire when first eligible

I still can not see why contribution in stock to a pension plan would be considered a prohibited transaction. Everything I read is referring to either the Keystone case that was about truck terminals or the first definition under prohibited transaction regulations as “sale or exchange, or leasing, of any property between a plan and a party in interest/disqualified person”. Q&A46 is also about contribution of property to a plan. But, by regulations, a transfer of real or personal property by a party in interest to a plan shall be treated as a sale or exchange if the property is subject to a mortgage or similar lien which the plan assumes. So, again we are talking about real property and not stocks. Then we have Section 4975 talking about tax on prohibited transactions and it seems that one of the exemptions from 4975(d)(18) through 4975(d)(22) would apply. Furthermore, if it is a prohibited transaction and you need to correct it by selling stocks to a third party, it really means that you call your financial institution and ask them to sell the stock. Then you ask them to buy it back and you end up in the same position you were before the “correction” (assuming the same stock price and no fee for transactions), but now it is suddenly “corrected”. It seems ridiculous to me. Merlin or somebody else, please enlighten me why you think that contribution in stock is prohibited. Thanks in advance.

So, let me get it straight. If one person sole proprietor has a DB plan, he can sell some stocks, wire the proceed of this sale as his contribution to a DB plan, and buy the same number of shares as part of his investment (assuming the price of the share didn't change). But he cannot save a couple steps by making his contribution in stocks, which essentially will produce the same result. Is my understanding correct? Merlin, could you post the whole Q&A 46 from the 2002 ASPPA Conference?

Below is an extract from the 5500 manual which, unfortunately, does not provide a definite answer PRACTICE POINTER: When there is more than one owner, the type of entity sponsoring the plan determines whether Form 5500-EZ may be filed. There are no specific instructions about the treatment of a limited liability company (LLC) as an entity eligible to file Form 5500-EZ. An LLC elects whether to be treated as a partnership or as a corporation for tax purposes. As noted in the above example, a partnership with no employees may file the Form 5500-EZ, whereas a corporation with multiple owners but no employees may not file Form 5500-EZ; however, it is not clear that an LLC may file Form 5500-EZ simply because the entity elects to be treated as a partnership for tax purposes.

Another thing to look for. The contributions for the employees should be deducted on Dr.'s Schedule C reducing his NE from SE. His contribution should be deducted on his 1040.

Since all his emplyees were paid out, wouldn't both plans become the plans that cover only the sole owner of a business? Therefore the plans are not covered by ERISA, and the funds are subject to creditors.

Since the snapshot date is typically the last day of the prior plan year (12/31/2006), I think the 1983 GAM tables should be used.

It maybe a case when the assets was transferred from one custodian to another custodian during the year.

Instruction says to include any individual who terminated employment ... and/or received a cash distribution or deemed cash distribution of his or her accrued benefit. In case 1 you have 0% x $X = $0 (deemed cash distribution) In case 2 you have X% x $0 = $0 (deemed cash distribution) I think both cases should be reported on line 7h.

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