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To Masteff: I'm not looking to 2007-7 for the spouse's RIGHT to rollover to an inherited IRA. I'm looking to 2007-7 by analogy to determine what rules apply if the spouse chooses to exercise that right. (btw, I know of some companies who take the position that, despite the PLRs, it's not clear that a spouse can rollover from a qualified plan to an inherited IRA. I think that's incorrect, and would lead to the anomaly of a nonspouse beneficiary now being able to do so while a spouse can not. Nat Choate thinks a rollover to an inherited IRA is possible and I think her logic is, as usual, reliable. section 3.2.07, 6th edition.) To MJB: your statement is basically the question. if the spouse was subject to the 5 year rule in the qualified plan, then why shouldn't the same rule expressed in 2007-7 (ie, if the 5 year rule in the applies in the qualified plan, it also applies in the IRA unless the rollover is made within a year after the year of death) also apply to a spouse? If the spouse chooses to be treated the same as any other beneficiary by rolling over into an inherited IRA, rather than her own, then what is the legal basis for treating the spouse differently in this situation? Do you have a legal basis for your statement? I think if you research this, you'll find little on point. thanks. card

"WRT your last question, a spouse doesn't have to choose the 5 year or life expectancy method if the participant dies before the RBD; they simply must take RMDs by te later of the year following the participant's death, or the year the participant would have turned 70 1/2. If death occurs after the RBD, the spouse can roll over or take annual RMDs." Don't think you're correct. The plan can require use of the 5 year rule where the participant dies before starting RMDs. And if it does, I see no reason why a spouse would be treated differently from a nonspouse if he or she wishes to transfer the assets to an inherited IRA.

Notice 2007-7 provided detailed and controversial rules governing the ability of a nonspouse beneficiary to roll over benefits from an employer plan to an inherited IRA, where the 5 year RMD rule applies to the employer plan distributions. While the Notice applies specifically to nonspouse beneficiaries, why wouldn't the IRS apply the same logic to a spouse beneficiary in the same situation? For example, a spouse beneficiary might want to roll over 401(k) funds to an inherited IRA in order to get distributions free from the 10% early distribution tax. If the 401(k) plan requires use of the 5 year rule, what rule applies to the spouse beneficiary? why wouldn't he or she also be subject to the same rules the IRS sets out in Notice 2007-7? Ie, would the spouse beneficiary be required to complete the rollover by the end of the year following death in order to be able to take RMDs using the life expectancy method?

announced last week in rev. proc. 2006-53. card

PPA provides that the IRA income limits are adjusted for inflation beginning in 2007. Has anyone heard when these adjustments will be announced by the IRS? (CCH and others have already projected the new dollar amounts.) thanks card

QDROjerk- I don't believe I said I didn't know why I advised against it. As I'm sure you know, the preemption rules of ERISA DO apply to NQDC plans. And, perhaps in an overabundance of caution, I do not want to taint an ERISA plan, which is by definition for employees, with non-employee particiants. Take your condescension elsewhere. Or maybe enter into practice with G Burns.

I have always advised against including non-employees in any ERISA plan, including nonqualified plans. Yet I often see NQDC plans that include outside directors. Any opinions on this? Thanks. card

Can an attorney licensed only in State A review NQDC plan documents for clients in State B in connection with a 409A rewrite, if the review deals only with federal tax and ERISA issues, and anything state related (for example, a rabbi trust document) is provided on a specimen basis only? (Assume the lawyer has not applied for admission to any federal courts.)

A DBO plan provides (appropriately enough) benefits upon an employee's death, and no lifetime retirement or disability benefits. Is the plan a welfare plan or pension plan under ERISA? If the plan requires employee contributions, is a trust required? My tentative answer is: it's probably a welfare plan, and trust is required. I want to avoid the trust requirement. The DOL's nonenforcement policy in Technical Release 97-01 doesn't apply to unfunded plans. However, top hat pension plans are exempt from the trust requirement, and it seems inconsistent to apply it to top hat welfare plans. I don't know of any DOL enforcement in this area. Anyone have any recent experiences? I'm not entirely uncomfortable taking the position that the plan is a deferred comp plan exempt from 409A.

nice try. ok, one last time. I asked if anyone sees endorsement split dollar used as an informal funding vehicle for NQDC plans in the real world. (They can be, they have been, and they will continue to be. I was interested in how common they are.) GBurns said: "After the many successful attacks by the IRS and the new rules, this should be a very rare rarity," and "I thought it appropriate so as to indicate a possible no no situation." Now what the hell does 7(b) have to do with this? Does 7(b) say endorsement split dollar is gone? Does 7(b) say endorsement split dollar can't be used as an informal funding vehicle for NQDC plans? That it should be a very rare rarity? Was anyone talking about a roll out of cash values to an employee? Talk about intellectual dishonesty (you're very good at it)- did your first post say "informally funding a NQDC plan with endorsement split dollar containing an equity rollout guaranteed by a contingent assignment should be a very rare rarity?" Is that what you really meant? And what was "tongue in cheek?" 7(a)? Insmark's statement to continue to use standard endorsement split dollar is tongue in cheek? Are you serious? HA HA HA!!! You are something. But again, I'm too civil to say exactly what that might be. Really, this is it. You're not worth the time. And I don't want any part of your attempt to reach the 3,000 post plateau.

"Why do you want to argue about a subject about which your knowledge is limited?" Funny, I was going to ask you the same thing except I am apparently far more civil than you. All these words, GBurns, just to try to obfuscate the fact that you gave a ridiculous response to begin with, and then compounded it with an even more ridiculous defense? Or is Gracie really writing your responses? My question was clear. You had nothing to add, yet spoke solely to hear yourself speak. (An ingrained habit, from what I've seen on these boards.) But to answer your most recent absurd response, since you asked, I did not mention "4 and 6 and 6(?)" because they are not applicable. Not only that, in the words of Insmark, they are "odd arrangements." In fact, Insmark says in both paragraphs 4 and 6: "Most of you have never used this variation, and InsMark has never illustrated it." (And if you really meant paragraph 5, instead of the second "6," Insmark says the same things about that arrangement.) I cited paragraph 7 because it says continue to use "Endorsement Split Dollar in which the policy owner is an employer..." And I'm sure you know, since you're apparently an expert on NQDC plans as well as every subject matter on Benefitslink, employer owned endorsement split dollar is often suggested as an informal funding vehicle for NQDC plans. My question asked whether practitioners saw this happening in the real world. Not whether endorsement split dollar is still a viable product. That was (and is) a given. (Want to pounce on the word "product" again? Really, go ahead.) Have you even read what you cited (twice now)? Perhaps you should reconsider the style you've adopted on these boards as an abrasive condescending bully. Even worse, an uninformed one. This is my last post directed at you. And thank you TC. card

From the "hundreds" of articles, a quote from the one YOU cited: 7. Continue to use the following Endorsement Split Dollar plans after September 17, 2003: a) Endorsement Split Dollar in which the policy owner is an employer or a parent. For illustrations of this variation, see the module of the same name under the Executive Benefits tab in the InsMark Illustration System. Also see the module named Private Endorsement Split Dollar under the Private Split Dollar tab in the InsMark Illustration System. There should be no adverse tax consequences associated with the policy cash values caused by the final split dollar regulations. what exactly is your point?

Thanks but the article you cite just goes to confirm that standard employer owned endorsement split dollar continues as a viable product. Equity split dollar is the target.

The IRS attacks haven't changed endorsement split dollar all that much- which was the usual method (I think) of informally funding NQDC plans. card

I need help too. I always get otters confused with beavers and muskrats. card [sorry, couldn't resist.]

I always read articles about the use of endorsement split dollar as an informal funding vehicle for a NQDC plan, and I've read the Miller case, but does anyone see this being done in practice? I saw a survey once that showed (I think) 2% (maybe less) of NQDC plans using split dollar. Just curious about how common it is in real life. Thanks. card

Katherine: to complicate things a little more, you said earlier: "If that is true, then the money was probably vested for 409A purposes at 1/1/05, because a rolling risk of forfeiture is not a valid SRF for 409A purposes." Actually, for determining which dollars are grandfathered, the definition of SRF in Section 83 applies, not the definition in Section 409A. See Question 16(b). But I thought this entire issue was fairly straightforward: 457(f) plans are generally subject to both sections 409A and 457(f). A rolling risk of forfeiture works (presumably still) for 457(f) but not 409A. If a 457(f) plan complies with section 409A's substantive requirements (elections, distributions, etc.) the issue of a substantial risk of forfeiture as defined under Section 409A is irrelevant (except for the 2 1/2 month rule), and the plan continues as it always has under section 457(f) (including RRF's) If a 457(f) plan fails to satisfy section 409A's election or distribution requirements, then the definition of SRF in section 409A applies, the rolling risk of forfeiture is ignored, and there is immediate taxation under 409A. If a 457(f) plan fails to satisfy Section 409A's funding requirements then a transfer under Section 83 is deemed to occur (and SRF as defined in Section 83 applies). SRF's are important under 409A for three reasons: 1. Benefits under noncompliant plans are taxed when the SRF lapses. (409A definition for election and distribution failures, section 83 definition for funding failures.) 2. Determining the grandfathered benefit. (section 83 definition) 3. Determining if the 2 1/2 month rule in Q4© applies. (409A definition- so RRF would be ignored for this purpose, and you would have a deferral of compensation subject to 409A) [edited to clarify that a violation of the funding rules creates a transfer of property under Section 83.] card

Hi A typical arrangement is for the TPA to make the initial claims determination, and handle the first level of appeal, with the employer providing a second level of appeal. The regs require that a claimant be allowed to appeal an adverse benefit determination to a named fiduciary. If the first level of appeal is to the TPA, and the TPA does not have final claims authority, and refuses fiduciary status, is that level of appeal even permissible? Can a plan require the employee to appeal to the TPA (not a named fiduciary) before the employee is eligible to bring the appeal to the employer/named fiduciary? Is the only solution to get the TPA to agree to fiduciary status? Thanks. card

An employee terminates employment and chooses 15 year installment payments from a 401(k) plan. The employee can choose to receive an additional payment (or cash out the remaining balance) at any time. 1. Are these substantially equal periodic payments rendering them ineligible for rollover? 2. If so, are they periodic payments subject to wage withholding, or nonperiodic payments subject to 10% withholding? I believe the answers are (1) yes and (2) nonperiodic, but I'm having trouble finding conclusive guidance with respect to (2), other than a 2000 private letter ruling which says that, because of the "on demand" feature of the installment method, these are "amounts not received as an annuity." Therefore wage withholding would not apply. I researched this several years ago, and had concluded then, based on the section 72 regs, that installment payments for a fixed period were amounts received as an annuity, and payments of this type would be subject to wage withholding. Anyone know of any official guidance? Thanks. card

Both Code sections 403(b)(3) and 415©(3)(D)(ii) add back section 125, 132(f), and 457 deferrals into compensation. The language contained in the statutes is pretty broad. Section 415 says "The term 'participant's compensation' shall include... any amount which is contributed or deferred by the employer at the election of the employee and which is not includible in the gross income of the employee by reason of section 125, 132(f)(4), or 457." Neither the statutes, nor the Committee Reports to SBJPA and TRA 97, distinguish between deferrals under Code sections 457(b) and (f), and I haven't been able to find any official guidance from the Service. Does anyone know of any informal guidance on this? Thanks. card

Hi- An earlier thread (from 2002, below) discussed noncompete provisions as a SRF under section 457(f), and some members expressed concern about whether they work. Has anything happened in the meantime to change your mind? I have seen some suggestions that the Service's failure to address this issue in the recent 457 regs is a "tacit acknowledgment" that these provisions work. I am still concerned however that, at best, the guidance in section 83 applies. I have heard some of the major consulting firms say that use of noncompetes as a section 457(f) SRF is now very common. (For example, a 2 year/ 50 mile radius noncompete.) Is this your experience as well? Obviously legal advice shouldn't be based on the herd concept, but sometimes there is safety in numbers, and I would assume this is another area where any adverse guidance from the Service might be applied prospectively. thanks. card http://benefitslink.com/boards/index.php?s...2&hl=noncompete

An employer determined the employee contribution for health insurance to be 5% of premium. The employer notified employees, and set out the per check dollar amount for each benefit option. Then the employer realized that the insurer had reconsidered the rate, and slightly lowered the premium. Based on the new premium, employees would be paying 5.09%, instead of 5%. I know this raises alot of issues. Potential breach of fiduciary duty if the employer doesn't somehow "correct" this: potential prohibited transaction, potential loss of trust exemption, section 125 change rules, etc etc etc. On the other hand, the cost to correct might exceed the dollars involved. The employer would like to use the actual rate for COBRA purposes, but leave the active employee population alone. Has anyone confronted this in the past? I don't think I can recommend doing nothing, given that the employee contribution was communicated as a percent of premium. I'm thinking perhaps the easiest approach is a premium holiday if refunding to individual employees is not practical. Any suggestions are appreciated. card

1. A client is considering a "severance pay plan" funded solely by employee pre-tax dollars, and payable upon any termination of employment. If the employee dies before termination of employment, the deferred compensation is "forfeited" and instead the employee receives a death benefit under a split dollar arrangement. (Alternatively, if the employee terminates prior to death, the split dollar benefit is lost). While there is no formal guidance, the informal guidance provided by the service in PLR 199903032 seems to strongly suggest that a benefit payable on _any_ termination of employment likely will not be considered a bona fide severance pay plan (especially, it seems, if the plan is funded solely through employee pre-tax deferrals). Are tax exempt employers adopting plans like this? 2. Assume the Service decides this is a deferred comp plan subject to section 457(f). When is the "severance" benefit taxable? Is there a substantial risk of forfeiture until the employee actually terminates employment, because the severance benefit is forfeited upon death? Or is there immediate taxation, because the employee can choose to terminate at any time and receive the severance benefit? 3. I should be doing real estate closings. Thanks- card

Ooops! Did I mention DOL is currently in there auditing the plan? But I think you are right. From a practical perspective, just get the dollars back in. Client has suggested simply having the actuary send the next bill to the trust showing an overpayment, and a credit balance. So the trust will be made whole with its next payment to the actuary (but without any earnings adjustment). Seems like the path of least resistance. Peace, bro. card [there should be a de minimis rule for these situations]

Hi- The SERP expenses are actuarial expenses relating to the top-hat nonqualified plan that provides benefits in excess of the DB plans. Clearly those expenses are not payable from the qualified plan trust. The actuary sends a seperate bill with respect to it's SERP charges. It just got mixed up with the DB plan's bills and improperly paid from DB plan assets. Thanks- card