chris

Client adopted a prototype profit sharing plan through financial advisor. Client recently terminated it and with help of financial advisor sent in a Form 5310. Appears that IRS is now asking for a plan doc from 1991. Client moved offices a number of times over the years and could not locate original document. Financial advisor appears to not have a copy either as she says financial advisor company was not required to keep a copy so she did not do so. My initial thoughts are to have client turn over every stone to see if he can locate a doc from 1991 incl adoption agreement. I assume that there will be a closing agreement necessary since it is in the midst of a Form 5310 review? Any thoughts on avenues to locate a copy of the original doc? Thanks for any suggestions....

Andy: Thanks for the $10000 potential ballpark number. Again, I realize that there any number of details that might skew that number. Client wanting a starting point I guess. Please pardon the following as this might not be the place for it, but are there any qualified individuals on this board handling DB plans in NC? Again, I am not trying to do DB plans when I only know DC plans. Just trying to point the client in the right direction...... Thanks, Chris.

SoCalActuary: To respond to your initial advice. I am not going into the deep end of the pool. I just want someone to tell me if they know how deep it is. I told client that I have no experience in handling DB plans. Client asked if I could find out what a ballpark range might be for setting up a DB. Again, I understand there are many moving parts involved and therefore my post above.

I have a client who is one of three persons in an S corporation owning a farming operation. They have no employees and approximately 4 independent contractors. Client wants a ball park estimate of what it might cost to set up a DB plan for the business. I have no experience in setting up DB's and deem them to be more complex than DC plans. Can anyone venture a ball park range for setting up a DB plan based on the sparse info provided above? Thanks for any help.

So, looks like providing the safe harbor 401(k) notice prior to Dec. 1 and adopting a good faith 415 Amendment prior to Dec. 31 would be in order and amendment/restatement can take place later..... Thanks for your help.

Thanks Tom. I just wanted to check as Sungard Corbel has a separate four line amendment with its EGTRRA safe harbor 401(k) plans which states the specific safe harbor that will be used for the upcoming plan year and future plan years until/unless a new amendment is done. I would feel a whole lot better just giving the safe harbor notice for the takeover plans and then having some additional time to comb through the prototype so that I know it gets amended and restated on our VS document with no issues.

Just had a handful of safe harbor 401(k) plans walk in my door. They are all on the same prototype document and the prototype sponsor has received IRS approval for its EGTRRA document. Given the timing, I was considering whether or not the safe harbor notice could be given for the plans without having to amend and restate them prior to Dec 31 (or Dec 1 depending on how you see the issue). We maintain all of our documents via a Sungard volume submitter document. In the midst of working on amendments/restatements of current clients' safe harbor 401(k) plans I am mindful of a sponsor not only having to provide the safe harbor 401(k) notice but also having to execute an amendment to specifically invoke the particular 40(k) safe harbor contribution it will be using for the coming year. Hence, my issue as to the takeover plans -- can I just provide safe harbor notice and either look to amend and restate prior to December 31, 2008 (or some time prior to April 30, 2010?) or do I need to have an amendment specifically identifying the safe harbor to be relied upon. If an amendment is required setting forth the actual safe harbor contribution to be used in addition to the safe harbor notice, then it would seem that such an amendment may affect the ability of the plan sponsor to rely on the 6 year cycle. Any help is greatly appreciated.

Take a look at http://www.msba.org/sec_comm/sections/fami...ansferofIRA.pdf which I found. It b asically sets out exactly what I have found and is where Appleby also appears to have ended up.....

I ran acrss PLR 9344027. H and W signed off on a separation agreement w/no court order and did not represent to IRS that one would ever be obtained. IRS treated split of IRA's as taxable to H. In other words, written separation agreement in and of itself not enough....

Thanks, jevd. I think both sides have that angle addressed. It's just the court decree issue noted above that is the problem...

I think I may have run a similar rabbit before, but in any event I wanted to see what the collective wisdom is. Husband and wife have signed off on a separation agreement (no court decree, no court order, just an agreement as to who's entitled to what property on account of the separation). Husband has agreed to transfer 1/2 of IRA to wife. Wife wants to rollover said 1/2. Wife's counsel has advised that there has to be a court order. The tie in §408(d)(6) refers to a "divorce or separation instrument described in subparagraph A of section 71 (b)(2)." Section 71(b)(2)(A) states "(A) a decree of divorce or separate maintenance or a written instrument incident to such a decree". I note that §408(d)(6) did not tie in subparagraph B of §71(b)(2) which is "a written separation agreement". Thus, it would appear that without a court order somewhere in the mix (eg, the court decree could later incorporate the written separation agreement?), the movement of 1/2 of husband's IRA to wife's IRA would be a taxable distribution to husband. The legislative history (House Comm Report 101-247) regardng the change to §408(d)(6) seems to imply that the change in the language was to put IRA's on par with qualified plans as to the requirement of a QDRO. I also note that I ran across a number of third party research service materials which seemed to state that the IRA could be split pursuant to a divorce decree OR separation agreement and referred to all items under §71(b)(2). I do not know that they are exactly right based on the actual language of the Internal Revenue Code. However, I also note that the bank holding the IRA says a written separation agreement is fine (ie no need of a court decree). Anyone have any thoughts on this?

Participant has RE in his self-directed PSP account worth 2.5 MIL. Assuming plan allows for in-kind distributions, is there any reason why participant could not request an in-kind distribution of an undivided interest in the RE each year until it was all distributed out to participant? Particpiant's thinking is that as each undivided interest is distributed it would appraise for much less than the pro-rata value of the entire 2.5 MIL tract and thus he will have less tax to pay on the distribution. Two issues: 1) It seems incongruous that the PSP could have the property valued at 2.5 MIL inside the Plan and then have the participant receive for example, ten (10) distribbutions valued at less than 250K each because of the undivided interest aspect; 2) appears there would be potential for prohibited transaction issues in the interim, e.g., when participant would own 10% of the tract and the PSP would own the other 90%, e.g., PSP inadvertently pays all of the property taxes, etc.... Any thoughts? Thanks for the help.

Thanks, Bird. E/er doesn't want to field questions from 80+ other e/ee's as to why they now have less money re 2006 allocations. Most likely E/er will go with alternative solution... Thanks again for the responses.

Thanks for the response Bird. The problem is that the Employer's personnel handling the distributions moved the money into a non-interest bank account in name of the Plan in anticipation of writing the checks for the distributions within the next few days. Problem is that personnel never made the distributions and the money sat there w/o earning anything for almost all of 2006 and now the better part of 2007.

Consultant advises to treat the two balances (not distributed out) as being in the general fund and go back and reallocate earnings of general fund for 2006 and allocate a piece of the 2007 earnigs to them as well. Obviously, appears to be a 411d6 issue as to the other participants. Proposed alternative would be for the Employer to make a restorative payment into the plan as to the two accounts not distributed and not invested. The restorative payment would be determined by the rate of return for the general fund which is where the accounts would have been held. Any thoughts? Plan is to be terminated in 2007. EPCRS states that SCP is not available for a terminated plan even if there is a plan trust still in existence. Any idea as to when the IRS would deem a plan to be terminated for purposes of EPCRS (I know 89-87 applies in other contexts), e.g., consent of directors dated 10/31/07 to terminate plan as of 12/31/07...is plan deemed terminated as of 10/31/07...?

Consultant advises to treat the two balances (not distributed out) as being in the general fund and go back and reallocate earnings of general fund for 2006 and allocate a piece of the 2007 earnigs to them as well. Obviously, appears to be a 411d6 issue as to the other participants. Proposed alternative would be for the Employer to make a restorative payment into the plan as to the two accounts not distributed and not invested. The restorative payment would be determined by the rate of return for the general fund which is where the accounts would have been held. Any thoughts?

Shortly prior to end of 2006 Employer segregated out terminated participant's accounts and proposed to pay them out. 1099-R was issued, however, admin personnel never sent check. Thus, account balance stayed in segregated account until recent plan internal audit (not IRS). Off the top of my head appears that reasonable correction would be to issue corrected 1099-R's (if possible) and distribute out acct balances plus the higher of rate of return for period in question or IRS underpayment rate under §6621. There are also the distribution forms issues as well. Any suggestions appreciated. Thanks.

Shortly prior to end of 2006 Employer segregated out terminated participant's accounts and proposed to pay them out. 1099-R was issued, however, admin personnel never sent check. Thus, account balance stayed in segregated account until recent plan internal audit (not IRS). Off the top of my head appears that reasonable correction would be to issue corrected 1099-R's (if possible) and distribute out acct balances plus the higher of rate of return for period in question or IRS underpayment rate under §6621. There are also the distribution forms issues as well. Any suggestions appreciated. Thanks.

Dentist wants to set up the following: Dentist's father will own 100% of Corp X. Dentist will own 100% of Corp Y. Corp X will lease Dentist's services to Corp Y. Corp X will fund retirement plan covering only Dentist. Looks to me that it might be an affiliated service group such that all e/ee's of both Corp X and Corp Y would be in the plan. Any suggestions or comments?

Co. X and Co. Y each maintain a 401(k) plan with exactly the same provisions -- eligibility/vesting/dist. options, etc. Co. X is to be merged into Co. Y as of 1/1/2007. There are 40+ participants in Co. Y's 401k and 6 participants in Co. X's 401k. Was considering at a minimum to have a short amendment to be signed off by both Co. X and Co. Y as well as trustees of each 401k reciting the merger of the two Co.'s and authorizing the merger of the Co. X 401k into the Co. Y 401k and the transfer of Co. X 401k assets into Co. Y 401k. Any additional issues? I have reviewed the protoype adoption agreements and they are mirror images of each other.

B/c I have had e/er's/plan sponsors in the past that did not get all assets out w/i 1 year of termination and one of them got audited and the agent treated it as an ongoing plan and demanded the contribution as set forth in the doc. As you probably know, clients do not always do what you tell them.

Calendar year safe harbor 401k (3% qnec) to be terminated as of 12/31/06. Plan is a volume submitter doc relying on an opinion letter of the vol. sub. prac. Client plans to submit 5310 to IRS. As part of termination amendment, document to be amended at contributions section to 1) discontinue elective deferrals for all plan years beginning after 12/31/06 and 2) state that no safe harbor contirbution will be made by employer for plan years beginning after 12/31/06. Without such amendment the document clearly states that "For all plan years after ...2001, the Employer shall contribute a safe harbor contribution equal to 3%......." and would appear to be a continuing obligation under the plan doc. Since client is submitting 5310 the IRS will review the language of the amendment, there would be no issue here re document compliance. BUT if client were not going the 5310 route, then amendment of the plan doc. language would negate reliance on the opinion letter issued to the volume submitter practitioner. Thus, would it not almost always be a given that a 5310 would be submitted to get the IRS' blessing on the document's compliance?

"You can lead a horse to water but you can't make him drink." Except for the slapping, E/er has been advised properly a number of times as to the admin. fees issue and to merge/terminate the plans to resolve it.

PIP: E/er started out with a MPPP and PSP years ago. Because of various internal governance issues E/er wanted 401(k) to be a separate, stand-alone plan. With EGTRRA I advised E/er to get rid of the MPPP by way of merger or termination (just get rid of it), but E/er wanted to maintain it b/c of particular investment returns or some other reason. Couldn't get E/er to address the issue of duplication of admin fees, filings, etc... by having three plans. As for my initial question I was curious as to what other alternatives to termination (besides a merger) the bank/directed trustee might have in mind. I liked your suggestion of merging all into one and then terminating the last one, but the resulting determination letter wouldn't be able to cover the prior plan mergers would it? The E/er (medical practice) is very conservative and would probably opt for doing a 5310 for each plan? PAX: With respect to the larger asset base issue since the E/er maintains another defined contribution plan it appears the 401(k) assets would have to be transferred to one of the remaining DC plans and those assets could not be paid out to the participants. APPLEBY: You are correct, Rev Rul 94-76? requires the separate accounting for MPPP assets held w/i PSP. Assuming E/er wants to let MPPP and PSP remain in place and since the 401(k) assets would have to be transferred to one of the remaining plans and knowing what little I have been able to provide here does anyone see any additional benefit from terminating the 401(k) and seeking a FDL on it vs. merging it? Please forgive me for throwing out the question again....

Comparing apples to oranges....???? I understand the definition of merger vs. termination. Read the first post and the follow-up post as to your question. E/er wants to terminate the 401(k) but wants to keep frozen MPPP and active PSP. Bank is proposing that E/er merge the 401(k) into one of E/er's other plans. E/er may also consider filing a 5310 as to the termination. I was just looking for reason why bank might be advising merger rather than termination.....