david rigby

I agree with the above responses. The ending balance on a final return should be zero. I suspect that the situation posed in the original question is more common than we think.

PWBA Notice http://www.benefitslink.com/cgi-bin/show_a...tabase_id=24642

I certainly endorse the comment about this website. Don't forget the Operating a Pension Consulting Firm Message Board.

Another discussion: http://benefitslink.com/boards/index.php?showtopic=11579 I would like someone else to review my conclusion, and respond with correction or confirmation. Thanks.

BTW, it is also clear that such arrangements are covered by the accounting requirements of SFAS Nos. 87 and 106.

I have only skimmed the Notice http://www.irs.gov/news/n-01-61.pdf, but it appears to me that "affected taxpayers" do have relief. "(4) In addition the Internal Revenue Service has granted a 120 day postponement of time to the affected taxpayers to perform the other acts described in section 301.7508A-1©(1) of the regulations. The postponement applies to acts required to be performed within the period beginning on September 11, 2001, and ending on November 30, 2001." IRS Reg. 301.7508A-1©(1)(iii) reads, "(iii) Making contributions to a qualified retirement plan..." Note that only "affected taxpayers" get any relief. Whether I have interpreted this right or wrong, I hope someone will confirm and/or respond.

IRS Notice http://www.irs.gov/news/n-01-61.pdf

Not sure if I understand your facts. The issue of discrimination within a qualified plan is concerned only with comparison between NHCEs and HCEs. The plan can discriminate between HCEs or between NHCEs. Of course, this might lead to other HR problems, but it is not prohibited by the Internal Revenue Code.

For me, knowing that two prior actuaries valued it consistently is a help. But that is not what can affect the document itself. If the benefits actually communciated to participants, and especially the amounts actually paid to participants, used all service, then you have a claim that actions of the employer (not the actuary) have changed the substance of the plan.

Potential problem. But check to see how actual benefits have been done. If they use all service (consistently), you can probably argue that the plan has been de facto changed. Yes, this might be a stretch, but it might be worth it, especialy since the confusion will be resolved in favor of the participant.

Sounds vanilla to me.

I may get myself in trouble again by advocating for common sense. There is no precedent for this disaster. If your ability to make your contribution on time is legitimately affected by the disaster, perhaps it makes sense to do the best you can, document why and when. Then we'll see what the IRS says.

I think the rule is that it should be made by the due date. Weekend extensions normally do not apply to due dates for contributions, although they do apply to due dates for filings. Note that "making" a contribution does not mean that the trustee/custodian has to receive it by that date. Usually a postmark by that date is sufficient. However, since financial markets have been closed a few days, it is possible that the IRS may give some "disaster relief".

Maybe. See IRC 401(a)(1). Includes the phrase "...for the exclusive benefit of his employees or their beneficiaries..." IRS Reg. 1.401-1 http://www.access.gpo.gov/nara/cfr/cfrhtml...26cfrv5_00.html might include some flexibility. Subsection (a)(3)(ii) restates this "exclusive benefit characteristic". Subsection (B)(4) seems to acknowledge that former employees have a legitimate place in qualified plan. My hunch is to question the motivation of the employer for permitting this.

From facts given, looks like a simple NO. 1. If the DB lump sum value exceeds the cashout limit, then the plan appears not to permit a lump sum distribution to this participant. Absent any other information, that should be enough to answer the question. 2. Also, the provisions of the DC plan will say whether it accepts rollovers. However, most plans that do so also include a requirement that the individual be an active employee of the sponsor.

A few thoughts. You are not amending for GUST, so the remedial amendment period is not relevant (?). December 31, 2001 is probably relevant only in the sense that the plan must be formally adopted by the last day of the fiscal year for which you are taking the deduction (or is it March 15, 2002?). And this plan document should already be "GUST-ready". You never have to submit a plan to the IRS for a determination letter, although most consultants, attorneys, auditors, etc. will advise you to do so.

I don't think a plan merger is a problem. It happens all the time. However, it usually happens when A purchases B, not just the assets of B. If B still exists, then it might be the plan sponsor. You need some qualified legal beagle to tell you if that distinction is important. Also, note that merging the plan (or purchasing all of B for that matter) will certainly shift any potential liability from B to A, if there are any skeletons in B's closet.

Makes sense to me. There is probably an important timing issue. That is, would the amendment to the money purchase plan have to be enacted prior to 10/1/2001? You might also have to watch out for vesting for the short plan year.

In general, all distributions from qualified plans (ie, pension plans, profit-sharing plans [which includes 401k plans], etc.) are taxable to the recipient. The first exception is for amounts previously contributed to the plan by the participant with after-tax money. 401k contributions are made on a pre-tax basis (hence tax deferred until paid out), but some profit-sharing plans permit the EE to also make after-tax contributions. The second exception is when the distribution is eligible for a rollover, and is actually rolled over to an IRA. In this case, the tax is deferred until the amount is distributed from the IRA. In the case of a distribution due to the death of the employee/participant, the amount is taxable to the beneficiary. If the beneficiary is the surviving spouse, then a lump sum distribution is generally eligible for rollover to an IRA. Non-spouse beneficiaries do not have rollover rights. If I have errors of omission or commission, someone more qualified than I will correct me.

Seems unlikely to fit with the intention of the Code. As you describe it, the former employees of B were never employees of A. Any qualified plan is usually for the employees of the plan sponsor (and their beneficiaries). IRC 401(a)(1) includes the phrase "...for the exclusive benefit of his employees or their beneficiaries.... BTW, why does A want to be so generous with these people who were never A employees?

Hmmm. I also need more time to digest this, but it looks to me like a plan whose benefit is defined by the greater of formula A or formula B. Not sure that causes discrimination, although the change could be considered discriminatory under 1.401(a)(4)-5. Also, potential for problems with backloading.

Great list! Hey Dave, the attachment in Appleby's post is a one-page document. Perhaps that information would be a useful page of links. Whatcha think?

Some similar discussion here: http://benefitslink.com/boards/index.php?showtopic=6713

Plan X has been exempt from PBGC premiums because the only employees of the company are husband and wife. Now they have an employee. The employee first became a participant at 1/1/2001. The participant count at 12/31/2000 is 2. I thing the 2001 PBGC premium is $38. What am I missing?

You might also want to look at this "calculator" provided by the American Academy of Actuaries. http://www.actuary.org/briefings/pension20..._calculator.htm