Rob P

I knew there were issues, but wasn't sure if they were resolved yet. Thanks for the help!

Hopefully an easy question. If you use an EOY valuation for 2008, can you automatically switch to a BOY for 2009? It's a one-person plan. Thanks.

A sole-prop has a requirement minimum contribution greater than their earned income for 2008. So part of the contribution is currently non-deductible. Just a theoretical question: What would happen if they never have future earned income and never get a chance to take the deduction on the whole 2008 contribution? For example, for 2008 the sole-prop has a $150K required contribution and can only deduct $100K. In 2009, the sole-prop’s source of income dries-up and they don’t anticipate any future income. So in 2009, the sole-prop elects to terminate the plan and rollover their entire benefit to an IRA. What happens to the $50K non-deductible amount? Can it be rolled over? If they elect a taxable distribution is it subject to tax? Any thoughts are appreciated.

I am doing a 2009 contribution projection for a sole-prop. In 2008 the sponsor contributed about $170K more than the required minimum, as such I have a pre-funded balance in 2009. My preliminary 2009 calculations show a required minimum contribution of $130K, but I still have the pre-funded balance of $170k (adjusted with interest). The software that we're using seems to have ignored the pre-funded balance (other than adjusting the assets). Question: Is it required the any pre-funded balance reduce the year's required minimum contribution? For this particular case, the sole-prop is not anticipating any earned income for 2009, but still wants to make a contribution. It was my understanding that any contribution made in excess of the required minimum would be subject to a 10% excise tax penalty, so if the current required minimum of $125K (according to the software) must be reduced by the pre-funded balance, then I really don't have a required minimim and any contribution would be subject to an excise tax penalty. Any input is appreciated.

This is unrelated to the 2009 suspension of RMD's. Can a active participants (a non-5% owner) who previously elected to and has been receiving annual RMDs stop taking these payments? The participant wants to now suspend all future RMD's until he actually retires. The plan is written to say that a non-5% owner can defer payments. The plan is silent on whether a participant who previously elected payments can at anytime recind that election. Any input is appreciated.

I have generally thought of the AFTAP as a "cash basis" calculation. Current liabilities vs. current assets. We have a sponsor that failed to make their 2007 required minimum contribution, due 9/15/2008. The plan now has an unpaid minimum required contribution (prior accumulated funding deficiency). Sponsor has no intention of making the contribution. Does this effect the current AFTAP certification? Any input is appreciated.

Thanks! That's what I thought, but I just couldn't find anything to back it up. The sponsor did distribute notices on a timely basis, but they just forget to sign the formal resolution until right before the proposed termination date.

What is the actual due date for a sponsor to sign the Board Resolution terminating a DB plan? Assume the plan was previously frozen, and all participant notices where prepared and distributed on a timely basis. Can they sign it anytime before the designated date of plan termination? Any input is appreciated.

Thank you all for the input. It is appreciated. I know I sounded a little dense on the issue. Your conclusions are my original understanding of the rule. We just needed clarity since we started doubting ourselves the more research we did (there seemed to be caveats to everything we read). We recently got into a heated debate with the legal team of a major financial institution. Their prototype does not always for disaggregation. When we suggested to the client to change to our VS document (which does allow disaggregation), we were challenged and told by their attorneys that it would not make a difference. It’s tough to convince a client that a 10-person shop’s knowledge may be better than the attorneys for a 30,000+ firm. Thanks again.

Tom - Thanks for the response and thanks for getting Sal involved, I’m impressed. However, it's still not perfectly clear to me. Is Sal saying that if you are permitted to disaggregate, you are not required to give the gateway minimum to participants (who received the SH contribution and/or TH min) under the disaggregated "plan"? This of course assumes the plan document allows for permissive disaggregation.

Thanks for the responses. Our document is a volume submitter that does have the statutory exclusions language included. I am just concerned that because the SH contribution (same issue as TH minimum) is required, that I am still forced to give the gateway minimum regardless. As I mentioned, the ERISA Outline books seems to contradict itself on the issue.

We have a SH 401(k) plan that allows employees to defer after 3 mos., and requires employees to satisfy a 1-YOS requirement to receive a nonelective contribution (individual allocations). Can we give employees who have worked less than the 1-YOS the 3% SH, and not the gateway minimum? Essentially, can we apply the otherwise excludable rule to employees with less than 1-YOS? I thought I was clear on this rule until I read the ERISA Outline Book. [page 9.41 of the 2008 edition, paragraph 4.a.6.a]. Several of our employees have read this paragraph and it seems to contradict itself regarding the use of disaggregation when you allocate SH and/or TH mins. Can anyone clarify what he's saying? Any input is appreciated.

A tax-exempt entity sponsors a non-governmental 457(b) plan. We are getting conflicting information from several attorneys regarding the taxation of distributions. Is there any circumstances that would allow a participant to defer taxation of their account balance to a date later than their termination (but in no event later than attainment of age 70.5)? In this case, the participant is not interested in taking installment payments and wants to defer to a single lump sum distribution several years down the road. It was my understanding that a participant could elect to defer their payment to a later time providing that the election was in place prior to their termination. Thus, deferring taxation to a later time as well. A prominent attorney is telling us otherwise. According to him, taxation takes place upon termination unless installment payments are elected. Any input would be appreciated.

Thanks. I did see that link and it was helpful. Any thoughts on when contributions would count as an asset?

I have a client with a frozen DB plan that is concerned about making lump sum distributions next year. They're an underfunded calendar year plan with approximately 120 participants. Can someone please confirm that since the plan was frozen before 09/01/2005, they can continue to pay lump sums as long as the funding percentage doesn't drop below 60%? It's my understanding that they're exempt from the 60%/80% rule because of their frozen status. Also, when is the funding status for 2008 actually determined? Assuming we're doing a 01/01/2008 valuation, which probably won't be done until late winter or early spring 2008, is there any guidance on how we should be administering the plan for the first several months of 2008? Lastly, if the plan were less than the 60% threshold as of 01/01/2008, could a contribution be made in the 2008 calendar year to boost the funding percentage for 2008? Any thoughts are appreciated.

John, thanks for the response. I agree with you that a simple line added to the resolution would have solved the problem and this is something that we're doing now. I've still got my fingers crossed that it’s enough of a gray area and an IRS filing won't be necessary. I'm banking on that fact that it's still essentially a GUST volume submitter document which did not affect any of the provisions in my interim amendments. I would hate to explain to the client that we may have caused a qualification issue because we didn't have them re-adopt the same exact good-faith EGTRRA amendment for the third time in four years.

Question 1: Is it definitely required to re-adopt the EGTRRA good-faith amendment for a post-GUST plan restatement? (getting conflicting answers from different sources) Question 2: If it is required and the re-adoption was not done at time of restatement, is it a self-correction situation or is an IRS correction filing required? Situation: We restated a client's plan using a volume submitter plan back in 2003 for GUST. At that time the client also adopted a good-faith EGTRRA amendment, and a final RMD amendment. In 2006, the client wanted to change their elig. and a few other discretionary plan features. We restated the plan in entirety, but did not re-adopt any interim amendments. We justified our action after reading Rev Proc 2005-66, Section 5. Also, Rev. Proc 2005-66, Section 6.03 kind of infers that if it was unintentional that we can still fix through the end of the EGTRRA RAP. Any thoughts are appreciated.

A controlled group had 4 separate entities and a QSLOB filing was done about 10 years ago. Since then each QSLOB tested their plans separately. We just learned that a fifth entity was brought into the fold in 2002. That entity meets all the SLOB requirements, but no filing was ever done with the IRS. Question: Do each of the original 4 entities still stand on their own? Meaning, do we need to test each entity separately with the new company (aggregate each QSLOB with the new company), or does the entire controlled group need to be aggregated since 2004? Thanks.