mwyatt

Gary, I have to wonder: are you really Jim Holland trolling?

Grabbed pages 53004-53084 from the Federal Register and compiled to one PDF file (they don't make it easy, you have to download one page at a time and recompile). IRS_Final_430_436_Regulations_Oct_2009_FR.pdf

Trying to think this loan thing through and what the ramifications would be to the owner. Say the 430 contribution is under the loan limits (let's pick $40k). Actual assets are $500,000, owe participants $50k (to throw number out). Owner takes a loan of $40k out of plan, immediately circles around and pays the contribution due of $40k. But now assets are actually $540k ($500k of assets plus outstanding loan of $40k). Distributions are made; $50k paid out to participants. Remaining $450k is paid to owner physically, but in fact $490k is paid to owner because of loan. $450k is rolled over, $40k shows as income on umpaid loan, but offset by deduction of $40k for contribution to plan (so a wash - hopefully 59 1/2 excise taxes don't apply, and that value of deduction can be taken to offset the "income" of the distributed loan).

Effen, always thot it was akshuarials that billed so much to those TPAs. If the computer spit it out, it must be true, right?

This very question was asked of Jim Holland (by me) at the EA Meeting last spring. He had absolutely no problem with this type of approach. In point of fact, the target for once wasn't small plans at all, but rather overaggressive CB designs (allowing for immediate rollover of additions to get around the interest credit) and believe it or not public plans. Reality under PPA funding with a benefit being funded to the 415 dollar limit anyway is that it doesn't make much of a difference in the contribution ranges. Can be an issue for lower compensation 1 man plans though. The IRS hasn't even requested to see Schedule B/SBs on EZ filers since 2005, so this indicates that the small plan market was more collateral damage in this issue. Up here in MA we're dealing with public transportation plans having guys "retire" in their 40s with benefits substantially (I mean factors of 2) over the 415 dollar limit. Bigger targets out there than our 1 person plans.

Yes.

Just a thought, but someone in our office did bring up the question of just because you can file a 5500EZ, does that mean you have to (i.e., with that 2006 filing, couldn't you go in filing a 5500 rather than 5500EZ)?

Actually, there is room for ambiguity here in this situation. If you look at the instructions to the 5310 Line 3a. Section 3001 of ERISA requires the applicant to provide evidence that each employee who qualifies as an interested party has been notified of the filing of this application. If ‘‘Yes’’ is checked, it means that each employee has been notified as required by regulations under Section 7476 or this is a one person plan. A copy of the notice is not required to be attached to this application. If ‘‘No’’ is checked or this line is blank, the application may be returned. Now assuming that whoever wrote the instructions was trying to be PC and not create a new definition, I'd say your client was able to file a 5500EZ as it only covered partners. Could very well be an argument that the Notice to Interested Parties is inapplicable in your situation.

Mike, we do have to keep in mind that prior to 2008, the funding method proscribed under IRC 430 was explicitly labeled as not valid for salaried based plans. Have you tried to wrap your head around how you do an end of year valuation yet for a sole proprietor where Schedule C Income is a factor? There are infinite answers as to the contribution range. What do you solve for?

Think the suspension (assuming high pay) could potentially kick in around 68 with the new interpretation on High 3 comp. If a lower paid owner, and the actuarially increased benefit runs into the 100% High 3 comp limit, may have an argument. But to blanket state that you'll value the NRA benefit w/o increase to the XRA is a stretch. Best to justify the assumption (of course you're recognizing the obvious in that the participant/sponsor won't be running to the DOL over an unfavorable beneift interpretation). Ah, for the old days when we were all worried about overfunded plans. WTYD: the new retirement paradigm.

When we go with an extended retirement age (usually targeting the owner only) assumption, go through all the iterations by age to get the actuarial equivalent at the deferred retirement age. Hopefully noone here would go with funding the NRA benefit w/o increase at the XRA. Sadly, think that these deferred retirement age assumptions are all too justified given the new paradigm of WTYD (work til you drop) after investment returns for 2008.

Routine/random, just nothing particularly interesting or out of line. Not sure how this guy can justify 2 full days on an 8 person plan with only source of funds being deferral and 3% Safe Harbor, and all assets with one provider in subaccounts. Never ran into that before. The client phone interview was incredibly bizarre, including questioning about how they verified age and whether new hires filled out an application for hiring (client not a Burger King but an investment bank - sure that they used a Kiosk screen for applicants). Think the classic script kiddie moment (remember, this is an audit of a 401k's 2007 plan year that started in 2006) when he asked the poor bookkeeper whether the PBGC had audited the plan in the past. Stepped in and reminded him that one, this was the second year, and two, why would the PBGC audit a non-DB plan. He kept the door shut the entire time while he was there. Very glad we locked the file cabinets and password protected the computer (I did come in one time and he defensively said that the monitor "just came on" off of screensaver mode -GMAFB). Now just to shut off the A/C in the office and we'll see if we can chase him out early tomorrow. I've never had an audit run more than a day. I have no idea what in God's name he's doing to justify this amount of time spent on a trivial plan.

I guess no good deed goes unpunished, as we have had him in a vacant office for his convenience. We have a person out on maternity leave whose office is empty. And hearing file cabinets open and close repeatedly with him having the door closed is a logical conclusion. I had the file cabinets locked tonight (thought that would be more subtle than running duct tape over the front) and have the walls scrubbed of anything other than pictures. But when our secretary was complaining today of beyond the loon behavior with this guy, guess may have to assert myself (especially since he is doing a random audit of an 8 person plan in its second year of operation, and stating that he'll need 2 days to do the audit onsite - how do you justify that type of fishing expedition?). Maybe if I get in early enough I can close the AC vent.

I have an auditor coming in tomorrow for a routine audit on a 401(k) plan. We were able to get the audit location switched from the client's office to ours (for convenience and also to lessen costs for the client - if I have to sit around for 1-2 days at their office, costs would be dramatically higher). My question is this: from talking to other people in our office, this auditor is a bit of a strange duck. We had him located in a spare office the last time, and the next door person sweared she heard him opening and closing file cabinets in the office, looking at other clients' files. Know this isn't the bad old days (we had one auditor in the late 80s using our phones blatantly to talk to his bookie, and he wasn't even subtle about it), but what gives this guy the right to basically spy on our other clients? I can somewhat understand them looking around the client's office (they are after all being audited), but WTF?

This goes to a good point: any consensus on what exactly needs to be attached to the Schedule SB?

Also look to the case that a plan frozen with adequate funding requires full vesting as part of the freeze (of course, most plans freezing are under funded).

I'd check back with the actuary. There indeed was (or should have been) an actuarial valuation prepared for the 2008 plan year.

Conceptually, cushion funding is comprised of two parts: 1) 50% of Funding Target (taking into account 2 year amendment lookback for HCEs on small plans), and 2) Increase on FT benefit given future salary increases. Focusing on 2, which I think is the issue, in a standard final average salary plan one could argue that future salary increases would factor into the benefit accrued through the beginning of the year for FT purposes. However, in a CB plan or an old line unit credit plan, one would have to look at would future salary increases have any impact on the benefit accrued through the beginning of the year at the end of the day. Think the answer would be no. Future salary increases would only impact future accruals. So for a regular CB plan, I'd say that the effect of 2 would be $0.

DB EGTRRA program doesn't open up until 4/1/2010.

Gary, assume that you don't have a Determination Letter on the document (original doc was prototype or volume submitter). Therefore, under the instructions to the 5310, you have to submit everything back to inception, in order. I'd make sure my "ducks are in a row" before filing. Current restatement is an OK idea, but you are still going to have to submit original stuff back to inception since no DL. At the EA meeting, Rich Hochman was actually advocating that with the upcoming EGTRRA goaround that you in fact submit for a DL, even if prototype or VS, since that would force you to make sure everything is clean up to date and you would have a DL that would stop past references to older documents. Not sure I quite go along with it, but think in 2016 having to make sure that a client has everything available all the way back to the TRA '86 restatement.

Also points out the fact that something is now amiss if you have receivable contributions and your Plan Assets for Schedule SB after 2008 equal the Schedule H/I assets. Note that for your 2009 SB, there wasn't any discounting of contributions per the proposed regs (i.e., 2007 receivables were not discounted for a 2008 BOY val); this will only be an issue in 2009 going forward.

Think there is a further wrinkle on the 415 max lump sum, in that it is the lesser of your plan actuarial equivalence assumptions (w/o 417 minimum taken into account) and 415/417 mort @ 5.5%. What are your plan's assumptions in the document?

Submitted an ESOP restatement for Cycle A on January 30, 2007; received IRS acknowledgment letter dated February 7, 2007. No word until last week, until we got request for potential amendments dated April 21, 2009 (almost 2 years, 3 months to the date of original submission). Is anyone else experiencing this type of delay (and if so, can't imagine when Cycle E letters would be issued - 2014?).

"Overfunded" and "Union DB Plan". Isn't that an oxymoron (and that 7/1/2008 val date comment is pretty relevant). Interested to see the responses as I've yet to see such an animal in real life.

Not usre, but your clients are aware of that modest $9k user fee for IRS review?