SoCalActuary

Ask the taxpayer for the 1099r issued when the rollover occurred, and it should show the amount rolled. Then look at the account balance (if available) before the rollover. If the IRA trustee did not take the after-tax money, then the rolled amount is all taxable. If the IRA trustee did take the entire balance, then you only have recourse to the recordkeeper of the original account.

Ongoing PS plan, covering some participants with account balances in an underfunded DB plan with continuing contributions to end underfunding. No participant "benefits" in DB plan for non-discrimination purposes. Total contribution of PS plan normally limited to 25% of pay. Question was asked if the DB plan required contribution would lower the PS limit. Holland answer: "not sure", since the owner's db benefit is still being funded.

The question was brought to Jim Holland during one of the sessions. Jim expressed concern that the continued funding of the frozen db plan might have the result of the owner "benefiting under the db plan" since the assets available provide more protection for his benefits. However, he did not make a formal position. Not really unusual to see such ambivalent guidance.

Part of the purpose of my comment is that the next year deduction limit might be affected by the full funding limitation. For maximum deduction purposes, the FFL needs to be calculated with the proper assets, that is, by removing any contributions not previously deducted. Doug.. yes, you understood. A final note, if assets grew dramatically, the yield alone could result in assets that produce a full funding limit, so the contribution would not be deductible in the next year.

You have three choices: 1. either waivers by stockholders holding more than 50% of shares 2. company makes up all but the 50% stockholder funds 3. refile as a distress termination. If your three trustees do not control majority interest in the company, you need to look more closely at PBGC regulations, because I don't see any way for your waiver to work. If the company cannot pay the benefits, then a distress termination is your only solution.

One additional wrinkle to this is the actuary's adjustment of plan assets for 404 cost calculations. Assets in the trust would be reduced by $10,000 to reflect the undeducted contributions. Thus if assets were $105,000 at year end 2, the assets for minimum funding are 105,000, but the assets for maximum deduction are 95,000.

Without a safeharbor match, how does this affect the ACP test? Is the adopting employer more likely to have HCE's (like the owner's relatives?) You could amend the document to provide named individuals with a different match formula, or you could specify that the adopting employer has a different match. However, if any of the new adopting employer's people did not actually have 10 years of service, you ought to test for benefits, rights and features.

Getting below 100 employees is one reason to cash out. Getting rid of dialog with terminated former employees is a second reason. Lowering fees per participant is a third reason. Think PBGC premiums. However, for a church plan, the second reason is the main one.

I agree. The 401(l) rules would have limited the integration service to 35 in the denominator. In addition, the flat benefit portion would have required at least 0.65% accrual per year, effectively a cap at (20 / 0.65) years to provide parity between the integrated and basic benefit.

This design has an unsafe-harbor benefit formula, subject to the 70% avg benefit test. However, it also does not have a uniform retirement age. For the denominator, I interpret it at 16, since that was the projected retirement age. At worst it would have been 20.

Predicting the future of your employment, hmmm.. how's your predictive powers? If you are judging from past experience, network with people who've worked there, with their competitors, with their vendors (such as fund wholesalers, software companies), accountants you know, etc.. However, companies do sometimes change. The opportunity offered is partly what you want it to be, and partly what they imagined it would be. I would say to look for a firm that is willing to continue educating you, promoting you, and helping you grow.

Friendly divorce, hmm.. Robert Blake, Scott...? I don't say it will happen, but written agreements keep friendly divorces friendly.

In my opinion, you satisfy the 50 employee rule. The accrual during the year included 50 who received benefits. I believe for this test, you accrue benefits in a DB or you don't, and when you earn them during the year is not important.

When I use the term "highly compensated", it has a legal meaning, not an emotional one. If you own more than 5% of your business, or if you make more than $95,000 the law says you are highly compensated. As a small business owner myself, I am right there with you, but I did not make the rules. To understand this in an emotional context, what is the most money an IRS agent can make? If you make more, then you must be highly compensated.

To joeyd: You have expressed the common intent of many business owners, i.e., that the profits are all yours. The IRS treats pension contributions as a regular business expense deductible against business income before profits are determined. If you have a pension plan, it is not your money yet, because you have not been taxed on it. Unfortunately for you and your wish, the IRS does not grant the tax deduction if you violate IRS Code 401(a)(4) or 410(b), both of which require that the benefit is not for the exclusive use of the highly compensated. If you want the deduction, you must include some or all of your employees. If that does not work for you, then pension benefits don't either.

To answer your questions from my experience, 1. You develop a benefit at normal retirement age using the plan document assumptions only, not the testing assumptions. You normalize the plan benefit when a lump sum is available using testing assumptions for the most valuable benefit only. 2. During the elapsed time of the year, those with a benefit accrual might include current year terminees. Include them in the test as benefiting. Include the other terminees with 501 hours but no accrual as in the test with zero benefit. However, expect your plan audit to be done by an agent who misunderstands 401a26. If it happens that you are audited, some field agents are unwilling to follow guidelines already approved by the National Office, so be prepared to fight for your position.

The employee should try to report this to the IRS as potential tax fraud. The employee should have had not only her deposits made timely, but also her matching contribution from the employer. The DOL might also be interested. In addition, she should consider having a lawyer write to the employer demanding performance against her salary deferral agreement.

Sorry I can't help here, because I don't know the legal basis for a disability pension that is in the form of workman's compensation. I would have to ask the attorneys who set it up and local experts on workmans comp for the state where this plan resides.

mbozek: the teeth of that measure is found in the new circular 230 issued as a proposed regulatory position. If you issue a general opinion of suitability for a program, and you do not place the proper warnings on it, the IRS will come looking for you.

My original opinion was that the actuary doing the work should determine what assumptions are comfortable to them, and then the deduction is on the actuary's hands. If the original actuary was not there for the Schedule B, then their work just does not matter. Only the new actuary makes that determination.

Yes, certainly. However, do the documentation correctly. Assuming the plan sponsor properly adopted resolutions for termination and that the resolutions were properly posted to corporate minute book, then create a new resolution. Warning: If you have already informed people of full vesting, you should not now try to take it back with partial vesting for distributions during 2005.

In the original question, how long does the benefit remain tax-free? How long does this workers-compensation-type payment last? Can this be a lifetime benefit or does it expire at a particular age or anniversary of the award?

IRS just published changes in Circular 230, covering practice before the IRS. By way of background, some promoters of tax shelters received opinion letters from law firms that a particular program would satisfy requirements for favorable tax treatment. These opinion letters are used in the marketing promotion materials. The IRS has found that some of these programs did not work as contemplated by the law firm, or simply disagreed on the tax benefit. After declaring that the tax benefits did not exist, the IRS sought to impose penalties unpon the taxpayers for taking an unreasonable position. The taxpayers got penalties waived by reference to the original opinion letter. The new IRS position is to force the originators of these opinion letters to issue more caveats about their use, or to hold the writers responsible for their action. for more info: http://www.irs.gov/2005-04_IRB/ar10.html

Welcome to your first course in income taxes. Look at the last line on your 1040 filing, the Adjusted Gross Income (AGI). It may confuse you a little, but you will learn to take actions that do not cause so much pain in your future. Generally, money for retirement that is in a pension plan, 401k, IRA, or similar trust funds is money that has not been taxed yet. There are some exceptions, but you have not shown that any apply to you. Once the funds are in your possession, they are taxable. Keep reading the IRS publications and trying to understand their meaning, for your own benefit. Also, go see your local credit counselor, because your problems don't get better by themselves.

Has anyone considered calling the employer a nominee payor for the plan? The employer has the resources to do tax withholding and file the required information returns. The point about the distribution as a contribution is that the employer paid money on behalf of the plan, and would normally receive those funds from the trust to reimburse itself. However, the employer also sends funds to the plan as contributions. Why send two checks? If the employer records the payment as a contribution on their books, then the trust fund can credit the distribution due against the employer contribution due.