IRC401

I can think of two reasons. You decide how compelling they are. First, how does one run a test on a state government? I'm guessing that somewhere out there is a state university with a self-insured medical plan that hasn't given the slightest thought to 105(h). Second, what about Congress? I assume that Congress' medical program is self-insured. (Why have insurance if you can print money, unless you want to direct an insurance commission to some politician's relative or contributor?) Is it possible that Senators have a taxable retiree medical benefit that creates a 409A problem?

I believe that PA law prohibits governmental entities from increasing pensions after an employee retires (except for certain COLAs). Other states may have similar laws.

Does IRC 105(h) apply to governmental plans? I can't find an exception, but I have a diificult time understanding why Congress would want to apply 105(h) to governments.

I do not understand the question. To me a "KeySOP" is a nonqualified option product sold by Deloitte & Touche that has nothing to do with qualified plans. If you exercised a KeySOP, you have W-2 income.

Suppose that someone makes a rollover from a DC plan to a DB plans and that the rolled over amount is converted into a DB benefit and that the employer goes bankrupt at a time that the DB plan is underfunded, does the benefit attributable to the rolled over amount count aginst the PBGC guaranteed amount?

Kirk- Was the withdrawal liability assessed against the buyer or seller? If it was assessed against the seller, that doesn't surprize me. If it was assessed against the buyer, what was the basis for the assessment?

Aren't the MDs also on the payroll of the university, and doesn't the university have a 403(b) plan? In any event, I agree that this is a very complex area, and it would be dangerous to rely on the advice on anyone who doesn't have all of the facts.

Doesn't the plan document have some mechanism for throwing the noncontributing employers out of the group? Tell them that they are not longer contributing sponors, that they need to do nondiscrimintion testing, that they need to get their own plan document, and that unless they separately engage your client, they need to arrange for a new administrator.

Check the ESOP board. Nov 13th.

Yes, the client may do it (subject to the plan's complying with 401(a)(4)), but why? I strongly recommend explaining to the client all of the nondiscrimination testing issues (and associated fees) that go with that type of plan design. It would also be a good idea to discuss the plan design with the actuary.

I was going to ask how the new advisors got paid. Do you have any idea where you would like to invest your money? Why doesn't someone call Vanguard, Fidelity, TIAA-CREF, T. Rowe Price and a few other organizations and find out what they have to offer. PS: TIAA-CREF will try to sell your organization a money purchase type plan instead of a p/s type plan and saddle you with all sorts of unnecessary annuity waiver forms, but that is a whole let less of a problem than paying 4%+ every year. PPS: If there isn't a matching contribution, some of the employees may be better off contributing to an IRA instead of the plan.

Will the plan of the controlled group be split, or will the spun-off subsidiary set up a new plan and then accept transfers from the old plan? If the plan is split, I don't think that a new notice is needed. If a new plan is established, then I agree that a new notice should be given.

Many foreign countries will tax 401(k) contributions. In such a case a foeigner will owe tax to his country when he makes the 401(k) contribution and tax to the US when it is withdrawn. Non-resident aliens with no US source income should be excluded unless there is a specific reason to include them (and the employer should be willing to pay for good tax advice). PS: I once had a client that had not excluded Canadians (with no US income) from its DB plan. My firm got a lot of fees to figure out how to deal with the tax issues.

Isn't there a requirement that an ESOP have recurring contributions? If all of the contributions are in cash, there will be a 401(a)(4) issue if the other employees don't have the right to purchase stock. An ESOP must be designed to invest primarily in employer securities. If only one rollover and no employer contributions are invested in employer securities, I question whether that requirement will be met.

Before you do it, make certain that the plan permits it. If the plan document permits it, the SPD should also mention that the administrator has such discretion.

There are certain (very limited) circumstances under which the PBGC is required to take over a plan, and there are circumstances under which the PBGC has discretion to take over a plan. They generally aren't in the mood to take over plans. The client has the option to file for a distess termination if it wants the PBGC to take over the plan. In addition, if the plan is in such bad shape that the PBGC should be preparing to take it over, the client or the plan probably had a "reportable event" and should be filing a notification with the PBGC. The plan sponsor should be discussing these matters with its bankruptcy counsel.

My vote is that you use the accrued benefit (expressed as an annuity at Normal Retirement Age) as of the date of plan termination, and if payment is to be made in a lump-sum, you would discount back using the interest rate for the date of distribution (not the date of termination). I have no authority for that position, but: (1) isn't the benefit frozen as of the termination date, and (2) I am not aware of any reason not to use the interest rate for the date of distribution. BTW by termination date I am referring to the plan termination date that you used when you filed for a standard termination, and I assume that the PBGC will not object to the date.

I worked with a number of golden parachute agreements about four years ago. What amazed me was how uniformly poorly they were written. It was as if the authors were trying to generate useless legal fees for interpreting documents that should have been clear from the start. I'm guessing that whoever approved the agreements didn't know or didn't care what was in them or what the cost could be.

1. I believe that there is a PLR out there in which the IRS allowed government employees to make a one-time election between two benefit packages. 2. If PLR 9406002 is the one in whihc the IRS used the assignment of income doctrine to deny emplyees the right to choose between retirement and health benefits, keep in mind that it is a poorly reasoned PLR that isn't binding. 3. The IRS has never revoked Rev. Rul 60-31, even though it behaves as if it didn't exist.

In theory, you can make a contribution at any time and allocate it for any year. In practice, the 415 regs specify for what limitation year the contribution must be treated as allocated for 415 purposes. If the 415 regs state that the contribution must be allocated (for 415 purposes) for Year B, and if you want to allocate for Year A, you may allocate for Year A as long as the plan manages to comply with the 415 limits. Suppose that an employee quits during Year A and has no 415 compensation for Year B. If you want to give that (former) employee an allocation (for Year A), but the 415 regs require that the allocation be treated as being made for Year B, you have a problem. In addition, there are the issues of making sure that you comply with the terms of the plan document and SPD.

Can anyone recommend any organization to provide TPA or trustee services for a VEBA?

Personally, I don't think that conversions from DC to DB should be permitted, but the IRS has been accepting them for years. I am under the impression that BankAmerica converted over $1 billion of 401(k) money into a cash balance plan about five years agoe, and the IRS didn't object. [ The IRS reg. permitting the conversion of a DB plan into a DC plan became obsolete with SEPPA of 1986.] The IRS is only one agency that deals with DB plans. I have no idea what the DoL or PBGC thinks of conversions. I have this weakness of looking at the economic reality of a transaction. When a DC plan is converted into a DB plan, the participants are, in effect, buying annuity contracts from the DB plan, which is functioning as an unlicensed insurance company. That doesn't appear to bother anyone else. In addition, a fiduciary who previously had a duty to (prudently) maximize the return on the account in the DC plan, is now, in effect, engaging in a transaction with plan assets from which it can benefit. That appears to me to be an old fashioned conflict of interest, but there is at least one Circuit Court (and some lawyers and actuaries and accountants) who don't think that it is a prohibited transaction. Finally, does anyone have any idea what happens if the PBGC takes over the plan? If a sponsor goes bankrupt with an underfunded DB plan that contains former DC money that would have been protected if it were still in the DC plan, and if the PBGC doesn't pick up the tab to the participants' content, is anyone on the hook ???

I thought that the big accounting firms had stopped selling the discounted options. In any event most of the discounted options had no economic substance and didn't work anyway. [This position was argued at length (ad nauseum?) on the NQDC board.] From my perspective the significance of the proposed regs is that the IRS appears to have announced that it is going to wimp out and let the existing "options" go (which from my perspective encourages abusive tax planning by turning it into a ponzi scheme; it pays to get in early). Is your client prepared to fight with the IRS?

Any time that I read about a bunch of doctors in a plan with no non-HCEs, I suspect that I'm missing some facts, and I see no reason to be brave when the situation doesn't smell right.

Are you referring to a rebate of 12b-1 or sub-TA fees from a mutual fund to the plan? What must be reasonable is the the amount of plan assets used to pay administrative expenses. A rebate of fees to the plan is a reduction of the administrative expense.