PJ2009

The 5-year cycles for IDPs seem fairly straight forward. However, the 6-year cycle for prototypes and volume submitters has me hopelessly confused. I am lost in Rev. Proc. 2007-44 land right now. The way I read it, the EGTRRA remedial amendment period ends on January 31, 2011. However, I have read in numerous other places that the plans must be amended/restated and (if necessary) filed with the IRS by April 30, 2010. However, I can't find the April 30 date in any of the guidance, including Rev. Proc. 2008-56 (unless I am blind). Can somebody help me nail this down once and for all? It would be most appreciated!

It is my understanding that RMDs are waived for individuals turning age 70-1/2 during 2009. The waiver applies to the payment due by April 1, 2010, but NOT to the payment due by December 31, 2010, which is considered a 2010 RMD. Is anybody aware of an extension of this waiver to 2010 or beyond? I believe this waiver is limited to 2009 only. Thank you.

I would include the 180 day period instead of the 90 day period, regardless of whether the plan deadline for amending the plan has arrived yet. Otherwise, you could risk confusion, resulting in an operational violation.

I don't suppose anybody has sample language that they could share? We are in the same boat - amending and restating a former MPP that retained the J&S rules for all participants and all monies for ease of administration. Unfortunately, the LRMs are not helpful because they are from 2005. Also, is this amendment required in the EGTRRA restatement? Could we wait until the PPA amendments are due? The plan is quite active and not terminating.

What is the timeframe for revoking a prior J&S waiver? I thought it was 90 days prior to benefit commencement date, but somebody else thinks it should be 180 days prior. thanks!

Great catch....thanks and have a great weekend! pj

Happy Friday! Back in 2003 I recall that the IRS gave DB an indefinite extension of time in which to adopt the 401(a)(9) good faith amendment. 1. Is this extension still in effect? 2. I take it this means that DC plans are required to adopt such amendment. Does anybody know what the deadline was? I may have a plan that did not timely amend. 3. If the plan did not timely amend, should they simply amend now (late) and then "face the music" when they file the amended and restated plan for EGTRRA? Thanks!!

A capsule summary of your helpful comments: 1. A profit sharing only plan can offer loans, hardships, and regular in-service withdrawals. 2. The loans and hardships are NOT subject to the aging rules (2year/5 year). 3. Regular in-service withdrawals ARE subject to the aging rules. Thanks and any more comments more than welcome!

Yes, they would be subject to the 2/5 rule, just as profit sharing money is subject to the rules when part of a 401(k) arrangement.

I know that plain vanilla profit sharing plans can permit in-service withdrawals. Can they also permit loans and hardships? this question has never arisen before. I know money purchase plans cannot, but a profit sharing plan could provide for all three, could it not?

The client needs to reduce its work force due to economic factors and has decided to offer certain employees the opportunity to retire early with certain incentives, all of which are incorporated in a written agreement. The program is completely voluntary, in accordance with federal guidelines. Does this arrangement need to be expressed in a formal written "plan document," or is the written agreement suffcient? Because this is voluntary and a one-time event, I don't believe additional writings are necessary, but would like other opinions. Thanks much.

Excellent. That's what I thought, but just wanted to be sure. Many thanks! I might put together my own "cheat sheet" for EGTRRA, PPA, etc. in my "free time."

It is my understanding that multiple employer plans that wanted individual determination letters for EGTRRA were required to file in Cycle B. Is there a similar rule pertaining to multiemployer plans? If not, then how do I handle our MEPs? We have a number of them and I need to know how many must be filed in January for planning purposes. Also, can anybody refer me to a useful, easy to understand EGTRRA restatement guide? I want this stuff down on paper because it makes my head spin. Thank you so much!

Can an employer elect to pay for the health insurance of employees who elect an early retirement package for a set period of time, essentially deferring the start of COBRA?

That's what I thought. Thank you for confirming!

Has anybody seen final treasury regulations, following the proposed regs that came out a couple of months ago? I have not, but it's not easy keeping up with everything. Thanks!

Wonderful. Thanks so much.

Thanks for the replies. The document might not be signed due to timing issues (month end, vacations, etc.). Also, in my experience, the IRS always makes changes. This way, we can get the document signed one time--when the IRS finally signs off on all provisions. I just want to be sure that the filing is not bounced for failure to have a signed document. The board action, however, will be signed in a timely manner.

Will be filing a terminated plan soon for a determination letter on 5310. Can the amended/restated plan document be submitted to the IRS unsigned?

This is an easy one, but I just want a comfort level. Suppose an employee has elected to make the maximum deferral necessary to fund their dependent care assistance plan. Ideally, they will make regular payments throughout the 12-month period. However, is there a problem with funding the entire amount early in the year? There is always the possibility that the employee will not be able to use the entire amount and will have to forfeit the unspent portion. However, in my situation, that is extremely unlikely. The employee wants to pre-fund because she is going on medical leave soon. Thanks!

Very helpful string of messages! One more question - one person indicated that the IRS could consider the rollover contribution used to purchase insurance to be a taxable distribution. If the plan were to apply the incidental benefit rule broadly and consider the rollover contribution to be part of the "aggregate contributions and forfeitures," and only used 25% of the rollover contribution for purposes of purchasing insurance, would this reduce the risk of an adverse IRS finding of a taxable distribution? For example, using $25,000 of a $100,000 rollover contribution as a premium to purchases insurance, which is then held in the plan as a plan asset. Thanks again! If you will note in my response from Jim Holland above, rollovers are not contributions. Yes, you did mention that. I guess I am struggling with the concept that a rollover "contribution" is not considered a type of employee contribution to the plan. The logic escapes me. In any event, would that mean that 100% of the rollover could be used to purchase insurance? It sounds very aggressive to me. Again, many thanks for taking the time to help me out!

Very helpful string of messages! One more question - one person indicated that the IRS could consider the rollover contribution used to purchase insurance to be a taxable distribution. If the plan were to apply the incidental benefit rule broadly and consider the rollover contribution to be part of the "aggregate contributions and forfeitures," and only used 25% of the rollover contribution for purposes of purchasing insurance, would this reduce the risk of an adverse IRS finding of a taxable distribution? For example, using $25,000 of a $100,000 rollover contribution as a premium to purchases insurance, which is then held in the plan as a plan asset. Thanks again!

Thank you so much for the reinforcement! That's what I thought. Do you happen to know where I can find a reference to the lack of a limit on the rollover contribution?

We are in the plan design phase and the client is exploring all options. We want to make sure he know that there are limitations on life insurance in qualified plans. but I have not looked at this issue in years and like everything else, the rules may have changed. But I can't seem to find much on point! If anybody has experience with this issue, I would appreciate some input. Thanks

Hello, It isn't easy to find guidance on this topic, so I thought I would throw it out there. The client would like to hold universal life policies in a start-up profit sharing plan. 1. What is the percentage limit on contributions to be used to purchase such insurance? I believe it is 25% under the incidental benefit rule. I believe there is a 50% limit on other types of insurance, but I'm not exactly sure. 2. What is the percentage limit on a ROLLOVER from a SEP-IRA? I believe 25% of the rollover amount can be used to purchase such insurance, with the rest being contributed to the new plan in cash. Any thoughts/references would be most appreciated!