My 2 cents

One presumes that if the plan DOES say that deferrals are limited to the first $250,000 of compensation, the sponsor would be at liberty, without fear of disqualification, to amend it out effective immediately. Why would one want to have such a provision? It's January 4th, and (presumably) the issue has not come up yet this year. Check your plans and, if you find that language, consider amending it out before anyone is restricted from making the salary reduction they want by a technicality.

Probably be a good idea to at least start thinking how you will handle the questions. The IRS does promise some changes in the instructions, but don't expect it to be optional for long! Those with long memories will recall that the 5500 used to have a number of compliance-related questions (or was that the form that preceded the 5500?). As I recall, one of the purposes behind them was to highlight compliance failures (another having been to convert a lack of candor into the kind of fraud that would keep the statue of limitations from running).

I do not work with tax issues related to employee benefits (especially health benefits), but is it not true that the IRS has declared that benefits provided to domestic partners are taxable, end of discussion? Is it not true that the employer must report any such benefits in the employee's taxable income? If the domestic partner is a dependent, that might be different, but then aren't they being covered as a dependent and not as a domestic partner?

It is my understanding that defined benefit plans must permit participants who terminate employment after meeting the service requirements for early retirement to commence receipt of benefits upon attainment of the required age for early retirement. In that case, the plans are not required to do better than provide the actuarial equivalent of the deferred accrued benefit (even if people who separate from service after meeting both requirements are given a subsidy). Many plans do provide for the same benefit. As noted above by others, do what the plan says! And don't forget that if lump sums are offered prior to early retirement eligibility, the plan must also permit immediate annuity payments. Not a valid spousal waiver if the choice is between a QJSA later or a pile of money now!

No. That is wrong, inaccurate, inappropriate, incorrect, a misinterpretation. Come on - what do you really think? Did you have a reason to leave out erroneous, fallacious, false and untrue? Is it my imagination, or there about seven active discussion threads dealing with this one topic? It will be interesting to see if they all come to the same conclusion.

It is my understanding that the rate published by the Wall Street Journal reflects only the top 10 banks now. When 7 have updated their rates, the WSJ runs with it.

By "can he roll over the balance into his employer's plan", do you mean "can he roll over whatever is left in the IRA after he takes this year's MRD into his employer's plan"? I don't work on this sort of thing, but it would be my expectation that this year's MRD from the IRA must be treated as taxable income no matter what. This year's RMD can't be rolled over.

I don't work on this sort of thing, but I can't help but wonder why the C Corp plan would have agreed to purchase shares of C Corp. Where is the diversification? Aren't there limits to the percentage of plan assets invested in the sponsor of the plan? Was a process followed that would withstand scrutiny with respect to the fiduciary standards? Should the plan be choosing investments that benefit a participant? Are there other participants who could ultimately be hurt by the fiduciary's actions? What is the relationship between A and C Corp? Is A considered an employee of the wholly-owned C Corp (otherwise, how can A participate in C Corp's plan)? Is C Corp the best tenant for the building owned by A's LLC? Are the LLC and C Corp members of A's controlled group? Sounds way too cozy to me. But, as I said, I don't work on this sort of thing.

It is my understanding that if the payment form elected would meet the definition of a QJSA (between 50% and 100% continuing to contingent annuitant after the prior death of the participant, and the contingent annuitant was the legal spouse as of the date payments commenced), then no adjustment to the IRC 415 limit on account of the payment form being other than a straight life annuity is required, whether the plan is governmental or not, subject to the spousal consent requirements or not.

Not sure what amendment is needed here. It is my understanding that PPA's changes to the rules concerning actuarial equivalence don't apply to governmental plans. The plan must contain a specific actuarial equivalence basis, but that has been the case for years.

Who gave the auditors a vote? The Adoption Agreement is valid or it is not, but it is not the auditors who get to make the call.

Also, depending on age, may have to worry about being able to pay minimum required distributions if liquidity becomes an issue.

Not a defined contribution practitioner, but aren't the compensation limit and the 402(g) limit two separate things? The way I understand the compensation limit to work is that compensation above the 401(a)(17) limit cannot be taken into account under a plan. If the participant earns $400,000 per year and elects a salary reduction of 4% of compensation, they don't get to contribute $16,000 to the 401(k) plan even though that is fine under 402(g). They only can contribute 4% of the compensation limit. Suppose you were talking about a profit sharing plan. You cannot set the profit sharing contribution at 4% of compensation and contribute more than 4% of the limited earnings. Given the fact that the 402(g) limit does not override the compensation limit, the position taken by the accountant does not sound right to me (but then, not only do I not work on defined compensation plans, but I am also not an accountant).

My understanding of 415 vis a vis governmental defined benefit plans: 1. It is not necessary to cap accruals or single life annuity benefits before converting to other payment forms. You would find the J&S benefit equivalent to the uncapped normal form (life annuity) benefit and then cap that (assuming that the J&S benefit would qualify for QJSA treatment - if not, then the cap to be applied would be adjusted for the non-QJSA joint form, but still the cap would be applied after conversion and not before). The IRS rules appear to exempt the governmental plans from the "cap first" treatment applied to ERISA plans. The difference is that the governmental plans are not subject to Section 411, so permitting recognition of accruals above 415 limits that don't get paid would not be an impermissible forfeiture. Governmental plans are permitted to eliminate benefits already accrued (at least as far as the Internal Revenue Code is concerned). 2. It may be the case that extra adjustments are required for the pop-up feature, since that feature might not be covered as part of a QJSA benefit. A 50% J&S with a pop-up is (obviously) a bit more valuable than a straight 50% J&S, so an adjustment may be necessary. And that assumes that the adjustment only needs to be made with respect to the marginal extra value and not the entire difference between a QJSA and a straight life annuity.

I am not a lawyer and not expert with respect to compensation issues, but wouldn't the money put back in be in the nature of an increased investment and not negative compensation? That is, the amounts previously paid out would continue to be treated as taxable ordinary income, and the amounts put back in would be treated as increasing each owner's tax basis in the company, or is that not how the rules work?

Just wondering why the IRA agreement would be silent on so important a matter

Does that mean that to roll the money over, single participants must get married? Note - there was a BenefitsLink discussion thread in 2003 concerning what to do if the spouse is missing. One of the areas discussed was the extent to which the plan administrator must verify that the spouse is missing. Is a diligent search required? I have seen language in defined benefit volume submitter plans that specified that spousal consent shall not be required if it is established to the satisfaction of the plan administrator that the required consent cannot be obtained because there is no spouse, the spouse cannot be located, or other circumstances that may be prescribed by Regulations. Wouldn't that standard apply to any defined contribution plan that requires spousal consent?

Isn't it possible to proceed without spousal consent if the participant can credibly say that the spouse's whereabouts are unknown? Assuming that the distribution from the plan in question would normally require spousal consent.

My involvement is with defined benefit plans, but is it not the case that if a single 401(k) plan covers employees subject to a collective bargaining agreement and employees not subject to a collective bargaining agreement, then, even if the plan is top-heavy, the plan can provide that the employees covered by the collective bargaining agreement don't have to be given either top-heavy minimums or vesting? If that is so, why would it be necessary to separate the plan into two plans?

Just wondering - what does one have to do to get a fund manager to impose market-timing restrictions? I presume that we are not talking about multi-million dollar transactions. What were they doing, moving money in and out two or more times every week? I would imagine that there are no self-directed retirement plans out there using any funds that would allow transfers in or out while the market is open, so three times a day transactions would not have been possible to begin with.

"The participant may encounter some trouble in the state court if that happens." Especially if the participant and the plan administrator are the same person, creating at least the appearance of a deliberate attempt to thwart the court order and the ex-spouse's rights under the divorce settlement! It would be difficult (if not impossible) for the plan administrator to claim ignorance that the ex-spouse will be filing a DRO claiming a portion of the benefit, even if a DRO has not been filed yet. Under the circumstances, it would be appropriate to not pay anything out with respect to the participant's benefit until all of the paperwork has been received and reviewed.

Does the plan permit the participant to elect a higher monthly income in return for the elimination of the possibility of a death benefit? Were the election materials provided to the participant clear in specifying that the choice of a single life annuity would effectively trade any possible death benefits for a higher level of monthly income? Surely there is nothing in the law that would prevent such an election from being made with respect to annuitizing voluntary contributions. In the opinion of this non-lawyer, if the election materials are clear and the participant did, in fact, elect a true single life annuity, the plan should deny the claim made by the participant's children and provide a copy of the election materials as a reason for the denial. The annuitization election should not operate as a "heads I win, tails you lose" proposition. Surely, the plan administrator has no fiduciary duty to protect the interests of potential beneficiaries from poor decisions by the plan participants, especially non-spouse beneficiaries, and so long as the election materials would have made it clear to the participant that nothing would be payable after his or her death, there could be no reasonable finding of a fiduciary violation in permitting the participant to make such an election.

Given the prior behavior of the former employer (which as described above sounds egregious to this non-lawyer), it does not seem likely that any offer short of financial ruin for the employee would be accepted. Is it not true that if the case does go to trial and the former employer wins big, if the employee declares bankruptcy, the money in the IRA is unreachable? And if the employee prevails, it is not unlikely (especially given the prior behavior of the former employer) that the former employer will be paying the employee's lawyer bills!

So what is the employee supposed to do? Pay off the former employer enough to make the lawsuit go away? Who has the deep pockets here? Apparently the employee DID post an adverse blog about the ESOP and the former employer IS suing them (presumably for sizable damages). Unless the former employer is looking for an apology and little or nothing else, isn't the employee pretty much forced to defend himself? If so, what better way than to assert that the agreement was coerced and thus invalid?

Wouldn't one month's advance notice for each week of shutdown be a reasonable standard for the IRS to be expected to meet? Certainly, one day's advance notice for each week of shutdown does not appear adequate. But for this discussion thread, who would have known to watch out for this? So mandmeickhoff@msn.com, you have my thanks!