Ron Snyder

This has been much discussed in the past. Check prior threads.

They could now adopt a 401(k) and allow employees to roll. Then new loans could be made and none of the existing loans would necessarily become taxable.

Wow! Maybe after 25 years of not joining NIPA, I will change my mind because you now have new targeted membership categories. Or maybe not. NIPA should have joined with ASPPA when it had the chance, like COPA did.

My thought is post PPA the TNC needs to include some expense for the cost of the death benefit. As I said, this is NOT the premium amount * * *" This is correct. There are 2 choices: (1) a one-year term cost that is added to the normal cost, representing the cost of term insurance for the year, or (2) a split funded valuation where the retirement benefit is split into 2 pieces, the portion represented by the cash value of the insurance police at retirement (the normal cost of which is the current year premium) and the balance, for which the normal cost is actuarially determined. I think the main question is how do you handle the cash values. I believe the consensus is that you add the market value of the insurance (cash surrender value?) to the trust assets and those are your assets used to determine your minimum and maximum contributions. You are correct that the "value" of the insurance is added to the assets in the case of OYT costing (although the surrender value may be inappropriate with some policies). In other words, the min/max should be the same regardless of whether the policies are term, whole life or universal life. The cost of the death benefit is the same, the only reason the premiums are different is due to the investment component of the policy. Therefore, you need to break out everything other than the cost of the death benefit and treat it like an investment, not a cost. Again, you are correct for those using the OYT method. The incidental death benefit rules didn't change when PPA was past. The incidental death benefit rules didn't change when PPA was passed. Keep it to the 100X and you won't have any trouble. I disagree. This is akin to "avoid permitted disparity and you won't have any trouble". There are alternative rules supported by most software systems. Run the tests all 3 ways and use the one that is in the employer's best interest.

An excellent candidate for a DB plan is a C corporation where the principle has already established a high 3-year compensation history. The principal needs no current compensation other than to show he/she is an eligible employee. The funding is not limited to earned income, but may be used to create a sizable loss.

The remedies for this may involve going after your attorney for malpractice.

Of course the could always incorporate and avoid the potential problem altogether. The scenario you describe raises the inevitable question: how can they both fund the plan and stay in business? If their expenses are necessary for the business, they will need to be paid. If the money is drained from the business to fund a retirement benefit, they will be short at least by the after tax cost of the contributions.

I have done lots of one-participant plans, but have no idea what you mean by TNC and FT. Total normal cost and free throws are my best guess. Apparently the earned income is greater than $195,000, since that is the given 415 limit. How can the death benefit be both the "AE of accrued benefit at death" and $3,000,000? The maximum incidental death benefit is determined under several alternative rules. The basic rule is the 100 to 1 rule, which would indicate that the participant could have a death benefit of 100 X the monthly pension benefit of $16,250, for a total insured death benefit of $1,625,000. Your plan fails this test. The second test is simple and straightforward. Up to 50% of the contributions may go toward the purchase of whole life policies, or up to 25% of the contributions may go toward the purchase of term or universal life policies. Your plan also fails this test. A third test available is available under RR 74-307. Under that test, 2/3 of the actuarially-based contribution may go towards whole life insurance premiums, or 1/3 toward the purchase of universal life. Your plan also fails this test. (b) What is asset? CV or CSV? IRS likes the greater of the sum of premiums paid or the surrender value.

Insurance agents are desperate to find money to pay insurance premiums with. Unfortunately for them, IRA funds may not be used to purchase life insurance. So they come up with desperate strategies such as this one. Besides I would never recommend that someone establish a qualified plan simply to provide a rollover mechanism to be able to purchase life insurance. In IRS's view, the fair value to sell the contract at is the greater of the sum of the premiums paid or the surrender value. The strategy will not work. From an estate planning point of view, by doing things this way, the policy, once in the ILIT, will still be in the estate for the next couple of year as a "transfer in contemplation of death". A new policy issued to the ILIT, even if funded by an IRA distribution, would not be.

I thought Netherlands was good, but not as good as Brazil. Oh, well, wrong again. The Netherlands will beat Uruguay. Spain beat Paraguay and is a major threat to knock off Germany. A few days ago we were talking about an all-South American final. Could we really have an all-European final? It now looks likely.

Good info. Thanks for the post. Like you, I had heard nothing. But they love to get projects crossed off their list by June 30th so they don't lap over into the next fiscal year. So we should expect some additional last minute filings. (I am waiting for one on captive insurance arrangements which they promised to have before 6/30).

I changed my mind, too. The US will lose. Ghana will lose in the next round. In fact, every team will end with a loss except for one. And that one is Brazil, Argentina or Spain.

The concept of "conduit trust" is not alarming. But I suspect that no "conduit" language is included in the trust that is being used as a conduit. You suggest that the welfare fund trustees are comfortable commingling trust funds. I wonder if their ERISA attorneys are equally comfortable without enabling language in the trust documents.

In reviewing the brackets, I expect Brazil, Argentina and Portugal to win their brackets. The only bracket the US stands a chance of winning (and making it to the final 4) is the one they're in. Certainly Uruguay has to be the favorite to win it, but our lads have a decent chance. I note that if Uruguay wins our bracket, and Paraguay knocks of Portugal (or Spain), we could have an all-South American final 4. That would really flabbergast Europe!

Can I 1) withdraw an amount from the Keogh plan, If the plan allows either in-service distributions or you are beyond the retirement age. 2) pay (low) 2010 taxes on the withdrawn amount, Yes. 3) then redeposit some or all of it in the same Keogh plan, Also yes. and 4) thereby avoid paying the (high) 2009 taxes on the deposited amount? And yes. I understand that I could use the rollover provisions of the law to avoid paying tax on the withdrawn amount if I redeposit cash, but must I do so? Your partial distribution may not be eligible for rollover treatment. I also am over 60 and have taken plan distributions and made plan contributions in the same year. At the least, it saves payroll taxes on the amount funded and withdrawn.

If there is a specific exclusion from coverage under ERISA, it is hard to say that a state law applicable to underfunded plans of service organizations with fewer than 25 participants would be pre-empted. I have read several states' insurance codes and have never seen one that gave the Commissioner the right to take over a pension fund. Those laws apply to insurance companies with impaired capital. The Commissioner also has the right to shut down unlicensed insurance arrangements, but no one would argue that he can close down a pension plan.

Yes, 2-1. The question is, who's next? We can beat: England South Korea Japan Paraguay Slovakia If we're lucky we might beat: Germany Spain Uruguay Chile Mexico But we won't beat: Brazil Portugal Netherlands Argentina

Can't they come up with a more direct method? For example, have a payroll company do separate remittances? What is the nature of the payment from the WBP to the PSP? And on who's behalf is the WBP trustee acting? Does the WBP document permit an escrowing service? There are no "rollovers" from a WBP to a PSP. And the WBP contains language barring distributions that are not for welfare benefits. This is not a direct transfer to another WBP. This sounds like another group looking to get themselves into unnecessary trouble.

The moratorium has ended. If I remember correctly, the Commissioner promised that during the moratorium the IRS task force would review, revise as necessary and formalize their policy on fines, providing a nexus between the amount of tax benefit obtained and the amount of the fine assessed. They were to have reported back to the Senate Committee and Senator Grassley. To the best of my knowledge, they haven't yet done that. However, the IRS has started sending out letters fining participants in some listed transactions. Time to start contacting Sen. Grassley again.

Since my company is a TPA firm, I believe that the TPA should be selected and employed before any decisions are made.

The question is not simply whether a natural person OWNS the annuity, but the annuity is covers the life of and individual. A group annuity will never work.

The real issue on which the IRS will focus is whether the highly-paid received a greater percentage of compensation in the value of their benefits provided (not made available) than the non-HCEs. Not enough facts to make that determination.

Can you say "party fund". It's not enough to go to Brazil. Seriously, why not do a simple calculation of the breakdown by participant and send the check to the state escheat office with the identification of the participant's name, address and social security no. Or, in the alternative, you might go to an involuntary rollover providers and set up involuntary rollovers for each of the participants.

You are ignoring the central question: are such state laws pre-empted by ERISA. The general answer is yes. One exception is in the case of bankruptcy. The Federal bankruptcy statute was passed after ERISA and did not defer to ERISA. Therefore, whether or not such benefits are protected in bankruptcy depends on whether, under state law, the trust is a spendthrift trust. Another exception to the general rule may be in other laws passed after ERISA, such as the Patriot Act and forfeiture laws related to narcotics violations. However, these would also have to be federal, not state. There is almost nothing a state can do to seize assets legally from an ERISA-qualified retirement trust. Note: we have discussed escheat statutes previously.

The question is not whether they "have to set up" a fringe benefit account. They could go ahead and pay the benefit in cash, for example, and still meet the requirements of Davis Bacon. The real question is whether they are better off establishing fringe benefit plans, and the answer is yes, it will save them payroll taxes. This explanation should be in the TPAs materials as well.