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Thanks, everyone, for your responses. We found out that corporate trusteeship would cost significantly more than the $5,000/yr. bond premium. I wish the trustee would rethink the non-qualifying assets, but he's a real estate guy, so you can guess what his favorite type of investment is. He'll probably end up doing as Belgarath suggests - the only people currently participating or who will ever participate are family members and they all seem to get along well. The super-low quote came from one of the biggest, well-known names in the business, and, of course, the rep swears up and down that he's totally familiar with the bonding requirements and the distinctions between qualifying and non-qualifying assets. If the bond correctly specifies the coverage being sought, the insurance company would be on the hook. Realistically, though, a claim would be extremely unlikely.

We're trying to help a client obtain an ERISA fidelity bond for their qualified plan and have found a wide disparity in what insurance firms charge. He needs coverage for $2.5 million in non-qualifying assets and received quotes from two companies, one for $5,000 per year and the other for $300 per year. From your experiences, which one is closer to reality?

A few days ago I received a flyer from Sungard, who acquired Corbel, that they'll be having a three-day PPA seminar in Florida (Orlando?). You can probably access info about that from the website you posted.

Last time I calculated one of these (many years ago), the accepted method was dividing the individual's PVVAB by their life expectancy factor. The general consensus in my office is that you can't do that anymore, yet no one knows what the procedure is since the laws last changed. I may have missed something, but it seems that the 401(a)(9) regs don't specify how an RMD from a DB plan should be calculated. Can somebody please explain the procedure to do this? Thanks everybody and have a happy new year!

I actually found several hundred hits when I googled "TD 9294". The first one, oddly enough, had a link to this very site. Here's the address: benefitslink.com/taxregs/td9294.pdf And, qdrophile, there is more to my previous post than "yup", also - but you would've known that if you'd gotten past the first word. Would you care to expand a little on the topic?

We have quite a few 401(k) plans with profit sharing accounts that have 3/20 vesting and are under the impression that the 2007 safe harbor notices can be given to the participants without the plans being amended to 2/20 vesting as prescribed by PPA. Just wanted to be sure - is this correct, and when would the plans actually need this amendment? Or would it just be part of the inevitable PPA restatement that will happen years from now as long as the plan operationally uses the new schedule? All help is appreciated.

Yup. The IRS just published final regs on this a few days ago (TD 9294, 10/20/06; Reg sec. 1.401(a)-21). It applies to any notice, election or similar communication provided to, or made by, a participant or beneficiary under arrangements pursuant to Code Secs. 401(a), 403(a) and (b), 457(b), 104(a)(3), 105, 125, 127, 132, 220, 223, and 408.

Thanks for the response. Two months later I'm now forced to revisit this issue. I need to produce citations stating how RMDs from a DB plan are calculated. I've pored over 401(a)(9) and couldn't find a passage talking about paying out the annual benefit as the RMD. Does anybody know where something definitive on this topic can be found that has been issued by the government?

100% owner/participant has a DB plan where the only other participants are her husband and her father. Would the plan be required to have PBGC coverage, a fidelity bond and file a 5500, or is the father also deemed to own 100%? Likewise, would the father, who's over age 70-1/2, have to take required minimum distributions while he's still employed? All help is greatly appreciated.

I believe that as long as the document allows for it and the SPD explicitly states so, charges incurred as a result of a participant's actions can be assessed directly to the individual, e.g., the way participants can be made to pay for loan fees. I would imagine that to be nondiscriminatory, a participant who even makes one trade may have to be dinged unless the doc/SPD establishes a threshold for a minimum number of transactions before charges are applied.

Trustee/100% owner/participant wants to take $100K from his plan and either invest it in or lend it to a partnership/joint venture in which he will have a 30% interest. At first I thought he would be a disqualified person but after reading IRC sec. 4975, it seems OK as long as he owns less than 50% of the joint venture and the money is given to the business entity (and less than 50% of the joint venture is owned by the trustee's relatives or anyone providing services to the plan). Am I reading this correctly or would this be a prohibited transaction? Thanks for all help.

Company owner has a DB plan, is a deferred retiree and is taking annual required minimum distributions. RMDs were calculated by the previous TPA using Treas. Reg. 1.72 tables. The amounts paid were usually significantly less than what his annual benefit was. My first question is, aren't those tables only for calculating RMDs for DC plans? I thought that just paying out the annual plan benefit in a situation like this would suffice as the RMD and no actuarial adjustments are needed. If this is correct, would his current benefit have to be actuarially increased to reflect the under-payment of his previous RMDs? All help is appreciated.

I think it would be considered discriminatory for the simple reason that after the cutoff date you would have HCEs investing in something that's not available to NHCEs. Even if NHCEs invested in the ML accounts before the cutoff date the same problem would exist. Generally, you should give everyone access to everything all the time.

Thanks for the responses. Charlie, we're doing some projections for calendar 2006. The plan defines "Employer" as all entities required to be aggregated under IRC sec. 414, so wouldn't this automatically include all members of a controlled group and not require company B to formally adopt the plan? I'm a little rusty at this, but what you're describing sounds more like a participating employer in a multiple-employer plan.

The owner of Company A has his wife on the payroll and sponsors a 401k plan. The wife owns Company B which has nothing to do with her husband's company and does not have any plan. She is paid $100K by Company A and receives $50K from company B. I believe this is a controlled group situation and the combined compensation of $150K from both companies can be used for purposes of Company A's plan. I always thought Company A can make and deduct the resulting contribution based on the $150K, but have recently spoken to someone who insists that the deduction has to be split between the two companies based what each company paid her. Which method is correct? All help is greatly appreciated.

I would also think that matches must be made on bonus deferrals due to the definition of comp.

Since this will not qualify for the DFVC program, is there any voluntary IRS program that will provide penalty relief for filing 2 or 3 years late, or is the $25/day $15K penalty the only option for an EZ non-filer who wants to become current?

I think the determining factor in whether or not to take into consideration unrealized gains or losses on an investment is whether it has an ample secondary market, so I do handle individual bonds differently than CDs and show an adjustment at year end. However, I must say that the individual bonds I see in plans are usually held to maturity. We do have some plans, though, that hold bonds with maturity dates that are decades away that I cannot imagine will be held until maturity. Regarding the GICs, I can maybe see why an auditor would make adjustments given the insolvency of some insurance companies in the '90s - although perhaps that's a stretch. But since CDs are backed by the FDIC, they would appear to be bulletproof.

A husband and wife each own 50% of Company A and there are no other employees. Company A (not the indivudual owners) owns 56% of Company B which has several employees. To me this looks like a parent-subsidiary group and a controlled group situation does not exist. However, there's been recent evidence that instead of A owning the 56% ownership in B, it's actually one of the 50% owners of A that owns 56% of B. If this is true the two companies would be classified as a brother-sister group and a controlled group situation would exist due to the attribution of spousal ownership (each spouse would be deemed to own 100% of A). Am I interpreting IRC sec. 1563(a) correctly?

I've had similar experiences with CDs held by a couple of the largest, most well-known brokerage firms. Their statements show unrealized gains or losses depending on whether the prevailing CD rate is higher or lower than the rate of the CDs held! Since we feel such gains/losses are not appropriate for CDs, we disregard these adjustments. I have a related question concerning accrued interest on CDs. Some investment firms include accrued interest on CDs in the total year end value and some don't. Do most of you include the accrued interest in your EOY accounting or do you just show what is actually received (the docs we use do not address this issue)?

Two participants in a six-life self-directed 401(K) plan have had the correct amounts deposited to their respective accounts and investment choices, but incorrectly allocated between their deferral and matching subaccounts. There's about $2,000 - $3,000 for each shown as deferrals that should have been allocated to the matching subaccount. The plan does not allow loans or hardship withdrawals and all the matching contributions are safe harbor and 100% vested. Between the hassles involved in getting the investment company to make the adjustments, the employer's reluctance to correct the problem due to his perception of a pr issue with the employees, and the calculations entailed in figuring out the exact transfer amounts and earnings adjustments, we sure are tempted to not fix this. What reasons should be given to the employer to have this fixed? As long as money from this point on goes in correctly, and all previous amounts are in the correct investments in the aggregate for each participant, should this even be an issue? All help is appreciated.

I can't see a reason for filing a 5310 after the fact. Plans sometimes get audited after they file a 5310 in a timely manner and receive an approval letter, so you probably don't want to file one now. Many plan administrators argue that a 5310 should never, ever be filed since the approval letter won't make you bulletproof. Exceptions apply if the plan is absolutely humongous, or unless there are individuals receiving $1M+ in distributions.

Two participants in a six-life self-directed 401(K) plan have had the correct amounts deposited to their respective accounts and investment choices, but incorrectly allocated between their deferral and matching subaccounts. There's about $2,000 - $3,000 for each shown as deferrals that should have been allocated to the matching subaccount. The plan does not allow loans or hardship withdrawals and all the matching contributions are safe harbor and 100% vested. Between the hassles involved in getting the investment company to make the adjustments, the employer's reluctance to correct the problem due to his perception of a pr issue with the employees, and the calculations entailed in figuring out the exact transfer amounts and earnings adjustments, we sure are tempted to not fix this. What reasons should be given to the employer to have this fixed? As long as money from this point on goes in correctly, and all previous amounts are in the correct investments in the aggregate for each participant, should this even be an issue? All help is appreciated.

A client would like to have a new plan set up with an eligibility requirement of 6 months and 500 hours of service. I was previously told that if a plan requires less than 12 months of service, an hours requirement cannot be used. I've also seen volume submitter documents that allow you to specify a number of hours required for each month during the eligibility period (seemingly even if the period was less than 12 months long). Is not having an hours requirement for less than 12 months of service a safe-harbor rule or can you have an hours requirement no matter what the circumstances are and no matter how short the eligibility period is? All help is appreciated.

For the umpteenth time over a period of years, we've been solicited by a firm that claims it can reunite terminated participants with their long-forgotten benefits that are currently held by "government agencies" and are just waiting to be picked up. We figured they're talking about the PBGC. Their literature does mention a hefty fee that will only be paid from the distributed benefit resulting in no "out of pocket cost to the participant". I'm guessing their fee isn't predicated on the participant signing a promise to pay after receiving a distribution, as the cost to chase down non-paying participants would be huge. Would they have a deal with an investment firm that'll pay them the fee once they get the investment? Even if they themselves are some kind of investment firm subject to SEC rules, how can they legally charge a fee that's far in excess of what similar firms charge for fees, commissions, etc.? Of course, their literature doesn't have a phone number.