thepensionmaven

Several years ago, we met an attorney who used a document called "conversion minutes" to "convert" a defined benefit into a profit sharing plan. The name of the plan did not need any change as the defined benefit was called "pension plan", the plan continued as Plan #001 and the 5500s were subsequently filed as Plan #001, but as a profit sharing plan. Over the years, we have seen several of these plans, all the documentation prepared by the same attorney. He said this could be done, but ONLY in the case of a plan whose sole-participant is the owner of the company, or a sole proprietor. After all, there are no common law employees, and technically, if there were any discrimination in benefits, since the owner is the only participant, this is of no consequence. Thoughts??

A client has several frozen SEP accounts and wishes to consolidate them. He has found an investment vehicle with a fixed rate of return, but the investment is only available to SEPs, SIMPLES and 403(b). Can a SEP account be established just as a rollover with no additional contribution?

We just inherited a plan with an outstanding loan by the officer of the company. The participant made one payment in 2011 and has not made a payment since; the prior TPA has not issued a 1099R. We asked around at a few pension meetings and someone mentioned the possibility that the transaction could be handled as follows: participant taxable in 2011 on the missed payments due in 2011 participant taxable in 2012 on the missed payments due in 2012 participant taxable in 2013 on the missed payments due in 2013. Therefore, there would be 1099Rs in 2011-2013 only for the missed payments and these would be a code "1". The participant has every intention of starting to repay the loan with the next quarterly installment. This is a most interesting take on the situation and would appreciate any comments.

Where did you find the penalty for a 1099R, the only One I could find is a flat $100 for 1099-MISC.

I have a doctor client who was fortunate enough to have a plan in force at the time of TEFRA and has a valid 242(b) election and he is not going to retire anytime soon. The plan is a profit sharing plan and he needed to take an inservice distribution in order to purchase a primary residence. I do not believe this has any affect on the 242(b) election??

I posted this elsewhere, but don't think it would be seen. We just took over a profit sharing plan in which the owner took a loan in November, 2010, has never made any payments, but is in a financial situation to pay the entire loan back plus interest. He has not filed 2010 or 2011 5500s, but we can address that under DFVC. Since I have never dealt with this prior to this point, he's obviously defaulted on the loan in 2011 and should be issued a 1099R for 2011. But, does the fact that he has defaulted negate the fact that he wants to, and is in a position to, repay the loan now with the interest owed? Any suggestions are appreciated.

Related question. We just took over a profit sharing plan in which the owner took a loan in November, 2010, has never made any payments, but is in a financial situation to pay the entire loan back plus interest. He has not filed 2010 or 2011 5500s, but we can address that under DFVC. Since I have never dealt with this prior to this point, he's obviously defaulted on the loan in 2011 and should be issued a 1099R for 2011. But, does the fact that he has defaulted negate the fact that he wants to, and is in a position to, repay the loan now with the interest owed? Any suggestions are appreciated.

I agree that it is not fair to the QPA to have to take and pass both ERPA exams to become an ERPA, but an ERPA is automatically designated as a QPA. Having obtained both designations, I can honestly say the ERPA exams were much easier. I can certainly understand the IRS' position that they want all their EAs to start on an equal footing, but that doesn't mean I have to like it. Oh, and by the way, I'm the moderator of this message board.

Participant terminated more than 5 years ago, was 100% vested and was paid out. Participant is rehired in 2012. Does this person start over for eligibility and vesting purposes?

I'm sure there is a penalty for not issuing a participant a 1099R, but I can not find it anywhere. The only penalty for non-issuance of a 1099 mentions a flat $100 for non issuance of a 1099-MISC. Does anyone know what the penalty for non issuance of a 1099R is? I just took over a plan and a participant rolled over a distribution in 2011 and was not issued a 1099R. I'd rather be safe and issue one now, but would like to warn the client that there will be a penalty.

I used to work for a law firm-TPA firm that prepared plan conversion amendments. This was prior to the 411(d)(6) regs- I do not recall whether it was DB to PS or PS to DB. We are speaking of a sole proprietor with no employees. Since we are speaking of an owner-only plan, what is the opinion??

Have an LLC prospect that wants to do a combination 401(K) and defined benefit plan. How do the LLC members pay the elective deferrals to the plan, through a personal account, from their draw??

We've had this issue arise a few times over the years and I was wondering how others handle the situation. Employer/Sponsor approached with questions about the pension plan, either general or participant specific. Employer passes the participant on to the TPA rather than calling TPA himself. In the past, we have told terminated participants that they should be asking their employer and if he does not know, he should come to us because he is the trustee and only he can give out this information for privacy issues. Other TPAs I know have told participants that their E&O policy only allows us to deal directly with the Employer/Trustee and all questions must go through the Employer. An insurance broker I deal with is telling me that this is a HIPAA issue and there is a $1000000 fine for giving out any information. Sounds good, but I don't think this applies to the situation. What do you think and how do you handle situations like this?

Does anyone know of an Excel spreadsheet capable of cash balance and new comparability illustrations as well as testing in one spreadsheet? I found one a few months ago but the calculations for the cash balance portion referred to empty cells, so it is unusable Anyone know of a home grown spreadsheet for sale?

GHBC is the company that has taken over the DB prototypes that were previously offered by MetLife (New England Life before that). For a relatively small registration fee and a small annual fee, an Employer can adopt these prototypes, and the Trustees are not limited to any insurance company investments. We are using these plans for our frugal clients.

Hey, thanks for the compliment! Being a TPA for some 30 years now, I am using Datair and am looking for something better. What does being a "newbie" have to do with the answer??

Actually, I was asking if there is any difference in terminating a cash balance vs a traditional DB. I have been in thepension business for 30 years - I know what I know and ask when I don't I have handled only a handful of CB plans vs over 100 Traditional DBs.

You fund for the shortfalls or the substantial owners waive benefits for underfunded plans. On the other hand, for overfunded plans you allocate the excess, or you transfer the excess to a successor plan. If you want to revert the excess plan assets, get an ERISA attorney involved. From your question, it appears you need to do a lot more studying of how defined benefit pension plans operate. Good luck. Thanks for the information. Didn't realize that criticism would be a part of the answer. That was very useful.

Does anyone have experience terminating a cash balance plan? If the accrued benefit is equal to the hypothetical account balance, how do you handle the disparity between the total actuarial value of plan assets and the total hypothetical account balances of all psrticipants?

Does anyone know of any web-based defined benefit valuation software?

Tom, Do we know WHY the delay with the EZ form? I suppose the immediate solution, especially if we want to get paid, is to file 5500-SF as a 1 participant plan.

Do we even know why the delay?

We currently administer a profit sharing plan for a doctor-sole proprietor with one employee. It was just brought to our attention that the doctor has a P.C. as well, with one employee also. Per the client's wishes, we amended the sole proprietor plan to include the P.C. and its' employees. The salary for the doctor from the PC plus the self employed income from the sole proprietorship brings the doctor over the 415 limit on compensation, and he would be eligible to make the full $49,000 contribution. However, his self employment income is only $150,000 and obviously can not justify a contribution of $49,000. Can we combine the income from the PC with the self employed income so he can contribute the full $49,000; and if so, woiuldn't it have to be split between the PC and the proprietorship? Can he deduct the full contribution from the proprietorship since the PC tax return has already been filed and the accountant took $0 deduction and wanted a $0 deduction.

One of our clients decided to terminate his profit sharing plan because there was a former participant/employee who stole quite a bit of money from them. The client's attorney suggested they terminate the plan as soon as possible. The account was liquidated and all people rolled over except for one. The participant involved had an account balance well over $5,000 and is not married. The client's attorney advised them to pay everyone out by 12/31/10. The participant involved has refused any and all mail from the client, and the client sends everything certified, return receipt. The client still has the check representing the 80% and has not forwarded the 20% withholding yet. Any suggestions on how to handle the check the participant will not accept??