Everett Moreland

I've looked and looked and found no guidance.

I have assigned a plan number when applying for a determination letter

Read Revenue Ruling 80-360

Read Revenue Ruling 78-120. http://www.taxlinks.com/rulings/1978/revrul78-120.htm

Sorry for not being clearer. We're probably both right. Prevailing wage employees often perform nonprevailing wage work for the same employer. What is prohibited is offsetting the profit sharing allocation for nonprevailing wages by allocations under the prevailing wage plan. For example, assume an employee earns $100 in nonprevailing wage work and $100 in prevailing wage work and, before the offset, would have $10 allocated under the profit sharing plan (5% of $200) and $20 under the prevailing wage plan ($20 for the $100 of prevailing wage work). Only $5 of the pre-offset profit sharing plan allocation can be offset, not the entire $10.

It violates the prevailing wage law to reduce other compensation or benefits on account of prevailing wage compensation or benefits.

I'm thinking of state contract law. It might be that the profit sharing plan includes a binding promise to pay benefits in an optional lump sum.

Would participants have the right under state law to preserve the lump sum option for profit sharing benefits accrued to the merger date?

The plan must be unfunded to qualify as a 457(B) plan for a tax-exempt and as a top-hat plan under ERISA.

I briefly looked at this issue two months ago. I became concerned that (1) such a cost-sharing agreement would be void as inconsistent with the specified employee contribution rate in the state PERS statute and (2) the additional employee payment would be treated not as a payment by the employee to PERS but as a payment by the employee to the employer, since the PERS statute requires that the payment come from the employer; I think this concern (2) responds to your second paragraph.

I would advise a taxpayer who does not report 457 plan income under the constructive receipt rule that the income probably is taxable when received, because of the duty of consistency. See UAL CORPORATION AND SUBSIDIARIES v. COMMISSIONER OF INTERNAL REVENUE, 117 T.C. No. 2 (2001): "In LeFever v. Commissioner, 103 T.C. 525, 541 (1994), affd. 100 F.3d 778 (10th Cir. 1996), this Court addressed the equitable doctrine of the duty of consistency: 'The "duty of consistency" is based on the theory that the taxpayer owes the Commissioner the duty to be consistent with his tax treatment of items and will not be permitted to benefit from his own prior error or omission. The duty of consistency doctrine prevents a taxpayer from taking one position one year and a contrary position in a later year after the limitations period has run on the first year.'"

A beneficiary mandated by the plan is a designated beneficiary

p 9 change "5% or more" to "more than 5%" p11 change "10%" to "an amount" p 13, paragraph starting "There are other limits", change "tax-sheltered annuity contract or from an IRA" to "tax-sheltered annuity contract, a governmental 457 plan, or an IRA" p 20 change "10%" to "an amount"

http://ftp.fedworld.gov/pub/irs-drop/n-02-3.pdf

The revised Special Tax Notice was added this morning to the IRS "drop" directory. There are three changes in the notice for qualified plans and one change in the notice for 457 plans.

http://www.irs.gov/ep

My memory is the IRS has expanded its 403(B) amnesty program, in RP 2001-17, to deal with nonqualifying employers that have adopted a 403(B) plan. You might confirm that and consider submitting the 403(B) plan under that program. The appropriate plan is a 457 plan.

I sometimes deal with this question in governmental plans that have vague definitions of the compenation on which contributions or benefits are based. This is a matter of interpreting the plan document. Determining the answer generally requires collecting a lot of information from the client about such things as past adminstrative practice, whether the terms used in the plan document are similar to terms used in personnel policies or salary schedules, whether the term has a known meaning to the client, the terms of collective bargaining agreements, and on and on. After collecting this information I often have the client (who generally has authority to interpret the plan) adopt an administrative interpretation about whether the item is included or excluded from compensation.

IRS Handbook 7.7.1, Employee Plans Examination Guidelines, Chapter 5, Top-Heavy Plans, 5.3.2, 3.C. (3/11/98): "In determining the applicable percentage, a defined benefit plan may disregard a year of service . . . for an employer in which the employee did not participate in the plan, unless the employee received an accrual in that year. See IRC 416©(1)©(i)." IRS Q&A from 2000 ASPA Annual Conference: "15. If a Plan is Top Heavy and employer decides that they would like to begin excluding commissioned employees, and the numbers work out so that the Plan passes §410(B) - or general testing, without a contribution allocation to commissioned employees, and some commissioned employees were eligible for the plan prior to the amendment, will commissioned employees who have already become eligible for the Plan, but who are no longer an eligible class of employees due to redefinition be required to receive a Top Heavy contribution allocation? "In the year of change a top-heavy minimum will be required. In subsequent years a top-heavy minimum would likely not be required in a defined contribution setting. In a defined benefit setting this would be more problematic."

The QDOT regulations address your question and tell you the requirements to meet

The reversion language in the prior plan document was one of the relevant facts. I based the reversion amount on the value of the membership rights at the time they reverted to the employer. I'm not sure I understand your last question, and I'm not sure I agree with the caution in that statement. It seems to me that you first need to determine who owns the demutualization proceeds. If they belong to the employer, deciding to give them to the employees instead avoids no problems and raises new ones.

Do you know of any pension service that includes TIR 1408 ?

Carol: What is the authority for the conclusion that USERRA does not require an employer to credit military service for accrual under a dc plan?

My conclusion was that it depends on the facts and that under my client's facts reversion was the right answer and the 4980 reversion tax was not a signficant issue. Another attorney who contacted me said he will be publishing an article on the subject.

I looked at this a few months ago and concluded that, in your situation, the employee gets a profit sharing allocation for $24k of comp.