Everett Moreland

My reading of the vague regulation, after comparing it with the prior version, is that a distribution to an alternate payee of a restricted employee is subject to the restrictions on distributions to restricted employees. I recently looked for authority on this question and did not find any. Most plan documents I have seen don't explicitly address this question.

Please comment if you have dealt with allocation or reversion of demutualization proceeds received from a group annuity contract that is used to pay retirees under a DB plan that terminated years ago

Many will statutes provide that a beneficiary under a will can witness the will

If the plan is not an employee benefit plan under 29 C.F.R. § 2510.3-3, no SPD is required because the plan is not subject to the labor provisions of ERISA. 29 C.F.R. § 2510.3-3© states that an individual and the individual's spouse are not employees with respect to a trade or business wholly owned by the individual or the individual and the spouse.

Yes, although vesting probably occurs before retirement age, such as after 5 years of participation.

The 401(a)(17) limit applies for purposes of allocations and nondiscrimination testing. As to nondiscrimination testing, 1.401(a)(17)-1©(3) states that the 401(a)(17) limit applies separately to each plan: "Plan-by-plan limit. For purposes of this paragraph ©, the annual compensation limit applies separately to each plan (or group of plans treated as a single plan) of an employer for purposes of the applicable nondiscrimination requirement. For this purpose, the plans included in the testing group taken into account in determining whether the average benefit percentage test of section 1.410(B)-5 is satisfied are generally treated as a single plan." If you read 401(a)(17), 1.401(a)(17)-1(a) and (B), 1.410(B)-7(a) and (B), and 1.414(l)-1(B)(1), I think you will conclude that for allocation purposes the 401(a)(17) limit also applies separately to each plan. Permissive aggregation of two plans for nondiscrimination testing does not make them one plan for allocation purposes, even if maintained by the same controlled group. If the two LLCs in fact have only one plan under the rules in 1.410(B)-7(a) and (B) and 1.414(l)-1(B)(1), the two plans would be treated as one plan for purposes of applying the 401(a)(17) limit to both allocations and nondiscrimination testing. However, my guess is that the 401(a)(17) limit still would not be prorated between the two plans for allocation purposes. My guess is that the aggregated plan would be treated as making only one allocation for the owner (the aggregate of the two allocations), and thus the allocation would not be based on compensation over the 401(a)(17) limit. If the plans fail nondiscrimination testing because the 401(a)(17) limit is not prorated for allocation purposes, you would want to provide a method for prorating the 401(a)(17) limit for allocation purposes. The method of proration would need to be stated in the plan documents. Otherwise the plans would not have a definite allocation formula (if they are profit sharing plans) or provide definitely determinable benefits (if they are money purchase plans).

The general test does not apply either.

The assets in the 457 plan are required to be held in trust; they cannot be City assets. The ACP test does not apply to the City's plans.

403(B) is not available to a city. What does the City want to match? Contributions to the 457 plan? If so, the City could contribute the matching contributions to a DC plan. The City's matching contributions to a DC plan would not count toward the 457 limit.

http://www.dol.gov/dol/pwba/

IRS Notice 98-8 (dealing with governmental 457 plans): "In order to satisfy the requirement that all plan assets and income be held in trust, amounts deferred under a governmental section 457(B) plan after a trust has been established must be transferred to the trust within a period that is not longer than is reasonable for the proper administration of the accounts of participants. For purposes of this requirement, a governmental section 457(B) plan may provide for amounts deferred for a participant under the plan to be transferred to the trust within a specified period after the date the amounts would otherwise have been paid to the participant. For example, a governmental section 457(B) plan could provide for amounts deferred under the plan to be contributed to the trust within 15 business days following the month in which these amounts would otherwise have been paid to the participant."

You might consider whether the permanence requirement will be satisfied

Read the following page: http://retireplan.about.com/money/retirepl...ly/aa021101.htm

(1) Is the employee's life the measuring life for the straight life annuity referred to in 1.401(a)(4)-5(B) for payments to a beneficiary or alternate payee of a restricted employee? 1.401(a)(4)-12 states: "Straight life annuity means an annuity payable in equal installments for the life of the employee that terminates upon the employee's death." (2) If the employee's life is the measuring life, do 401(a)(11) and 417 override 411(d)(2), and what is the employee's life expectancy after the employee's death? (3) If the beneficiary's or alternate payee's life is the measuring life, does 401(a)(9) override 411(d)(2), and should the employee's life expectancy be used for a beneficiary that is not an individual?

(1) Is the employee's life the measuring life for the straight life annuity referred to in 1.401(a)(4)-5(B) for payments to a beneficiary or alternate payee of a restricted employee? 1.401(a)(4)-12 states: "Straight life annuity means an annuity payable in equal installments for the life of the employee that terminates upon the employee's death." (2) If the employee's life is the measuring life, do 401(a)(11) and 417 override 411(d)(2), and what is the employee's life expectancy after the employee's death? (3) If the beneficiary's or alternate payee's life is the measuring life, does 401(a)(9) override 411(d)(2)?

You might be assuming that whatever is left in your account in the plan at your death goes to your children. That might be an incorrect assumption. It might go to your estate instead, in which case you can provide in your will that it goes to your husband. Ask the plan administrator to give you a copy of the plan and the summary plan description and take them to an employee benefits lawyer for advice.

If the plan truly has no participant, the plan is not and cannot be made a qualified plan. Revenue Ruling 70-316. If there is a trust, its qualification for exemption must be determined under the rules in the Internal Revenue Code other than 401(a). My reaction without knowing the facts is that if the plan has no participant it should be terminated and the assets paid to the employer. If the plan does have a participant, the remedial amendment period is still open for TRA '86 and later laws and so it probably is not too late to amend and submit for a determination letter.

"(4) if the contributions or benefits provided under the plan do notdiscriminate in favor of employees who are officers, shareholders, persons whose principal duties consist in supervising the work of other employees, or highly compensated employees." "(7) A trust shall not constitute a qualified trust under this section unless the plan of which such trust is a part provides that, upon its termination or upon complete discontinuance of contributions under the plan, the rights of all employees to benefits accrued to the date of such termination or discontinuance, to the extent then funded, or the amounts credited to the employees' accounts are nonforfeitable. This paragraph shall not apply to benefits or contributions which, under provisions of the plan adopted pursuant to regulations prescribed by the Secretary or his delegate to preclude the discrimination prohibited by paragraph (4), may not be used for designated employees in the event of early termination of the plan."

The following from IRS Notice 98-8 indicates that the "trust" requirement for 403(B) annuity contracts and custodial accounts could be violated by an excessive wait: "In order to satisfy the requirement that all plan assets and income be held in trust, amounts deferred under a governmental section 457(B) plan after a trust has been established must be transferred to the trust within a period that is not longer than is reasonable for the proper administration of the accounts of participants. For purposes of this requirement, a governmental section 457(B) plan may provide for amounts deferred for a participant under the plan to be transferred to the trust within a specified period after the date the amounts would otherwise have been paid to the participant. For example, a governmental section 457(B) plan could provide for amounts deferred under the plan to be contributed to the trust within 15 business days following the month in which these amounts would otherwise have been paid to the participant."

If you want the 415(B) audit procedures, go to http://www.irs.ustreas.gov/prod/bus_info/t...t07/35955a.html

See 1.401(a)(4)-4 and 1.411(d)-4 re covenants not to compete

You might consider whether basing allocations on perfect attendance and no accidents would violate workers compensation law or the ADA. As to definitely determinable, my guess is it would be definitely determinable if you can define each of these three matters in a way that does not involve discretion. That could be difficult. It seems to me that allocating on a monthly basis but with a last day/1000 hour requirement might violate the vesting rules as to long-term employees.

The employer could contribute the match to a qualified plan, whether the employee contribution is pre-tax to the 457 plan or after-tax to the qualified plan. The employer's matching contribution to the qualified plan will not count toward the $8,000 limit ($8,500 next year).

I have combined a profit sharing and a DB plan in one document, stating explicitly that there are two plans, one a profit sharing and one a DB. I have not yet submitted it to the IRS, but I do not anticipate a problem. I might submit it with two determination letter applications.

My experience with the IRS is consistent with MWendell's. Where a money purchase plan and a profit sharing plan clearly satisfy the rules for being treated as one plan (one asset pool), the IRS treated them as two plans.