Medusa

Different conclusion reached in following topic: Fidelity Bond Discussion

It can be reported as taxable to either the deceased participant, or to the participant's estate. Not to the beneficiaries.

We have a husband and wife DB plan (not PBGC covered). The husband just died. Currently plan assets are about $330,000, and the following benefit liabilities exist: Death Benefit payable to wife: $425,000 (of which about 1/3 represents the required survivor benefit) Retirement benefit payable to wife: $125,000 The last AFTAP put us at about 73%. The business can't continue without the husband. Obviously we do not have enough assets to pay both the death benefit and the retirement benefit. Everyone would like to get rid of this plan as soon as possible. Any thoughts as to whether there is any way under the sun to accomplish?? All suggestions appreciated!

Our problem is that we made the switch from Relius to ASC forms software and ASC does not have their forms or software for PBGC ready yet. Not having 100% confidence that they will have them in adequate time for us to get everything done, we decided to start using pure My PAA submissions. If we get a pleasant surprise from ASC, so much the better!

It must!!

Man, carrots, I would like to know how you did that. We are having one heck of a time and I am wondering if we are doing something wrong. It simply will not let us submit without that Plan Administrator e-signature. Are you uploading the filing from vendor software, or entering the info directly into My PAA? Any suggestions you have much appreciated!

I purchased them and I can't say they were all that useful. In fact, whenever the subject matter became complex, he would tell you to read further in the ERISA Outline Book. It was useful, but maybe more as a review than as a primary study resource.

Carrots, As far as I can tell, My PAA won't let us submit the filing at all without the Plan Administrator's electronic signature. I don't know if this is a change or not! I do know I don't like it!

Thanks for your reply Tammy. We seem to have some clients who are "technologically challenged".

Is anyone else using "My PAA" through the PBGC's website to e-file Form 1? We are trying to use it for the first time, since the PBGC forms are not yet available on ASC's forms package. We are trying to figure out how we want to deal with the "Plan Administrator's" signature on the e-filing. I would be curious as to whether TPA's are signing on behalf of their clients, or whether they are forwarding a link to their client to e-sign directly. Thanks for any input! Med

Not yet!

Help... can anyone point me to anything that indicates whether elective deferrals to a health savings account (HSA) are added back to compensation, to get to 415 compensation for HCE determination? My gut says yes, but I would like something else to say yes as well. Thanks! Med

Thank you. I am not insane. The attraction of retroactive termination is the potential savings of (a) not having to pay for a valuation for the current year and (b) not having to possibly come up with a required contribution for the year. That being said, these would not be the clients who agree to incur the extra expense of applying for a determination letter. Know what I mean? Thanks again, Med

The firm that I work for seems to routinely allow retroactive plan termination dates for defined benefit plans (non-Title IV). For example, they are trying to terminate some now, effective 12/31/08, on the basis that there haven't yet been any 2009 benefit accruals. I say no and am becoming very unpopular. Am I correct that there is simply no basis at all for doing a retroactive plan termination? This is one of those things that I thought everyone knew but now I'm starting to doubt myself.

Hello all, Some of our clients pay their TPA fees directly (we are the TPA), with the exception of distribution fees. If a participant's vested account balance is $500, and the distribution fee is $100, the participant receives $400 and that is what is reported on their 1099R. Now, the investment platforms don't typically break out that $100 in their annual reports. In the foregoing situation, they would show a distribution of $500. The question is whether the $100 fee is a plan expense or a participant expense. I feel that because the participant never sees the money, nor does the taxable amount include the $100, it is really a plan expense and should be reported as such on the Schedule I. Does anyone feel that this doesn't need to be reflected as a plan expense? All points of view welcome! Also posting this on 5500 board. Medusa

Hello all, Some of our clients pay their TPA fees directly (we are the TPA), with the exception of distribution fees. If a participant's vested account balance is $500, and the distribution fee is $100, the participant receives $400 and that is what is reported on their 1099R. Now, the investment platforms don't typically break out that $100 in their annual reports. In the foregoing situation, they would show a distribution of $500. The question is whether the $100 fee is a plan expense or a participant expense. I feel that because the participant never sees the money, nor does the taxable amount include the $100, it is really a plan expense and should be reported as such on the Schedule I. Does anyone feel that this doesn't need to be reflected as a plan expense? All points of view welcome! Also posting this in Distribution board. Medusa

Thank you Mike - the client has written in to the PBGC for a coverage determination. Our office assumed it would be a covered plan and has had the client pay premiums for some years. I hope it doesn't turn out to be "our bad".

The question is coming up about whether a "landscape architect" is a professional employer for purposes of exemption from PBGC coverage. Any thoughts? What, if anything, can we ask them to help clarify? We have been told that none of their employees "uses a shovel".... Med

I've reviewed some other posts along these same lines, but not exactly the same, so thought I would give this one a try. Have a frozen DB plan and a profit sharing plan. Any TH minimum is to be provided in the DC plan. The profit sharing plan is cross-tested and the sponsor is making contributions, but those contributions wouldn't necessarily satisfy top heavy (for example, participants who are still employed at the end of the year but who have less than 500 hours aren't getting them). Just based on percentages, this is a top heavy group - and I believe I still have to satisfy the top heavy minimum contribution requirement in the DC plan, even though the DC plan would not be top heavy on its own? I wasn't sure whether the fact that the DB plan was frozen has any bearing on this situation.

Is a deferred variable annuity in a qualified plan considered "life insurance" for the purpose of plan feature code 4B? I can talk myself into either position! Med

Thanks for the link, Sully. As it turns out, even though we sent the client the SH notice and instructed them to distribute same, they didn't do it - so as long as we amend the SH nonelective contribution out today, we should be okay. Med

Here we are 12/30/2008. In mid-November 2008 our 401(k) client distributed a notice indicating that the plan would be a safe harbor plan (with a 3% nonelective contribution) for 2009. It was not a "wait and see" notice. Now they have changed their mind and don't want the plan to be safe harbor for 2009. What are our options? Can the plan still be amended once a non-"maybe" notice has been given out? Some quick thoughts would be appreciated!!

The Rev. Ruling jpod refers to is 2002-45. Your circumstances seems to dictate that the restoration will be treated as a nonelective contribution, and in order to allocate it in the same manner in which it was assessed as a "market value" adjustment, yes you will need a plan amendment authorizing a special contribution that will be allocated in a manner that will restore the losses incurred by the plan participants due to the surrender of the contract. Such contribution will need to satisfy 401(a)(4). jpod suggests the possibility of treating as investment earnings - I wouldn't go that route without getting a PLR.

Maybe I'm not being clear. The new provider is correct about the date. I just didn't see the point of amending the return. After all, they're wrong all the way back. Anyway, we decided to just do it instead of dickering over it.

In any event, a distinction needs to be made between excess contributions (assuming that there are some) and forfeitures, such as that generated by the terminated participant. The plan document will address how the latter funds are to be handled - either applied to reduce required contributions, or reallocated amongst remaining participants.