TPATC

A participant with a TEFRA 242(b) deferral election has died with a substantial deferred MRD balance. He is currently in the middle of a fixed 30 year installment schedule. (Died after RBD.) If Spouse beneficiary revokes the installment schedule, this will revoke the 242(b) election. Question is: Is Spouse then required to take the make-up MRD distributions of the participant within 2 taxable years, or do the make-up MRD distributions ONLY apply to the MRDs that the BENEFICIARY has deferred AFTER the participant's death? ERISA Outline Book indicates only the post-death MRDs would have to be made up, but I have not found a supporting reference for this. Thanks!

Participant died in 2001. Spouse continues the MRDs each year until she dies in 2007. Daughter continues RMDs each year based on the life expectance of the spouse as of the spouse's birthday in the year of death, reduced by one each year. Spouse's single life expectancy in 2007 was 11.4. Therefore, factor for 2018 is 0.4. I am assuming this converts to 1.0. For discussion purposes, account balance at 12/31/2017 was $100,000, and balance as of today is $105,000. My question is, must the daughter close the account in full by 12/31/2018, or can she take the 12/31/2017 balance of $100,000 as the RMD by 12/31/2018, and carry over the earnings each year with continued RMDs on that substantially declining balance?

To revisit this topic, Per GMK: "What I'd do is a slight change in procedure. The ESOP distributes the shares to the inherited IRA (with a stock certificate issued), and the company immediately and automatically buys the shares back with the check." In this scenario, does the IRA Custodian itself (such as Vanguard or Fidelity) have to "accept" the stock and sign the put option, or can the participant make that election? As long as the stock certificate which is distributed and immediately cancelled indicates the IRA Custodian/Inherited IRA Account, does the participant rollover and put election suffice?

An ESOP sponsor is interested in closing down a long-term ESOP plan. If the company borrows the funds to repurchase the shares from participants, is the interest on that corporate loan deductible?

Shareholder X of a corporation which sponsors an ESOP owns 4.8% of the NUMBER of outstanding shares of the company. This 4.8% is based on his non-esop shares only, and the total outstanding shares includes the ESOP shares (all outstanding company stock). Shareholder X is turning age 70-1/2, so determining his ownership % is important. If he is a >5% shareholder, he must take a substantial RMD for 2016 and all future years. If he is not a >5% shareholder, he does not have to take RMDs until he retires. Reg 1.416-1 T-17 says a 5% owner is any employee who owns (or is considered as owning within the meaning of 318) more than 5 percent of the VALUE of the outstanding stock of the corporation . . . To determine whether shareholder X is a >5% owner, can I do a pure number of shares owned over number of shares issued calculation, or do I need to know an appraised dollar value of shares for each of the other shareholders? In other words, the stock valuation for the ESOP may say ESOP shares are worth $10, but another owner may have a different per share value based on his specific discounts applied, depending on minority/majority and deemed marketability. If some shareholders' stock is worth say $8.00, then the math could work out that shareholder X owns more than 5% of the VALUE of all shares. Assume voting rights are equal for all shares. Which way does the 5% determination need to be made - number of shares or dollar values - and has anyone heard of the non-esop shares being valued for a purpose like this? Thanks.

Corp. ABC sponsors a 401(k) Plan. Corp. ABC has two 50/50 shareholders who liquidate the business 6/30/14 and go their seperate ways. One shareholder takes 7 of 11 participants to a new corp. which does not sponsor a new plan. This group is treated as terminating from ABC corp. and is paid out in 2015. The second shareholder takes the other 4 participants to a new corp XYZ which adopts the existing ABC corp Plan as the new Plan Sposnor. Since ABC and XYZ are not a controlled group or ASG, how must the prior year ADP test be completed? I have tested the ABC employees separately for the first half of the year and they pass based on the prior year NHCE ADP. If I test the XYZ employees seperately for the second half of the year, what NHCE ratio do I use?

Susan, I agree with you on this RMD. I have a related question, though, for anyone out there, dealing with termination on December 31. I have a non-owner participant who is age 71. The Plan was terminated on December 31, 2012. The company he worked for was then acquired in an asset sale effective 1/1/2013. The new company is not adopting the Plan. The last payroll received from the Plan Sponsor was on 12/31/2012. Is this participant considered terminated, and if so, as of December 31 or January 1?

I administer an ESOP that states that distributions will be made in the form of company stock in the case of Participants who die, retire or become disabled, subject to the requirement that the stock be sold to the company or back to the Plan at FMV. The Sponsor's articles of incorporation restrict the ownership of shares to current employees and the Trust, and the Sponsor also converted from C-Corp to S-Corp about two years ago. To date, participants who have terminated due to retirement or disabilty, as well as spouse beneficiaries have been paid by check directly from the Sponsor - such check representing the distribution of shares and the immediate repurchase of those shares by the company. These participants/beneficiaries may then roll to IRAs. However, I now have a non-spouse beneficiary who would like to roll to an inherited IRA. This must be done through a direct rollover/Trustee to Trustee transfer. If the same procedure is used, and a proceeds check is issued from the Sponsor to the beneficiary IRA, does this satisfy the Trustee to Trustee transfer rule? Should the Plan receive a put agreement from the IRA Custodian to substantiate the transaction? Thoughts, anyone?

I have a client that plans to revoke his TEFRA 242(b) election in 2012. He will have a substantial amount of catch up distributions to take into income, so he plans to split it over the two year period. I am looking for information / references on how to calculate the final catch up amount that must be taken into income. I have tracked the delayed amounts every year, but does the catch up amount effectively freeze at 12/31/2011 if he is revoking in 2012, or does it continue to accrue (adjusted up or down based on earnings and actual distribuitons taken into income) through 2013?

I need help defining a Master Trust versus a commingled Trust. I have a few clients that invest their PS and MP Plan assets jointly. To date we have allocated the investment performance and underlying assets between the two plans on a consistent and reasonable basis for purposes of participant allocations and Form 5500 reporting. Recently an auditor (CPA, not IRS or DOL) asserted that these are Master Trusts that must file MTIA 5500s. In none of our situations are the Trust documents written as Master Trusts, but they do allow for the commingling of investments. While the investments may be placed with brokerage firms or mutual funds, the brokers or mutual fund families are not acting as Trustee or Custodian for the plans. The Plans are Trusteed by the shareholders. What insight can anyone out there offer?

I need help defining a Master Trust versus a comingled Trust. I have a few clients that invest their PS and MP Plan assets jointly. To date we have allocated the investment performance and underlying assets between the two plans on a consistent and reasonable basis for purposes of participant allocations and Form 5500 reporting. Recently an auditor (CPA, not IRS or DOL) asserted that these are Master Trusts that must file MTIA 5500s. In none of our situations are the Trust documents written as Master Trusts, but they do allow for the comingling of investments. While the investments may be placed with brokerage firms or mutual funds, the brokers or mutual fund families are not acting as Trustee or Custodian for the plans. The Plans are Trusteed by the shareholders. What insight can anyone out there offer?