jaemmons

I assume you mean a participant must work 1,000 hours AND be employed on the last day of the plan year. If so, an eligible participant does not accrue a benefit until the last day of the plan year. As such, I would say that the plan does not have a funding liability for the plan year, since no one is accruing a contribution. If however, you have a 1,000 hours OR employed on the last day requirement, the plan would be subject to minimum funding up through November, since a participant accrues a benefit once they have worked 1000 hours which may be before November.

No. It now only applies to DB plans.

If the plan allows for the bottom up QNEC then the plan administrator is following an allowable allocation method written into the plan. The Rev procs don't stipulate how the QNEC is to be allocated (except to provide "acceptable" examples of how to apply it to the current year of allocation), so I would assume that whatever allocation method applies to the plan's operation during the year of failure is allowable. My office uses the Corbel volume submitter document which also allows for a bottom up qnec as an allowable method of adjusting ADP percentages to pass testing.

KJohnson, If the plans had different profit sharing allocation formulas (e.g.- one is comp to comp the other is cross-tested), do you agree that all ee's of both corps would be counted in the 401(a)(4) testing? I have always treated them as such, but have received conflicting opinions on the matter. thanks

KJohnson, If the plans had different profit sharing allocation formulas (e.g.- one is comp to comp the other is cross-tested), do you agree that all ee's of both corps would be counted in the 401(a)(4) testing? I have always treated them as such, but have received conflicting opinions on the matter. thanks

chris, What are the distribution options available for death benefits under the PSP? The surviving spouse may be able to elect annuity payments over his/her life expectancy, which in turn would be exempt from the 72(t) excise tax. In addition, unless there are plan provisions to the contrary, a spousal beneficiary cannot be forced to withdrawal a death benefit from a plan, regardless of the amount. Required distributions would not need to commence until the deceased participant would have attained age 70.5. Of course either option must be elected by September 30th following the calendar year of the deceased participant's death, according to the final 401(a)(9) regulations.

The 10% early distribution excise tax is not applicable to a death benefit distribution. (IRC 72(t)(2)(A)(ii)). Pardon my ignorance, but I don't see why the surviving spouse doesn't roll the money over to an IRA in her name. A surviving spouse is eligible to do this. Subsequent distributions from the IRA would be taxable to the surviving spouse, but would be exempt from excise taxes under 72(t) if any of the exemptions listed thereunder apply.

I see that I did inerrantly count the shares twice. Sorry for the confusion. Thank you to those who pointed out my oversight.

You may be able to obtain them from the Society of Actuaries website at www.soa.org.

The surviving spouse is eligible to rollover the decedent's PS account balance to their own IRA. (Treas Regulation 1.402©-2, Q&A 12) A decedent IRA is unnecessary and I don't think can be done anyway.

If they had a child who is under the age of 21, then the stock would be attributed to the child and a controlled group would exist. Assuming all other requirements are met under 1563(e)(1) through (4), the spousal attribution exception would apply if she had absolutely no involvement with Corp. B. However, if they live in a community property state, then the spousal exception requirement listed in 1563(e)(1) (Spouse does not own any stock in that corporation directly) has not been met, as the stock deemed to be part of the community property assets of the marriage is deemed to be directly owned by each spouse.

The spouse is attributed the 50% ownership from the husband. No spousal exception applies to the attribution of stock, since she is an employee of Corp. B. Therefore, collectively they own 100% - 50% of direct ownership from husband + 50% attributed stock to wife from husband.

Yes. Through stock attribution under IRC 1563, husband and wife each are deemed to be 100% owners and 50% owners in Corporation B. Controlling interest in Corp A is 200% and Corp. B is 100%, so they meet the first requirement under 1563(a)(2)(A). Effective control, taking into account smallest ownership interest is 100%, so they meet the effective control requirement under 1563(a)(2)(B). Above determination assumes that all stock considered has voting rights.

generally, yes.

MWeddell, If the Puerto Rican residents work and are paid by a US corporation in Puerto Rico, I agree that they would be treated as a non-resident alien. However, if they work in the US, as defined in Publication 519, and meet the "substantial residency" test, it seems that they are a resident alien and as such, would be nonexcludable. Would you agree, that so long as they are working in Puerto Rico, they are a non-resident alien, but if they work within the US, then a closer look needs to be taken at the residency test? thanks

From my understanding, "bona fide" residents of Puerto Rico are still required to file a 1040 for US federal income tax purposes, if they received income from sources within the US. Therefore, a 1099-R should be distributed to them accordingly.

Once the file has been saved from the ftp site of Nationwide, you can accomplish what you want to do from the Financial interface link on the Processing screens. Log on to RELIUS and click on "Processing" from the top menu bar. There should be a Financial Institution Interface option on the drop down menu. Then click on Nationwide and follow the screen prompts. There is a "source mapping/excluded transactions" screen which allows you to suppress the transfers.

I am not disagreeing that a safe harbor 3% nonelective serves three purposes (e.g.- TH minimum, ADP safe harbor and application to minimium gateway), but that was not what you were asking. As such, my answer was given accordingly. Like I had previously stated, the minimum gateway allocation is determined by taking into account all non-matching employer contributions and forfeitures thereon, for the plan year. Forgive me, but I don't understand your previous comments, as their purpose seems, to me, to be irrelevant.

I don't think you have a problem with the plan's definition of compensation, as a self-employed individual's comp by definition under IRC 415©(3) is earned income. IMO, the exclusion of the secretary group, may be a demographic "error" (assuming the plan fails coverage) and would need to be corrected under the VCP General program under Rev Proc 2001-17, whereby a corrective amendment can be done and a formal application to the IRS is made. Should the plan fail 410(B) due to the exclusion, it becomes a demographic issue, as the plan's qualification error was due to a plan provision. The plan is being operated as it is written, so it does not seem to qualify as an operational "error" which may be corrected under the self correction programs under VCS or VCO programs as described in Rev Proc 2001-17.

All employer matching contributions made and subject to Code section 401(m) and the regulations thereunder are not taken into account in determining satisfaction of the minimum gateway. This includes ADP and/or ACP safe harbor contributions pursuant to 401(m)(11).

Matching contributions are not taken into account for purposes of the minimum gateway (5%). Thus, so long the plan is not top heavy, the 5% can be given to only those NHCE's who meet the plans allocation requirements for the cross tested employer contribution. See Explanation of Provisions Paragraph B to the final 401(a)(4) regs.

Mike, You are correct. I overlooked the "death benefit" part of the question. After rereading the original question, the death benefit would fall under the 401(a)(9) regulations, since the consent requirements of IRC 411(a)(11) do not apply after a participant's death. (Reg 1.411(a)-11(5). The timing of when payments must commence depends upon whether the plan contains provisions as described under Reg 1.401(a)(9)-3 Q&A -4(B) & ©. As such, the plan can dictate application of the 5yr rule or life expectancy rule or it can contain provisions which allow for individual elections. If individual elections are allowed, they are irrevocable and must be made by September 30th of the calendar year following the year of the participant's death. If no election is made by this time, the plan may (as long as it contains such language) specify the method of distribution. I suppose it gets back to what Mike P. eluded to earlier...What does the plan say? Absent any language, the benefit could be left in the plan until the deceased participant would have attained age 70.5. (1.401(a)(9)-3 Q&A 4(a).

Reg 1.410(B)-3(a)(2)(i) - Exceptions to allocation or accrual requirements. As long as an employee is an eligible employee under 1.401(m)-1(f)(4) they are considered benefiting for purposes of 410(B) testing. If they are eligible to defer and there are no other requirements to receive a match, they are considered benefiting, regardless of whether they defer to the plan or not.

Technically if an employee is elgible to receive an employer match, regardless of whether one is made, they are treated as benefiting for purposes of 410(B), so the option to check off "No HCE's benefiting" should not be applied to the match portion. I come to the same conclusion (same two boxes checked), but different application to disaggregated portions.

Unless the other forms of benefit are annuities, I don't think you need spousal consent. Just because optional forms of benefit are offerred, does not necessarily subject the plan to spousal consent (e.g.- other form is an installment) What are the other forms of benefit? Is the plan automatically subject to the spousal consent requirements IRC 417? (ie. - plan is a db, money purchase, target benefit or nonsafeharbor profit sharing plan?) If the plan is a profit sharing plan which contains safe harbor language (e.g.- plan doesn't allow for annuity payouts, spouse is automatically the primary beneficiary and the plan does not contain transferred ("tainted") assets from a db, money purchase or target benefit plan) it is not subject to spousal consent. Generally, only nonsafeharbored plans, and plans subject to minimum funding standards must provide for spousal consent, with respect to benefit payments and loans issuances greater than $5k.