Blinky the 3-eyed Fish

The contribution is more than 30 days after the tax return due date so it is an annual addition for 2005. Therefore 2005's earned income will be applicable in determining what the 2005 deduction limit is. She might as well wait until next year after her earned income is determined. She missed being able to contribute for 2004. There is no excise tax issue. Not sure why you posted this is the DB section though, since you state it's a PS plan.

That is an interesting interpretation. Have you any experience if the IRS would agree? Without the actual deposit into the trust, I personally don't see how you could treat it as a contribution.

I would want 412(i) software that also navigated my yacht. (I wanted to make an Andy-like comment for a 412(i) Friday.)

Correct. I was speaking in the context of the question, which was about a terminated participant.

I disagree with that blanket statement. If the plan needs to be amended under 1.401(a)(4)-11(g) to provide a contribution, that contribution must be vested. However, if the document has "fail-safe" language which automatically gives a contribution to someone who didn't otherwise satisfy the accrual requirements, then there is no prohibition of following the document and giving the contribution to whomever is to receive it. If that person happens to be terminated and 0% vested, so be it. The -11(g) provision has discretion in who to give the contribution and that is why it is necessary to have the restriction. Following the document has no discretion and that is why the person can be 0% vested.

I am betting there is no ERISA counsel and is the case with 99% of small plans. This sounds like a small plan mistake. Anyway, it seems as if you can treat it one of two ways, 1) the plan didn't pay the distribution, therefore, no distribution was paid or 2) the corporation loaned the plan money effectively, a prohibited transaction. I lean heavily toward the latter. But I can't tell how you are treating it Carolyn. Was the corporate distribution greater or less than the person's vested balance? Why was this not addressed with the client 4 years ago?

An interesting question, but rather than that, you could freeze the MP accrual ASAP and provide 25% of salary year-to-date. Add to that the 3% SH nonelective, and I think you are better off.

Of course both plans will need to file a 5500 and the owner-plan's asset information is a public record easily accessible by anyone. Tell him to grin and bear it.

The Pension Funding Equity Act made that change to the code. Notice 2004-78 will help explain.

You can file with the IRS for a ruling on whether there is a partial termination or not via Form 5300 I recall. If you don't have a resource such as the ERISA Outline Book handy, get it. In it are a world of details, such as information on partial terminations.

1.401(a)(26)-5(a)(1) references 1.410(b)-3(a). Within 1.410(b)-3(a) is 1.410(b)-3(a)(iii)(F), which is on point here.

No, any amount is benefiting for 410(b). 401(a)(26) requires it to be a "meaningful benefit". That was describes as 0.5% in the Paul Schultz memo although there is nothing official. This case is of course an exception to the 0.5% as -5 references.

http://benefitslink.com/boards/index.php?s...95&hl=structure I think this is the link to the prior discussion. Anyway, this person is benefiting for 410(b) under 1.410(b)-3(a)(iii)(F) if they would have otherwise satisfied the accrual conditions. That is the difference in Andy's post where the person did not meet the 1,000 hours requirement. That is also why a frozen plan would not cause someone at retirement age to be benefiting. As for (a)(26), you certainly can have someone benefiting for 410(b) and not for (a)(26) if they didn't accrue a meaningful benefit. A one cent accrual is enough for 410(b). However, in this case I think Belgarath's cite of (a)(26)-5 clearly states the person is also benefiting for (a)(26).

Since the first post spoke of how the document read, I presume that issue was reviewed. As for any possibility of it being a prohibited transaction or impoper on any level, maybe I am just dense, but how can that be even a consideration? If forfeitures reduce the employer contribution, the only beneficiary of the forfeiture account is the EMPLOYER. The participants have no economic benefit if there was $100 in forfeitures or $1,000,000. Therefore, if the account is used to reduce the match, PS, QNEC, whatever, it is just saving the EMPLOYER some cash.

Again that is a specfic document question. I can tell you that most documents though provide for the return of deferrals so that the 415 limit is not violated.

How are you going to make up the earnings without it being a contribution? The QNEC is making up both the missed deferrals AND earnings. A QNEC is a contribution. I see no problem here.

Finding lost money is a simple internet search. My local news will have the occasional story on it periodically. I tried it for me and some relatives and found my grandmother had a lost bank account, but nothing for me. :angry: While I am not a lawyer and you are, I can't see this as being the ultimate criterion. After all, what if the owner of a business took all the money and terminated the plan? Is there then no recourse? I see the same concept applying here, albeit, not quite in the same criminal context. There has to be recourse against someone even though no plan is around anymore. As for the particpants' duty, there are host of reasons why that may not have happened, like death, not understanding this responsiblity, whatever. Lastly and most importantly, I don't see forfeiting the money is the right thing to do. An IRA rollover has a decent chance of getting to the participant. Forfeiting their money is exactly that.

MB, I know you always come up with this same fofeiture advice, but I fail to follow the logic of why anyone would do that. You think it is better to forfeit the balance to other participants instead of an auto rollover? Even if it does go to the state, there is the possibility the person or beneficiary might recover it someday. Forfeiting the balance brings up the possibility the plan adminstrator may have defend a lawsuit should the participant/beneficiaries come calling, whether there is merit or not.

While you may take PIP's advice, you certainly are not required to go that far. Because the plan is terminating, if you can't locate him after a locator service is used, simply open up an IRA for him and roll over the money there.

It is conceptually like a fideltity bond, but I have found that the premiums are mulitudes higher in my brief research. For one client the best I could find for a $600,000 bond, when I could actually find someone at an insurance company who knew what I was talking about, was a premium of about $5,000 annually. As I mentioned though, my research was brief, so perhaps there is a much cheaper product out there.

I second Andy's comments. Also with these type of designs, which I assume you are doing to avoid 404(a)(7), you need to be very careful in how you word eligibility. One new eligible participant can ruin the whole plan if not properly placed in the appropriate plan (DB in this case so 401(a)(26) continues to pass). Also that new person can wreck your tests, so that what if scenario should be considered and communicated to the client.

Correct.

I think that on its face it is appropriate to use the forfeitures to reduce the QNEC deposit. Whether the forfeiture is reducing an employer profit sharing contribution an employer matching contribution or this QNEC, the fact remains it is reducing an employer contribution. The reasons for the QNEC are irrelevant to me as is the concern that it would draw down the forfeiture account. The bottom line is the forfeiture is going to reduce a contribution in the first place, so why not the QNEC?

They are located in the highest peaks of the thick jungle mountains of Borneo where most men dare not tread.

Interesting perspective on the document issue. If using a VS or prototype, it's not like actuaries are writing the language. Rather they are simply making choices that are appropriate for the client. Who would be better at this than the person who is most knowledgeable about the plan and about the defined benefit issues in general? Not to disparage attorneys, but with the GUST restatements, I needed to assist in every DB restatement an attorney prepared or I had to have them correct their mistakes after the fact. No exceptions.