Blinky the 3-eyed Fish

This has been discussed many many times on these boards. FWIW, Jim Holland agrees with your conclusions.

George, I deleted it. I was just coming up with a random reason for the limp. My apologies.

I wish there was an older document in existence. It appears to have vanished.

For some background to my request, it's a takeover case with this table in the pre-GUST document. In actuality, the distributions were prepared using 83 IAM for males and 83 IAF for females. I guess they never heard that you can't do that. Also, for fun, they decided not to consider 417(e) on lump sum payouts. The plan has been in existence 25 years with the same TPA, who is an attorney too. They also never bothered to restate the document for GUST. Oops! So in the end, it very well may just be a typo in the document. Thanks for the help.

Anyone ever heard of the IA 81 Male or IA 81 Female tables? If you could point me to the qx's that would be great (assuming they exist).

Mwyatt, here's an answer to 2 of your questions. As indicated in prior posts, I disagree with this statement, but I was curious to your reasoning. Do you feel the purchase of insurance is not an assumption?

No fixed rate portion either CBMMN since there are no participants for premium payment purposes in the first year if no past service credits are granted. I want to guess as to who this "could be". I guess it's MoeHoward2 in disguise.

Yes.

It would be easier to reverse it and say where does the idea that attribution comes into play come from? It's not stated in the instructions. It's not stated what rules of attribution should be used, 318 or 1563.

Kirk, there is no point in time after the fact at which the assumptions become unreasonable. There is only the valuation date, and if at that specific point in time the assumption is reasonable, then that is the only criterion that must be met. That same logic then negates the need for the insurance to be purchased by the end of the year.

Whether you consider the assumed purchase of life insurance as an assumption or part of the funding method is merely semantics. You are choosing this method of funding the plan, which is based on an assumption that life insurance will be purchased, henceforth, the purchase of life insurance is an assumption. I believe you to be incorrect in your belief that the IRS would disallow this deduction. Think of what the result was because of the assumption that life insurance was purchased. As you state, some of the premium was used to fund the death benefit, and therefore the contribution was increased. This is no different than a valuation that uses 83 IAF mortality setback 7 years with a 5% interest rate. This is no different that using a salary scale. In other words this is no different than any assumption that effectively increases the contribution. But the main point is that each of those items I listed have to be reasonable and that is it. Your distinction that the assumed purchase of life insurance is not reasonable unless it actually happens is erroneously distinguishing it from other assumptions that we all know don' t have to come to fruition. Now take all of that and now let's take it a step further. If you go to the client and want to charge him for any redo of the work or submission of the plan to the IRS, then that is unreasonable. The prior actuary certified to those results and it's his/her head on the line if anything ever comes back. It is not your job to second guess those results to that level of detail.

Yes, IF THE ASSUMPTION THAT LIFE INSURANCE WOULD BE PURCHASED WAS A REASONABLE ASSUMPTION.

The only question is whether the assumption at the time of the valuation was reasonable, not anything else. As for the rest of your post George, ac said the insurance wasn't purchased, so I am not sure I understand what you are saying.

Every valuation has assumptions. To assume that life insurance would be purchased can be one of those assumptions. The only criterion is for that assumption to be reasonable at the valuation date. Just because the life insurance was not actually purchased does not invalidate the assumption necessarily.

I think the issues are this: Attribution does not come into play for determining if an EZ can be filed, so it doesn't matter if they are minors or not. You say it's an LLC taxed as a sole proprietorship, but yet he doesn't own 100% of the sole proprietorship? I am not accountant, but by definition this seems to fit the definition of a partnership, not a sole proprietorship. That being said, if a plan covers only one or more partners in a partnership, they can file an EZ. What I am curious about though is how this entity files a Sch C under these circumstances. I someone wants to enlighten me on that, feel free.

Mbozek, let's spin it a different way. By year's end the company is going to contribute $20,000, which will provide for a 2% allocation for those eligible. After determining they are having a fabulous year in January, they decide to reward certain employees with an additional 3% of pay allocation via an amendment to the plan, for a total contribution of $40,000 Now compare that to the company who is just going to make a $40,000 contribution, but wants to change the allocation formula after year-end to target certain employees. HOW IS THE IRS, OR ANYONE ELSE FOR THAT MATTER OUTSIDE THE COMPANY, GOING TO KNOW THE DIFFERENCE? The answer is that they aren't going to know. And that is why the IRS is treating the first instance as a cutback and a true violation of 411(d)(6). Company CEO, "Really Mr. IRS agent, this is what we intended to do." IRS Agent, "You're a filthy liar! Prove it!"

And those stipulations still can be applied to plans. The 2-year wait is certainly within this timeframe. EGTRRA did not change this at all.

Mbozek, as discussed previously, your point is valid IF the profit sharing document prescribed allocation amounts (say 2%) and then an increase in those allocation amounts was desired. But under the question posed that is not the case. Rather the contribution is DISCRETIONARY! Bird can't say it any clearer in his last post. Employers do increase allocations after year-end, but they do so within the framework of the allocation formula in the document. You ask for IRS authority to contradict your position. Well how about 411(d)(6) and their repeated interpretation of its application under these situations at conferences and anywhere else? What authoritity do you have to support your position? The bottom line is that a plan was audited, the IRS would have issues with the amendment. I doubt any client is looking to go to tax court over this.

Mbozek, you may see it that way, but the IRS doesn't. Who is to say that it is an additional contribution and not the same contribution allocated differently and therefore a cutback for some?

You would need to amend the plan, potentially under 1.401(a)(4)-11(g). Even though I don't use Corbel, I am sure they have issued an amendment for this purpose.

And here is where we will have to agree to disagree. My cost/benefit analysis has determined that the cost of filing the 1096's for every client is FAR greater than the benefit of doing so. I can't even fathom charging a client for a form they didn't need to file under the guise that they may eventually make an unauthorized distribution and then forget to tell me. Can you imagine that discussion?

And don't forget that we should caveat every single thing we say or write so that it can in no way be taken out of context or misconstrued. Also, we should each purchase loud beepers to afix to our vehicles when we back them up so that no children run behind them. Also, we should never take a bath when no one else is home because we could suffer a blackout and drown. I don't even like to walk with scissors, let alone run with them. I am being facetious to point out that we can't consider every wrong possibility. The trouble it would take to send a 1096 to every client would far outweigh the harm that would come from a missed distribution the client didn't tell me about.

Third time's the charm? The post referenced in the post referenced by pax, when you asked this question last year provides the details. In short, you don't need to provide the TH min if the only contribution is a SH contribution and if there are no forfeitures. Read Rev. Rul. 2004-13.

Harry, we all can't be that cautious, can we? I certainly hope I am aware enough to know if a "massive distribution" occurred for any one of my plans. If not, then either the plan sponsor performed an egregious boo boo or I need to go into a home. The former removes me of liability. I could think of a thousand things more likely for a plan sponsor to do wrong with a plan then forget to tell me of a distribution that I should know of in the first place.

WDIK, SoCal is correct, although since the Alternative Calculation Method is being used, the discounting should be using the Required Interest Rate, not the pre-retirement interest rate. Also, to be clear, you are NOT using contributions made for the premium payment year even if they are made before the filing date. I went ahead and looked it up - see page 37 of the 2004 instructions.