Belgarath

It depends. If benefit subject to QJSA, then payment in a non-QJSA form would require spousal consent. You might want to read through IRC 417, IRC 401(a)(11)(B), and ERISA 205, as well as 1.401(a)-20, which will give you detailed information. Probably more than you want.

Thanks for the responses. I had a chance to dig a little more, and discovered the following FAB 2006-01. The DOL, reasonably enough, takes the stance that these are plan assets. However, they show a rare flash of common sense when they sugggest that in certain circumstances where the cost to allocte and distribute is too high, that it might be appropriate for the fiduciary to refuse to accept the check. http://www.dol.gov/ebsa/regs/fab_2006-1.html

Profit sharing plan terminated in 2002. Everyone paid out, determination letter issued by IRS, etc... Now years later, one of the mutual funds sends the Trustee a check for a little over $300.00, due to some settlement for something they did wrong - whatever. What the heck is done with this? It would cost many, many times the three hundred bucks to attempt to locate, allocate, and pay all these former participants, which is ridiculous. What would y'all do?

"Only the cost of insurance (PS 58 Costs) need to be reported as taxable income for the participant. Thay may or not be equal to the term premium." I'd just interject a note of caution here. I'm not certain that the IRS necessarily agrees. I heard second-hand from a tax attorney many years ago who had just returned from the IRS National Office, and had been in conversation on just this issue, that he received "conflicting" views. One view is that entire premium is considered TTC, and you can't use a lower rate. I bring this up FWIW. P.S. - it is really a matter of semantics, but for the S/E, it isn't actually "reported" as income on a 1099. Instead, it simply isn't deducted on the tax return. So plan contribution 20,000, TTC of 1,000 - S/E only deducts 19,000.

Again, in the context of a non-governmental plan... Depending upon how you read Revenue Ruling 2004-20, I have my doubts that such "key person" insurance would be currently deductible. And the insurable interest issue that you raised might be an issue as well. Additionally, I have a hazy recollection that the IRS has been less than definitive in discussions from the podium, saying that there "may be" problems. I think there was some concern that using the proceeds would relieve the employer from otherwise required funding obligaions. Depending upon the $$ involved, I think I might want a PLR before messing with this.

For a non-governmental plan, I don't see any possible way for this to be allowable in a DC plan. For a governmental plan, I have no idea.

Some docs also provide that if you don't pass general testing, you revert to some form of design based safe harbor allocation specified in the document. You wouldn't be able to do the 11(g) amendment proposed in this post in these plans either. Blinky - are the documents you've seen/used that you refer to (that don't suck) prototype/volume submitter documents, or custom?

And if your client is a "prove it to me" type, refer them to 1.416-1, M-10.

For proper adoption, I think the crux is whether or not they are "required." Generally, for required amendments, the interim amendment must be adopted by the end of the regulatory RAP. For discretionary, by the end of the plan year in which it is effective. But to answer your question, I believe the answer is found in Section 6, .05, (3) of Rev. Proc. 2008-50. It defines "interim amendments" for the purposes of the Revenue Procedure. I've then pasted in below the excerpt from Rev. Proc. 2007-44 that is referred to in 2008-50. SECTION 5. ADOPTION OF INTERIM AND DISCRETIONARY PLAN AMENDMENTS AND EXTENSION OF THE REMEDIAL AMENDMENT PERIOD .01 Designation of disqualifying provision. Unless otherwise provided in future guidance, in addition to the plan provisions designated as disqualifying provisions subject to the EGTRRA remedial amendment period as described in sections 2.07, 2.08, and 2.09 of this revenue procedure, a plan provision is designated as a disqualifying provision under § 1.401(b)-1(b)(3) if the provision either - (1) results in the failure of the plan to satisfy the qualification requirements of the Code by reason of a change in those requirements that is effective after December 31, 2001; or (2) is integral to a qualification requirement of the Code that has been changed effective after December 31, 2001 but only if the provision is integral to a plan provision that is a disqualifying provision under section 5.01(1) with respect to the plan. .02 A change in a qualification requirement includes a statutory change or a change in the requirements provided in regulations or other guidance published in the Internal Revenue Bulletin. For purposes of section 5.01, a disqualifying provision includes the absence from a plan of a provision required by or, if applicable, integral to the applicable change in the qualification requirements of the Code. An amendment with respect to a disqualifying provision described in section 5.01(1) or (2) is referred to as an interim amendment for purposes of this revenue procedure. .03 This section 5.03 extends the remedial amendment period for the disqualifying provisions described below as follows: (1) The remedial amendment period for any disqualifying provision described in § 1.401(b)-1(b)(1) that would otherwise apply under § 1.401(b)-1 is extended to the end of the applicable remedial amendment cycle described in section 6.01 that includes the date on which the remedial amendment period would otherwise end if the disqualifying provision was a provision of, or absence of a provision from, a new plan and the plan was intended, in good faith, to be qualified. The same extension of the remedial amendment period applies to a disqualifying provision (including a disqualifying provision described in section 5.01) in the case where the employer adopts an amendment to an existing plan (without regard to whether that amendment was required to be adopted) if the amendment was adopted timely and in good faith with the intent of maintaining the qualified status of the plan. The Service will make the final determination in all cases as to whether a new plan or an amendment was adopted with the good faith intention of being qualified or maintaining qualified status. (2) In addition, the same extension of the remedial amendment period applies to a disqualifying provision described in section 5.01 in the case where the employer (or sponsor or practitioner, if applicable) reasonably and in good faith determines during the period when an interim amendment to reflect a qualification change would otherwise be required under section 5.05 that no amendment is required because the qualification change does not impact provisions of the written plan document. Thus, for example, if a sponsor, practitioner, or employer makes such a determination and the Service in its review of the opinion, advisory, or determination letter application finds that an amendment is required, the plan would still be eligible for the five or six-year remedial amendment cycle to correct the disqualifying provision as described in section 5.01. The Service will make the final determination in all cases as to whether the sponsor's, practitioner's or employer's determination that no interim amendment was required was reasonable and in good faith. .04 A qualified plan must be operated in accordance with written plan documents. Thus, when there are statutory or regulatory changes with respect to plan qualification requirements that will impact provisions of the written plan document, the adoption of an interim amendment will generally be required by the deadline set forth in section 5.05. The Service intends to concurrently identify statutory and regulatory changes to facilitate compliance with this requirement. .05 Except as otherwise provided in section 5.06 and 5.07, the deadline for the timely adoption of an amendment with respect to any plan is determined as follows: (1) In the case of an interim amendment, an employer (or a sponsor or a practitioner, if applicable) will be considered to have timely adopted the amendment if the plan amendment is adopted by the end of the remedial amendment period described in section 2.05 (determined without regard to the extension under section 5.03 of this revenue procedure). (2) In the case of a discretionary amendment (i.e., one which is not an interim amendment described in section 5.02), an employer (or a sponsor or a practitioner, if applicable) will be considered to have timely adopted the amendment, if the plan amendment is adopted by the end of the plan year in which the plan amendment is effective. .06 Special deadlines for governmental and tax exempt employers (1) Governmental Plans Within the Meaning of § 414(d) of the Code. The adoption deadline for interim amendments or discretionary amendments is: the later of (a) the deadline that would apply under the regular applicable rules of section 5.05(1) and (2), or (b) the last day of the next regular legislative session beginning after the amendment's effective date in which the governing body with authority to amend the plan can consider a plan amendment under the laws and procedures applicable to the governing body's deliberations. (2) Tax Exempt Employers. In the case of a tax exempt employer, the adoption deadline for interim amendments is set forth in section 2.05 as modified in this section 5.06(2). For purposes of determining the tax filing deadline, the following is substituted for the language under section 2.05(1) describing the due date (including extensions) for filing the income tax return for the employer's taxable year. The due date for filing the employer's tax return in the case of a tax exempt employer that files Form 990-T (Form 990 or Form 990-EZ if no Form 990-T is filed) is the later of the 15 th day of the 10 th month after the end of the employer's tax year (treating the calendar year as the tax year if the employer does not have a tax year) or the due date for filing the Form 990 series (plus extensions). An employer will not be treated as having obtained an extension of time for filing the Form 990 series unless such extension is actually applied for and granted. The due date for filing the employer's tax return in the case of a tax exempt employer that is not required to file a Form 990 series return is the 15 th day of the 10 th month after the end of the employer's tax year (treating the calendar year as the tax year if the employer does not have a tax year). .07 Exceptions to section 5.05 amendment adoption deadlines (1) Section 5.05 applies except when a statutory provision or guidance issued by the Service sets forth an earlier deadline to timely adopt a discretionary amendment with respect to a plan year (e.g., an amendment to add a qualified cash or deferred arrangement to a profit sharing plan cannot be adopted retroactively) or where a statutory provision or guidance provides another specific deadline for the adoption of a particular type of interim amendment that is earlier or later than the deadlines under section 5.05. For example, section V of Notice 2005-95 lists specific deadlines to amend for specific provisions. (2) Section 1107 of PPA '06 is a statutory provision that changes otherwise applicable deadlines under section 5.05. Under section 1107 of PPA '06, a plan sponsor is permitted to delay adopting a plan amendment pursuant to statutory provisions under PPA '06 (or pursuant to any regulation issued under PPA '06) until the last day of the first plan year beginning on or after January 1, 2009 (January 1, 2011 in the case of governmental plans). This amendment deadline applies to both interim and discretionary amendments that are made pursuant to PPA '06 statutory provisions or any regulation issued under PPA '06. If section 1107 of PPA '06 applies to an amendment of a plan, such a plan shall not fail to meet the requirements of Code § 411(d)(6) by reason of such amendment, except as provided by the Secretary of the Treasury. Accordingly, future guidance issued by the Secretary may limit the availability of a retroactive plan amendment under PPA section 1107 in order for the plan to meet the requirements of Code § 411(d)(6). For additional special rules relating to PPA '06 amendments, see section 4 of this revenue procedure. .08 For purposes of this revenue procedure, a pre-approved or individually designed plan restatement which is generally effective as of a certain date should not be treated as superseding a previously adopted interim plan amendment that is effective after the restatement's effective date and that has not been incorporated or reflected in the restatement provided the pre-approved or individually designed plan is operated in a manner consistent with the interim plan amendment. For this purpose, a plan is presumed to be operating in compliance with the interim plan amendments in any case (such as a determination letter application) in which the operation of the plan cannot be determined. This section 5.08 applies for all purposes, including the determination of plan qualification, funding requirements, and deductions.

Wow. Give 'em an earful. I hope we get one of those surveys.

No, I think they are fine. IMHO, the contribution is subject to the penalty tax under 4972 only to the extent that it has exceeded the allowable deduction limit. That hasn't happened. The fact that the employer chooses not to take the deduction to which the employer is entitled is immaterial.

I like QDROphile's solution! Tighten the thumbscrews a little. Waterboarding is out. Even the THREAT of reporting them to the DOL for exercising a fiduciary judgment to prevent the plan from properly paying required distributions might make them less recalcitrant. P.S. - to play Devil's Advocate for just a moment - it is possible that the provider is justified, depending upon the specific terms of the plan, the terms of the contract with the sponsor, etc., so I at least allow for the possibility that they are operating properly and reasonably.

What about 1.401(a)(9)-8, Q&A-4? If they are before NRD, then this provides that it must be made. If after, then the plan should have language for a "non-elective beginning date" which specifies when a distribution may be made without consent. But if all that fails to convince a custodian, then I presume the Plan Administrator/Trustee/Fiduciary would move the funds. Or if this is the TPA and not the custodian, then get a new TPA. I must admit I've never heard of a funding institution refusing to make a RMD on the basis you specify. Until now.

I've been discussing this with a colleague, and it appears to us that the SAR requirement has not been repealed for ALL traditional DB plans, but only those subject to PBGC. This led me on a merry romp. I note in passing that such luminaries as Sal Tripodi and Janice Wegesin flatly state that SAR's are no longer required for DB plans. When I view the statutory language of PPA, and the Conference Committee reports, I can see how one might arrive at this conclusion, as there are headings that state that the Summary Annual Report doesn't apply. However, I don't think these can be read in a vacuum. I think the repeal of the SAR requirement does, in fact, apply only to those plans covered by the PBGC. Before agreeing or disagreeing with this, it is probably worthwhile to actually read PPA 503 and the Committee Reports, as well as as WRERA 105. Otherwise, it's hard to get the full flavor of this. But for what appears to be the plain, updated statutory language: The new ERISA 104(b)(3) as amended, provides for SAR's on plans "...(other than an administrator of a defined benefit plan to which the requirements of section 101(f) applies)..." And lo and behold, 101(f) applies to defined benefit plans to which title IV applies, which is a PBGC covered plan. So the ERISA 104(b)(3) default to provide an SAR appears to have an exception only for those plans to which 101(f) applies. I'll be the first to admit I may have missed something crucial here, which is why I'd greatly appreciate opinions on this swill. Thoughts?

Say you have a money purchase plan with a 25% formula. Granted that most people amended out of these, there are still some who have them because it is old and comfortable, like an old shoe, or because of employee or union situations where a mandatory contribution is desired or required. Like an old shoe, however, it may also be nasty and smelly. The employer, for 2007, misses minimum funding deadline and undercontributes by $50,000. Understands penalties on the 5330 for missing minimum funding. However, under 404(a)(3)(A)(v), a money purchase plan is subject to the 25% deduction limit, rather than being able to use the 404(a)(1)(A) methodology (which they did use pre-EGTRRA). So, first, the employer must contribute the $50,000. Then must contribute the 25% under the formula - which is the maximum deductible. So there's a required contribution of $50,000 which cannot ever be deducted! Furthermore, there are arguably penalties every year for a non-deductible contribution of $50,000. Now, they can amend the formula downward to use this up at some future date. They could also argue that the $50,000 isn't nondeductible, but is merely not currently deductible, and thus not subject to the penalty tax. It just seems completely unreasonable to have to take these approaches. Anyone run into this before? Had conversations with someone at the IRS who actually knows something about it?

What if the employer contribution amount is made out to "The Trustees of the ABC Profit Sharing Plan" - and then the Trustees can endorse the check over to the recipient IRA. Arguably a check made out to the Trustees becomes a plan asset, so a Trustee endorsement over to the reciepient IRA is a distribution from the plan. Only thing I can think of...

No, there's no code for a VS, so you wouldn't enter a 3E. It's just that if it IS a prototype, you enter the 3E. Don't ask me why...

Right.

Agreed, but I certainly didn't present it as a statistic. Merely an observation passed on to me by those who were responsible for investing plan funds, and failed to diversify adequately or match assets to distribution timeframes. Some of those folks (and again, remember, we're talking primarily small plans where the lion's share is for benefits for owners and families) have had their assets devastated, at least in the short term, and to wait for a market recovery means they can't retire when planned. Some of those folks, with the benefit of hindsight, are wishing they invested in something more conservative. I don't know if there is really such a thing as a valid, "basic investment theory" but if there is, it would seem to me that beyond rule 1 of diversification, it would be prudent to diversify away from risk and lean toward more conservatism as the distribution timeline shortens. A lot of small plans seem to ignore this. But then, I'm a conservative investor anyway - although since I've got a lot of years left until retirement, I must confess that once the market dropped 50%, I pulled a big chunk of my 401(k) fixed interest account out and bought into the mutual funds. I figure if they don't come back in 15 years, we're all in the toilet anyway. But the REALLY important question is, did the Red Sox or Yankees win last night? I went to bed in the 7th, I think, and it was 1-1.

People who have anything good to say about annuities often don't bother to post them here, because there is a vocal portion of the subscribers who bash everything to do with them. Their prerogative, and sometimes amply justified! However, I've got broad shoulders, so I'll accept a little bashing. Annuities, like any other investment, CAN be either good or bad, depending upon the particular terms, the company issuing them, and more importantly, the specific situation and investment goals of the retirement plan. As a PORTION of an investment portfolio for a plan, they can provide a perfectly sane, reasonable investment. Are they sometimes/often sold improperly, or have absurd and draconian surrender charges/expenses, etc? In the immortal words of that Alaskan Einstein and intellectual giantess, Sarah Palin, "you betcha." However, I've seen annuities issued on the life of a 60+ year old Trustee of a plan, as a general plan investment in a DB plan, that have ZERO load and ZERO surrender charges. Is this the norm? Probably not. (I've also seen ridiculous, 20 year surrender charges with rolling "buckets" so the charge is assessed against new money first!) But they can provide a positive, guaranteed return, with withdrawal rights at any time for liquidity, and even those with high surrender charges may offer, for example, a 10% penalty free withdrawal per year, etc... As to "expenses" or "commissions" - the comissions must be disclosed to the purchasing fiduciary anyway, so this shouldn't be an issue - the fiduciary should be able to evaluate whether they are an appropriate investment or not. I can say that I've personally heard some plan fidiciaries recently lamenting that they wish they had bought annuities 10 years ago instead of mutual funds. And there are expenses and commissions on nearly ANY type of investment. There are "expenses" (or surrender charges for early withdrawal) on bank CD's, for example, yet you rarely hear CD's demonized. Now, if you are talking about VARIABLE annuities, rather than fixed, I have a whole different perspective. While I'm open minded enough to listen to arguments otherwise, I'm firmly against them in a qualified plan. Buy mutual funds instead! Bottom line - IMHO, sometimes bad, sometimes good. And the BRF feature is distinctly an issue - I think that great care must be taken with this, since they are usually issued on a HC (at least in the small plan we administer.) And no, I don't sell anything, so whether anybody agrees or disagrees doesn't affect my paycheck! And we absolutely, categorically, refuse to offer any sort of investment advice to our clients, even though they often ask (I'm sure the rest of you find this as well.) Let the rebuttals begin!

There is a penalty under IRC 6672. However, the IRS can abate it if the income tax liability on the distribution is paid by the recipient. I suspect this is why we never hear of a penalty being imposed - if the payor does a 1099, and the participant corrrectly declares it on their income tax return, then they will either owe more - and presumably pay it, or receive a smaller refund. Or maybe the IRS has bigger problems to contend with so this one is generally ignored. I do have a hazy recollection that it may be a different story if the plan is large enough to be subject to electronic withholding, but our plans are small and never cross that threshhold - so I've never delved into the details. Thankfully!

Try IRC 401©(2)©, and Revenue Ruling 68-498.

Here's one I haven't seen before. Client installed a new 401(k)/PS plan for 2008. clearly indicated on plan "set-up" papers that they wanted to allow up to 100% deferrals, catch-up, and Roth. However, document was completed by TPA, and signed by client, not allowing deferrals. Client deferred anyway. Can this be fixed by retroactive amendment under VCP? There's no specific fixmin Appendix B. However, plan loans or hardship withdrawals that were allowed where document does not allow them are eligible for correction, so it seems reasonable to attempt this. Anyone ever run into this? Success or failure with a fix? Other fixes? Perhaps consider an excess deferral?

You might check Sal's EOB. I haven't looked so I don't know, but this is the type of checklist/chart that he often includes in Chapter 15.

Bill is correct. If your client's CPA/Attorney are "prove it to me" types, you could refer them to Durando vs. U.S., or also PLR 8716060. Once they look at this, I don't get any further arguments (yet, anyway.)