Belgarath

Tried to send a reply and my 7 thumbs botched it somehow! First, do you qualifiy for excise tax relief under PTE 2002-51? If not, take a look at Revenue Ruling 2006-38. I think you'll find that the excise tax is a lot less than you think! The "amount involved" in this particular situation is not the principal amount.

Yes, IMHO.

If $100.00 or less, then no correction required under RP 2008-50, 6(.02)(5)(d). If greater than $100.00, see Appendix B, 2.04. This shouldn't generally require a VCP filing.

Here in BoSox heaven, Mole Day is sometime in April when the snow finally melts, and you see that your lawn has been destroyed (yet again) by the little devils... Personally, I prefer to refer to it as "Avocado's number" and celebrate the day by consuming avocado stuffed with crab or lobster salad.

A profit sharing plan can have a fixed formula. Many documents contain that option, although it is rarely (in my experience) used. I don't see how the minimum funding standard can apply, under the plain language of 412(e)(2)(A). If the plan is using an IRS approved PS prototype or VS plan which contains a fixed option, then minimum funding standards shouldn't apply.

We generally recommend 60 days, but you could probably use 30. We recommend a certified letter to the last known address. No response in 60 days, rollover.

How could I forget! I haven't read it for a while, but I still remember snatches of Vogon poetry: Ah freddled gruntbuggly, thy micturations are to me..."

After first blowing a giant raspberry to Congress and the DOL for this whole mandatory rollover foolishness (THBBBBBTTT)... Seems a viable approach to me. Finding an institution that will handle them isn't necessarily all that easy, but there are some. Penchecks comes to mind. Most institutions (that I've seen) who will handle them just accept the last known address, etc, on the IRA app. Once the rollover is complete, the Trustee has no further involvement or fiduciary role. Their fiduciary role extends only to properly choosing a company or companies to handle the mandatory rollover IRA's. The IRA's are typically set up in some sort of fixed interest account. Some of the literature I've seen from individual financial institutions requires that you let the camel's nose into the tent - for example, they say they will accept these piddling amounts of money, but only if every distribution kit for ALL participants has some sort of brochure on this company's investment portfolio options. Not that I blame them - if your are going to handle this accounts, you need to make money somehow. Others, such as Penchecks, charge a set fee or fees. You might want to take a gander at IRS Notice 2005-5 and DOL FAB 2004-02.

I'll probably regret asking, but what is "towel day?"

Do they have a square peg day?

Yes, I'd say that SCP isn't an option. And for those of you out there who (like me) slept through Latin class in 7th Grade, I offer the following: Lat: The expression of one thing is the exclusion of another. In construing statutes, contracts, wills, and the like under this maxim, the mention of one thing within the statute or other document implies the exclusion of another thing not so mentioned. See 95 P. 2d 1007, 1012. "The maxim . . . Though not a rule of law, is an aid to construction. It has application when, in the natural association of ideas, that which is expressed is so set over by way of contrast to that which is omitted that the contrast enforces the affirmative inference that that which is omitted must be intended to have opposite and contrary treatment." See 34 So. 2d 132. Thus a statute granting certain rights to "police, fire, and sanitation employees" would be interpreted to exclude other public employees not enumerated from the legislation. This is based on presumed legislative intent and where for some reason this intent cannot be reasonably inferred the court is free to draw a different conclusion. See 16 N.E. 2d 459, 462.

Any thoughts on this?

Check 1563(e)(5). If you satisfy the requirements (and as you mention, no community property state) then you should be ok. I'd be very careful on "management responsibility" that you mention. Although they may not have any active management responsibilities, they often have a title, which allows them to sign checks or something in an emergency. We always tell them to get an opinion from a competent attorney, but they rarely do...

Nothing "official" - just a discussion from the Q&A session of the ABA meeting several years ago that an attorney had sent to me. I checked Sal's EOB, and he has nothing official, but also refers to this, specifically Q&A-40 of the 2004 meeting on May 7th. I have also heard this view expressed by some who have actually conversed with IRS personnel. I'd be hesitant to take TAG's approach unless my client was prepared to fight it if audited.

You're right that there are a lot of different opinions. However, the IRS takes the approach that if you are eligible to defer in a 401(k), you are a participant for these purposes.

Andy - if you want to run for Congress to knock some heads together, you've got my vote!!

Ok, it sounds like I've been mixing apples and oranges. "In your example, an accrued benefit payable at age 58 is $6,000. But the plan limited the accrued benefit to $4,500, presumably because of the 100% salary limit. But in the earlier discussion, you discussed an accrued benefit payable at age 58, which is then converted into an equivalent benefit payable at age 62. Please clarify which fact pattern you are using." SoCal - I was using the former. So I guess what I'm trying to confirm is that if the participant keeps working to the new NRA of 62, and gets to the 10 years of SERVICE, the $6,000 benefit would be payable in spite of the freeze that occurred at age 58. Or, is the benefit payble still stuck at $4,500? Thanks again!

SoCal - can you elaborate a bit on your penultimate sentence? When it comes to DBspeak, I'm one of the unwashed masses, so these things sometimes fly right by me. How is the increase a reduction in value? Or I probably asked the question wrong to start with, so let me try some wildly stupid numbers just for sake of illustration. Suppose at age 58 the accrued benefit was $6,000/month. But due to less than 10 years, 415 limited it to $4,500/month. Benefit formula is then frozen. Now you change NRA to 62, and at 62 the participant will have the full 10 years. So if I'm understanding correctly, in spite of the freeze, the participant's benefit that can now be paid will be $6,000. First, is that right? Second, if it is, can you explain where a reduction in value comes in? (if this requires a lot of actuarial background in order to understand it, then please don't waste your time trying to explain it to me, I'll just take your word for it!) Thanks again.

I don't believe you can "freeze" a 412(e)(3) (formerly 412(i)) plan. As soon as you do, it no longer satisifes the level premium requirement, and drops out of 412(e)(3) status, and is then subject to the normal minimum funding requirements. This brings up another issue, somewhat related. Those of you familiar with my posts know that I'm not an actuary, so sometimes I don't ask these DB questions quite "right" but I'll give it a shot. Suppose you have a plan that had a NRA of 58, which due to the recent guidance changed to age 62. The plan was frozen prior to the change. The participant's benefit was reduced for 415 due to less than 10 years of service. Now, if the participant keeps on working, does the benefit increase for each year until the 10 years of service are attained, or is it truly "frozen" at the reduced level at the time of the freeze? I think it is the former, but I'd love to hear from someone who actually knows!

The best I could come up with was "EGTRRA restatements are disGUSTing."

1. The roundest knight at King Arthur 's round table was Sir Cumference . He acquired his size from too much pi. 2. I thought I saw an eye doctor on an Alaskan island, but it turned out to be an optical Aleutian . 3. She was only a whiskey maker, but he loved her still. 4. A rubber band pistol was confiscated from algebra class because it was a weapon of math disruption. 5. The butcher backed into the meat grinder and got a little behind in his work. 6. No matter how much you push the envelope, it'll still be stationery. 7. A dog gave birth to puppies near the road and was cited for littering. 8. A grenade thrown into a kitchen in France would result in Linoleum Blownapart. 9. Two silk worms had a race. They ended up in a tie. 10. Time flies like an arrow. Fruit flies like a banana. 11. A hole has been found in the nudist camp wall. The police are looking into it. 12. Atheism is a non-prophet organization. 13. Two hats were hanging on a hat rack in the hallway. One hat said to the other, "You stay here; I'll go on a head." 14. I wondered why the baseball kept getting bigger. Then it hit me. 15. A sign on the lawn at a drug rehab center said: "Keep off the Grass." 16. A small boy swallowed some coins and was taken to a hospital. When his grandmother telephoned to ask how he was, a nurse said, "No change yet." 17. A chicken crossing the road is poultry in motion. 18. The short fortune-teller who escaped from prison was a small medium at large. 19. The man who survived mustard gas and pepper spray is now a seasoned veteran. 20. A backward poet writes inverse. 21. In democracy it's your vote that counts. In feudalism it's your count that votes. 22. When cannibals ate a missionary, they got a taste of religion. 23. Don't join dangerous cults: Practice safe sects!

I don't have it handy, but I believe the reg Z requirements were amended in the Federal Register within the last couple of weeks to exempt participant loans from qualified plans. Is that what you are referring to?

Absolutely disgraceful!!

I once heard a Canadian comic describe Canadians as, "unarmed Americans with health care."

The other thing here is, would anyone care? I'd like to think that the IRS would allow a Trustee to a good deal of leeway on whther they allow this, as long as not expressly forbidden by the terms of the loan/plan. Hard to judge, however - I don't expect this is a high volume situation.