Belgarath

Depends upon the plan language. I think perhaps it CAN be, although I don't know whether or not folks are including this in their documents, and if so, is the IRS approving them. I'm not certain if a general USERRA statement is sufficient, (you know, something along the lines that regardless of other provisions in the plan, the plan will provide benefits in accordance with 414(u), etc) or if it would need to be stated more explicitly. I'd want to err on the side of explicit... At any rate, the DOL reg. 20 CFR 1002.149 seems to indicate that a plan can't refuse to provide USERRA benefits just because the plan treats the participants as "terminated" so it seems like for some items, being considered as terminated is ok. However, to me this language is gray enough that I wouldn't want to rely on it, but would want an IRS approved document to explicitly state it. I'll be interested to see what others think.

Unless you charge a lot more for admin than we do, no client is worth this kind of baloney. Invite them to find another TPA who will administer their plan without salary data! Or to take a long walk on a short pier. The only modification I can recall, off the top of my head, that we have allowed is in a situation where where the client makes well in excess of the 401(a)(17) limit, but doesn't like to say how much. As long as they certify that their income is in excess of that amount, then it is good enough. Of course, if unincorporated, it sometimes has to be certified as enough higher to back into a max calculation. But this is very rare - we've only had a couple of these, and it's probably been in an upcoming divorce situation...

But "gibberish" is an official and well-recognized language. It is used as the EXCLUSIVE means of communication by anyone in government.

Being a Luddite, I prefer the books - plus, I find it dizzying to try to flip back and forth between pages on-screen. However, I asked one of my cohorts, who uses the disk, and here was the reply: "There does seem to be one major problem. The CD uses a new format this year, which is likely designed to make navigation easier. Unfortunately, it eliminates the page numbers. Which makes the references in the index totally meaningless. Well, not totally. It still points me to the right volume. So let's say practically meaningless."

I'd recommend you go to the DOL website - they have a QDRO booklet (free) available which gives a great deal of information, as well as sample QDRO's, etc. It is about 90 pages - entitled, "QDROs The Divison of Pensions Through Qualified Domestic Relations Orders."

Thanks! But why can't he still have an extension? There's no automatic override of the 404 default (that the contribution is deductible in the fiscal year when paid UNLESS you choose to use the 404(a)(6) period) is there?

Sole prop has Schedule C income of $50,000. Has both a DB and a 401(k) plan. DB cost is $70,000. I've always understood that this brings his income to zero, so he can't make any 401(k) deferrals. Am I crazy? If he already made them, I assume they must be refunded? I'm having a bad morning. Driving in to work, with temperatures in the single digits and close to 2 feet of hard packed snow on the ground, I turned on the radio and the Red Sox were playing (behind already!) Major league baseball, under way in Japan, with March still roaring like a lion. This surrealistic start has left me completely off balance.

I agree with Andy. My experience with small plans is that those professions where the owners make a tone of money, and therefore use a lower NRA to load up contributions/deductions are precisely those professions where in general (of course there are exceptions) they do NOT retire at age 55, or even 62 for that matter. I'm not sanguine about the amount of "deference" the IRS will actually grant when looking at a given plan.

I'm a little confused. Let's go ahead and suppose that for business A, you use 75%/25% for the spouses. Or 90/10, or whatever. Now for business B, let's assume the spouse with the lesser (or greater, doesn't matter) ownership of business A also has some level of ownership in business B. For purposes of the controlled group/affiliated service group rules, this spouse will be considered as owning 100% of business A, through spousal attribution rules. Can you post Derrin's entire example to which you refer, or give a page number reference? I'm sure I'm missing something, and Derrin's "Who's the Employer" is my CG bible, so I'd like to see precisely what he said, and in what context. Thanks!

Just make sure you don't refer to your wife as a "non-working entity" where SHE can hear you!

The Revenue Procedure 2006-27 does actually provide for a correction. See Appendix A, .05(1). Now, if the correction is not "insignificant" and is "significant" but beyond the correction period, then you may have to do the Appendix A fix through a VCP submission, but that's not generally that big a deal where the correction is straightforward, such as a situation you are describing.

Have you considered contacting the FBI? I don't know if this is within their jurisdiction, but I'd think that they could locate her if they really wanted to. Good luck!

CindiW - re your question as to whether you can withdraw Roth earnings, INCOME TAX FREE, if you haven't satisfied the 5-year period: According to Treasury Regulation 1.408A-6, Q&A-1(b), in order to be a "qualified distribution" (that is, no taxation on the earnings) you must satisfy the 5-year period IN ADDITION to attaining age 59-1/2, death, disability, or allowable first-time home purchase. So while you can always withdraw the contributions tax free, the earnings are another matter. P.S. - here's the regulation excerpt if you are interested. § 1.408A-6 Distributions. This section sets forth the following questions and answers that provide rules regarding distributions from Roth IRAs: Q–1. How are distributions from Roth IRAs taxed? A–1. (a) The taxability of a distribution from a Roth IRA generally depends on whether or not the distribution is a qualified distribution. This A–1 provides rules for qualified distributions and certain other nontaxable distributions. A–4 of this section provides rules for the taxability of distributions that are not qualified distributions. (b) A distribution from a Roth IRA is not includible in the owner's gross income if it is a qualified distribution or to the extent that it is a return of the owner's contributions to the Roth IRA (determined in accordance with A–8 of this section). A qualified distribution is one that is both— (1) Made after a 5-taxable-year period (defined in A–2 of this section); and (2) Made on or after the date on which the owner attains age 591/2, made to a beneficiary or the estate of the owner on or after the date of the owner's death, attributable to the owner's being disabled within the meaning of section 72(m)(7), or to which section 72(t)(2)(F) applies (exception for first-time home purchase). © An amount distributed from a Roth IRA will not be included in gross income to the extent it is rolled over to another Roth IRA on a tax-free basis under the rules of sections 408(d)(3) and 408A(e). (d) Contributions that are returned to the Roth IRA owner in accordance with section 408(d)(4) (corrective distributions) are not includible in gross income, but any net income required to be distributed under section 408(d)(4) together with the contributions is includible in gross income for the taxable year in which the contributions were made. Q–2. When does the 5-taxable-year period described in A–1 of this section (relating to qualified distributions) begin and end? A–2. The 5-taxable-year period described in A–1 of this section begins on the first day of the individual's taxable year for which the first regular contribution is made to any Roth IRA of the individual or, if earlier, the first day of the individual's taxable year in which the first conversion contribution is made to any Roth IRA of the individual. The 5-taxable-year period ends on the last day of the individual's fifth consecutive taxable year beginning with the taxable year described in the preceding sentence. For example, if an individual whose taxable year is the calendar year makes a first-time regular Roth IRA contribution any time between January 1, 1998, and April 15, 1999, for 1998, the 5-taxable-year period begins on January 1, 1998. Thus, each Roth IRA owner has only one 5-taxable-year period described in A–1 of this section for all the Roth IRAs of which he or she is the owner. Further, because of the requirement of the 5-taxable-year period, no qualified distributions can occur before taxable years beginning in 2003. For purposes of this A–2, the amount of any contribution distributed as a corrective distribution under A–1(d) of this section is treated as if it was never contributed.

Interesting question! No, I haven't. I think I'd tell them to extend the 90 day period - in spite of there being no regulatory support that I know of, it seems the only remotely reasonable solution.

We have a last day rule as well, but we depend upon the employer to tell us when the employer/employee relationship is severed. To use Austin's example, if the employer fires you on 12/29, or if you officially resign effective 12/29, I find it hard to see how you qualify as an employee on the "last day" of the plan year which is, in fact, 12/31. I suppose the document could perhaps define the last day as the last business day of the plan year or something like that, but I've never seen one do it. If they terminated ON 12/31, then we give them a contribution. So if a census sheet comes in with a term date of 12/30 (and the employer is filling out this sheet and certifying as to the accuracy) we do not question it, and under the terms of the document, no contribution assuming testing otherwise passes. Do any of you have plan docs that actually define last day as last business day? If not, playing devils advocate here for the remaining participants, you could have an operational error, and be giving money to a participant who is not entitled to it, at the expense of other participants. Also possibly overcontributing/deducting contributions that aren't allowable under the terms of the plan.

Agree, with a couple of quick observations. Assuming the participant properly declared the taxable term costs as income and wasn't an unincorporated owner, then the accumulated taxable term costs should be recoverable income tax free as well. In a death situation be a little careful - sometimes people say "tax free" meaning income tax free - but the proceeds are included in the estate, which may or may not be subject to estate tax. Clients sometimes hear "tax free" and think that means all taxes.

Aside from the smell test, I'd argue that this fails the requirements of 408(k)(5). An employer contribution to the SEP plan must satisfy a written allocation formula. I'd interpret this to mean that for any given contribution, a set percentage of that contribution must be made to the IRA's of all eligible employees. This might also be considered discriminatory under 408(k)(3)©, which says that contributions will be considered discriminatory unless they bear a uniform relationship to the compensation of each employee. If a contribution of (x) is made, with 100% going to the HC and zero to everyone else, I think you fail this. As to the age 21, I'd say that you cannot contribute for someone not yet eligible without changing the eligibility - e.g.- change it to 20, if they just want to contribute for her now.

Agree.

I beg your pardon. The "window" in which I was viewing the instructions cut off the page, so that what I was really looking at was Code C in Box 15 instead. I'm now not sure what the appropriate amount to use is. Like you, I lean toward the 200,000, but I'm by no means certain!

I think you are ok here, given that it is an asset sale. The plan can be terminated, and the new employer can establish another plan. My understanding is that the IRS agrees wit this approach, but I can't give you anything formally stating this other than the following GCM. There may be other guidance that someone can point you to. GCM, PEN-RUL 17,524, G.C.M. 39824, July 6, 1990. G.C.M. 39824, July 6, 1990. Qualified plans: Distributions: Terminations: Corporate dispositions The conditions under which an employer may make distributions from a qualified pension plan depend on what constitutes a severance from employment. The IRS expressed the opinion that a determination whether a severance from employment has occurred should be made on the basis of whether or not the employee continues to be employed by the employer maintaining the plan and not on whether the employee continues to work on the same job for a different employer. Back reference: ¶See Finding Lists. ROBERT I. BRAUER Assistant Commissioner (Employee Benefits and Exempt Organizations) Attention: Director, Employee Plans Technical and Actuarial Division This memorandum is in response to your request of September 29, 1989 for formal consideration of your proposed technical advice. FACTS a. * * * * * Employer Z, a parent company, maintains a defined benefit pension plan, Plan X. Under the terms of Plan X, a participant may become eligible to receive a monthly retirement benefit after his "severance." A "severance" is defined in Plan X to mean an employee's voluntary or involuntary termination of employment with Employer Z and its affiliated companies. An "affiliated company" is defined by Plan X as (1) any corporation which is a member of a controlled group of corporations with Employer Z (within the meaning of section 414(b) of the Code), (2) any partnership, joint venture or other business organization (whether or not incorporated) which is under common control or is affiliated with Employer Z (within the meaning of section 414©) or (3) any member of an affiliated service group within the meaning of section 414(m) of which Employer Z is a member. Employer Z proposes to amend Plan X to provide that in the event of a sale by Employer Z to a purchaser other than an affiliated company of (i) all or substantially all of the assets used by the Employer Z in a trade or business or (ii) Employer Z's interest in a subsidiary, a severance will occur on the date of such sale with respect to an employee who continues in employment with the corporation or other person acquiring such assets or with such subsidiary, as the case may be, unless the purchaser agrees in connection with the sale to be substituted for Employer Z as the sponsor of Plan X or to establish a defined benefit plan that is qualified under section 401(a) to which plan assets in the amount of the employee's benefit under Plan X will be transferred. b. * * * * * Corporation Q and its subsidiaries were acquired by Corporation R. They are now members of the controlled group that includes Corporation R and its subsidiaries. Before the acquisition, Corporation Q and certain of its subsidiaries had adopted a pension plan for their employees, Pension Plan P. Since their acquisition by Corporation R, they have continued to maintain Pension Plan P. Pension Plan P provides for the distribution of benefits upon an employee's termination of service prior to normal retirement age. Pension Plan P defines termination of service, in relevant part, as the voluntary or involuntary severance of employment with the employers included in the Plan (except by reason of death, retirement, temporary layoff, or leave of absence) and any other change in an employee's status resulting in his no longer being an employee. However, Pension Plan P provides that a termination of service does not occur upon the transfer of an employee to Corporation R or any employer under the direct or indirect control of Corporation R (or Corporation Q for the period prior to its acquisition by Corporation R). Pension Plan P defines employee, in relevant part, as a person in a common law employee-employer relationship with an employer included in the Plan, i.e., Corporation Q and subsidiaries that have adopted Pension Plan P (certain former subsidiaries of Corporation Q). Pension Plan P defines employer maintaining Pension Plan P, as employers included in the plan, and Corporation R and the companies under its control that have not adopted Pension Plan P. Corporation R proposes to amend Pension Plan P to further define termination of service. Termination of service would occur when an employee ceases to be an employee of an employer maintaining Pension Plan P as a result of certain enumerated business dispositions, notwithstanding the fact that the employee is employed by a subsequent employer, as defined. The enumerated business dispositions are: 1) sale or other transfer to a subsequent employer of all or substantially all the assets used in a trade or business of an employer maintaining Pension Plan P 2) liquidation, sale or other means of terminating the parent-subsidiary or controlled group relationship with Corporation R of an employer maintaining Pension Plan P; (3) liquidation, sale or other means of terminating treatment of an employer maintaining Pension Plan P as a single employer with Corporation R pursuant to section 414(b); (4) loss or expiration of a contract with a government agency by an employer maintaining Pension Plan P and entry into such contract by a subsequent employer; (5) sale or other transfer to a subsequent employer of all or substantially all the assets of a plant, facility, or other business location of an employer maintaining Pension Plan P; and (6) any other sale, transfer or disposition of assets of an employer maintaining Pension Plan P to a subsequent employer. The proposed amendment defines subsequent employer to be an employer that is not maintaining Pension Plan P and that is not in a subsidiary, controlled group, or single employer relationship with Corporation R. The proposed amendment does not differentiate between distributions in the case of a sale of stock or assets of the employer maintaining the plan in conjunction with a transfer of assets in the plan to a plan of the purchaser and distributions in the case of a sale without such transfer of assets. ANALYSIS We agree with your conclusion that the term "severance from employment," as used in Rev. Rul. 56-693, 1956-2 C.B. 282, for purposes of determining whether a pension plan qualified under section 401(a) may make distributions, does not have the same meaning as "separation from the service," as used in section 402(e)(4)(A)(iii) for purposes of determining whether a distribution is a "lump sum distribution." A determination as to whether a severance from employment has occurred should be made on the basis of whether or not the employee continues to be employed by the employer maintaining the plan (determined using the criteria described below) rather than on the basis of whether the employee continues to work on the same job for a different employer as a result of a liquidation, merger, or consolidation, etc. Section 401(a) provides that a trust created or organized in the United States and forming part of a stock bonus, pension, or profit-sharing plan of an employer for the exclusive benefit of his employees or their beneficiaries shall constitute a qualified trust under that section if it meets the requirements provided therein. Treas. Reg. S1.401-1(b)(1)(i) provides that a pension plan within the meaning of section 401(a) is a plan established and maintained by an employer primarily to provide systematically for the payment of definitely determinable benefits to his employees over a period of years, usually for life, after retirement. Rev. Rul. 56-693, 1956-2 C.B. 282, as modified by Rev. Rul. 60-323, 1960-2 C.B. 148, construing the definition of a pension plan in Reg. S1.401-1(b)(1)(i), reasons that a pension plan which permits participants, prior to any severance of employment (e. g., retirement, disability, or death) to withdraw all or part of the funds (other than their own voluntary contributions) accumulated on their behalf is inconsistent with the accepted concept of a pension plan which meets all of the requirements of section 401(a) of the Code. Consequently, Rev. Rul. 56-693 holds that, although an employee's qualified pension plan may provide benefits prior to normal retirement, such as disability and death benefits, which are only incidental to the main purpose of the plan, an employee's pension plan that permits the participants, prior to any severance of their employment or termination of the plan, to withdraw all or a part of the funds (other than their own voluntary contributions), accumulated on their behalf, in times of financial need or otherwise, will fail to meet the requirements of section 401(a). Section 402(e) provides special tax treatment (five-year averaging) for certain lump sum distributions. Section 402(e)(4) generally defines lump sum distributions as the distribution or payment within one taxable year of the recipient of the balance to the credit of the employee which becomes payable to the recipient (i) on account of the employee's death, (ii) after the employee attains age 59 1/2, (iii) on account of the employee's separation from service, or (iv) after the employee has become disabled (within the meaning of section 72(m)(7)). Rev. Rul. 79-336, 1979-2 CB 187, updating and restating Rev. Rul. 72-440, 1972-2 CB 225, provides that an employee will be considered separated from service within the meaning of section 402(e)(4)(A) of the Code, only upon an employee's death, retirement, resignation or discharge, and not when the employee continues on the same job for a different employer as a result of the liquidation, merger, or consolidation, etc., of the former employer. Rev. Rul. 81-141, 1981-1 CB 204, updating and restating Rev. Rul. 58-99, 1958-1 C.B. 202, addresses the issue of when a separation from service occurs in the case a stock transfer rather than an asset transfer. Under the facts in that ruling, control of S Corporation was obtained by other interests under which it continued to operate as a taxable entity. The profit-sharing plan maintained by S Corporation was at that time discontinued as to the employees of S Corporation. The ruling provides that the employees who remain employees of S Corporation have not separated from service for purposes of section 402(e) because such employees did not retire or resign and were not discharged from employment. One of the principles that underlies the definition of pension plan in Reg. S1.401-1(b)(1)(i) and thus is relevant in construing the term "severance from employment" as used in Rev. Rul. 56-693 is that only employees (within the meaning of section 401) of the employer maintaining a pension plan may benefit under the plan. Treas. Reg. S1.401-1(b)(1)(i) provides that a pension plan is a plan maintained by an employer to provide benefits to his employees. Consequently, when the employment relationship between an employee and the employer maintaining a pension plan is severed before the employee retires, a distribution of benefits to the employee from that pension plan after severance of the employment relationship with that employer is not inconsistent with the concept of a pension plan that meets all of the requirements of section 401(a). However, the determination of whether the employment relationship between an employee and the employer maintaining the plan has been severed is not based simply on whether, under common law, the employee has terminated employment with the employer. The rules for making this determination must be consistent with the provisions of section 401(a) and the definition of pension plan in Reg. S1.401-1(b)(1)(i). In determining whether the employment relationship with the employer maintaining the plan has been severed for purposes of section 401(a), the employer includes all members of any controlled group as defined in section 414(b); partnerships, proprietorships, etc., under common control as defined in section 414©; and members of an affiliated service group as defined in section 414(m), of which the employer maintaining the plan is a member. Each of these sections provides that all employers described in that section are generally treated as the same employer for purposes of sections 401(a), 408(k), 410, 411, 415, and 416. Consequently, if the employer of an employee changes from the employer maintaining the plan to another employer who is treated as the same employer pursuant to section 414(b), ©, or (m), no severance from employment will be treated as having occurred for purposes of section 401(a). Further, a severance of employment does not always occur when the common law employer of an employee changes to an employer that is not treated as the same employer of the employee pursuant to section 414(b), ©, or (m). If the new employer is substituted as the sponsor of the former employer's pension plan (or the subsidiary now under the control of a new parent retains the plan) or there is otherwise a transfer of plan assets and liabilities relating to any portion of the employee's benefit under the pension plan of the employee's former employer to a plan being maintained or created by the new employer, then the employment relationship with the employer maintaining the plan has not been severed with respect to that employee. Section 414(1) generally provides that in the case of a transfer of assets or liabilities to a plan, in order for the plan to which the assets are transferred to be qualified under section 401(a), each participant in the plan must be entitled (if the plan then terminated) to receive a benefit immediately after the transfer which is equal to or greater than the benefit he would have been entitled to receive immediately before the transfer (if the plan had been terminated). Consequently, in the case of a transfer of assets and liabilities, the new employer has stepped into the shoes of the old employer with respect to the portion of the plan represented by the assets and liabilities transferred and is now treated as the employer maintaining the pension plan of the former employer with respect to that portion of the plan. However, in some cases, there may be a transfer of assets and liabilities to a plan of the new employer that are attributable to the benefits of only some of the former employer's employees who become employed by the new employer. Assets and liabilities attributable to the benefits of other employees who become employed by the new employer remain in the plan of the former employer. For those employees with respect to whom the assets or liabilities attributable to their benefits were not transferred to a plan of the new employer, the new employer is not treated as maintaining the plan of the former employer. If the new employer of an employee is not treated as the same employer as the employee's former employer under section 414(b), ©, or (m), and the new employer is not treated as maintaining the pension plan of the former employer with respect to the employee, a severance of the employment relationship between the employee and the employer maintaining the plan may be found to have occurred even though the employee has not separated from service for purposes of section 402(e). In the case of a liquidation, merger, or consolidation, etc., of an employee's employer, severance of the employment relationship with the employer maintaining the plan may be found to have occurred even though the employee continues at the same job with the new employer. Further, a severance of the employment relationship between an employee and the employer maintaining a pension plan may also be found to have occurred for purposes of section 401(a) under certain circumstances when the stock in a subsidiary is sold by a parent (resulting in loss of control) even though there is no change in the common law employer of the employee. A severance of employment with respect to the employees of the subsidiary will be found to have occurred for purposes of section 401(a) if three conditions are met: the pension plan continues to be maintained by the original parent but is no longer maintained by the subsidiary in the hands of its new owner; no assets or liabilities are transferred to the subsidiary in the hands of the new owner or to any other employer who is treated as the same employer as the subsidiary under 414(b), ©, or (m); and the subsidiary in the hands of the new owner is not treated as the same employer as the original parent under section 414(b), ©, or (m). If these conditions are met, the pension plan is no longer being maintained by the subsidiary for the benefit of that employee. As a result, we concur generally with your conclusion in the proposed technical advice memorandum that Employer Z should be permitted to amend Plan X to allow distributions to employees who become employed by an unrelated employer (an employer who is not an affiliated company) upon the sale of (i) all or substantially all the assets used by the Employer Z in the employing trade or business, or (ii) Employer Z's interest in the employing subsidiary, unless the purchaser agrees in connection with the sale to be substituted for Employer Z as the sponsor of the defined benefit plan or to establish a defined benefit plan to which plan assets and liabilities representing the employees' benefits under Plan X will be transferred. The amendment generally only permits distribution when an employee is no longer employed by the employer maintaining the plan based on the criteria described above and, thus, only after a "severance of employment" has occurred. However, the amendment should be revised to clarify that a severance of employment will not occur on the date of sale in the case of any employee with respect to whom assets and liabilities attributable to his benefits under Plan X are transferred to any plan of the new employer regardless of whether it is a new plan or a pre-existing plan of the former employer. Further, although we agree with your conclusion that the definition of separation from the service for purposes of section 402(e) should not be used for purposes of interpreting termination of employment for purposes of determining whether a pension plan is permitted to make distributions, we do not agree with the analysis in your proposed technical advice memorandum. The technical advice memorandum should be revised to reflect the analysis in this memorandum. We also concur with your conclusion that the amendments submitted by Corporation R are not acceptable because Pension Plan P, as amended, would automatically permit distribution to employees after certain business dispositions that cause the employer of those employees to no longer be a member of the controlled group that includes Corporation R. The amendment does not prohibit distribution to those employees when the new employer is substituted as the sponsor for the plan (or, in the case of a stock sale, the subsidiary in the hands of the new owner continues the plan) or there is a transfer of assets and liabilities to a plan of the new employer which represents the benefits of those employees. Further, the definition of "subsequent employer" should be clarified to insure that it does not include any employer that is (1) a corporation which is a member of a controlled group of corporations with Corporation R (within the meaning of section 414(b) of the Code), (2) a partnership, joint venture or other business organization (whether or not incorporated) which is under common control or is affiliated with Corporation R (within the meaning of section 414©) or (3) any member of an affiliated service group within the meaning of section 414(m) of which Corporation R is a member. JAMES J. McGOVERN Assistant Chief Counsel By: MARY E. OPPENHEIMER Deputy Assistant Chief Counsel (Employee Benefits and Exempt Organizations)

While I always recommend checking with the CPA, a code "C" is a qualified rehabilitation expense. So, I would use only the $200,000.

'Cause the year of the transfer is 2008. Arguably, the language requires you to allocate it IN the year of transfer, and therefore you can't allocate it in a prior year. Mind you, I'm not adamant about this by any means, just offering my "leaning" based upon the literal language.

I think there might be a problem. I'm not sure the 404(a)(6) period applies here. The Code says: 4980(d)(2)©(i) IN GENERAL. --In the case of any defined contribution plan, the portion of the amount transferred to the replacement plan under subparagraph (B)(i) is -- 4980(d)(2)©(i)(I) allocated under the plan to the accounts of participants in the plan year in which the transfer occurs, or 4980(d)(2)©(i)(II) credited to a suspense account and allocated from such account to accounts of participants no less rapidly than ratably over the 7-plan-year period beginning with the year of the transfer. I'm focusing for the moment on the phrase in ©(i)(I), ""in the plan year in which the transfer occurs" and in ©(i)(II) "beginning with the year of the transfer." If the funds aren't transferrred until 2008, then I'm not sure this would pass muster. I've never seen this done, not seen this question, so I don't know what the IRS stance is, if any.

'Tis possible. Depends upon the auditor, plus I don't know anything about the plan/policies involved, so hard to give anything other than a wishy-washy answer. In a just world, it SHOULDN'T generally make any difference in a DB plan where the employer pays all, the benefit is fixed, and the death benefit is fixed - the employee/beneficiary gets the same benefit no matter what policy type(s) are purchased. But, since the participants presumably have purchase rights to buy the policies out of the plan, then 401(a)(4) comes into play - and I think Revenue Ruling 2004-21 highlights this.

Austin - for your formula, before I start thinking about this, is the "YTD" that you refer to the plan year, (since we are looking at off-calendar year) or the calendar year 402(g) limit? Just in case it makes any difference when I attempt to go through this exercise. I'm not mathematically inclined, so I have to go through the steps very S L O W L Y.