Belgarath

I wouldn't say that in general this would need to be corrected under VCP. Generally, this could be corrected using SCP as an insignificant failure, depending upon the good old facts and circumstances.

Yes, but I read the "participants squared" clause as only applying if you have unrelated contributing sponsors. In other words, if you have a plan vanilla single employer plan, or a controlled group where everyone is covered anyway, then the $5.00 per participant cap does apply. At least, that's what I get out of the JCT explanation.

Yes, the 403(b) and 401(k) deferrals are aggregated for purposes of the 402(g) deferral limit.

If it is a community property state, be careful as well. (There are differing legal opinions on this - some are of the opinion that community property automatically confers direct ownership upon the spouse, others disagree.)

But don't be surprised if the client "finds" such an election in his files once you point out that without it, he cannot do a deferral. I am constantly amazed, and sometimes horrified, at the number of documents that clients have in their files when it suits their purposes. We've even had requests to "prepare a specimen so I can see what it looks like when I'm looking through my files." We draw the line in the sand on that, and flatly refuse to have any involvement in such foolishness.

I see no problem with it. I think there's indirect support under 1.411(d)-4 Q&A-1(d)(8), which lists some items that are not protected benefits. Included in this as an exception, and therefore an example of something which IS a protected benefit ...(the conditions for receiving an allocation of contributions or forfeitures for a plan year after such conditions have been satisfied)... my emphasis. Since the conditions for eligibility have not yet been satisfied, I see no protected benefit issues, and like you, I find nothing in the safe harbor guidance that would indicate otherwise.

I was thinking the same thing. Of course, the plan may not allow rollovers, and the 20% withholding has already been done, so this isn't necessarily a perfect solution, but it could alleviate some of the problems.

Thanks Bob.

True... I think we may continue to date them anyway. Takes about 1 second, can't hurt anything, and may possibly help in "tracking" what happened when if the IRS questions it 2 or 3 years later.

Wow! I agree with the comments that it will generally need to be allocated as an employer discretionary allocation. As far as the missed deferrals, there is a potential specific fix now under Rev. Proc. 2006-27. See Appendix A, .05, and examples 3 through 10 in Appendix B. Although this is meant for people who were not provided the opportunity to make a deferral election and to defer, I'd argue that you have effectively the same problem. If it is a large plan and there's really a substantial amount of money involved, you could consider a "John Doe" submission with some creative solution which is less expensive for the employer, but I have no guess as to how this might work out. Just when you think you've seen it all...

Thanks for the info. We've still been dating them on the theory that since TD 9229 didn't specify that dating was no longer required, that it was still required. Apparently the IRS is taking the more logical approach that since the date is part of the signature line, and signature no longer required, that the date isn't either.

Yes, they still need to be dated.

I would tend to disagree if Mr. Watson is asserting that such a transaction is automatically a PT. Does he have a court case or cases to cite as support for his opinion? I certainly think that there is a POTENTIAL for this to be considered a PT, depending upon facts and circumstances. For example, perhaps if the fiduciary is a beneficiary under the sister's will, or if the sister then helps pay for the college tuition of a child of the fiduciary, etc.. Barring some facts and circumstances evidence of a "benefit" to the fiduciary of some self dealing as a result of this transaction, I'm hard pressed to find a reason that this would be considered a PT. While I'll leave it to the attorneys to provide a more informed opinion, as a layman, it would at least seem like a possibly increased potential for a successful claim for fiduciary breach IF the investment turns out to go sour. If I were a fiduciary, I'd probably be rather hesitant to engage in such a transaction, but that may be paranoia.

Having a little debate on a takeover plan. I'm always willing to believe I'm wrong, so here goes. The plan is new for 2005 - calendar year plan and fiscal year. It is a DB plan, based upon an approved VS document, but using a modified compensation definition that makes it fall outside of the safe harbors and the current VS language, so we are requiring that they submit for a determination letter as a condition of our performing TPA services. As I read the RP 2005-66, this falls under the 5 year individually designed plan deadlines, which are dependent upon the last digit of the EIN. So let's just suppose it is 7. This would be "Cycle B" and therefore must be filed by 1-31-2008. Filing currently (this year) on an "off cycle" is an option, but I don't find any specific deadline for this, since an off cycle filing is voluntary. Any disagreement? I guess as a further question, do you see any benefit here to a current off cycle filing? I can't see any other than perhaps getting a quicker response. But the RP specifies that off cycle filings will only be reviewed once ALL on cycle filings have been reviewed and processed, so it could actually take longer than waiting. Maybe I'm missing some important point. Thanks in advance.

You've got my vote as well. No problem whatsoever.

Many thanks!

Looking for some opinions on this subject. The question raised was, "Can you use 412©(8) to increase the formula retroactively?" This really seems to break down into two issues - first, can you do it, and second, if so, is it deductible for the prior plan/fiscal year. For example, let's say that you have a calendar year 2005 plan and fiscal year, with a 12-31-05 EOY valuation date. Can you, on 3-2-06, amend the plan to increase the benefit formula for plan year 2005? In reading 412©(8), I find myself sitting on the fence. It appears to me that the purpose of this is to allow for retroactive amendments to REDUCE minimum funding requirements, but it also seems to leave room to increase benefits with a retroactive amendment. So, do you believe you can, or not? I'm inclined to lean towards the interpretation that you can. Second, assuming that you can, what about deductibility? Is it deductible for fiscal year 2006, or not until 2007? Thanks in advance.

However, I believe the level amortization requirement has been around for a lot longer than that. I have an impression that this was a requirement of TRA '86, but I certainly don't trust my memory on this.

PIP - your last line brings up a question I was muddling with yesterday. Now that the IRS specifically tells you not to file the P if you are an EZ filer (but you should sign, date, and keep in your records) is it necessary to file the P to start the running of the statute of limitations? Common sense tells me that this should be sufficient, but I've seen nothing from the IRS specifically indicating that. However, I'd like to think that if it ever DID go to court, that you would prevail in an argument that the statute starts running with the signed but unfiled P. Any thoughts on this?

There's actually a fair amount of complexity to the general issue of trusts and RMD's. For minimum distribution purposes, the trust itself is not the "designated beneficiary" - but the underlying beneficiaries of the trust can be if certain requirements are met. See 1.401(a)(9)-4, Q&A 5 and 6 of the 2002 regulations. I would say that yes, in general, you would use the same factors once the "designated beneficiary or designated beneficiaries" is/are determined. There are various intricacies if some beneficiaries satisfy the definition of "designated beneficiaries" and some do not, and this whole area is, I think, worth engaging the services of someone well versed in distribution planning if there's any substantial amount involved. I think there are perhaps some folks on these boards who are expert in this arena who may provide you some better advice. Sorry, I hadn't seen JEVD's reply when I was typing this.

I agree with MJB. Given that the plan is subject to QJSA/QPSA rules as you have stated, then it is a plan qualification requirement. See IRC 401(a)(11), 417, and ERISA 205. The plan may not even use the one year rule, (many don't) in which case, as soon as he gets married, the previous beneficiary designation becomes invalid, and would have to be executed again with spousal consent to be valid.

We have been filing the 5558 for automatic extension without signature.

There's not enough information in your post to provide a really good answer, but it appears that a SIMPLE might be your best option. I'd look at IRS publication 560 if I were in your shoes, which will answer most of your questions.

I would say the answer is no. Under Revenue Ruling 81-114, it is established that a deduction cannot be allowed for a prior taxable year if the plan is not established by the end of that taxable year. I don't think it makes any diference if it is corporate or self employed. I'm not a CPA either, so I'd recommend that you ask the client's CPA this question before the client makes any final decision.

I agree with Nate if Corporation A actually owns 56 % of corporation B. However, your post appears to indicate that A may not own any of B, but instead, one of the owners of A also owns the 56% of B. If that's the case, then the 415 issue mentioned does not apply. This applies only to 1563(a)(1), which is parent-subsidiary only, and does not apply to a brother-sister situation.