Belgarath

I'd be interested in Mr. Holland's arguments for this, if that's really exactly what he said. I'd refer him to 1.401(a)(4)-3(b)(5).

I agree - I've never seen a buy/sell within the actual document language. I've also only ever seen one PS plan that used plan assets to purchase the insurance to fund the outside buy/sell. Seemed rather complex to me at the time, but in retrospect it really wasn't...

You might try Penchecks. I believe they do this type of stuff. I'm sure there are others as well..I suspect a web search will give you quite a few.

"Travels with Charley" by John Steinbeck. "The Federalist Papers."

I'm not an actuary, but I think it's a fantastic idea. I'm just not sure what it would look like once the lawyers get done with all the caveats and conditions. (And I'm not saying that to put down the lawyers - their job in this case is to cover our backsides, so some healthy paranoia is probably a good thing!) Does the DOL have any sort of model paragraph that has their blessing?

I have trouble operating an abacus, so I'd have to ask one of my kids...

"Proposed regs are not enforceable under the tax law and cannot be use against a taxpayer because they are not law until adopted as final regs under the APA, 60 days after publication in the federal register. While the IRS can issue rulings based on proposed regs to taxpayers it cannot apply prposed regs to enforce the tax law." This is good! Now here's my followup question: Let's say the proposed regs say that as of (X) date - let's say 90 days after the proposed regs are issued - that plan sponsors can no longer double park their cars in IRS parking slots. Can the final regs that are issued 2 years later be made retroactive (and enforceable) to the originally proposed date, or can they only be applied and enforceable starting 60 days after the date of publication in the federal register?

I got 8 out of 10 correct. I'm not an actuary, so I'd say that that equals about 95% correct. But it said I was playing as a guest so it didn't save my score, so I don't think it helps. Tom, the anwer I was looking for that didn't appear was WAY too many.

An interesting conundrum. The guidance is all concerned with what is the LATEST date that this can be, but is less helpful when it is earlier! I wasn't able to come up with a solid answer based upon the regulations. 1.411(a)-7(b) says that participation is based upon the first day of the plan year in which the employee first becomes a participant in the plan. Does the plan define participation as the entry date, which would be 1-1-2006? If so, then I'd feel comfortable using this as NRD. It has the added advantage of being the common sense answer, as I agree it does seem odd to have an NRA or NRD prior to plan entry.

Well, I don't know the Corbel document. But I think you could have a life insurance policy that had been around for a lot of years where the cash value was pretty much equal to (or at least somewhere near) the death benefit - so under the death benefit option that flosfur quotes, it could be zero. Or at least very darned small. Maybe one of the life insurance experts could chime in as to whether such a scenario is possible.

Yes, I agree with mbozek. I was making a perhaps unwarranted assumption that the one-participant plan was a sole owner.

I'd vote for prorating. 1.401(a)(17)-1(b)(3)(iii) says that if a compensation period of less than 12 months is used for a plan year, then the otherwise applicable annual compensation limit is prorated.

Alf - I respectfully disagree with the prior post, or at least what it appears to be saying in the first sentence. I don't believe a 1 person 401(k) plan is subject to coverage under Title I of ERISA. See DOL regs under 2510.3-3©. The sole proprietor or sole shareholder (and spouse) are not "employees" for purposes of Title I coverage.

It's very easy to get the alphabet soup mixed up on these. I think what you really want is VFCP, not DFVC (DFVC is for late filing of 5500 forms.) Here's a link to the VFCP program. If you scroll to the bottom of the page, you'll find additional links on the revised VFCP program that should answer all of your questions. And they provide a very nice on-line calculator as well. Pretty user friendly. http://www.dol.gov/ebsa/compliance_assistance.html#section8

Just idle curiosity here - if you had to guess, for a sort of "plain vanilla" QDRO dividing up a profit sharing plan 50/50, how much would the attornies fees be? I'm just wondering at what level does the entire account balance get eaten by such fees, if the plan is charging them against the participant's account? And, is there any alternative to two attorneys and a court filing if it is a small account balance? I don't see one, but just wondered. (Other than the attorneys in the divorce exercising some common sense and dividing up another asset rather than the qualified plan.)

Yes, and if the employer is a "prove it to me" sort, then you can start with IRC 414 - which will, of course, lead you to other pertinent sections as well.

Sorry if my lack of specificity offended you or wasted your time. To be precise, here's what I remember (from page 7 of) the skim I referenced: "For a defined benefit plan, these regulations provide that a death benefit that is not part of an optional form of benefit is an ancillary benefit and, therefore, is not a protected benefit under section 411(d)(6), even if paid after retirement. The regulations also clarify when a death benefit under a defined benefit plan is part of an optional form of benefit. The definition of optional form of benefit is defined in 1.411(d)-3(g)(6)(ii) of these final regulations and in 1.411(d)-4, Q&A-1(b)(1), which has been revised by this Treasury Decision to coordinate with the definition of optional form of benefits in these final regulations."

You might want to take a peek at the new final regs on 411(d)(6) protected benefits. I haven't read them yet myself, and have only skimmed the first 7 pages of the "explanation" but it seems to me that I saw something indicating that a death benefit in a DB plan (but not a DC) could be eliminated. If true, seems kind of rotten, but I have to read it before I can form an opinion!

Ignoring for the moment any possible negligence (and I'm not implying that there was) on the part of the Plan Administrator for not purchasing the policies in a timely fashion... Don't insurance policies generally have a 2 year "suicide exclusion" so that even if the policies had been issued, there would have been no death payout other than a return of premiums? You might want to check this out with the insurance company.

You still have to satisfy the gateway requirement, which will usually be higher than the top heavy.

Flosfur - I'm not aware that there's a qualification requirement to offer the policies for sale to the participants. It may be that LRM language does this, but I don't know. I do know that every plan I've ever seen that allows insurance has this provision, but again, I don't know if it is required - I'm inclined to think not, but I haven't done any research on the question. Even if not required, I can't imagine why a plan with life insurance wouldn't allow it - there's no detriment to the plan other than some small amount of administrative work in selling as opposed to a simple surrender. If you had a participant who was uninsurable, or terminally ill, etc., and the plan didn't offer this option, I would think that beneficiary lawsuits might ensue. (Whether they would be successful I have no clue, but who wants to get sued if easily preventable.)

No, I'm not sure of anything at all! Apparently Big Papi's second home run bounced off my skull. But I think you are right, and I was confused. So would you test former employees only if the plan is frozen? I mean, for a normal active plan, then you'd test based upon current accruals, where this person wouldn't be excluded - is that right?

I think you are correct on the 410(b). I also think you are right on the 401(a)(26). It appears to me that 1.401(a)(26)-6©(4) agrees with what you said.

This seems a little confusing to me. In no particular order: Is the death benefit really defined as the larger of the PVAB or the life insurance policies? I only ask because the DB plans that I have seen generally either use the 2/3 rule, or the "stated times" method, where the benefit is the larger of the (in this case) 100 times projected benefit that you mention, or the PVAB. Not the larger of the PVAB or the life insurance. Of course there are variations, and what you mention may well be one of them - I just haven't happened to see this particular one. As far as surrendering the policies, I agree that this is no problem. As far as keeping the policies in force in one form or another, so that under the apparent current definition some folks will have a higher death benefit than others, I agree that this is a BRF subject to testing. And I'm frankly dubious that it will pass, or at least not for long. Presumably all the current HC's will receive the higher death benefit, and all the newer NHC's as they are hired will not. If this is a small plan following "normal" hiring and turnover patterns, it is likely to fail as the percentage of NHC's with lower death benefits rises. What I've generally seen in such a situation is that the plan sponsor amends the plan so that there is NO insured death benefit, then surrenders all the insurance (after first offering all insured participants the option to purchase the policies on their own lives under PTE 92-6.) This seems a lot cleaner to me.

I just noticed that - didn't have time to edit my post. Oh well, I'm used to looking foolish anyway!