Belgarath

Hi Blinky - I'd interpret the instructions (which I just got out and looked over) to require the final form for the MP plan for 2001. Under the last sentence in the "who may not have to file" section on page 2 of the instructions, it includes the words "...or distributed to another plan." FWIW.

I haven't checked the form instructions, but I seem to remember that a final 5500 for an EZ filer must be filed REGARDLESS of the amount of assets. If so, the issue of whether to count on accrual or cash basis is moot.

It is owned by ABC as Trustee. If Bob Doe dies, the Trustee is responsible for distributing the plan's death benefit to Bob's beneficiary(ies) that he has on file with the Trustee. Depending upon the plan language and whether there are other participants, etc., the entire assets are not necessarily payable to Bob's plan beneficiaries. You'll have to check the document language which will define what the death benefit is, and how the determination is made as to whom the benefit is payable.

This would be under the 1.401(a)(4) regulations - specifically I believe it would be a "right or feature" under -4(e)(3) of the above cited reg. It shouldn't be a problem, unless the only life insurance product offered, for example, had a minimum premium that was too high for the rank and file to purchase it. Then it would fail to meet the "currently and effectively" available standard under the regs.

My "off the cuff" opinion, for what it is worth, is that it is effective for reemployment initiated more than 60 days after 12/12/94. Although the plan has the two year period to come into compliance, I don't think that relieves the employer of the obligation to make up the requisite amount. Fortunately I haven't run into such a situation, so have been able to avoid thinking about it! I'll be interested to see what others think.

I agree that there's no problem if the sole reason for exceeding the 50% limitation is a drop in asset value. It's probably stated more clearly in English somewhere else, but take a look at DOL Reg. 2550.408b-1(f), which essentially says that it is ok if you satisfy the requirements immediately after origination of the loan.

Thanks. This is new for them, too, so maybe this will be changed in the future. Maybe someone at ASPA should raise this issue at the podium at the next ASPA conference?

Haven't run into this yet, but undoubtedly will soon. Line 3C on the 5310 says that if you don't have a determination letter, you have to submit initial plan, all amendments, etc.... Under IRS Announcement 2001-77, there will be batches of Prototype and Volume Submitter plans where adopters no longer file for determination letters, and instead use the document sponsor's Opinion or Advisory letter as a determination letter. My question is this: has anyone talked to the powers that be in the Plan Termination unit at IRS to determine if such plan adopters can, under Line 3C(1), answer "yes" and submit a copy of the most recent Opinion/Advisory letter plus subsequent amendments, or must they answer "no" and be forced to go back to day one, or at least to the last actual determination letter? It would seem consistent with the spirit of 2001-77 to allow the former rather than to require the latter, but I don't know. Anybody have any information/experience? Thanks!

What does the document say? Since the Safe Harbor requirements are to make sure that the NON highly compensated employees receive their required minimum, I can't see that there would be any violation of the law. HC are NOT required by law to receive a safe harbor nonelective. And if the document contains language permitting such a waiver, then you should be all set. But if it doesn't, then you are stuck.

Included. So, for example, participant has vested account balance of 50,000, with a 5,000 outstanding loan. When calculating the maximum loan allowable, you'd use 50% of 50,000, not 50% of 45,000. So maximum would be 25,000, reduced by highest outstanding balance in the last 12 months, etc...

Just wanted to check something regarding the attribution rules for adult children under IRC 1563(e)(6)(B). Controlled group questions are generally posed in terms of stock ownership. Yet the code seems, to me, to indicate that the determination of ownership of the "more than 50%" requirement is based upon the ownership of VOTING stock, or VALUE. So am I correct that if you have a father and adult son, and the stock ownership is 50/50, yet the father's stock is all voting stock and the son's is not, that the son's stock will nevertheless be attributed to the father, in spite of the fact that the number of shares owned is 50/50? I always refer clients to their attorneys to get these questions answered, but I like to try to know what I'm talking about... Thanks!

Saw that this just passed the house. I have a couple of questions, for anyone who follows this stuff: 1. If I'm reading it correctly, it would require quarterly statements for any plan that allows participant directed investments. Other opinions? 2. If I'm correct, does anybody have "contacts" in the industry or on the Hill who have a feeling for how likely this is to pass, in current form or something reasonably close to it, the Senate and have the Head Cheese sign it into law? A lot of plan currently allow participant directed investments, yet only require annual statements. A quarterly requirement would be a pain. Any input/thoughts appreciated!

I don't think so, but I hestitate to make a statement that is too definitive without double checking. The "Uniform Lifetime Table" in the 2002 regs replaced the "Uniform Table" in the 2001 regs. And my understanding is that you MUST use the new "Uniform Lifetime Table" for 2003 and beyond.

You might take a look at IRS Form 4461, 4461-A, and 4461-B. These should get you headed in the right direction.

I have seen a couple of BOY target plans, but they weren't set up the way you decribe. The limitation year had an overlap, to avoid some of the problems you mention. So although the plan year might be 1-1-03 to 12-31-03, the limitation year would be 1-2-02 to 1-1-03. I'm not sure how a plan such as you describe could be justified - I can't see a way to do it, at least.

Archimage - I've pasted in the following excerpt from DOL 29 CFR 2520.104-46. The original question was whether the additional disclosure on the SAR was necessary. I interpret this that it is. In other words, assuming the investment is in a "qualifying asset" the additional disclosure on the SAR is NOT required if the participant is furnished with the statement, at least annually, from the company(ies) under which they have their participant directed accounts. See the last paragraph of the excerpt. But from the sound of this question, they are not being furnished with such a statement, hence the SAR disclosure is required. This shouldn't be a big deal - they still qualify for the audit waiver, it's just that they aren't exempt from the SAR disclosure that is required from most other "qualifying assets." At least that's how I read it. But again, I may just be paranoid. Of course, I wouldn't be paranoid if everyone wasn't out to get me... (a) General. (1) Under the authority of section 103(a)(3)(A) of the Act, the Secretary may waive the requirements of section 103(a)(3)(A) in the case of a plan for which simplified annual reporting has been prescribed in accordance with section 104(a)(2) of the Act. (2) Under the authority of section 104(a)(3) of the Act the Secretary may exempt any employee welfare benefit plan from certain annual reporting requirements. (b) Application. (1)(i) The administrator of an employee pension benefit plan for which simplified annual reporting has been prescribed in accordance with section 104(a)(2)(A) of the Act and Sec. 2520.104-41 is not required to comply with the annual reporting requirements described in paragraph © of this section, provided that with respect to each plan year for which the waiver is claimed -- (A)(1) At least 95 percent of the assets of the plan constitute qualifying plan assets within the meaning of paragraph (b)(1)(ii) of this section, or (2) Any person who handles assets of the plan that do not constitute qualifying plan assets is bonded in accordance with the requirements of section 412 of the Act and the regulations issued thereunder, except that the amount of the bond shall not be less than the value of such assets; (B) The summary annual report, described in Sec. 2520.104b-10, includes, in addition to any other required information: (1) Except for qualifying plan assets described in paragraph (b)(1)(ii)(A), (B) and (F) of this section, the name of each regulated financial institution holding (or issuing) qualifying plan assets and the amount of such assets reported by the institution as of the end of the plan year; (2) The name of the surety company issuing the bond, if the plan has more than 5% of its assets in non-qualifying plan assets; (3) A notice indicating that participants and beneficiaries may, upon request and without charge, examine, or receive copies of, evidence of the required bond and statements received from the regulated financial institutions describing the qualifying plan assets; and (4) A notice stating that participants and beneficiaries should contact the Regional Office of the U.S. Department of Labor's Pension and Welfare Benefits Administration if they are unable to examine or obtain copies of the regulated financial institution statements or evidence of the required bond, if applicable; and © in response to a request from any participant or beneficiary, the administrator, without charge to the participant or beneficiary, makes available for examination, or upon request furnishes copies of, each regulated financial institution statement and evidence of any bond required by paragraph (b)(1)(i)(A)(2). (ii) For purposes of paragraph (b)(1), the term ``qualifying plan assets'' means: (A) Qualifying employer securities, as defined in section 407(d)(5) of the Act and the regulations issued thereunder; (B) Any loan meeting the requirements of section 408(b)(1) of the Act and the regulations issued thereunder; © Any assets held by any of the following institutions: (1) A bank or similar financial institution as defined in Sec. 2550.408b-4©; (2) An insurance company qualified to do business under the laws of a state; (3) An organization registered as a broker-dealer under the Securities Exchange Act of 1934; or (4) Any other organization authorized to act as a trustee for individual retirement accounts under section 408 of the Internal Revenue Code. (D) Shares issued by an investment company registered under the Investment Company Act of 1940; (E) Investment and annuity contracts issued by any insurance company qualified to do business under the laws of a state; and, (F) In the case of an individual account plan, any assets in the individual account of a participant or beneficiary over which the participant or beneficiary has the opportunity to exercise control and with respect to which the participant or beneficiary is furnished, at least annually, a statement from a regulated financial institution referred to in paragraphs (b)(1)(ii)©, (D) or (E) of this section describing the assets held (or issued) by such institution and the amount of such assets.

I believe participant would qualify for the exemption from the 10% penalty tax, but I haven't looked it up to make sure, so I wouldn't trust my opinion just yet!

You can't roll the nontaxable portion of an IRA to a 401(a) plan. See 408(d)(3) as amended by EGTRRA Section 642.

Archimage - are you certain on this? I'm sometimes overly conservative on these questions - particularly with the DOL, but I'd have said that first, unless the participant is actually furnished the statement, at least annually, from the regulated financial institution, that you don't even necessarily pass the qualifying asset test. Admittedly, the investments are likely "held by" a regulated financial institution, but even if they pass this test, and are therefore qualifying assets, they wouldn't pass under the "participant directed account" exception to the SAR disclosure. Of course, the TPA could actually be the regulated financial institution, but if not, I think the SAR disclosure is required. Maybe I just worry too much... what do you think?

Are you asking for purposes of the Small Plan Audit Waiver requirements? If so, note that participant loans are not required to be reported on the SAR for this purpose.

Try 1.411(d)-2(d)(1). It's not perfect, but better than nothing. Also, IRS audit guidelines in IRS Announcement 94-101.

See 402©(8)(b), and 408(d)(3)(A)(ii).

FWIW - why not amend the plan in the other direction? In other words, instead of making the entire balance subject to J&S and spousal consent, why not create a "prior pension account" or whatever wording you want to use - make this account subject to J&S, spousal consent, etc? Then you can still have the profit sharing account money available for in-service withdrawals. Maybe I'm missing the point of what you really wish to accomplish, but this seems relatively simple, yet retains the flexibility for in-service without the spousal consent hoopla.

Rmeigs - thank you.

I'm not aware of any change. Doesn't make sense to me that they would ever be considered a "qualifying asset" - I'd be surprised if such a change were seriously considered, and even more surprised if it took place. Of course, my ability as a prognosticator is generally questioned by anyone who is sane, so I'd advise a second opinion...