Belgarath

Assuming that the designated beneficiary(ies) is/are individual(s), then distributions for years after the year of the owners death can be determined using the beneficiary's single life expectancy. (ie the new rules) So yes, you can use the new rules in the situations you described. I'm assuming that the calculation for the year of death (2000) in your second situation was properly calculated using the OLD rules.

Interesting question. First, I'd check the document to see if loans are even allowed with a repayment period extending beyond a certain age (65, for example) - most documents I've seen do this to avoid practical problems such as this one. If the document terms have been violated, they have other problems! Assuming this is a valid loan under the terms of the document, I agree with ERead that the outstanding balance is still considered in the account balance. I see no alternative to reporting the required amount, (over and above the available cash) as a deemed distribution. But I haven't reread the deemed distribution rules to see if they address this specific situation. Through the haze of memory, I don't recall that they do...

Appleby - Since the IRS is also the agency charged with enforcing this, and the Rev. Proc. represents their thinking on the issue, I don't see a problem. Maybe my stance on this is too relaxed, but I don't see it as an issue that causes the IRS any concern, and I'd be very surprised, even if they changed their viewpoint, that they would try to enforce it retroactively. If it had just been a PLR, I would feel differently. But we'll have to agree to disagree. If I start thinking too hard on a Monday, I'll be useless for the rest of the week...

Pmacduff - I notice that our replies were made at nearly the same time, so you may not have seen mine when you replied. Since the Rev. Proc. was meant to clarify the 401(k)(11) code section, I'd feel very comfortable relying on the Rev. Proc. rather than hanging my hat on the 401(k)(11) language. I'm not aware of anything since the Rev. Proc. was issued that would prohibit the rollover.

I think you can rollover from a SIMPLE(k) to another SIMPLE(k). If you look at Revenue Procedure 97-9, Section 3.3(a), it allows rollovers. I haven't followed the code references through to see if it can be rolled to anything other than another SIMPLE(k), but I'm inclined to think it can, as the only reference is to 1.402©(2). Hope this helps.

Carol - thanks for the response. Forgive my being obtuse, but I want to make sure you're saying what I think you are saying. Are you saying that they are still aggregated in the situation where the separate employer is the participant (as in the case of a self employed), or are you saying that they will not be aggregated even in this circumstance? I believe you are saying the former. I need another cup of coffee before I start thinking too hard. Thanks!

The general rule is that the 403(B) is separate - not aggregated. However, take a look at 1.415-8(d)(2), which lists two exceptions, one of which is the situation you describe. Since he owns the sole propretorship, they are aggregated. I agree with Yanikoski that this aggregation isn't changed by EGTRRA.

Yes, I've seen this PLR used as the basis for not allowing universal life in 412(i) plans. It depends upon how far you want to push the envelope, but I wouldn't recommend using UL. You can make an argument that the PLR wasn't thought out all that well - for example, a whole life policy that has a level premium will lapse if the premium isn't paid, so the "guarantees" are only good insofar as you pay the required premium. A UL will do the same - given payment of a certain premium, there will be guaranteed cash value at a given date, such as age 65. But, a UL isn't by definition a "level premium" policy, and this appears to be the issue on which the IRS focused. Since the IRS issued this PLR, and since there is nothing specifically ALLOWING UL in a 412(i), it seems the prudent course of action not to allow it in a plan you administer.

This is a subject about which I know nothing. What's the deal on amending, for example, IRA annuity contracts, which specify a maximum non-rollover contribution of 2000 dollars. Does the IRS provide "snap-on" amendments similar to what they released for qualified plans? What deadlines apply, if any, if such contract language changes are required? I suppose this would apply to 403(B), maybe 457 as well? Thanks.

Even better! Thanks for passing this along.

ERISAweasel - will do. And for all folks reading this thread - I was just speaking with one of my cohorts, who has a friend in a big Washington law firm with "inside" contacts at Treasury. This is now at least third hand, but evidently Treasury said they would have guidance on this by the end of October. Let's hope it's true.

Wow! I had already read the law, committee reports, etc., and reached the conclusion that if the plan limits the participant's deferrals, the catch-up provisions apply. Even after reading the somewhat philosophical discussion on this thread, I remain convinced that is true. I'm not going to rehash my reasoning, because most points of view have been hashed and rehashed, but I'm not losing any sleep over this, because I agree with Bob R. - I could work myself into a frenzy and get nowhere, because IRS guidance is needed, and I believe they will provide it soon - they recognize that folks are grappling with this issue. But this has been interesting reading.

Kirk - interesting interpretation. Personally, I'd say that it's a bit of a stretch. I'm not aware of any regulations, enforcement actions, etc., that have taken this approach. Do you know of any? Did the IRS or DOL ever float any trial balloons on this? Thanks.

Since Revenue Procedure 2001-17, which governs the EPCRS programs, is silent on this issue as far as I know, then I'd say you file as is, then file an amended 5500 as appropriate. But I'd also call the PWBA first to se what they say.

Sorry - I forgot to mention the fact that the loan apparently violates the plan document due to no purchase of the house. Again, this is an operational error which can be corrected under EPCRS.

There are several items to consider - among them: 1. Is this plan subject to QJSA requirements? If not, and if the plan document does not specify that spousal consent is required, then no spousal consent violation has occurred. 2. Does the plan have a "cure" period for late payments? If so, no deemed distribution has occurred until the "cure" period has been violated. 3. If everything turns out rotten re the above, you have an operational error, which can be corrected under EPCRS. Details are very plan/situation specific, so you'd need to look at the proper EPCRS correction very carefully.

No. Oddly enough, under EGTRRA, you can roll over a distribution FROM a Simple IRA to a workplace plan (assuming the 2 year period has been satisfied), but you cannot roll from the pension plan TO a Simple IRA.

Have them contact a good ERISA attorney, and have them do it NOW. Depending upon the amounts involved, the amount of time which has passed since the participant elective deferrals should have been submitted, what the employer did with the money in the meantime, etc... - you are looking at possible plan disqualification, certainly prohibited transactions, civil and possibly criminal penalties, etc. There is a PWBA program called VFC (Voluntary Fiduciary Correction)which was established a little over a year ago. It DOES NOT cover criminal violations, but can be used for "normal" late submission of elective deferrals. Again, I can't emphasize enough that they need qualified legal counsel immediately. Good luck.

Thanks MGB - what a waste of energy, for the IRS to take this interpretation of the regs they wrote, and then have to go back to Congress! Oh well, as long as they get some relief through...

2001-63 is in addition to 2001-61.

Just saw (but haven't read yet) IRS Notice 2001-63. Do you suppose this is what they were referring to when they told ERIC that it didn't apply to minimum funding? I remain convinced that 2001-61 does apply to minimum funding. Will have to read 2001-63 to see if 2001-63 trumps 2001-61, or merely adds to it.

Grrr! Things like this in the morning make me grumpy. I agree with MGB. This statement is just plain wrong, if in fact the IRS said this. But was it anyone in authority, or some minor knucklehead who doesn't know what is going on? I can't believe they would win on this in tax court. And further can't believe they would dare (nor should they) to try to apply this - imagine the extended crucifixion by Congress and the media? 301.7508A-1©(1) lists several acts - among them, the making of deductible contributions to certain retirement plans. Under section (4) of Notice 2001-61 Grant of Relief, it specifically grants 120 day postponement "to perform the other acts described in section 301.7508A-1©(1) of the regulations." I don't see how anyone could interpret this to say minimum funding deadline not extended. If in fact the IRS is taking this incredibly stupid position, we'll have to start calling our Congressmen, and some of the big newspapers. Let's see if an IRS official is willing to be quoted on this one! Whew, I've worked myself into a lather on this...

QDROphile - I tried to reply, but it didn't work, so I'll try again. I think you're right. Yet when I look at 1.411(d)-4, Q&A 2(e), it provides the rules for eliminating optional forms of benefits from a defined contribution plan (note that it does not specify profit sharing). I find the whole thing rather confusing, and the more I think about it, the less sure I am! It appears that you can eliminate optional benefits, but must retain a QJSA benefit for the prior money purchase benefit, because QJSA overrides the provisions of this regulation. Does this jive with your understanding? Any additional thoughts? Thanks for questioning this.

PAX - I came to the same conclusion. I wasn't at all sure about it until I actually looked at the 301.7508 regs on Friday, but it seems clear to me that you are correct. So if I'm wrong, we'll probably be cellmates. Naturally, I tell them to consult with their accountant before making any decisions!

Here's my opinion, for what it's worth... EGTRRA section 645 directs Treasury to develop final regulations to address such issues. Unfortunately, they have until 12-31-2003 to develop such regulations, although they may do it much faster due to the screams and howls from plan administrators! Absent such guidance, I think you must rely on 1.411(d)(4). This provides that you can eliminate optional forms of benefts, as long as you provide for a lump sum distribution option. HOWEVER, the amendment cannot apply to a participant who had accrued a benefit while other optional forms were available, if that participant has an annuity starting date which is earlier than the earlier of (1) the 90th day after the date the participant has been furnished with a SOMM explaining the changes, and (2) the first day of the second plan year following the plan year in which the amendment was adopted. If anyone out there can figure out a way to ignore this requirement, I'd be delighted to hear it!