Mike Preston

The amount of this individual's election was required to be in writing before the end of the year. If the result of that election is that money is due the plan, then that deferral must be adhered to. Where the funds come from is another matter. If your LLC member chooses to treat monies received in 2004 as the source of those funds, that is ok. There is a complete disconnect.

That is certainly what it says. Note that each section has a reference back to imputation of permitted disparity. Taken literally, it might appear that multiple imputations are permitted. I don't think that is possible. However, I agree with you that it appears the fractions should be added, rather than the numerators added. Kind of makes you wonder why they put it in that way. But ours is not to reason, I guess.

I'm not sure I agree as to the denominator. Once you are using the accrued-to-date methodology, it is predicated on, well, what you have accrued to date. The divisor should be the period over which those benefits have accrued. Of course, that is just an English derivation of how I thought the rules were supposed to operate. Add to that the fact that I think adding up fractions runs the risk of using double integration and I have always added benefits before performing a single division. I have LOD's on the methodology so it seems to be an acceptable method. Of course, that doesn't mean much.

I think the IRS has stated in one of the ASPA Q&A's that you do, indeed, get a free pass in any year where there aren't NHCE's. However, that is just informal advice. If your reading of the cited regulation doesn't provide enough comfort, couldn't you switch testing to current year?

As long as the first k plan is not going to allow distributions upon plan termination, I'm not aware of anything that would preclude a plan sponsor from effectively stopping deferrals into one plan and then starting a new plan to take new deferrals. I've seen this happen most frequently when the plan sponsor has a contract with a financial provider that has significant charges for moving accumulated assets and no flexibility to provide multiple investment options within the plan.

Is the person that received the loan an NHCE? I'd scour EPCRS to see whether a retroactive amendment to expand eligibility for loans wasn't available. If not, I'd see whether the client would be willing to submit an application to the IRS under EPCRS to cure the problem with said retroactive amendment.

The valuation of the insurance policy is something that needs to be reasonable. I would feel very comfortable using the fund value.

It sounds like the CPA firm is attempting to treat the distribution as a loan in excess of the applicable limits, and therefore a PT. That sort of sounds like the least problematic way to handle this, although recasting what actually took place sounds iffy to me. If, after consultation with ERISA counsel the recasting is cast aside, the client should be prepared to file under EPCRS. The more experienced the representative he chooses the less likely the result will be onerous. But it won't be painless. One possible suggestion might be to go the IRS under an anonymous submission suggesting a retroactive amendment that changes NR to 55 and authorizes in-service distributions. The deferrals and interest thereon would either have to be paid back or that amount treated as a loan. That is best case scenario, upon quick review of scanty facts. Yes, the IRS may require full repayment. Pure speculation, of course. There is no place I'm aware of on the 5500 to report operational failures. If the recasting is deemed appropriate, and it is being treated as a PT, yes the 5500 is the place to report it. Keep in mind that it may be possible to self-correct in certain circumstances, if the client has the money (doesn't sound like he does). All in all, this situation screams for ERISA counsel.

Andy is right. Scary indeed. Maybe I can claim sleep deprivation? In any event, there is always something that is to be gained from a more current LOD. In the case of a freeze with respect to a plan that is not overfunded, I agree that it might not be very much. However, as has been pointed out, a freeze might be considered a partial termination if it "increases the chance of a reversion" (I *think* that is the right phrase). I have heard the IRS talk about this, but I've never seen any PLR's or other citations that back them up.

1. HCE's have nothing to do with TH. If you must describe something that will fail the TH rules, use "Key EE", not HCE. 2. It is a very poorly drafted document that does not provide that the TH minimum is the LESSER of 3% or the highest percentage allocated to any Key EE. So, read the document, of course, but if it doesn't say what number 2 above indicates you should, at the least, amend it for the future.

It appears that if one is not a 5% owner on one's 70 and 1/2 birthday that one is not a 5% owner.

No, not that I'm aware of. Is there a particular circumstance that has you worried?

You can change assumptions in your case. While the IRS is fond of saying you can't change assumptions once a Schedule B has been filed, the actual rule is not quite so strict. Almost, but not quite. You are allowed to change assumptions to the extent that the new information you are processing would naturally lead to a situation where you would sort of have to make that change. Doesn't come up often, but when it does, it is good to know that it is not impossible to change assumptions.

You just missed the best one there is. Contact Larry Deutsch Enterprises and see when his next LDE Symposium is scheduled for. I think the next one will be on the East coast later this year.

Agreed. But I've always avoided the cash basis method because having administration reports that don't match the 5500 is a disaster waiting to happen.

Without more detail I'm still a bit of a non-believer.

The letter of determination one gets on plan termination is significantly different from the letter of determination one gets from a submission with respect to an ongoing plan. Different things are reviewed. Therefore, there is different reliance.

If the document really says that, then a "stab" at actual earnings seems perfectly reasonable. Is that what you are doing?

Well, in the absence of a clear rule to the contrary, I think I'd submit on the basis if the lower fee being applicable and then see what happens.

Well, it must be, because it certainly doesn't make any sense to me!

Yes, but your name isn't guppy.

Can you summarize?

Very true. But there are some general guidelines. Componing (!) works best when you can eyeball the EBAR's/Allocation rates and see where an HCE can be paired with an NHCE group (what Larry Deutsch refers to as the "magic number") of NHCE's to build a foundation for that HCE. From there it really isn't that tough. There are so many options, though, that you are correct that one can spend an eternity if one chooses to do so.

Are you one of Blinky's offspring?

Usually the document tells you what to do.