Mike Preston

What does your custodian agreement say about what assets you will hold? What does the Trust Document say about what assets may be invested in? In general, there is no prohibition against holding real estate in a qualified plan. The extent to which an investment is prudent is an entirely different matter. Also, it has been my experience that real estate transactions frequently involve prohibited transaction issues. Self-dealing and all that.

1.401(m)-1(f)(4) makes it pretty clear.

You make the amendment? The effective date of the amendment that the IRS is asking for is the major issue. In a GUST restatement shouldn't that be a while back? The provision, to the extent it is modified by the amendment for EGTRRA, is changed in accordance with the EGTRRA amendment. Hence, the IRS request is for a temporary change to the provision.

I suspect so as well. My recollection is that the reference you seek is in 1.401(a)-20 and it applies to the circumstance where an individual has benefits in excess of the applicable threshold ($3,500 or $5,000) on an annuity starting date and later accrues additional benefits therefore requiring that all such benefits be subject to the annuity/involuntary cash-out rules. This is purely from memory, though, as I don't have time to do an exhaustive search. I believe EGTRRA changed the rule, however, such that a cash-out is now allowable with respect to a current distribution amount being less than $5,000 even if there was a prior annuuity starting date and the threshold was exceeded on that prior annuity starting date. Don't take my word for it, though, until somebody finds the cites, as this is all purely from memory.

If they deferred and didn't receive a match, they don't count in the ACP test. It is a much more interesting question as to whether the mere existence of the quarterly match eliminates the ability to treat those who terminate with less than 500 hours as excludable when doing the 410(B) test with respect to the match. I think it depends on your interpretation of what "minium period of service" means in the context of the regulation in question. If it just means a specific number of hours, then I think you lose the ability to exclude those who terminate with less than 500 hours from the 410(B) test, which may just be the conservative position. However, if the individual terminating is an HCE it might be the opposite of the conservative position. I'd be in favor of asking Wick his opinion on this at the first opportunity.

Oh, you were clear. It is my understanding that the simple deductions are taken in the fiscal year that the simple year ends. Further, that an entity that attempts a simple deduction in such a fiscal year is precluded from having a deduction for another qualfied plan. I think someone should look into this before you spend too much time dealing with the compensation issue, as it may not be relevant. Of course, this is just from memory, so I might be all wet.

My wife tells the story of a plan that she dealt with that had a significant investment in alpacas.

Very high.

Oh, that. My understanding is that this would be the result of the revised 401(a)(9) regulations. Specifically, the elimination of the account balance method forces a plan to provide, at age 70 and 1/2, the participant with an annuity distribution. While the annuity can provide for continuation upon death, such as is paid with a joint and survivor annuity, it doesn't seem to be able to provide a lump sum death benefit. As you can surmise, I am pretty much in the same camp as those that posted the information on the nystrs.org web site. That is, I hope that the efforts being marshalled to convince the IRS to restore the account balance method as a means of satisfying 401a9 in defined benefit plans will be successful. I'm not aware of anything that would preclude a lump sum death beneift below the point in time when required distributions under 401a9 are required, though. In that sense, I think the language on the website is a bit rougher than it needs to be. But I suppose being able to offer the death benefit only up until a retiree reaches age 70 and 1/2 wouldn't mean much to most retirees.

At which point, someone will undoubtedly cry....off with your head!

I guess I am more concerned than you are as to the participants making an issue over it.

Me, too.

I think there are a number of issues going on here. The benefit accrual in the short plan year can only take into account pro-rated compensation per the 401a17 regs. That will certainly impact current liability. However, the normal cost pursuant to a valuation is almost always based on a 12 month year, and if so, uses the full a17 compensation limit. That normal cost must then be pro-rated. If, however, your valuation uses a valuation period of less than 12 months (and I've never seen a valuation system do that, although I guess anything is possible if the calculations are done by hand) I don't think you further pro-rate the result. Now, if you have a hybrid, where you are limiting comp to the pro-rated a17 limit but still developing a 12 month cost, which must then again be pro-rated, I would say that there is something wrong with the hybrid. My problem in visualizing the issue is my prejudice towards valuation systems that always first develop a 12 month cost and then pro-rate the result. Hence, the a17 comp limit is not pro-rated. This would all be so simple if it weren't for current liability. ;-)

I agree that each entity has its own 404 limit, unless the plan was in existence before 1989.

Somebody is feeding somebody a line. Financial condition has nothing to do with the issuance of a fidelity bond. The issue might be related to other things, however. In any event, if the fiduciaries can't get the necessary insurance, get different fiduciaries.

The answer to the first question is yes. I don't understand the context of the second one. Care to craft an example?

I'm with Katherine. If you indicate there was a resolution to terminate, the participants and the Service will be looking for 100% vesting.

Where did you hear that?

I'm with Blinky. It isn't a multiple employer plan, it is a plan that is sponsored by more than one employer, but each employer is a member of an asg. In any event, each employer in the ASG has their own 404 limit unless the plan was in effect before 1988.

For what purpose? ADP testing? If so, you use what the document says. If is says fiscal year pay, you use fiscal year pay. Further, does it say that you use compensation before date of participation? If so, you do, if not, you don't. Of course, I question the way this whole thing was designed, but that is a separate matter. Further, the adoption of the K within a fiscal for which a simple was maintained may either invalidate the simple for that period (which is the most likely result) or cause major problems for the k. Somebody should look at that issue.

I agree with everybody.

In my experience, the accountant will turn to the pension professional to determine the amount deductible. Further, my understanding of the rule is a bit different from the way mbozek described it. If a contribution is made during the 3 month period ending 12/31/2001, then that amount is deductible on the 12/31/2001 tax return (I'll ignore contributions made before 10/1/2001 for now) if, and only if, the trust is tax exempt for its year ending 9/30/2002. However, since we usually make the assumption that for qualified plan purposes, the trust remains qualified at all times, the logic becomes much more simple. If the contribution is made, it is deductible for the fiscal year during which it is made, subject to the overall deduction limits, of course. The one modification is 404(a)(6) which allows you to make a contribution after the end of the fiscal year, to as late as the due date of the tax return, and still deduct it on the tax return, but only if it is allocated as if it were contributed on the last day of the fiscal year. I certainly agree with mbozek's statement that the rules are complicated, though. I am amazed at how often the language mbozek cites is confused as meaning something it doesn't. It is a red herring in most circumstances. It only has relevance if the trust has a year where it is not qualified. When that happens you have much bigger problems!

Combining plans for ABT testing does not in any way imply that one must combine the plans for gateway testing.

Pretty sure. If one tests by combining the EBRs then one must, per the gateway rules, provide a gateway based on the entire group. Since the gateway regs make it clear you don't have to do that, there must be a mechanism for using EBR's of a subset.

If the two plans are being tested separately, then the plans are tested separately. It sounds like you are running a test where the plans are not being tested separately.