Craig Schiller

Participant is a salaried employee whose regular work schedule is 35 hours per week. The person is paid for 35 hours per week, with no overtime. Participant terminated on June 14th. Hours at 35 x weeks is under the 1,000 for vesting. If equivalency has to be used, at 45 hours per week, person has 1,000 hours. Since hours are not actually tracked, is it required to use equivalency? Plan uses standard definitions: (1): The term Hour of Service means (1) each hour for which an Employee is paid, or entitled to payment, for the performance of duties for the Employer or an Affiliated Employer (2): Use of Equivalencies. Notwithstanding paragraph (a), the Administrator may elect for all Employees or for one or more different classifications of Employees Thanks for your help with this.

Thanks for pointing out the definition of Hours of Service. I thought that hours wouldn't count after termination. This has an odd way of working. For Hours of Service, the hours count, even if after termination of employment, with the limitation being not more than 500 hours for any such continuous period. As for the pay itself counting, that depends on whether the plan document has the optional provision in it that counts such comp as post-severance comp or not. Another words, even though it isn't required to count hours for vacation as post-severance comp, it is required to count those hours, with the 500 hour maximum cap, for vesting. Craig S.

Plan's definition of post-severance compensation counts compensation paid for unused vacation paid after termination of employment. Assume ee' terminated on June 10th and worked 950 hours. She is paid for 60 hours of unused vacation. Does she have 1,000 hours for vesting that year? (I think hours stop at termination of employment even if compensation does not. But I don't know - just my interpretation, What do others think or know? Thanks for any opinions (or answers). Craig Schiller

I am trying to help a friend use some of his and his wife's IRA money to buy land. There would be no debt and I can help him avoid the pitfalls - UBTI, UBDFI, PT.. What I don't know any longer is a good IRA custodian to advise him to use. I looked on YELP and didn't see good things about Pensco. Does anyone know a "good" IRA that would hold the real estate? "Good" here means, would meet whatever the legal requirements are but be a good value - not too expensive. The couple has been out of work and needs to limit their expenses. Thanks - Craig Schiller, CPC

Hi Pension Pro - Thanks for your help. Between the article and some other reading, I think that the rules are somewhat as follows for an owner whose defined benefit plan has no participants: My understanding now is that 401(a)(13), would provide someone protection in general from creditors even if the owner is the only participant. (I don't think 401(a)(13) protection depends on the entity being covered by Title 1 of ERISA). In Bankruptcy, OTOH, the provision that exempts from the bankruptcy estate trusts "exempt under applicable non-bakruptcy law" does not apply, as the courts have interpreted such assets not exempt for this purpose uness covered by Title I of ERISA. IRA's, which rollover money from any IRS qualified plan, or substantially qualifed plan, are considered "exempt under applicable non-bankruptcy law", and therefore do get projection from creditors in bankruptcy. However, as the article you referenced helped verify, if not in bankruptcy, the IRA's are subject to the state's rules on creditors. For Caifornia, this means whatever the court interprets are enough to meet ones needs to live on. Another words, Better creditor protection in the defined benefit plan but worse in bankruptcy, while better in an IRA for bankruptcy but worse for creditors. I'm not sure if I have it right, but this is how I understand it. Craig Schiller, CPC

Hi Belgarath - Thanks for the reply. I checked out the code section and it clearly permits the rollover to his own IRA. Craig

Hi Benefits Link users: I'm wondering if I'm understanding certain creditor proection issues correctly. If someone who lives in California rolls money to an IRA, the IRA assets can still be attached EXCEPT in bankruptcy. If a doctor were wanting creditor proection, but would be extremely unlikely to ever need to file for bankruptcy, I think the rollover IRA would be subject to general California credtior protection, something called Spendthrift amounts, that aren't that high. If the person rolled their money to a new defined benefit plan that only he would be in, what type of creditor protection outside of bankruptcy does he get? Thanks for any opinions! Craig Schiller, CPC

Hi Benefits Link users: Spouse was beneficiary for 100% of plan account. Participant died under age 70 1/2 and had not taken any distributions. Spouse is younger than participants. Can the spouse rollover the money to his own IRA and not start taking minimums until he is age 70 1/2, or does he have to start when the participant/spouse who died would have turned age 70 1/2? ***** See below from the final regs on MDR****** 1.401(a)(9) -3, Q -3(b) Spousal Beneficiary says the distribution must begin on or before the later of (1) End of calendar year following the calendar year when the participant dies; or (2) the end of the calendar year in which the employee would have attained age 70 1/2. ************** Does the IRA have to be set up as an inherited IRA? Thanks! Craig Schiller, CPC

Hi Gary and Bird - Thanks for your responses. I checked out 408(k)(3) and subpart (A) is general enough - since it is very general "contributions that do not discriminate". While it says that to not discriminate contributions must be pro-rata (or with 414l disparity), that doesn't meant that if contributions are pro-rata that the contributions are not discriminatory. I'm not sure why you (Gary) think a new SEP has to be considered a continuation of an old SEP. The IRS Model SEP is allowed to be used even if someone has another SEP, which contemplates there can be more than one SEP at the same time. By the same token then, each could have its own eligilibility. OTOH, starting NEW SEP in 2013 after employees have met the eligibility for the OLD SEP could be discriminatory under 408(k)(3). I would argue this is less likely covered by 408(k)(3) assuming the owner had met 3 years, and the other issue didn't apply. I think that because the IRS allows 2 SEP's at once. I think an Employer could even run 2 SEP's at the same time - one pro-rata amount those who met its eligibility, e.g. 2 years, and a second with an eligibility of 1 year. I think the idea of protected eligibility is less likely to relate to 408k3 but that is only my opinion. What do you think? Craig Schiller

Hi Benefits Link users: Employer "A" started a SEP in 2009 at Wells Fargo bank and neither he nor the bank has a copy of the SEP document that was adopted. We don't know if it had a 0, 1, 2, or 3 year eligibility. Call this OLD SEP. He hired employees for the first time in 2011. Assume he adopts a new SEP in 2013 at another custodian, Schwab, and adopts it as a new SEP, not an amended and restated SEP, effective 1/1/2012. Assume he elects a 3 year eligibility. Call this NEW SEP. Would the fact that the employees hired in 2011 met the eligibility in 2012 under OLD SEP, prevent the employer from being permitted to exclude these same employees by contributing to NEW SEP with the longer eligilibility? I don't think the SEP rules address this. Assume one step further that Owner A had been hired in 2008 and he had started with a SEP with a 1 year eligibility. (I am working with and advisor so don't know at this point when the business started). Since Owner A met the eligibility in OLD SEP in 1 year, is it discriminatory to now amend to NEW SEP to a 3 year eligibility? Qualified plans are governed by 401(a)(4) which addresses a series of amendments being looked at together. I don't think that concept applies to a SEP but don't know. Thanks, Craig Schiller, CPC

Hello. This is my first time posting a question on this board. A PS plan has a whole life policy for the principal. The pension firm that set up the policy used a method of calculating the maximum employer contributions available for premiums by taking 100% of the PS contributions that had been in the plan at least 2 years. What are the risks in using this method to calculate the Incidental Death Benefit limits? FWIW, the plan allows for in-service distribution, but the premiums are paid by the corporation. Thanks for your assistance.