mbozek

Maybe I am missing something but Reg. 11.412©-12(b)(2) provides that rules for determining the year for which a mimimum funding contribution is deemed made are independent of the year for which the contribution is deductible under 404(a)(6). Therefore the year for which a contribution is allocated for Schedule B purposes can be different from the year for which the deduction is claimed under 404(a)(6). See rev. rul 77-82.

Every deal I have ever worked on has provided for payout in the event of a c in c. Most acquirors consider the tax payments to be the cost of doing business and the purchase price is adjusted for the cost of the payments.

Under 404(a)(6), contributions are deductible either in the year in which they are contributed or for the prior tax year if made by the time for filing the return including extensions and the employer deducts them on the return. Rev. Rul 76-28. If the deduction was taken on the 2000 tax return it should be deductible for 2000 since it was contributed in 2000. The IRS position that the deduction can only be taken in 1999 because it was contributed prior to the expiration of the extenson for that year is wrong.

But a 403(b) plan can not lose its tax deferred status because it is administered in accordance with changes in the IRC instead of the terms of the plan., e.g., permit max contribution of 40k even if plan has not been amended.

There is no remedial amendment period for a 403(b) annuity because a 403(b) plan does not have to be administered in accordance with its terms since it is not a qualfied plan. A 403(b) plan only needs to be administered in accordance with the applicable provisions of 403(b). A 403(b) plan sponsor can adopt amendments in 2003 which are retroactive to 2002 or any prior year.

Since ERISA prevents the reduction of benefit accruals under any plan subject to Title I, the benefits are guaranteed to the participants regardless of whether the plan is amended to prevent a reduction of benefit accruals. Converting the plan to a non ERISA plan would only affect benefit accruals after the plan becomes exempt from Title I. A DB plan sponsor cannot avoid the application of the cutback rule of ERISA for accrued benefits by converting the plan to a church plan exempt from title I.

This may be obivious but what does the plan say? Qualified plans usually provide for a distribution of assets to participants upon termination of the plan. I dont know whether an employer can transfer assets to another qualfied plan upon termination instead of distributing assets to the participants. IRS termination guidelines permit distribution in the form of an annuity or single sum.

In todays world of electronic publishing why can the inappropriate language be edited out of the SPD before distribution?

I have heard that claim made before but all assets of a qualfied plan must be held for the exclusive benefit of the participants. It is a violation of the exclusive benefit rule for plan assets to be held outside of the plan in an irrevocable trust for the benefit of the heirs of a participant. If the participant dies the proceeds will be paid to the trustee of the plan or the beneficaries as an asset of the participant's estate. I have heard of mysterious PLRS that allow the LI benefits to be held outside of the plan and the participant's estate but no one has ever been able to find a citation. Also a retirement plan is not permitted to make inservice withdrawals of benefits to an active participant prior to normal retirement age. IRS announcement 75-110. My reference to non alienation was to the transfer of assets (li policy) outside of the control of the plan trustee, not to the ability of the participant to designate the beneficary of the death benefits.

The queston is how long is the s/l? Why should employee election forms be preserved in a terminated plan? Remittance reports should be kept for 6 years or until the s/l for an emplyee to make a claim for a mistaken or omitted contribution expires. Under ERISA 107 records used to create annual reports must be kept for 6 years after the report is filed.

What records are you talking about?

its 20% before subtracting the contribution from the covered comp. e.g., comp of 200 K and contribution of 40 k = 40/(200-40) = 25%

There is no problem is getting employees to sign such a form- However the employer has to make sure that it keeps the form until the employee termintes to protect itself from a claim.

I thought that rule only applies to the timeliness of the remittance of employee salary reductions to the plan. The employer satisfies the the reg by remitting the contributions to the funding entity/ trustee. There may be a issue under the Investment Company act of 1940 as to how long the fund agent has to post the accounts or make contributions but that should be disclosed in the prospectus for the fund.

Under the IBM case all age or service weighted formuals used in DB plans have be tested to determine if benefit accruals are reduced on account of age under ERISA against any employee, not just employees 40 and older.

Pete: I am very intersted in how a trust can own a LI policy outside of the plan and the participant's estate since retirement benefits must be held for the excluisve benefit of the participants in a qualified trust and be non alienable under IRC 401(a)(13), eg., the participant cannot waive rights to benefits. I have heard many promoters make similar statements but I am unaware that any ruling has ever been issued by the IRS. The problem is that the client's estate, not the client, will pay the estate tax (unless the LI is paid to the spouse). However avoiding estate tax is a poor reason to over pay for a death benefit in a retirement plan with tax deductible dollars since the estate tax will be eliminated for most taxpayers in the next few years. After paying income taxes (with max rates of 35% though 2010) the dollars could be invested in more productive investments such as dividend paying stocks with a max tax of 15% for both dividends and cap gains which is considerably less than the 80% tax on IRD that you used.

I think this question is to complex for this board. For one thing you have not adequately explained what the dispute is about and PERA is not an identifiable term. Second you have not stated why the employer cannot make the correction, e.g., the employer may have transferred the funds in question to another party. You should consult cousel to see if there is a remedy.

An IRS determination letter wil not protect the plan sponsor from a lawsuit or judgment that the plan violates ERISA because it provides a smaller benefit accrual to older emplyees (See IBM case). why take a risk by adopting a CB plan?

You have to ask the question of whether the late adopton will be discovered by a random audit. Otherwise how will the IRS ever know that the document was adopted late.

There are some issues that need to be addressed. First, no one names a will as the beneficiary but can designate their estate which is administered by an executor as the bene of the IRA. The IRA assets will be distributed under the terms of the will. Second, some individuals designate their IRA beneficaries in their will. It is a strange practice but some state courts will enforce the designation made in the will. Third I dont know what you mean by designating the trustee as a beneficiary. Some participants designate a trust as the beneficiary of their IRA distributions. The trustee of the trust will distribute the IRA payments in accordance with the terms of the trust.

The 25% figure was given by the director of enforcement for the NY Regional office of the PBWA a few years ago at a conference I attended. It appears in several laws suits that the DOL has filed against plan fiduciaries for failure to diversify assets.

It is a PT because the commissions will be paid directly to the agent to benefit his personal account. The gain to his personal account occurred only because the agents plan (at the direction of the agent) loaned money to the developer. The PT rules are absolute unless there is a PT exemption. The PT rules are intended to prevent plan assets being used to enrich the non retirement account of the plan fiduciary. the Plan sponsor can disregard the PT rules and take a risk that the IRS will never find out about the violaton. If they do then there will be n initial 15% tax and the laon will have to be paid off

Why not read the instructions to the 5500 form. It is available on the IRS web site. The exceptions are stated in the introduction. I dont know of any exeption from filing a 5500 for a non profit qualified plan that is not a govt or religious entity.

why not treat this as (a) terminaton of non erisa Plan and replacement with ERISA Plan 001 since there are no formal procedures for terminating a 403(b) plan or (b) adoption of ERISA Plan 001 in 2002 which replaces the non ERISA plan.

A PT exists if plan assets are used to benefit a fiduciary's personal account even if the transaction will not result in any greater income than if paid to a person who is not a party in interest.