mbozek

See thread under self employed person contribution to 401(k) plan under this topic. last comment 1/16. Since partnership is deemed to earn all of its income on 12/31, partners can make contribution from annual draw provided that they have executed a salary reduction agreement by 12/31. When pship determines each partners draw the pship makes a contribution to the plan from the draw due each partner. Since the catch up is $1000 over the max deferral by each partner, catch up is deferred until the draw is determined and is contributed in the same way. I dont understand why partners would write a check to the plan from personal accounts which is not compensation.

One reason not to do market trades more than once a day is that it gives the employees the opportunity to game the system by trading the stock down by placing sell orders early in the day and then buying the stock back at the days low knowing that the stock will be settled at the 2 pm settlement price. Several employers have been burned by employees using day trading techniques or by manipulating the day to day sale price to their advantage. You really need to talk to a broker/ market maker for advice. Also why do you want to engage in matching up the stock sales more than once a day?

What kind of fees are u referring to? Are these fees approved by DOL under the Sunamerica ruling? Second have u reviewed the fee based program with counsel for the plan? It seems that counsel is the party to ask.

The new tax law permits a surviving spouse to rollover a distribution of the deceased's spouse's interest to any plan in which the sur. spouse has an interest. I think the Sur. spouse needs to receive a distribution from the Q plan of the deceased's spouse's interest and then rollover the distribution back to the Q plan account in his name. This will generate a 1099-r and a rollover on the 1040 for 2003.

The revision of the PS 58 tables by the IRS was intended to prevent Ins co from making up special rates for LI policies to circumvent the PS 58 rates. The IRS position is that the new ps 58 rates are a reasonable charges for LI coverage and that an Ins co that uses lower published rates must demonstrate that such rates are available to all standard risks for individual initial issue 1 year term policies, not just owners of employer based polices. See Notice 2002-08 , III 3. As a result many ins co are refusing to publish their rates.

Terminating the PS plan will trigger the filing of a final 5500 form and the need to file a 5310 form for a determination letter. IRS may audit plans that terminate without obtaining a determination letter. I dont know why the 401(k) feature was not added to the PS plan instead of this convoluted arragement. There is no such thing as a merger with a terminated plan because plan assets must be distributed to participants upon termination but not in a merger. By the way prior to terminaton a ps plan can eliminate all payment options except a lump sum by providing 90 days notice of the eliminaton to participants.

I dont understand your question. A DRO that meets the requirements for a QDRO will have instructions as to what the rights of the alternate payee are. In A DC plan the ct order will provide the amount of the benefit that is transferred from the part. acount to an account of the AP as of a specific date. The AP will then be entitled to all gains and losses on the investments in the AP account from that date. Sometime the Plan admin has to go back and reconstruct gains and losses in the account to the date of the transfer in order to properly divide the benefits between the parties. The AP would only be entitled to interest if the ct order provided for it or the AP's interest was invested in a fund that provided for crediting of interest after the date the account for the AP was established, e.g., in a stable value fund.

If one thinks about this issue the IRS position in the prop. regs are contradictory because the employees' contributions are considered an ins premium to the employer to cover the cost of the benefits (hence use it or lose it) yet the experience gains from ee contaribions must be used to defer admin cost or be used to provide additional benefits. Thus the employer is in the position of being required to pay up when employee costs ?admin charges exceed the premium payments but the er can never benefit from the gains. Since the prop. regs are not binding on anyone and the ee contributions are employer assets why not keep the gains as a reserve againsit next years plan expenses?

Too often what appears to be rational means of managing risk in financial products on paper breaks down in the reality of an unforgiving market (long term capital and Bankers trust come to mind). Both BT and LTC were victims of their overindulgence in financial products based upon faulty assumptions in future interest rate changes that were contradicted by the market. But at least its not my money.

That may be true from a benefits perspective but most persons called to active duty make less than their civilian jobs and have less disposable income. The purpose of the SSRA is to prevent financial hardship to military personnel.

What is the relevance of ERISA to the max interest rate that can be charged since the ERISA does not preempt other fed laws such as the SSRA?

It has been a while but I though that there was a requirement that the participant have a controlling interest in the investment in order for the IRS pt rules to apply.

Perhaps you should consider retaining the LI policies in the current trust which would become a sub trust of the plan maintained by the new provider. Also who owns the policies in the plan? The participants or the trustee? Check the plan document to see if the trustee has the authority to cash out the policies without the consent of the participants. If not consider adding such a provision. The accounts of the participants would then only hold cash unless the participant purchased the policy under the PTCE.

Why not just make a larger er contribution for those ee who decline coverage in health ins.? As long as there is no dispropornate participation by HCEs earning over 90 k there will be no discrimination. Otherwise the er could pay additional comp to HCEs who could make contributions to the 403(B) plan or a 457 plan which would be taxed at the 1.45% FICA rate for comp in excess of 87k.

These issues are much too complex for a discussion on this site and can only be analzyed by counsel after a review of all the issues. My own view after reading all the posts is that there is a real risk to the fids under ERISA. Chasing yield at the risk to principal is not a prudent investment strategy. It is questionable to use investment gains to support current yield if the value of the principal investment held for participants can decline. There is a real risk of devaluation of fixed interest investments in the next year or two because interest rates are supposed to rise which could result in a lawsuit against the fids for not taking the profits and investing in a lower yielding investment. The legal fees would be staggering even if the fids prevail (Unisys litigation went through 4 court decisions before the decision to invest in Executive life GICs was determined to be prudent). I also think that the complexity of disclosure of a sale and capture of the gains to participants is not a valid basis for converting to the synthetic GIC. I disagree that the goal is to "make this happen" instead of making a prudent investment decision for the participants. The make it happen mentality in financial engineering resulted in ENRON and Executive life disasters. There are several law firms and Investment banks with financial risk because counsel signed off on dubious deals because ENRON executives wanted "to make it happen".

In the absence of a ct determination the rate cannot exceed 6%. The participant can always require the plan to return any interest in excess of 6%. I guess the plan adm are gambling that the participants will not demand a refund or seek other legal remedies.

For those of us who are quantitatively challenged are you saying that upon termination, a SV contract with a bk val of $1m and interest rate of 5% will be exchanged for a SV contract with the same bk val and an interest rate of 6% or that a SV contract with $1m bk val and 5% rate will be exchanged for a SV contract with Bk val of $1.2m and interest rate of 5% which will produce a 6% return (1.2m x .05 =60,000/$1m= 6%). If the latter is the answer then I think the participants's account balances should be adjusted for the higher value of their accounts under IRC 414(i) that requires allocation of gains in a DC plan every year (RR 80-155). I am assuming that an the end of the term the contract will have a val of about 1.2 m. If the former is the answer then your client has a prudent investment question as to whether it should reinvest in the contract instead of pocketing the gain (200K) and reallocating the gain among the particiipants' accounts and reinvesting the prinicipal ($1m) at market rate to prevent a loss to participants in the contract for interest rate risk or other market risk in the future. Also there is a prudence question as to whether the plan should use this termination at a gain as a way to avoid paying charges to the participant's accounts at a later termination. I also think your client needs to rely on counsel and not on a sub advisor who cannot give legal advice.

While a single employee DB plan is exempt from ERISA if no common law employees are in the plan, the PT rules of IRC 4975 apply to any qualified plan. The PT rules of IRC 4975 apply to IRAs as well.

I thought that under Rev. Rule 80-155 the plan assets must be valued each year and that all assets in a DC plan must be allocated to participants accounts except for suspense accounts under the exclusive benefit rule. See reg 1.401(a)-2. This is required because a DC plan under IRC 414(i) must provide for the allocation of income, expenses, gains and losses to the participant's accounts. This leads to the queston of how has the unrealized gain been allocated to the accounts of participant's who received a distributions? Have you reviewed the plan document to see how gains/losses are allocated?

I thought separate accounts for beneficaries can only be designated by a written designation on the beneficary designation form prior to death. see reg. 1. 401(a)(9) -4 A-5©. Separate accounts permit each beneficiary to receive his/her portion of the participant's account based up that bene's life expectancy. Sep. accts can be made under a Q plan if the plan permits designation of sep accounts. Sep acct of non spouses under a Q plan cannot be transferred to an IRA by a tax free rollover. The right to direct investment is considered a separate sub account.

I agree that there is no Sanity Claus in the IRC.

KJ- The legislative history of ERISA indicates that Congress understood that certain provisons of ERISA would conflict with the IRC. I see no basis for the application of the 15 day rule to Self employed persons who are not employees under ERISA to the IRC provisions for deductions. Also the 15 day rule would apply only to timing of the contributions by the partners. In the pship situations I have been discussing the partners have earned income by 12/31 which is held by the P ship until the final allocation of profits for each partner is determined by the accountants. After the profit determination is made then the k contribution (ADP % x profit/draw) for each partner is transferred by the pship to the plan and the pship takes a deduction. The partner thus has made a contribution to the plan by year end.

The "Moral issue" are the complex restrictions that the govt places on employees who want to save for retirement. As another thread on this topic disclosed most emplyees dont rollover their distributions. The IRS should support a leave of absence policy that can be used to permit an employee to make additional contributions. Morality aside the leave of absence policy is only an audit issue.

Huh? The plan can always exclude employees who meet the age and service test if they are in a specified job classification, e.g., hourly employees. See Reg. 1.410(a)-3(d). This exclusion is subject to 410(B) testing. The restriction you cited under -3(e) prevents exclusion of part time employees who are members of a class not excluded from participating in the plan if they perform 1000 hours of service. A part time employee in an ineligible class cannot become a participant by performing 1000 hours of service.

workers could be excluded if under age 21 or if they are members of an excluded category provided that the plan still meets the 410(B) requirements.