Just Me

To answer your easy question, I higlight and copy the portion I want to quote, then when composing your message there is a quote button at the top you can click on, and paste the quote in. To answer your trickier question - since it's a Corbel document, perhaps you could ask Corbel what it means? ---------------------------------------------- But that's *Just Me*

All I'm seeing in 409A is "...a corporation any stock in which is publicly traded on an established securities market or otherwise." Where is this definition you refer to? JM

Kirk - I worked for a company traded on pink sheets, which is a step down from even the NASDAQ, and it was considered publicly traded for securities regulation purposes...but that being said, §409A says "or otherwise" so I'm inclined to err on the side of requiring Key Employees to wait 6 months under the terms of the plan so there is no risk of blowing the deferred compensation requirements. And, in keeping with the foreign theme of this thread, if the parent is traded on something like the Tokyo exchange or the London exchange, would the U.S. sub be subject to the 6-month rule? I'm thinking "yes." ---------------------------------- But that's *Just Me*

And, keeping in mind that the 6-month rule only applies to publicly-traded companies, exactly what is "publicly traded" for this purpose? Note that § 409A says that the rule applies to key employees of "a corporation any stock in which is publicly traded on an established securities exchange or otherwise." So - If the plan sponsor is a wholly-owned subsidiary of a foreign parent that is publicly traded somewhere like London or Tokyo - does the rule apply; and Does anybody have an idea what "or otherwise" means? This is a very scary term in how broad it seems. ----------------------------------------------- But that's *Just Me*

My cynical answer is that there have been fewer reported "scandals" and perceived "abuses" regarding deferred compensation plans in the nonprofit/governmental world than in the corporate world, thus Congress is being more of a bully with 409A than 457. Merely my own opinion...

It is possible that the "no cease" rule is being inferred because otherwise a participant can intentionally select a higher rate of deferral than needed and cut off deferrals later in the year, thereby reducing the actual rate of deferral. This would be contrary to the *new* requirement that the amount of deferral be elected before the service year begins. Several commentators have stated that stopping a deferral is now prohibited, and you are right, this is not in the statute or the Conference Report per se. But then again, that's *Just Me*

True. But for any pre-2005 deferrals that ARE earned and vested, the law does not say that the new distribution rules apply (i.e. you can keep your haircut and distribution upon plan termination provisions for that money).

But, what about the fact that ACJA CLEARLY applies ONLY TO deferrals made after 12-31-04. How do we conclude that somehow parts of the Act apply to existing account balances at 12-31-04?

Thanks. This plan has no employer contributions, but is electing to be an ERISA plan because there is a matching contribution being put in a 401(k) plan for employee contributions to the 403(b). This is, of course, another thorny issue, but applying an abundance of caution, the NP employer decided to go with an ERISA plan...so the consensus is that no QJSA/QPSA is required, which is where we were heading.

Does an ERISA - covered 403(b)(7) plan (custodial account) need to provide QPSA and QJSA benefits, or is is treated like an individual account plan that need only provide that the account is payable to the spouse unless waived?

Thanks. That's what I was afraid of. (And I meant VFCP not DFVC. I was thinking the right letters but the fingers typed out the wrong ones. Too late in the week to keep the alphabet soup straight!)

What does a plan sponsor due in this situation? A few years back, salary deferrals for one pay period were not deposited timely to the 401(k) trust. Upon discovery the sponsor made the contribution to the trust, and filed form 5330 to pay the excise tax on the "amount involved" (the assumed interest on the assumed loan). BUT, the sponsor forgot to deposit the related lost earnings to the plan associated with the late deposit. It seems clear under DFVC principles, that the lost earnings, plus earnings on the lost earnings are still due to the plan. But, is there a new or recurring prohibited transaction excise tax because the original error has not been fully corrected?

>>In other words, they can't force out the participants with a balance of over $5,000. Can they force them out through the purchase of an annuity if they have appropriate J&S language?>> Yes, that's my question. Thanks for the synopsis - anybody know of a reason why this wouldn't work? Alternatively, has anyone done this with success? Just Me

Yes, but the company is closing down eventually (bankrupt) so we wanted to be able to get rid of the frozen plan sooner, and keep the active 401(k) around until the last moment for the benefit of the remaining employees.

We have an old frozen DC plan which has only terminated vested participant accounts remaining. All of the remaining account balances are over $5,000, and none of these participants have or will consent to lump sum distributions. The §411 regs say that you can terminate a DC plan with a lump sum provision and force out payments without participant consent even if the balances are over $5,000, UNLESS the employer maintains other DC plans, which it unfortunately does. So, could we add a J&S form of benefit payment to the plan and terminate the plan, then buy commercial annuities to get the assets paid out so we can shut down? Or are we stuck with maintaing a plan document, trust, 5500s, etc. etc. etc.

Has anybody had any luck getting a determination letter from the IRS on a cash balance plan termination? In particular, one that had a conversion in the past and got a favorable letter at the time? The plan in question is already frozen, but the employer wants to terminate it. Are we just stuck maintaining the plan indefinitely?

There is an exception to the requirement that a participant consent to a distribution in excess of $5,000, but it's pretty limited. On the other hand, this may work: Treas. Reg. §1.411(d)-4, Q&A-2(b)(2)(vi) says that in a profit sharing plan the plan can force out balances regardless of the amount if the plan does not have a J&S option AND the employer does not maintain any other defined contribution plans.

So should I feel reassured that after over 40 people viewed my initial post and none of them replied with any other examples of situations where a 5310-A must be filed upon the merger of DC plans, that there are no situations than the one "example" the IRS provides in the instructions? Plase say yes.......

We are contemplating merging several old inactive DC plans into a single plan for administrative convenience. Other than the example given in the instructions for Form 5310-A of a money purchase plan with an oustanding minimum funding waiver, is there any other situation where a 5310-A would be required? The assets will be combined to form the assets of the merged plan, and each participant will have the same account balance after ther merger as before.

Nope. You only "add up" the ownership of multiple entities in a Brother/Sister group, which this fact pattern does not have. (You wouldn't do the 50% + 50% math in a Parent/Sub analaysis.) With respect to the shareholder attribution, greater than 5% shareholders are deemed to own any stock owned by the company of which they are a shareholder. So in the facts we are discussing, it would be important to know if the have any large common shareholders of X and Y, because if we do, then we may have a Brother/Sister group there, combined with the Parent/Sub group below. (The dreaded "combined group.")

One thing to remember when doing a controlled group analysis is that Brother/Sister groups are very limited - look at §1563(a)(2) and note that it involved ownership by Individuals, Trusts and Estates only. Since what you have are all corporations, the brother/sister rules are in applicable. That being said, it appears to me that you have a Parent/Sub controlled group of all entities EXCEPT X and Y since their ownership is not 80% or greater. You also need to take a look at §415(h) which streches the Parent/Sub controlled group by dropping the percentage to "more than 50%" in lieu of "at least 80%." However, since you indicate EXACTLY 50%, you do not need to test §415 limits by considering X and Y either (you didn't indicate that they had any plans, anyway). Just my humble opinion....

The friend of your friend may very well be able to make this switch of annuity vendors. The difference between a governmental 403(b) and a corporate 401(k) is that the 401(k) is clearly an employer-sponsored plan where the employer sets the investment parameters, whereas, a government 403(b) arrangement is generally between the employee and annuity vendors, with the salary deductions and payment to vendors merely facilitated by the employer. Some states prohibit public educational employers from limiting the allowable vendors so the scenario you presented happens all the time.

The key factor in determining whether or not FICA tax restarts is which entity is the employee's common law employer and whether or not that has changed under your fact scenario. You seem to indicate in your facts that the employee provides services for company A (presumably whom, under the common law 20 factor test, controls the employee) -- if that has not changed, FICA does not restart. A mere change in wage payer shifts the responsibility from one company to the other for withholding and paying over the tax, but does not require that the payers disaggregate their wages for purposes of determining wages for FICA tax purposes. Check out TAM 199918056 which covers this issue.

You can take it out, but if it's not used for educational expenses for the beneficary, you lose the tax-free character. So if you leave it in the account long enough, you will come out ahead cash-wise even if you never use it for educational expenses.

Thanks for the comments. To clarify the facts, yes, both the employer and the plan are calendar years. I understand that the amount "carried over" won't be "automatically" deductible for 2002 unless the actuarial valuation for 2002 shows that there is an allowable amount within deduction limits (and it's not otherwise fully funded, etc. etc. etc.). The "what's the point" part is very complicated, but the simple version of the story is that the employer wants to make $X of contribution for various reasons, however, for cash flow reasons, it's better to be spread out over 12 months in 2002 rather than all deposited by 9/15. Thanks again for your thoughts