Final 401(a)(9) Regs and Cont. Receivable

[Guest pension222]

Here's the situation. A new profit sharing plan is established for 2003, the 100% owner's 90 year old grandmother is a participant. The only money in her profit sharing account as of 12/31/2003 is her share of the receivable employer contribution for the 2003 plan year (let's say it was $2,000) which was not deposited during 2003.

So for distribution calendar year 2004, is her adjusted account balance as of 12/31/2003 zero, or $2,000?

I am beginning to think zero.

Here's why.

ASPA ASAP No. 02-10 says that "Contributions allocable as of the valuation date but not deposited until the following year need not be included."

The 1987 proposed regulations were very clear on this matter. F-2 A(b) "The account balance is increased by the amount of any contributions and forfeitures allocated to the account balance as of dates in the valuation calendar year after the valuation date. Contributions include contributions made after the close of the valuation calendar year which are allocated as of dates in the valuation calendar year."

The final 401(a)(9) regulations say: A-3. (a) In the case of an individual account, the benefit used in determining the required minimum distribution for a distribution calendar year is the account balance as of the last valuation date in the calendar year immediately preceding that distribution calendar year (valuation calendar year) adjusted in accordance with paragraphs (b) and © of this A-3.

(b) The account balance is increased by the amount of any contributions or forfeitures allocated to the account balance as of dates in the valuation calendar year after the valuation date. For this purpose, contributions that are allocated to the account balance as of dates in the valuation calendar year after the valuation date, but that are not actually made during the valuation calendar year, are permitted to be excluded.

This really doesn't seem to apply to an employer contribution allocated as of December 31 but deposited in the next calendar year.

And finally, the preambles to the final regulations say under Calculation Simplification: Contributions and distributions made after December 31 of a calendar year are disregarded for purposes of determining the minimum distribution for the following year.

[Guest Bob K]

Your research is correct. The receivable may be ignored and the balance is $0.

[Guest pension222]

I've heard from a web based answer group that I should include the $2,000 receivable in the calculation.

Does anyone have any guidance that defines "account balance" as it is used in 1.401(a)(9)-5 A-3?

[Lynn Campbell]

the answer you cite - A-3 (b) says that such contributions are "permitted to be excluded". So your balance is -0-, if you opt that way.

[Harwood]

This is probably out-of-context:

§ 1.401(a)(9)–1 Minimum distribution requirement in general.

Q–2. Which employee account balances and benefits held under qualified trusts and plans are subject to the distribution rules of section 401(a)(9), this section, and §§ 1.401(a)(9)–2 through 1.401(a)(9)–9?

A–2. (a) In general. The distribution rules of section 401(a)(9) apply to all account balances and benefits in existence on or after January 1, 1985.

Don't forget: http://benefitslink.com/boards/index.php?s...t=0entry83698

where the comment is made that the Model Amendment does not support ignoring receivables.

[Lynn Campbell]

Is a grandmother of a 100% owner an HCE? How far does the attribution go?

[Guest pension222]

This really doesn't have anything to do with being a 5% owner although the rules are similar for 5% owners.

1.401(a)(9)-2 A-1© For purposes of section 401(a)(9), a 5-percent owner (as defined in section 416)...

1,416-1 T-17 A. If the employer is a corporation, a 5-percent owner is any employee who owns (or is considered as owning within the meaning of section 318) more than 5% of the value of the outstanding stock of the corporation...

1.318-1(a) An individual is considered to own the stock owned, directly or indirectly, by or for his spouse, and by or for his children, grandchildren, and parents.