Do the Attribution Rules Apply?

[mming]

100% owner/participant has a DB plan where the only other participants are her husband and her father. Would the plan be required to have PBGC coverage, a fidelity bond and file a 5500, or is the father also deemed to own 100%? Likewise, would the father, who's over age 70-1/2, have to take required minimum distributions while he's still employed? All help is greatly appreciated.

[David MacLennan]

Yes, PBGC filing is required. Attribution under 1563 does not support substantial ownership of the father. ERISA Bond Coverage also required.

Re RMD for father, I believe you need to look at the year in which the father attained age 70.5. Did daughter (owner) have ownership or had started her company that year? If so, then father is 5% owner by attribution under 318. You look only at the year the ee atttained age 70.5 to determine 5% ownership (per the final regs). This same reasoning would mean that a person who starts a business after age 70.5, say at age 72 for example, would not be a 5% owner. I might be wrong - I have not seen this rather surprising result confirmed by anyone else, and it is the first time I have given it thought.

[david rigby]

And check the vesting for Dad.

[Jean Crook]

So, if a husband files Sch F (farmer) & owns the business 100% and the wife owns 0% would the plan be required to be covered by the PBGC?  There are no other employees.

 

[Mike Preston]

On 10/1/2006 at 3:55 PM, David MacLennan said:

... I might be wrong... 

You aren't wrong.