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TRI Pension Services

The ERISA Outline Book

Errata Page

In this section we update you on errors we have found in the 2008 Edition of The ERISA Outline Book. Each entry includes the date it was added to this page. The entries are listed in chapter order.

Chapter 1, affiliated service group definition, Part A, paragraphs 3.a. and 3.b. (added April 21, 2008). The reference to Prop. Treas. Reg. §1.401(m)-1(f)(1) in each paragraph should read: Prop. Treas. Reg. §1.414(m)-2(f)(1).

Chapter 5, Section II, Part C.3.a. (added June 2, 2008). In the 7th line of this paragraph, "September 30, 2005" should read "September 30, 2010".

Chapter 7, Section XVI, Part J.1.c. (added June 5, 2008). The last sentence of this paragraph should read as follows; "X may deduct the $75,000 contribution for the short taxable year ending December 31, 2007, based on aggregate participant compensation for that taxable year, and the $80,000 contribution for the 12-month taxable year ending December 31, 2008, even though both contributions are allocated for the same plan year."

Chapter 9, Section IV, Part E.4.a.4)b)i) (added June 13, 2008). This paragraph is incorrect with respect to the maximum allowable number of HCE allocation rates. The paragraph should read as follows: "The maximum number of allocation rates is the sum of the maximum allowable rates for eligible NHCs plus the maximum allowable rates for eligible HCEs. The maximum number of allowable allocation rates for eligible HCEs is the lesser of: (1) the number of eligible HCEs, or (2) 25. The maximum number of allowable allocation rates for eligible NHCs is based on the number of eligible NHCs, but is limited to 25, as determined under the following table:"

Chapter 9, Section XI, Part D.2.b. (added September 2, 2008). This paragraph is revised to clarify that the bond/letter of credit option for securing the repayment obligation is for 100%, not 125%, of the restricted amount. Accordingly, substitute the following language for paragraph 2.b.: "If an HCE is unable to receive full payment of benefits because of these restrictions (e.g., a lump sum distribution is requested by the HCE), the plan may pay the restricted amount if the HCE satisfies the security requirements of Rev. Rul. 92-76, 1992-2 C.B. 76. Under Rev. Rul. 92-76, the HCE must provide security to the plan, in the form of an escrow arrangement or a bond or letter of credit. In the case of an escrow arrangement, the property deposited in escrow must have a fair market value that equals at least 125% of the restricted amount. In the case of a bond or bank letter of credit securing the repayment obligation, the bond or letter of credit must equal at least 100% of the restricted amount. A bond must be furnished by an insurance company, bonding company or other surety approved by the U.S. Department of Treasury as an acceptable surety for federal bonds. Where the HCE receives the restricted amount as part of an eligible rollover distribution, the HCE may rollover the restricted amount to an IRA, and the IRS permits the IRA to be used as security under Rev. Rul. 92-76, without jeopardizing the tax-exempt status of the IRA. See PLR 9514028. The purpose of the security arrangement is to enable the plan to recover the restricted portion to the extent necessary, upon termination of the plan, to satisfy the nondiscrimination requirement described above in 1."

Chapter 10, Appendix A, 1996 Covered Compensation Table (added May 30, 2008). The covered compensation entry for birth year 1946 should read $52,164 instead of $51,432.

Chapter 11, Section VIII, Part H.5. (added May 29, 2008). The text states that recharacterized contributions are treated as employee contributions for purposes of the ACP test, but as employer contributions for all other purposes, including the distribution restrictions under IRC §401(k)(2). This is an error. The recharacterized contributions are treated as employee contributions for purposes of the distribution restrictions, as well as for IRC §72 purposes and nondiscrimination testing under IRC §401(a)(4). The following text should substitute for paragraph 5:

5. Recharacterized contributions are treated as employee contributions for purposes of the ACP test and certain other rules. Recharacterized contributions are treated as employee contributions for purposes of the ACP test. If inclusion in the ACP test causes the plan to fail that test, these contributions may be distributed anyway. They also are treated as employee contributions for purposes of the taxation rules under IRC §72, the nondiscrimination testing requirements under IRC §401(a)(4), the distribution restrictions under Treas. Reg. §1.401(k)-1(d) and the ADP testing requirements set forth in Treas. Reg. §1.401(k)-2. See Treas. Reg. §1.401(k)-2(b)(3)(ii). Thus, the recharacterized contributions would not be subject to the distribution restrictions that apply to elective deferrals under IRC §401(k)(2) and (10) (explained in Section IV, Part C, of Chapter 6). For all other purposes under the tax code (e.g., IRC §415 limits, top heavy rules under IRC §416, the deduction limits under IRC §404), the recharacterized contributions are still treated as employer contributions (i.e, elective deferrals). See Treas. Reg. §1.401(k)-2(b)(3)(iii)(C).

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Opdateret d. 2/9/08