One of my clients has an old PS plan with 1.5 million in it that's been around for many years. Back in calendar 2007 he set up a DB plan and has accumulated about $350K in that plan. Client wants to terminate BOTH plans and roll the proceeds to a Roth IRA, then set up a NEW DB again for 2010 to continue with the big deductions. He's in his early 50's. I say OK for the PS plan, but to terminate the DB just to set up another seems silly.

Is this a wise move?

Thoughts?

Hypo:

HCE will have zero compensation for Plan Year.

415 limit will therefore be zero.

HCE wishes to make catch-up contribution.

Possible? Or impossible?

The Code and Regulations address catch-up in the context of elective deferrals. If a catch-up is an elective deferral, how can a catch-up contribution be made in this hypo when there is no compensation from which to make the elective deferral?

Form 5330 instructs a filer to calculate the excise tax for a PT using Schedule C FOrm 5330.

Schedule C has a column called "Amount involved in pt"

It seems this amount is based on the amount for the use of the money.

So for example say a employer or owner of company takes $20,000 out of his one participant pension plan. We'll assume it is all a PT since he already took a maximum loan of 50k.

Say he takes $20,000 from plan on 1/1/09.

When completing the Schedule C form 5330 what is "Amount involved in pt"?

It seems that it is not the $20,000 but the amount or value for the use of the $20,000 for the year. What would that be? What interest rate should be used? If an interest rate of 0 is used than there amount involved is $0.

Any comments?

Thanks.

I have the "opportunity" to take over a 401(k) plan using the safe harbor match. The issue is that the employees of another business owned 100% by the plan sponsor have not been offered the chance to participate in the 401(k) plan. No other employer contributions are made to the plan.

Looks like the employer is responsible for certain employee and corresponding matching contributions and a EPCRS filing, correct? Any way out?

A DB client of mine said he heard that the medical bill before Congress includes a provision to assess FICA taxes against "unearned income" (I presume that means passive income of some sort). Has anyone heard anything about this ?

He's beyond the NRA but under age 70.5 and is considering whether to start taking distributions from his plan and thinks this bill "might" assess FICA taxes on income (distributions) taken from his DB plan.

Anyone aware of such a provision and whether it would apply to retirement income ?

Not for profit has a deferral only 403(b) and a 401(a) with 'varying' contributions by person. Since 2002 even Not for Profits have had to pass discrimination testing. Oh by the way - we are taking the plans over for the 6/30/2010 year....

As I read 415, we aggregate the 403(b) deferral with the 401(a) contribution to test maximum annual additions. Indications are this was 'overlooked' in the past so I am asking for confirmation on this point first.

Since the 401(a) contributions are such that they cannot make any safe harbor formula, and they cannot pass general testing on a contributions basis, I now go to cross testing. IF (that is a big IF because I do not know the results yet) each rate group does not pass 70%, I will need to perform the Average Benefits Test. If I have to do the ABP, then again I include the deferrals into the 403(b) plan, correct?

My thoughts are yes and yes, but I am willing to listen to rebuttals.

Participant completes an enrollment form electing ROTH deferrals. Client withholds the deferrals from the paycheck for about one year as pre tax deferrals. Deferrals went into ROTH account in the 401k plan. What is the fix?

Are employees allowed to drop dependents midyear according to section 125? In this case, an employee wants to remove dependents however the dependents have not become eligible for health insurance under another plan and are not being forced out due to age, the employee just wants them removed. I've heard conflicting information regarding whether or not this is allowed. Can anyone clarify?

A Plan document currently excludes union employees. The employer has decided to change the Plan’s eligible employee definition to include union employees and has already begun submitting 401(k) contributions to the Plan on behalf of the union employees since the beginning of this year (2010). Question: If the Plan is amended no later than the end of this Plan Year (2010) to include union employees as an eligible classification, would this qualify as a timely adopted amendment under the “discretionary amendment” rules or did the amendment need to be in place prior to the employer’s implementation of this change? In other words, does the ECPRS correction method for the early inclusion of ineligible employees only apply if the Plan was not amended by year-end?

Hi all,

I've been trying to research this issue and just get a headache and more confused, the more I read about it......My twin boys just turned 1 and I have some savings in an ING account for them, but looking into transferring that to either a Roth IRA or my state's (north carolina) 529 plan. I can't figure out which would be the best bet. From what little I understand, with the 529 plan, I can have a state tax deduction, but the money MUST be used for education (either for my boys or it can be transferred to another relative)...with Roth, I can withdraw the money for college (only what I contributed, not the gain) at no penalty, but I get taxed on it now.....Am I correct? Is there anything else I should know? Any recommendations would be GREATLY appreciated!!

Michele

Hello, I am wondering if anyone has any data on what an average fee is paid to a third party investment advisor to our 401k plan. Our commitee asked me to determine if the fee we are paying is reasonable, and I have no idea how to find this information. I know it is probably based on the size of the plan, but any ranges or other information would be helpful. thanks!

I never came across something like this...

A participant turned 70 1/2 in 2010. He is actively participating in the company 401k.

He has an outside IRA that he would like to roll into the 401k plan to avoid the RMD.

The plan doc allows for the RMD to be at retirement date instead of 70 1/2.

Is there anything I would need to be concerned with him bringing in the IRA to the plan?

The only think I see for him to do is to take the RMD for 2010 before rolling it over to the plan.

Any thoughts or concerns?

Where on the Form 5500 does the name of the Trustee appear?

We processed a distribution of a participant's account in full (mistakenly thinking we had a distributable event). Now we need to correct the error. Is an impermissible distribution of a participant's full account considered an overpayment in EPCRS? I am trying to figure out how to correct the error and the overpayment correction is the only area I can find that seems to apply to our situation.

Thanks.

The final 401m regs prohibit prefunding, but mainly to prevent the acceleration of a tax deduction. A tax exempt entity does not get tax deductions. Therefore, if a 403b allocates the match each payroll period, but has a 1000 hour and last day requirement, does this not still violate the prefunding rules? At least in terms of contributions being made before the service is performed.

Any comments?

When obtaining employer census data, do you obtain 2 sets of w-2 comp if it excludes Salary Deferrals from the definition?

Generally in a AA you can select to INCLUDE salary deferrals, which i believe would be Box 3 on a w-2, this comp would be used to determine top heavy, hce, 415, etc, but if the plan has no adjustments to comp, then box 1 of w-2 would be used, yet you would still need box 3 for other plan purposes. This has become an issue of debate in our office.

Hi all,

We are thinking about switching from Bank of America (horrible HSA customer service and administration!!) to Wells Fargo to administer the HSA's for our employees. I was wondering if anyone had any feedback about Wells Fargo's HSA admin.

How is their employer website? Is it easy to make funding contributions? Can you enroll a new employee online?

Have you had a good or bad experience with the debit card, customer support, or with submitting a reimbursement claim?

The monthly fee of $4.25 seems a bit high, and I'm sure that our employees are going to be upset, so I wanted to see if anyone out there has any feedback on Wells Fargo before we make the switch.

Many thanks for your thoughts!!

~Rebecca

An employee has medical insurance through her spouse and and an FSA with my company. She recently found out that her spouse's company is changing their medical insurance as of April 1 to a High Deductible Health Plan with an HSA. We do not offer a limited FSA. Does she need to stop her contributions to our FSA?

Does nayone know if the suspension was passed for 2010?

Plan uses statutory 1 YOS/age 21 eligiblity.

Scenario 1:

Owner and owner's immediate family are the only employees. Owner's Kid is hired on January 1, 2010, and owner wants him in the Plan from Day 1. No other employees have been hired since that date and there are no immediate plans to hire anyone else. Would an amendment that waives eligiblity for anyone hired as of 1/1/2010 be allowed? My assumption is yes, since there are no other NHCE's, and therefore there is no issue of discrimination. If the answer is "no, this isn't allowed" then it would seem that this type of Plan would be precluded from making several kinds of amendments, which would seem wholely inappropriate...

Scenario 2:

Same as Scenario 1, except that there are three employees who have been working there for 5 years who were made to satisfy statutory eligiblity. My feeling is that this WOULD be discriminatory because there are NHCE's in the Plan, and as such the amendment is subject to discrimination testing.

Scenario 3:

Same as scenario 2, except that eligbility is amendmed to be immediate. The employer has very very low turnover and is not growing, and it is not anticipated that any new employees will be hired any time soon.