.

Our Special Tax Notice needs to be updated for the Roth IRA rollover language. Is there a new "model' notice available anywhere that has this language? Thanks and welcome to Monday!

Employer has learned of loss of major contract and is facing severe cash crunch. It currently matches 401(k) deferrals 100% up to first 3% of compensation. Employer needs to eliminate matching contribution effective October 1st. Even though there are only 3 months left, the employer needs to conserve this cash rather than simply start with the 2010 Plan Year.

The 401(k) plan document provides as follows:

"The Employer may make discretionary Matching Contributions. The percentage of Elective Deferral Contributions matched, if any, shall be a percentage as determined by the Employer. Elective Deferral Contributions that are over a percentage of Compensation won't be matched. The percentage shall be determined by the Employer. Matching Contributions are calculated based on Elective Deferral Contributions and Compensation for the payroll period. Matching Contributions are made for all persons who were Active Participants at any time during that payroll period. Any percentage determined by the Employer shall apply to all eligible persons for the entire Plan Year."

I am wondering about the effect and intent of the last sentence. The provisions seem to make very clear that the match is discretionary and thus the employer could set any percentage or no percentage at all for the match at the outset of the Plan Year. However, does the last sentence work to make that discretionary match a fixed match for the entire Plan Year once the match percentage is set / used for the initial payroll period?

I have reviewed several prior posts on this board and other discussions regarding the elimination of discretionary matching contributions mid-year and have not found a discussion of a provision exactly like this one. Those discussions have also frankly left me confused about just how much discretion employers have in reducing clearly discretionary matches given my understanding that plans eliminating or reducing matching contributions must pass current availability testing since participants entering the plan after a match is reduced or eliminated will be entitled to a different rate of matching contributions than participants in the plan the entire year. In addition, my understanding is that such reductions in matching contributions create non-uniform formulas for the plan year and thus will need to pass the general nondiscrimination test in addition to ADP / ACP testing.

We are not worried so much about the plan being able to pass these tests if required under our facts--there are not likely to be many new entrants to the plan nor would I think discrimination in favor of HCEs under our facts would likely be a problem. The phrasing of the plan provisions, however, suggests that the rate of the match must be the same for the entire Plan Year regardless of whether testing concerns are an issue. Thus, it seems to me any elimination of matching contributions for the remainder of 2009 would violate that last sentence and that any amendment of the Plan now to delete that last sentence effective prior to 2010 would be problematic.

I would appreciate any thoughts or guidance.

2 clients received "Application for Extension of Time to File an Employee Plan Return - Approved" from IRS in Ogden UT.

I've never seeen this before. Is this new this year?

Suppose you have a small DB that is less than 80% funded. Can the 100% owner's spouse be paid a lump sum as ordered by a QDRO?

Hello all, I want to open an Roth IRA for my spouse however she is not working as of now due to medical illness. She has Leukemia so I have many questions regarding my situation. I am 37 and she is 36 I just opened the roth for myself this year, I am getting started way late with retirement savings so I need to try to catch up. Would it be in my interest right now to open a spousal IRA given her medical condition?

Thanks all for your help

One of our young employees lost her life suddenly this week and left a 28-year-old spouse. He's entitled to a very tiny (<$10) monthly lifetime survivor pension that starts on October 1. Or he can choose (or perhaps it's mandatory - still being studied) a rather small lump sum settlement.

If he gets the lump sum, will he be able to roll it over into his IRA?

I apologize if this has been posted but I haven't been able to find consistent information regarding all of my questions. I have a Plan with both a traditional and roth 401k feature. Participant Age 50 wants to move money into a Roth account (either 401k or IRA).

1) Can someone move money from Traditional 401k to Roth 401k in the same Plan?

2a) Can someone under age 59.5 (assuming the Doc allows for 59.5 withdrawal) transfer money to a Roth IRA?

2b) Is there any way to make an amendment to allow for the above?

Thank you, in advance, for your assistance.

We have a plan that uses an enhanced match of 100% of deferrals up to 4% of pay. In addition, they contribute a discretionary match of 100% of deferrals up to 3% of pay. In this particular case do we have to perform the ACP test or does it automatically satisfy the ACP safe harbor since the discretionary match is less than 4% of pay?

Any input (including reg cites) would be greatly appreciated. Thanks!

I'd like to get a feel for what other Relius users do in this instance:

I have a large (1000+ lives) plan. There are employees that terminate with no compensation in the current plan year. As an example - the client terms the employee as of 04/02/2009 but the employee has 0 hours and $0 comp in 2009. Employee was a participant in 2008; therefore Relius shows them in the 2009 ADP/ACP tests with $0 compensation.

If there weren't many I could just code them with 12/31/2008 term dates and they wouldn't show in '09 testing. But there are a lot of them and I'm wondering if there isn't another better (easier!) way that would maintain the accurate term date per the client's records.

Thoughts?

My company is in the process of switching to an HSA-type medical insurance plan. My understanding is that an HSA can pay for eligible medical expenses including Vision and Dental. If this is correct, why would I also need a Limited FSA to cover Vision and Dental?

Am I correct that ALL HSA's cover Vision and Dental? My employer also provides Dental Insurance and Vision Insurance...does that impact the ability to reimburse those costs via the HSA?

Loan payments continued for several months after the loan was repaid.

Is the correction as simple as writing a check from the plan to repay the borrower for the overpayment?

Hello. I have a question I'm hoping for some advice... After I was laid off last year, I withdrew my 401(k) and had it deposited into an IRA account. That all went smoothly. However, this fall, I was contacted by the former 401(k) custodian, indicating that they discovered an incorrect divided had been included in that account and therefore an overpayment had been made. They requested the excess payment be returned in order to avoid tax consequences for the incorrect distribution.

I delivered that correspondence to the IRA custodian. The IRA custodian sent me TWO checks--payable to me--one for the exact amount of the overpayment, and a second check for the earnings attributable to that overpayment.

I questioned why the checks were made payable to me instead of the new custodian, and spoke with the 401k custodian--who advised that some brokerages do it that way and it was not a problem--and she instructed me to deposit the checks and write them a check out of my own personal account--and the IRA custodian, who confirmed that she had followed company procedure and had coded this all as a "withdrawal of excess contribution." Anyway, so far so good.

Upon receipt of my check (as instructed), the 401k custodian advised that she had misunderstood my question, and that they were unable to accept any of the earnings from that initial incorrect dividend. She is having a check cut, payable to me, refunding the amount of the check that represented the earnings from the incorrect dividend. She stated that it was improper for the 401k custodian to have withdrawn those funds and this will result in a tax consequence to me.

401k custodian insists that she did nothing wrong or improper and tells me I should just deposit the "earnings" in my bank account and pay the associated taxes and any penalties.

I'm caught in the middle. Who is right? In my mind, the ITA custodian/fiduciary withdrew my money improperly, and now I have a tax hit, which I did not want or anticipate. But, perhaps if the earnings were based on money that was not supposed to be in the account in the first place, that is just the way it works and there is nothing to be done.

Is there a way to correct/undo all of this, or is this just how it works. Thanks for your thoughts and advice.

When you need a tax attorney that can argue anything without blushing, here might just be the guy.

Halby v CIR

I am preparing a 1099-R for 2008, which was inadvertently overlooked.

Questions:

1. Can we simply "type" the form on the form I printed from the IRS website and submit it, or is there a special type of paper I should use which can only be ordered from the IRS? As you can tell, this is my first venture into reporting land in awhile.

2. Should we simply file it as if it were not late and wait for any repercussions from the IRS, or is there a "late" procedure I need to be following?

Thank you, and Happy Rosh Hashanah to Jewish users.

I ran across a prospect that uses Davis Bacon fringe as ER match in a SIMPLE IRA. Can Davis Bacon fringe be used for ER match or ER nonelective contribution in a SIMPLE IRA?

I ran across a prospective client that uses prevailing wage fringe as the employer contribution in a SIMPLE IRA. Can prevailing wage fringe be used as an employer contribution or match in a SIMPLE IRA?

Is anyone having any issues with ensuring that items contained within the 2008 Cumulative List are incorporated into the PPA amendment that needs signed by 12/31/09? Maybe it depends on your document provider? Our document Provider has yet to provide us with the necessary amendment to incorporate the 2008 cumulative list items that need signed by 12/31/09.

I am curious how others are including 08 Cumulative list items: are they already incorporated into your EGTRRA restatements? Do you have a separate amendment?

Any help/guidance/opinions would be GREATLY appreciated!!

Suppose you have a 401(k) plan sponsored by Employer A. Employer B is 100% owned by the 100% shareholder of Employer A so we have a controlled group. Employer B is more profitable than Employer A.

Employer A has 20 employees. Employer B only has 3 employees including the 100% owner.

Employer B adopts Employer A's plan as a participating employer.

The participating employer agreement indicates that "any contributions made by a Participating Employer will be allocated to all Participants employed by the Employer and Participating Employers".

Question:

Does this mean that Employer B can fund any portion of the match and profit sharing contribution (perhaps even all) for all participants of the plan? Certainly they would not want to exceed their 404 deduction limit but this could be quite advantageous.

A one participant plan wants to invest in out of country real estate. Is this ok? I don't see why not at first blush. Actually owner wants to invest in a corporation (purchase stock) that invests in th is real estate.