I am adding 401(k) features to a client's profit sharing plan with a safe harbor nonelective 3% contribution. The plan only has 2 participants (company only has 2 employees). Both are HCE's. I understand that the plan is deemed to meet minimum coverage requirements. Is a safe harbor notice still required?

The CPA asks me" If Ms X has 2 full time employers who offer 401(k) plans, can she contribute the max to both plans since the employers are unrelated. Stupid me thought I knew the answer to be YES since practically every other kind of contribution(PS,MP, DB) would be a YES. Of course I was dead wrong. This went on in both 2007 and 2008. ANY IDEAS WOULD BE APPRECIATED!

Sincerley,

Imbarrased

Here are the facts:

Company A: Father owns 100%, son 1 (VP of comp. A), son 2, son 3 all receive W2 compensation from Company A

Company B: Son 1 owns 100% and receives W2 compensation from Company B (W2'd from both companies) -- no other family members work for Company B.

Based on this simplified scenario, could you tell me if there is a control group here? Would Son 1 be considered a 100% owner for control group determination because of attribution? OR Would the Father's will actually come into play to determine whether or not Son 1 is creating a control group (i.e. Father leaves 80% of comp. A to Son 1)?

Thanks in advance.

I have a cash balance defined benefit plan which was adopted on Dec 1, 06. We bought the company (on Dec 1, 2008) that had created the plan and don't think a determination letter application was ever filed. We'll check with the IRS to be sure but wanted to know when do we file for the new plan. I realize a determination letter isn't required but assuming we want to file for one (that's another discussion) do we use the Cycle in which our EIN number fits (I assume that rather than the old company's EIN number). Is there some rule that we have until the end of the remedial amendment cycle in which the plan was adopted (I found various articles which seem to suggest that)? ANy ideas? Silly me I called the IRS - they'll get back to me in 15 days if at all.

Thanks

One of my plans failed the ADP test in 2006. Corrective distributions were made. We later discovered that incorrect compensation was used. The test was rerun and now we see that too much money was "distributed" to HCEs earlier.

Does the method to correct ADP/ ACP failures also apply to this situation? If not, how would we correct this?

Thanks.

Are HCE elective deferrals made to a multiemployer plan included in the ADR for purposes of testing the employers non-union plan ?

Example: HCE participates in non-union 401(k) and makes elective deferrals of $2,000. Same HCE becomes covered by a multiemployer plan (a bargained plan in which the employer participates but does not sponsor) during the year and remains employed by same employer. HCE makes elective deferrals of $10,000 to the multiemployer plan. participants.

When testing employer 401(k) Plan, is the HCE's ADR determined based on the $2,000 contributed to the employer sponsored plan or $12,000 contributed to both plans?

A strictly read of the (k) regulations indicate only the contributions made to the employer (as defined in 414(b), ©, (m) or (o)) plan should be included in ADR. I have heard the IRS has said contributions to both plans should be included.

Any real life experience ?

Would suspension of benefits rules that are more generous than what the law requires be considered an "adjustable benefit" that could be reduced for a critical plan?

If not an adjustable benefit, what kind of benefit would the gap between the more generous rule and what is required under the law be called?

Cheers

Can someone give me an idea what a reasonable fee for a DB Plan audit is? $15,000??

a

Since church plans are not subject to IRC 430 i was curious to see how others are calculating the liability for the 110% test post-RPA. Also, are church plans subject to IRC 436?? Thanks.

For 2008 and earlier plan years, is there any place on the 5500 or any Schedule where the EIN of a mutual fund held as a plan asset might have to be identified? (No response relating to Schedule C reporting for 2009 and later is necessary, thank you.)

Hi all,

I am hoping someone could offer some insight to this question.

I have a plan that is looking to terminate in the next few years. Plan is currently frozen. Aftap is around 85% for plan year 2008. FSCOB stands at 100,000 for 2008. The MRC for the 2008 plan year is zero.

Say the employer decides they would not like to use any of the FSCOB in the 2008 year. They just want to let it ride. Are there any benefits to this?

I understand if the actual rate of return of the plan is positive, the FSCOB for the 2009 plan year will be increased. However, is there another angle that I am missing?

Also, say under a different scenario we tell the employer the maintain the FSCOB and to contribute excess contributions for the 2008 plan year...maybe 50,000. Of course this will not add to the FSCOB, but could be elected to be added to the PFB. Or they can just toss the 50,000 excess into the assets.

Good idea, bad idea? I am not very sure.

Help greatly appreciated.

Do the 415 limits apply to ancillary benefits from a multi-employer qualified DB pension plan, like a monthly disability?

At what point in time do you apply the 50% limit in a daily valued plan? My inclination (based on the DOL reg. and the effect of Section 72p) is that you apply 50% against the vested account balance as of the date the loan proceeds are distributed (rather than, for example, on the date the participant completes the loan application process)? Anyone agree or disagree? If you agree, is that the way loans are typically administered in a daily valuation environment? Is there any specific IRS or DOL authority on this issue which I may have overlooked?

Need some assistance in this complex area, with which I am not that familiar.

Facts:

Owner owns 100% of medical management company, which provides billing, management, etc services to 4 medical practices.

Owner owns 20% of medical practice #1, <5% in other 3 medical practices.

Medical Management Co's revenue evenly split - approximately 25% from each medical practice.

Is this an affiliated svc group, and which companies are included?

Thanks for any assistance.

We have been contacted about a type of VEBA being pitched to an employer. We're not sure if this type of VEBA will work or not. Here's how I understand the promotional materials for this VEBA--

This VEBA would be for retiree medical benefits. It works like a defined contribution plan. Each employee will have its own account. When an employee and spouse die without having used all of that employee's account, the remainder is reallocated to the VEBA accounts of the other employees. This reallocation is in proportion to the balances then in the other employees' VEBA accounts. On the other hand, no employee or spouse can receive retiree medical benefits in excess of the balance of the employee's VEBA account.

All contributions to the VEBA are made by the employer. The employer adopts a health reimbursement arrangement--HRA--that calls for employer contributions equal to the value of the retiring employee's earned but unused paid vacation time and sick leave. The retiring employee has no choice of a cash out or receiving anything else for that vacation time and sick leave.

All other HRA contributions the employer makes to the VEBA are made in the discretion of the employer, like profit sharing contributions to a 401k plan. The allocation of the employer's HRA contributions to the VEBA are not factored upon differences in the employees' compensations.

In the VEBA brochure refers to private letter rulings (200452013 9/14/04 and 200549008 9/16/05) in the claim that the IRS allows this. From my quick read, it looks like the IRS has allowed a design like this.

There is no ruling cited for the part of the VEBA that is most appealing to our client. While the allocation of the discretionary employer contributions do not depend in any way on differences in compensation among the eligible employees, different numbers of years to retirement are. It is explained that this is like new comparability for profit sharing contributions to a 401k plan. It gives an example of a situation with two employees, the owner at age 56 (9 years to age 65 retirement age) and the other employee at age 38 (27 years to age 65). If 8% earnings are assumed, then of a $100 contribution made by the employer, $20 can be allocated to the 38 year old and $80 to the 56 year old. Both will have $160 in benefits when they separately reach age 65.

The brochure explains that there is no IRS ruling allowing for this new comparability factor in the allocation of the discretionary employer contributions, but explains it makes more sense to compare the benefits of each employee at age 65 rather than when money is contributed since Code section 105(h)(2)(B) calls for nondiscrimination in "benefits provided". That makes sense to me, but I would feel more assured if the IRS had ruled on this.

Any comments on this type of 'new comparability' VEBA?

Client being advised to roll or terminate? existing DC SERP balances into new split dollar using loan regime. Can you convert an unvested DC balance into some type of split dollar? What would the accounting look like? How would move to split dollar work? Is this even possible, regardless ofbeing a good idea?

Thank You

A participant takes a nonqualified cash distribution from his Roth 401k account (plan terminated, age less than 59 1/2, less than 5 years participating). If income tax and early withdrawl penalties apply only to earnings on the deferrals, what happens when there is a loss on the basis?

Any resources would be helpful.

Thanks!

If I'm reading the regs correctly, this seems an unfortunate result, so I hope I'm missing something.

Client has matching formula of 50% of first 8%. Employees are 100% vested. The match for 2008 has not yet been contributed. When contributed, it will cause an ACP failure, necessitating a refund of some of the match.

According to 1.401(k)-2©(5)(i), if it isn't corrected within 2-1/2 months after the close of the year FOR WHICH the excess contributions are made, then employer is liable for the 10% excise tax under 4979. And 4979(f) provides no relief.

Is there something I'm missing, or is the employer just stuck? The way I read it, they are stuck. I've never happened to run into this situation before.

Thanks.

If a one-time loan administration fee of $300 comes out of the proceeds of a participant loan, and all of those loan fees add up to more than $5,000, is it reported as "service provider" income on Schedule C.

I think it is but the outside auditor doing the 5500 audit says it's an transaction outside of the plan between the borrower and the service provider and since the total amount borrowed will be repaid into the plan it should not be reported as fees coming out of the plan.

My feeling is that Schedule C is about service provider income and not necessarily the financial impact of fees to the plans overall assets.

Which way should I go? I'm thinking if I report it on Schedule C it would not tie to any numbers on Schedule H because it's not a fee that affects gains/losses in the plan. Maybe it's just a footnote on the audit report.