I have a partnership with the following groups identified in their plan document:

Group A = All Partners > 10% ownership

Group B = All Partners < 10% ownership

Group C = all non-partner attorneys

Group D = all remaining staff

Per the Plan Doc, determination of group status is made at the time of allocation.

Group A is receiving a 10% contribution. All other groups are receiving a 5% contribution. Testing passes.

We have one partner who is a 14% owner. He would like to receive a 5% contribution. Is there any way I can accomodate his request?

Thanks for your help.

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I was negligent and failed to fund my Money Purchase for 2003-2006. I funded for 2007 and am about to fund it for 2008. I was then thinking of converting the Money Purchase and Profit Sharing accounts to a SEP-IRA to reduce reporting requirements, etc.

I talked to a Retirement Specialist at Fidelity that was very good. She pointed out that I had a "Funding Deficiency in my Money Purchase Plan" and that I should clear it up. She suggested that I could work this out with the IRS on my own using:

EPCRS-Employee Plan Compliance Resolution System (an IRS website)

EGTRAA-to ammend the Plan before terminating

ERISA-more advice, all complicated.

I've spent hours Googling all of that, but I think it's too complicated for me. I think I should have an easy case, since I'm the only employee, my mistake only affected me (negatively), and that I'm not being audited.

I think I should pay somebody who knows this stuff to fix it for me. I'd like to minimize penalties and get back on good footing with the IRS. Any advice?Is it possible that this won't cost me any penalties? Or should I just continue funding the MP and PS plans and not worry about it?

Thanks for any help, including names of people that are in the business of addressing this problem.

What is tax treatment of following situation:

Employer maintains profit sharing plan. Participant is a fully vested participant whose plan account receives annual allocation.

Participant and Employer have agreed that participant will reimburse employer every year for the amount of contribution that Employer makes to plan on participant's behalf.

Would this be unreimbursed business expense for participant?

Would this offset income that participant would othewise report?

Would this create some type of 'basis' for employee in profit sharing account?

As a result of PPA, distribution of excess contributions are now taxable in 2009 even if they are distributed within the first 2 ½ months of 2009. A participant had a $1,000 corrective distribution amount on which they had a loss of $100 so that the net distribution was $900. They will receive a 2009 Form 1099-R showing $900 in box 1 and in box 2a. What is the amount that they need to report as taxable for their 2009 taxes? Thanks for your assistance.

PAL

Here is a unique to me situation. I have one participant, catch-up eligible, that worked at two completely unrelated employers during 2008, Company A and Company B.

At Company A she defered $4320 and was a HCE. She quits Company A March of 2008 and begins work with Company B. At Company B she defers $15,500 as a NHCE. No 402(g) limit problems so everything looks great.

Company A fails ADP testing and she is due a refund of $2200.00. Refund at company A is reclassified as catch-up contributions. Company A is happy; no actual refunds for 2008.

Meanwhile, Company B also passes ADP testing since she is a NHCE.

Since we happen to do plan administration for both plans this is brought to our attention that she actually only had $680.00 eligible to be reclassified meaning she should be due a distribution from Company A's failed ADP test; since 402(g) and catch-up are an idividual limit and not a plan limit.

How would you handle this? We are almost of the persuasion that this probably happens all the time. Except for the fact that she went to Company B that we do admin for how would Company A or we have known that she deferred $15500 at Company B? She didn't exceed a 402(g) limit. Many are tempted to take the stance of oh well she got lucky; and let tested dogs lie where they may.

Any input?

Are separate annual funding notices required for each employer in a multiple employer plan?

An employee fits all qualifications for the subsidy with a term date of 11/28/08. No problem there but upon initial termination and election (11/28/09) she elected for 2 people. Her and a child. The child had aged out as of 12/31/2008 and was issued a standard election notice (loss of dependant status) without ever responding.

Would this child be eligible for ARRA? I think not, but others disagree with the thinking that since the original qualifying event was 11/28/08 the child should be given the chance to elect under ARRA.

If the child did elect as of 12/31/2009 she wouldn't be eligible for ARRA. I don’t think ARRA would jump over the loss of dependent status.

Opinions?

Thanks.

My company has a Safe Harbor plan (flat 3%) with a one year of service eligibility requirement. We hired employees last year (our plan year is the calendar year) and enrolled them immediately (at their choice) because our controller forgot about the one year eligibility. Then we laid them off late in the year in what qualifies as a partial plan termination. Have we risked disqualification of our plan? How do we fix this now? And are we supposed to make safe harbor contributions for them (we do a one-time contribution each year that hasn't been made yet but has to be made by April 15)?

Are contibutions to an HSA or HRA considered annual additions. I realize that the answer may be different for each type of plan. I have read that Cafeteria Plan contributions are not annual additions, however neither HSAs or HRAs are cafeteria plan, however an HSA can be used in conjunction with a cafeteria plan.

Thanks.

A congregation wants to set up a NQDC arrangement for its soon-to-be-retired clergyman.

I understand the substantial risk of forfeiture requirement, and I believe that the organization will fully satisfy it. The clergyman's future benefits are contingent upon him serving out the remainder of his contract and providing substantial services to the congregation. If he leaves early, or if he otherwise fails to satisfy his job duties, he'll receive $0.

I also believe that I'm ok on the distribution rule. Nothing will be paid until the clergyman separates from service.

What I can't figure out is the timing of the payouts. Do all of the distributions need to be made within 2-1/2 months after the end of the year when the clergyman retires? Or, can the NQDC document specify a fixed schedule of payouts over several years? Of course, the clergyman doesn't want to recognize any income before the actual cash flow (and the congregation doesn't need the administrative burdens of that sort of timing issue). I've tried to research Sec. 409A's provisions about payouts, but the literature is very confusing. Also, it appears that Sec. 409A has been modified, several times, since its adoption.

Thank you for your guidance.

Under Title III of CHIPRA, it states -

(g) Opt-Out permitted for any month - A state shall establish a process for permitting the parent of a targeted low-income child receiving a premium assistance subsidy to disenroll th child from the qualified employer-sponsored coverage and enroll the child in, and receive child health assistance under the State child health plan, effective on the first day of any month for which the child is eligible for such assistantance and in a manner that ensures continuity of coverage for the child.

To me this sounds like the employee-parent may elect to cancel coverage for the child to enroll the child in a CHIP plan that was established under title xxi of social security.

However, Section 125 does not allow coverage paid for on a pre-tax basis to be canceled to enroll a child in a CHIP plan established or funded by title xxi of social security. It only recognizes Medicaid coverage under title XIX to be coverage to allow cancellation of a dependent.

Does anyone have any words of wisdom on this?

I am a qualified plan administator for 401(a) plans. This is my first entry into the cafeteria plan forum so please be kind as to my terminology. If additional details are needed, please let me know and I will try to get them.

I received a call from one of my colleagues regarding an ADP/ACP test he was processing. He said that the Plan Sponsor has a Section 125 plan and that any money that is "left over" can be transferred from the cafeteria to their 401(k) Plan. From speaking to some of other colleagues, they thought that this may have been an option many years ago for a very short period of time.

1) Has anyone heard of this? Is this possible?

2) If so, can anyone provide details and a good reference to read?

3) Would this be considered a pre-tax (401(k)) deferral and be tested in the ADP test?

4) If not, was it ever possible?

Thanks in advance. Any help is greatly appeaciated.

1. What is the deadline for amending a plan to provide for non-spouse rollovers assuming, of course, that the plan does want to offer them?

2. Is it possible to "retroactively" amend a calendar year plan NOW to permit this option for 2008 and ongoing?

The plan is a 1-person plan and the participant died last year, so there are no "discrimination" type issues to consider. Seems low risk to me, but I would appreciate any insights.

Thanks, folks!

Act Sec. 101.

(j) NOTICE OF FUNDING-BASED LIMITATION ON CERTAIN FORMS OF DISTRIBUTION. --

--The plan administrator of a single-employer plan shall provide a written notice to plan participants and beneficiaries within 30 days --

(1) after the plan has become subject to a restriction described in paragraph (1) or (3) of section 206(g)),

I know some of these have been asked before, but I'm looking for consensus.

1) Lets say my 2008 AFTAP is 75% and my 2009 AFTAP is 65%. I gave the appropriate notice in 2008. Do I need to give another notice in 2009 even though nothing changed? The statute says the notice is required "after the plan has become subject to a restriction". I was subject to the restriction in 2008, nothing new in 2009, so it seems that no additional notice is required. Agree?

2) Lets say my 2008 AFTAP was 85% and the 2009 AFTAP is 75%. My plan only pays lump sums less than $5,000 and therefore the restrictions have no practical impact. Do I still need to give a notice? I think the conservative answer would be yes, but does everyone still agree?

Is there any reason to amend Cafeteria Plans for the recent changes in COBRA?

Participant takes unpaid leave on January 2, 2008 which is the date of his last loan repayment. Does loan default on 1/2/09 or is it possible to inerpret 72(p) to allow a cure period to allow payment to begin prior to 6/30/09? Participant will be going back on payroll next week.

72-(p) Q&A 10 does not specifically state this but IRS Q&A with the ABA in 2003 stated that the cure period would allow a loan to extend beyond 5 years if the last payment of the loan was missed.

Loan policy would not prohibit this interpretation.

Thanks

When producing the benefit calculations on a 2008 Defined Benefit Plan and or Cash Balance Plan. When providing the prelimanary data for calculation from the clients, we are finding that the clients hesitate in providing this data. Why, is it such a hassle to make clients understand and or primarily the CPA's tax preparers that we must have line 31 and or the W2 of course to calculation the required benefits and required contributions for the Defined Benefit Plan. It is like we play ping pong with the CPA saying they need our calculation before they can give us the tax return document. What if any can be explained other than what I have said above can be told to the CPA and the client that in order to calculate the contribution and benefit for the 2008 tax reporting year is to show proof of the income on either providing the W-2 and or K-1 and or Schedule C and SE, also another questions is it possible for a client to have a K-1 and provide a SE as well....would these both be applicable when providing tax information on a partnership?

I was wondering it is possible to make real-estate investments (non-mortgage) in foreign countries (specifically I'm looking at India) through a Roth IRA account. If so, where can I find information about custodians who will allow this?

Being a newbie, I did some research on the existing topics on real-estate investments through Roth IRA, but did not find an answer to the question. In my case, I already sent some money for the real-estate investment. It is through an LLC registered in India and I have no mortgage. In the ideal case, I would like to open a Roth IRA and designate some of the money to have come from there. Can this be done? I'll truly appreciate it if you could suggest some sources where I can learn about this and other topics. Thanks!

Plan provides for unreduced retirement at age 62. Participant retirees at 62 with 2,000/month ab payable at age 65, so may elect life only of 2,000/month. Plan's AFTAP=70% and participant elects lump sum of $300,000 and participant elects to receive $150,000 and defers election of remainder. It just so happens that at 65, AFTAP=80% so restriction is removed. So, what does Plan pay?

(a) 1,000 x a₆₅ using interest/mortality at 65

(b) 1,000 x a₆₅ using interest/mortality at 62

© 150,000 x (1+i)³, where "i" is first segment intrest rate at 62

(d) 150,000

(e) Something else

I vote for © as being most reasonable and equitable and preserves the notion that the participant actually elected a lump sum.

Any thoughts or suggestions?