FYI

Thought the $1,000/day maximum penalty for failure to provide the benefits limitation notice to participants and beneficiaries was stiff? Think again.

That's what all the literature I've read said -- $1,000 per violation without defining violation. However, the December 07 proposed regulation defines a violation as "(2) For purposes of calculating the amount to be assessed under this section, a failure or refusal to furnish the item with respect to any person entitled to receive such item, shall be treated as a separate violation under section 101(j), (k), or (l), or section 514(e)(3) of the Act, as applicable."

So, if your Plan has 60 partiicipants, that's $60,000 per day. If this Plan Sponsor commits to contributing additional amounts for 2007 to bring funding up to 80%, you won't know of a failure unless he advises you. Thus, by time you get out to September 15, 2008, your looking at a maximum penalty of over $8 million.

Now, we are talking maximums and wouldn't expect such a draconian penalty. However, let's say a physician's group is being investigated for Medicare fraud . . .

For the purposes of the "ADP" test, what does ADP stand for?

Is it "Actual" Deferral Percentage?

Or is it "Average" Deferral Percentage?

I'm reading Publication 525 (2007) and just confusing myself even more. Obviously the bank can't issue a check and subsequent 1099R for the negative earnings adjustment. Can someone advise... I think participant gets a distribution for the net amount [excess deferral - earnings]. But 1099R will report gross amount??? According to Pub. 525, the loss is to be included on Form 1040, line 21 in the year of distribution. Okay, so what does the 1099R report? Net amount of distribuiton or gross amount? And, the check issued is for the net amount?

HELP!!!

For Plan Year 2007:

ADP Refunds paid in January 2008 and included as a Benefit Claims Payable 1d on the 2007 5500.

Do I also deduct the ADP Refunds from the Partcipant Contributions on Line 2(a)(1)(B)

As I understand it, the first of the three interest rates applies to years 1 thru 5, the second to years 6 thru 20, and the third to years beyond 20. [Please correct if wrong.]

So say an amount payable in year 27 is being discounted back to the present. Does the 3rd rate apply only back for 7 years (followed by fifteen years at rate 2 and then five years at rate 1) or does the 3rd rate apply to all 27 years?

Thanks.

Earned income is generally net schedule C less 1/2 of se tax. Does the deduction for self employed health insurance have any effect?

Sch c less 1/2 se tax is $8900. He wants to deduct the full $8900 (401k/profit sharing plan). Health insurance deduction is $8500. He has other income so he has use for both deductions.

Can he make and deduct the full $8900 to the plan, plus take the health ins deduction?

I am an independent agent in the state of Utah. I have a friend that makes a killing in PA setting up MERP's. Does anyone know of agents doing it in Utah or is it even possible to do since there is such a monopoly in Utah? I am trying to break into this but I dont know if its even possible. Any info would help, THANKS.

If an IRA participant takes assets in kind for his required minimum distribution how are the assets valued? Would they be the Fair Market Value average, high, low or closing price?

Thanks.

Hello,

I'm not sure if this is in the appropriate forum, if not please either move the thread or point me to the place to go.

What I am trying to find out is what TPA's are doing with the 50% administrative fees that are applied when a COBRA participant elects to continue for disability. Does the TPA usually keep those 50% in fees, or do they keep the 2% and turn over the remaining 48% to the employer?

Thanks so much for your help!

Hello,

I'm not sure if this is in the appropriate forum, if not please either move the thread or point me to the place to go.

What I am trying to find out is what TPA's are doing with the 50% administrative fees that are applied when a COBRA participant elects to continue for disability. Does the TPA usually keep those 50% in fees, or do they keep the 2% and turn over the remaining 50% to the employer?

Thanks so much for your help!

We have a client that has an employee that was in the country illegally and was recently deported to Mexico. They would like to pay out his 401(k) plan balance with 0% withholding. I know that we have an Income Tax Treaty with Mexico and 0% withholding for pensions and annuities, but I have not been able to find what documentation we must request from him in order to verify his address, etc. Thanks for any thoughts on this subject.

I am working on a plan that has been set up for Roth Deferrals. Several Participants elected to designate contributions in 2007 as Roth. Now that tax filing is upon us, they have asked that it be relabeled as SR- since there was no mistake- is this possible- is changing the deferrals possible if there was no error on the admin side- I feel like the deferral agreement they signed might have an impact, but an independent perspective would be beneficial. would the opportunity change if this were a solo K- can roth contributions be changed to SR at any time after they have been contributed if it is not a mistake of fact... and likewise can SR be relabeled as Roth in the same situation..

Does a welfare plan that otherwise qualifies for the small group exception have a 5500 filing requirement if it is part of a "controlled group" that has its own filing obligation? In other words, Company B is in the control group of Company A. Company B has less than 100 participants, but Company A has more than 100 participants. Must Company B be included in Company A's Form 5500? Company B would like to preserve their small group exception and not have to file a Form 5500.

Thanks.

I have a client that wants to convert their current Simple IRA plan to a 401(k) plan midyear when they have already made contributions to the simple IRA's. I know the simple rules in regards to maintaining more than one plan and the rules regarding termination of the simple plan, so I know that a regular 401(k) is out.

However, I am wondering if we can ammend the simple IRA plan into a Simple 401(k) plan? It appears that the plan would remain under the Simple umbrella and would therefore satisfy the requirements that the plan remains a Simple during the year and that more than one plan is not in effect.

I have run across section 4©(1) that states that a plan cannot have contributions to another 219(g)(5)(A) or (B) plan during the same year and the Simple IRA is listed under this description. So the question is, for purposes of determining a simple plan, is a Simple a Simple, or does the IRA and 401(k) create differences that makes them mutually exclusive of each other? It appears to me that the major difference is the omnibus account and not the regulations surrounding simple plans in general.

With this in mind, can we ammend the plan to become a Simple 401(k) now or are we required to terminate the Simple IRA at the end of the year and roll out a new Simple 401(k)?

I have a partnership with 2 partners, one of which has W-2 income AND a K-1 from services provided to the employer. The plan is a SH 3%, cross tested 401(k) PSP and I need to allocate both a SH and PS contribution. In Relius 12.0, how do I account for the W-2 income for allocations to the partner and calculating the partnership compensation?

401(k) Plan terminated on 6/30/07.

A participant took his balance (payable to him) 12/10/07 - 1099 issued by asset company.

This participant also had an outstanding loan - a 1099 has not been issued. Is it too late to issue a 1099 for 2007 (provided the participant hasn't completed his taxes yet)? If it is too late will there be a problem if the 2007 Form 5500 says it's a final return but a 1099 is issued in 2008?

Thx

Here is the scenario. Owner's son terminated before end of the plan year because of "medical disability". That is the client's term not mine. Anyhow, they made payments during the first 2 weeks or so of the next year that they are saying was for disability. Does this count as 415 compensation for the next plan year (the year the amount was paid but is the year after termination). I am still trying to fully understand the new 415 regulations. Thank you.

Anyone have a good sample notice about terminating a safe harbor match mid-year? i.e., it needs to explain consequences of the change, information on how to change deferral elections, etc.

Participant (P) and Alternate Payee (AP) have gone through a bitter divorce. She was awarded a separate interest in a DB plan along with hefty spousal support. The QDRO is drafted to require AP to begin receiving payments no later than the date P actually retires.

P is sick of paying "outrageous" child support and is advised by counsel to retire since the payments from the Plan to AP will reduce P's spousal support obligation.

Plan contacts AP and sends her election forms. AP tells Plan to pound sand and that she won't sign anything. P and AP are both going back to court over this issue, but how should the Plan respond? I would assume that she will be entitled to the benefit payments (without interest) at a later date, but I'm not certain of this.

Input is appreciated.

We have a calendar year plan and our actuary certified last week that our 2007 AFTAP is 70% after having to forfeit a portion of our funding standard credit balance. It would have beeen 67.2% without using some of the credit balance. He used values from the 1/1/07 actuarial valuation report to make this calculation and says he won't be able to calculate the 2008 AFTAP until this summer.

I'm thinking I may be able to make a rough estimate of the 2008 AFTAP myself because included in the materials that came with the 2007 actuarial report was a benefit payout projection for the next 75 years and I know what is the value of assets as of 1/1/08. I think I should really be working with an updated benefit payout projection, but is the following a valid approach?:

1. Select the 3 segment rates. [Can someone tell me what are the 3 rates?]

2. Discount to 1/1/08 the expected payouts in year 1 thru 5 (2008 thru 2012) using the rate for segment 1.

3. Discount the expected payouts in year 6 thru 20 (2013 thru 2027) back to year 5 using the segment 2 rate and then discount that result for 5 years using the segment 1 rate. [Or do I use the segment 2 rate for all 20 years?]

4. Similar approach for years 2028 to the end of 74 years.

5. We didn't use all of the credit balance so can I use what's left for the 2008 calculation if neeed?

Is this approach too 'simple' to be valid as a rough estimate?