Plan Sponsor is a Corporation, of which client is sole owner. A partnership has also adopted the plan. The corporation generates losses.

He is over age 59.

Let's assume his DB plan allows a distribution from the plan.

Here's what he wants to do:

Put in his required contribution. Deduct it on page 1 of his 1040, not his corporate return.

Then take a distribution of approx. twice that amount into his Roth plan. So page 1 will show 0 earned income. a $200 k distribution from Retirement Plan, and a $100k reduction for Retirement plan contributions.

Yes? No?

Plan Sponsor is a Corporation, of which client is sole owner. A partnership has also adopted the plan. The corporation generates losses.

He is over age 59.

Let's assume his DB plan allows a distribution from the plan.

Here's what he wants to do:

Put in his required contribution. Deduct it on page 1 of his 1040, not his corporate return.

Then take a distribution of approx. twice that amount into his Roth plan. So page 1 will show 0 earned income. a $200 k distribution from Retirement Plan, and a $100k reduction for Retirement plan contributions.

Yes? No?

Other than the IRS letter forwarding service, what services have you used for attempting to locate lost participants? Were they easy to use? Were they expensive?

Greetings-

I am aware that the IRS prohibits the use of the standard 5305-SEP if you want to set up a fiscal year end. My current investment group (BofA) does not seem to have a prototype SEP Agreement available to accommodate our 6/30 year end. FYI: Wamu seems to have a prototype SEP IRA plan that accommodates the Fiscal Year end based on my review of their SEP Application that references a box to check for plan year: "The 12-consecutive month period which coincides with the Adopting Employer’s fiscal year".

I know it is not a deal breaker if I set up the plan on a Calendar Year when our Fiscal Year is 6/30. I read previously in a post on this forum that it would just impact the timing of the contribution. IRS Pub 560 gives a pretty good example of a situation where this would apply.

But: would it be an advantage to set the new SEP IRA on a fiscal year end?

We have until the due date of this extended IRS 990 to contribute for our 06/07 tax year. If we make SEP contributions for this 06/07 year what tax year would the contribution go to? 2006 or 2007? Would the answer to this question be different if we were on a Fiscal Year Plan as opposed to a Calendar Year?

Thanks for your insight.

It is clear that in order to calculate a partners net earned income, his share of non-partner contributions must be subtracted from his gross income. Most illustrations I have seen show a profit sharing contribution being subtracted, some also discuss match. My question is does that subtraction include non-partner (employee) deferrals? Sal Tripodi's treatise says that the deduction should include the partner's share of employee deferrals (plus match and PS, if any.) While I believe that makes sense, I haven't seen that anyplace else. That could have a major impact on partner compensation. Any insight would be appreciated.

Can Davis Bacon contributions made to another qualified plan (multiple employer plan) be used to satisfy the minimum gateway requirement in another employer sponsored plan? In the past these contributions were used to offset the integrated profit sharing allocation, and now the employer is looking into a cross tested allocation. I want to make sure the davis bacon contributions can be used to satisfy the minimum gateway requirement, the rate group testing and the ABT.

Two sole proprietors each of whom maintained a 401(k) - Uni-K. They have since formed a new S-Corp and now want to establish a new 401(k) for the S-Corp and its employees.

Question - do you think it best to terminate those Uni-K plans and do a direct rollover to the new S-Corp 401(k)? Or merge the existing 2 Uni-K plans into the new S-Corp plan? I understand the net effect will be the same for the former SPs but everything communicated to me so far has been "merging" the plans but I'm a little leery about the shape (document/amendment wise) of those two Uni-K plans and would rather suggest establish the new plan, make sure the existing Uni plans are compliant, terminate them and affect rollovers to the new plan? Any thoughts either way? Thanks

What are small plan actuaries doing in anticipation of 2008 higher minimum funding requirements under PPA 06 (higher if you've been using weaker funding assumptions than the anticipated PPA rates/mortality table).

Anyone looking to freeze some plans or cut back formulas for 08 before the 08 accrual occurs ? With small sponsors it's tricky to anticipate their future 08 income so I'm contemplating a reduction in the formula to reduce Min Funding requirements, but then if they end having a good year they'll want the new Max Funding option which cannot take into account benefit increases for HCEs in past 2 years if we then move the formula back up for 08 late using the 412©(8) option.

Practically speaking, if a plan was frozen for 08, but then unfroze within 412©(8) time frames, it seems possible that some might not have a 404 larger than 412 (or whatever the new code sections are now) if they can't use the new accrual for HCEs in the max funding (if plan unfrozen in late 08), and if the 150% of the UCL at beginning of year (12/31/07) isn't large enough to produce a higher max contribution than the minimum funding. Does that seem like a possible scenario for some plans ?? (412=404; forgive the old code cites). Any thoughts out there ? Just trying to think things through and would be interested in other thoughts.

Client wants to establish a new 401(k) plan with a matching contribution and a profit sharing option. Deferrals would begin in 2008 but he would like to make a profit sharing contribution for 2007. Would it be acceptable to have the plan's effective date be 1/1/07 even though the doc won't be signed until the end of the year? In other words, can the adoption date be later than the plan entry dates (1/1/07 and 7/1/07) even if all of the employees have been asked on several occasions over the past year and have indicated that they would not defer given the chance? The opportunity for a match was explained to them. He and the few employees he has would all be eligible for a 2007 PS allocation.

Although it can't be considered a safe harbor plan for 2007 since a SH notice wasn't issued, could the plan be considered safe harbor for 2008 if it's drafted effective 1/1/07 to contain a regular matching contribution provision in the same amount as a safe harbor contribution, and a 2008 safe harbor notice is currenlty issued? Can this work without a safe harbor amendment since there weren't any deferrals for 2007?

Have a situation where the employees will retire and the employer will pay them a severance pay that consists of a % of their unused accumulated sick leave. The employees have the option to take a lump-sum payment now or to defer the severance pay until the next year. There are a couple of other requirements, but assuming that the employee(s) satisfy those, and the employee(s) defers until the next year, must the amount of the severance pay be included in the employee's current year taxable income? I could easily be wrong, but I do not see this as a severance pay plan, as this severance pay is tied directly to the employee having accumulated sick leave and meeting a few other requirements.

Also, are there any possible consequences to the employer if they do pay the severance pay in the next year?

Thanks

A plan was sponsored by an ineligible organization for a couple of years and they just realized the error of their ways. They sent a participant a letter stating that he should include contributions and earnings in income, and that he can't roll over the account.

Just to make it interesting, he's already terminated and rolled over the money to an IRA. My experience with IRA custodians is that there's no way they're going to just return the money and not report it as taxable income, so if he does the right thing and picks up the income from when he made the contributions, he'll wind up with double taxation, or at least the appearance of it, if he takes the money from the IRA and it is reported on a 1099-R.

Any thoughts on both legal and practical approaches (by practical I don't mean illegal, just good ideas)? Obviously if he's going to take money from the IRA and not have it reported as taxable income, there must be a code for disgorging an ineligible rollover, but I can't find it.

How will the proposed DOL initiatives on fee disclosures effect 403(b)(7) plans? (E.g. will there be additional reporting requirements on the 5500 - Schedule C to include fee disclosures/amounts?)

Try to make a long story short. We have or should I say had a client that did not make all of the employee deferrals for 3 employees. This isn't the first time this happened. We discovered this issue the first time in PYE 2005. We are the TPA on this case and perform all testing and Form 5500 work at the end of the year. At the end of 2005 we discovered that the client had not made all of the deferrals for several employees. We informed them of the situation and they agreed to make the deferrals and we calculated the gain/loss and the employer made the contributions and we took them through the voluntary compliance program and reported on the 5500 that the employer did not remit contributions on a timely basis.

Fast forward to 2006. We contact them as usual to get their updated census information...they do not respond. Finally they send us 2006 information. We find that again they did not remit the all of the deferrals. We contact them and let them know of the problem (which we believe they were well aware of) and they tell us that they will fix it. We file an extension and send them a letter describing all of the deficiencies and how they must be correct. After repeated emails regarding the need to get this fixed the contact us in late September and want to meet with us. I meet with them and give them a letter stating all of the deficiencies and the cost to correct it all. We also ask for payment in advance before any work will commence. They say no problem you will have the check the next day. October 15th comes and goes..we sent reminder emails with no response and no check. We sent them an email acknowledging that they did not make payment and we did not file the Form 5500. I will be sending them a formal letter telling them that we are no longer the administrator for their plan.

We have never run into this before believe it or not. My question is should we report them to the IRS. Do we face liability if we don't. Several of the employees have terminated and did not receive all of their deferrals. My feeling is we have an obligation to report this to the DOLE/IRS and we could face liability if we don't. What is your opinion and has anyone else gone through this before. How should we contact the DOL...what is involved?

thanks

Hello -

We administer several 403(b) Plans and we do not always receive enrollment forms in a timely manner. As a result, it's very common that someone contributing for the first time will error out of our recordkeeping system. I am wondering how other companies handle this issue. Could we request that the Plan Administrator not send us the funds for those who we have not enrolled?

Thanks!

My client as a defined benefit plan and a 401(k) profit sharing plan that covers ALL the Partners and Staff employees. The remaining employees (Associates) have a 401(k) plan with deferrals only. Can the compensation of the associates be used to determine the combined deductible limit of 25% + 6% of compensation? A former collegue has told me that the compensation used to determine this limit should include compensation from all employer sponsored qualified plans.

I'm hoping someone out there has had this happen to them or knows where to look for a specific answer.

I have a December year end plan with a plan provision that requires 1,000 hours to accrue a year for benefit accrual purposes.

The participant in question reached normal retirement age and worked past their normal retirement date in 2001.

Prior to retiring in 2001 she worked more than 1,000 hours in 2001.

She retired, requested and received a lump sum distribution of her entire benefit.

The second week of December she returns to work on a part time basis.

She has not worked more than 1,000 hours in a plan year since before she retired in 2001.

But, she returned to work in the same plan year that retired in.

The plan has a clause about not duplicating the benefit.

It's easy to see that we don't use the compensation earned prior to returning to work.

Her years of service for benefit accrual purposes aren't used, etc.

However, as she was employed on 12/31/2001 and she did earn over 1,000 hours of service during the entire calendar year, I'm having a hard time finding out whether or not she should get a year for 2001.

Anybody got any help on this?

Thanks

Christopher

I am doing DB/DC combined plan testing for a plan that had to refund part of the 401(k) deferral for an HCE in order to pass the ADP test. I just want to verify that the amount of the deferral that I include for the average benefits test is the net amount, in other words, the deferral amount after reduction for the refund, is that correct?

May a municipality recognize prior "nongovernmental" service for its current employees with respect to their past years of service with a private fire protection organization. I understand that 415(n) permits the employees to purchase "permissive service credits" for nonqualified service, subject to certain restrictions. However, it is not clear to me whether the IRC prohibits or limits the ability for a municipality to amend its plan to recognize prior service with the private organization.

Hi,

I have stock option granted in 2004 and is subject to 409A because of discount. The company is trying to fix the issue by fixing the price and is waiting for SEC's approval, so called tender offer.

I get a very good offer from a another company but may lose it if I sit here and wait for the tender offer. so i am thinking to quit before the tender offer is presented and exercise all my vested share within one month after the termination (the term of the grant).

I never exercised my option except a few hunder shares in 2005. Nothing in 2006 and 2007.

My questions are:

a) Will that subject to 409A penalty tax? As termination of employement is the allowed event of distribution per 409A, i think it should be fine, but not very sure.

b) Do i need to amend the plan before quit? Or can this consider a reasonable, good-faith compliance with 409A wiithout the need to amend the plan.

c) Will my exercise in 2005 has any impact? Are my option tainted because of exercise in 2005? Will aggregation rule apply?

Thank you very much for help,

Michael

hi.

i am in the benefits world but in a very small niche. we administer 457(e)(11) plans, which are exempt from 457. but we try and draw from the rules of 457 or erisa rules because the guidance for 457(e)(11) plans is little to none.

the overwhelming majority of our our DC plans are pooled accounts utilizing a rabbi/grantor trust. the plan assets are the sponsors until the volunteer reaches the payout age which creates the taxable event. the gov't sponsor sets an investment policy and invests the assets conservatively (usually no more than 20% exposure to stock-based mutual funds).

we have some clients that really want to have the option for participant directed plans. we are investingating daily recordkeeping platforms or hooking up withanother TPA to provide this.

some of these govt sponsors think that they will remove, or substantially reduce, their fiduciary responsibility by letting the participants direct their own investments rather than having to set an IPS to direct the investment of the entire asset pool.

my questions really are, if participant direction is allowed:

1) what are the requirements under a traditional 457 plan as far as education to the participants. does the sponsor have to have an investment professional available for education, or can everything be delivered via web site stuff? n if an investment professional must be involved, can it be over the phone or does it require any manditory face-to-face availability?

2) how much does this really take the sponsor off the hook? what if a participant looses his whole account due to bad investment choice - does the sponsor have any liability for allowing the investment option, or giving the choice of participant direction?

3) in your opinion, should a govt sponsored plan that is set up as i mentioned - where he plan assets are assets of the sponsor (local govt) until the participant meets the payment eligibility requirements, even allow participants to direct the investments? since the assets are technically the sponsors (this creates the substantial risk of forfeiture) is it prudent or even allowable for the participant to direct the investment of the sponsor's assets? i am sure they are precident here, but would like your take. we don't want to cloud the issue that the trust assets are the sponsors assets.

thanks so much.