My employer currently offers two HSA account through two different custodians. I'd like to set up my own HSA through someone else because of the investment options. My employer contributes a % and also matches that same % dollar for dollar to employee contributions. Is my employer required to contribute and match the amount in my HSA if I chose to open it somewhere else, outside of their two sponsored HSA plans? Does the Comparable contributions clause in Pub 969 take effect here? The answer I have received so far from my benefits department is that I have to open an HSA at one of the two sponsored plans if I want an HSA at all, but from my research, I think they may be wrong. Can anyone point me in the right direction? Should I print out Pub 969 and show it to them? Is there any other documentation that I can use to present my case?

Thank you very much for your guidance.

100% owner intends to sell 30% of shares to the ESOP and elect 1042 treatment with respect to the sale. Owner's son is an officer of the Company and part of the "next generation" management team. Allocation to owner's son would be less than 5% of the 1042 shares held by the ESOP.

The owner's son is an individual described under IRC section 409(n)(1)(A) -- he is an individual related to the taxpayer under IRC section 267(b). My question is: Is the owner's son also a person under section 409(n)(1)(B)? Under the attribution rules of section 318(a), the son would be considered to own his father's shares, so he would be a "person who owns more than 25%" of the Company.

But, and maybe this is just semantics, IRC section 409(n)(1)(B) starts out by including "any other person", which I think pretty clearly is referring back to 409(n)(1)(A). In other words, the restriction under subparagraph (B) is picking up persons who are not described in (A). Because son is described under subparagraph (A), he is not included again under (B).

Anyone else read this the same way?

Thanks.

Greetings-

I have been looking into setting up a 403b Plan for the 501c3 Non Profit that I serve as CFO. However my Board of Directors like the flexibility of a SEP IRA.

I just spoke with my BofA Financial Servcies Rep and she claimed that because we were a 501c3 we must use a SIMPLE IRA not a SEP IRA.

Further investigation into the IRS Pub 560 and IRS Pub 5305 SEP did not give me a clear answer into whether a 501c3 NFP could contribute to an employees SEP IRA.

Do you have any insight you could provide me as to if my 501c3 can set up contributions to a SEP IRA?

I appreciate your time.

Nick Batch

info@libertytaxglendora.com

Hi,

The company that I work for offers a SIMPLE IRA plan and I participate in it. I don't need my contributions to be tax-deductible, and I like the benefits of a Roth IRA. My question is, would it be better for me in the long run if I just contribute to my SIMPLE IRA up to employee matching percentage, and then put the rest into a Roth IRA?? I don't know much about this at all. Thanks for your help!

The question came up today in our office, on how to track the 402(g) limit as well as the 415 limit in an off calendar plan. We currently have a client who has a plan year of October 1 to September 30.

What I've done with other employers, is track the limits during the plan year, not a calendar year. Both the 415 & 402(g) should be tracked based on the limitation year which is in this case the same as the plan year. My current employer feels that that the 402(g) limit is only a calendar year event, and wonders how would those limits be treated if the participant still has 3 months left in a calendar year to contribute.

Can anyone shed some light on this for us? How should the 402(g)limit and 415 limit be tracked in an Off-calendar year?

A client has a VEBA plan for which the following is applicable:

• At the end of year 2005, included $1M in assets
  
• the VEBA trust account was terminated 1/1/06 and all assets paid out by early Feb. 2006
  
• All participants covered by another plan beginning 1/1/06 (so only payments were for claims incurred in prior years)
  

Since the audit is of the plan and not the trust, would you need to audit the entire year of 2006 which includes claim payments for claims incurred in 2005 and the majority of claims, including all claims after Jan .2006, were paid from the general assets of the employer (making it an unfunded plan upon the trust account termination). Also, my assumption is you would include all plan activity whther from the trust account or from the employer's general funds?

Financial advisor for a small 401k (eff 1/1/03) is in jail for stealing plan assets. Phony statements were created, 5500 was prepared using these phony numbers. Truth is there was no money in the plan until late in 2006, when the problem was discovered, and the current 401k and match amounts started to actually get invested. Plan should have had around $100,000 in assets as of 12/31/05.

Lots of questions here, but can anyone offer some guidance on how to prepare the 2006 5500 (due in a weeks time), especially the schedule I? Should we use actual assets (which were $0) for most of the year, use the number from the previous 2005 5500 as a starting point, or accrue what we think should have been the correct number as a starting point?

Also, is the trustee responsible for the lost assets in this plan? That is, if the crook is in jail and we assume they can't get anything out of him, and there was no fidelity bond for the plan, does that just leave the employer who has to make up the shortfall? The company that the financial advisor worked for is still in existence, should the trustee go after them?

Thanks

I've been out of the benefits world for a while so this may be a dumb question! A company I'm working with has recently completed a merger (well, completion of the purchase of assets). There are 10 employers in the deal and all have formed a new entitity but are all operating under their own federal ID and not an id for the new company. They were advised by their legal counsel that they must move to a national benefit plan effective immediatey. Currently, each of the companies purchased offers local managed care products. Is there a reason why each of the companies can not continue with their current coverage until the end of the year?

Had a participant die unexpectedly at age 35 this weekend. He has a spouse and kids. He participates on the medical reimbursement only.

Our plan doc states: 2.7 Death "If a Participant dies, his partipation in the Plan shall cease. However, such Participant's beneficiaries, or the representative of his estate, may submit claims for expenses or benefits for the remainder of the Plan Year or until the Cafeteria Plan Benefit Dollars allocated to each specific benefit are exhausted. A Participant may designate a specific beneficiary for this purpose. If no such beneficiary is specified, the Administrator may designate the Participant's Spouse, one of his dependents or a representative from his estate."

According to the section on "2.6 Termination of Employment" just before"2.7 Death" section in the PD, the termination of employment section specifically references that the section covers any termination other than death.

After reading the above, can his spouse and dependents continue to participate in the plan until the end of the plan year?

I have a client that is a sole proprietor w/ a DB plan. Based on the individual aggregate cost method, she had completed funding for IRC 412 purposes by 9/15/2007. She has now come back to me and is wondering if she could put additional funds into the plan for 2006 by her 10/15/2007 filing deadline. Amount she has under consideration would be under the 150% UCL cap.

My question is this: clearly these contributions for 412 purposes would be made after the 9/15 deadline so wouldn't show on the 2006 Schedule B (or the EZ); but could she take these deductions for 404 purposes on her 2006 return?

A plan sponsor with a profit sharing plan wants to retire. He wants to terminate the plan 12/31/07 and make an asset sale to another sole proprietor. He wants to make one last contribution to the plan after all year-end reports are in but before the final 5500 and other tax returns are due. So, the plan will have terminated in 2007 and the final contribution will occur in early 2008 before all tax returns are due.

Can this be done?

Generally, we find the answer book series to be an excellent first resource on many plan issues. The interpretations seem to be sound and they always provide sites for reference.

I recently read something in the Plan Termination Answer Book that surpised me.

It read as follows:

"Regardless of the magnitude of the operational defect, any defect that occurred outside the statute of limitations can be ignored"

It seems to me that a plan could be currently disqualified as the result of a prior operational defect even if it occurred outside the statute of limitations as that defect may lead to a current benefit that is incorrect.

Does anyone have an opinion on this?

Has anyone heard any rumors regarding guidance from the DOL on PPA statements? I know it was mandated by August, but they were very public about the fact that they were going to miss that deadline. But we at least had something (that FAB) on participant directed plans.

Any word on some guidance for the non-participant directed disclosures on participant statements? In particular, I'm hoping there will be some help regaridng the requirement to disclose the value of each investment held. I've got some pooled plans with over 100 individual stocks/bonds!

An investment advisor created nine asset allocation models based on age and risk using the existing funds in the plan. The advisor worked with the Record Keeper to put the models on the enrollment form as an investment choice by participants. You just check one box and your investment allocation is divided among the funds based on the model.

Is this still just education? Has the advisor crossed the line over to advice? Are they making a recommendation of which funds and what percentages to invest in? Does anyone have a similar situation? Should the advisor accept fiduciary responsibility for the investment choices made based on the models? Thanks.

Does anyone know of any instances where the IRS challenged a plan's use of the accrual method for determining whether a plan is top heavy (as opposed to the cash value method)?

I don't know if this is the correct place to ask, but I thought I would give it a try. It has to do with stock options being given to employees. We are trying to figure out if there is any liability on our part for a situation with an ex-employee.

All of our employees receive stock options, with a vesting schedule. During a staff meeting (8 ee's) the President announced that the company would allow a one-time opportunity for ee's to pay $0.05 per share (value is $1.00) and have the shares vested immediatly. He stated that everyone would receive a letter shortly outlining the details of the offer, and that people would have 2 weeks from which to reply.

An employee left (on good terms) and now claims that she never received the offer letter and has threatend legal action. As best as we can determine, it appears that she did not recieve the letter/offer. In discussing this internally, our president is essentially saying "too bad" for her. Some of us are concerned that there might be possible liability/risk on the organizations part. Any thoughts or comments? Thanks.

An employer has a 401(k) with a match and a 403(b) with only salary deferrals. The HCEs are not permitted to participate in the 401(k) (and the NHCEs elect to participate in the 401(k) because of the match).

Do the plans have to be aggregated for discrimination testing?

An employer has a 401(k) with a match and a 403(b) with only salary deferrals. The HCEs are not permitted to participate in the 401(k) (and the NHCEs elect to participate in the 401(k) because of the match).

Do the plans have to be aggregated for discrimination testing?

Any thoughts on the content of a time and form of payment election with respect to post-retirement fringe benefits provided under an employment agreement that are not otherwise excludable under Section 132 - e.g., use of a company aircraft?

I feel silly asking this question, as it's a quibble over an insignificant amount. But here goes.

I'm about to max out my Roth for 2007. As I just started it recently, I was hit with an annual small account fee of $10--this was deducted from my account by selling the appropriate share amount. My question: Can I make up this fee deduction with my next contribution? Or would doing so mean that I contributed $10 over the yearly limit?

I know this is a trivial matter. But maxing my Roth gives me a warm fuzzy feeling. Silly as it seems, it would really irritate me if I fell $10 short simply because I didn't know the proper procedure.

By the way, I've read IRS Publication 590 from cover to cover. (For those who haven't yet done so but are considering it, my advice is to wait for the movie.) Couldn't find an answer to my question. I'd call the IRS, but I didn't want to listen to the giggling that would doubtless greet my question.

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