I have a New Comp Plan with 3 HCE's.

We Plan on giving the HNCE's 5% in order to Pass the Gateway Requirement.

The Ratio Percentage Test is 100 %.

The Individual Rate Group for the 3 HCE's Pass.

My question is do I still need to pass the Average Benefits test?

The CEO (the CEO is not an owner) of a manufacturing firm (Company A) decides to move the plan to a new broker and TPA (Company B). The equity owner of Company A is not involved with the day to day management of the Company A, nor is he a plan trustee or administrator nor is involved in the decision to move the plan. After doing some research it is found that the owner of Company A has an investment in a venture fund (Company C)that has invested in the TPA firm (Company B). This investment is with Company C and the investor has no control over what the venture capital (Company C) can invest in or any managment control over any of the companies that Company C invests the venture capital in. Would this be consider a Prohibited Transaction or Arms Length Transaction? Is Company B considered a party in interest?

Are expense reimbursements to plan sponsor reported on Schedule C if over $5,000?

Suppose employer has a 06/30 fiscal year end 401(k) plan. Employer wants to amend to a SIMPLE 401(k). Can employer amend to SIMPLE 401(k) effective 07/01/08 & make a short plan year from 07/01/08 and make a short year from 07/01/08 through 12/31/08? The exclusive plan requirement throws me with the SIMPLE 401(k); although this an amendement to an exisitng plan, I want to be certain that for exlcusive plan purposes this really isn't looked at as 2 separate plans, a regular 401(k) and then a SIMPLE 401(k).

(I know employer can amend to a short year now & then adopt a SIMPLE 401(k) effective 01/01/08, but employer may not want to do that.)

Thanks in advance for any guidance.

If the 8 1/2 months ends on a Saturday (in this case 9/15/07), doesn't the client's check have to be dated 9/15 and if he dates his check 9/17, he's OK for deduction purposes but not minimum funding?

Situation: New employment contract for a new executive that has not worked for employer before. Employer wants to pay severance over the course of 5 years. One payment will made annually on March 1 for the first 5 tax years following the year in which separation occurs. The amount of each payment will be spelled out in the employment agreement. Services will not be performed for employer until after employment agreement executed.

Thoughts on whether this satisfies 409A? I know it is subject to 409A but believe it should satisfy the form and timing of payment requirements?

If an EE has made after-tax EE contributions to a QRP in which he/she also has pre-tax benefits, may he/she withdraw just the after-tax EE contributions (and not be taxed due to the basis), leaving the pre-tax benefits and investment earnings in the QRP for later withdrawal? or are any withdrawals deemed to be proportional between the after-tax employee contributions and pre-tax benefits, with just a proportional amount of the basis applying?

After the PPA, interest rates for calculating lump-sum payments are changed from the 30 year Treasury rate to rates which reflect the yields on investment grade corporate bonds. If an employer does not want to amend a DB plan for this change (and leaves the 30 year Treasury for purposes of the interest rate calculation), does 411(d)(6) come into play if the employer decides to amend the plan (to change to corporate rates) sometime in the future. There is relief in the PPA from the anti-cutback rule for plan amendments consistent with the provisions of the PPA. However, has anyone looked at this issue (i.e., if you are not amending for the PPA now, but doing so sometime in the future)? Thanks for any suggestions.

I can't remember how many times the small business owner(s) that is gung ho to set up a DB plan wants to know how often they can change their contribution amount. It's reasonable that the business owner(s) wants to know what the committment of starting a DB plan entails. I am comfortable saying that there is not a problem making cutbacks due to unforeseen changes in the financial condition of the business. I am not comfortable saying that the plan can be amended every X years to change the owners contribution level. Sometimes they are most worried about not being in a bind if business drops off but often it seems that they are more concerned with as much flexibility as possible. I say that's the tradeoff with DB plans, higher deductible contributions but less flexibility. They always want to know if they can amend the plan every 2, 3, 5 years. I'm not comfortable with answering that question. Personally I don't think any small business owner knows what things will be like in 5 years but I think that they should start a plan with the idea that they could maintain their initial contribution level for 3+ years barring unforeseen problems. If they can't make that committment then a DB plan is not right for them. I think there is some case law where the IRS has disallowed deductions due to too frequent plan amendments so that the plan was basically operating like a discretionary PS plan but with much higher contribution amounts. I'm guessing that involved annual amendments. I don't like to play games, but I don't want to misinform the potential plan sponsors either.

I'd like to know how others handle this question.

A rollover occured from a regular 401(k) to a SIMPLE IRA this year. I've check the search function but can't find a specific case.

Facts:

Rollover occured this year, more than 60 days ago, but within 60 days of distribution.

Corrected to state it was a direct rollover.

Funds were deposited to a SIMPLE IRA

Possible Solutions

1. Return as an Excess plus earnings. Client is out of luck for IRA rollover.

2. Re-characterize client reports as being rolled over to traditional IRA.

3. EPCRS and hope for the best.

Does it matter who the Employer is for the Simple?

can anyone clarify what type of plan they are referring to here in the regs.

A pension benefit plan the benefits of which are provided exclusively through allocated insurance contracts or policies which are issued by, and pursuant to the specific terms of such contracts or policies benefit payments are fully guaranteed by an insurance company or similar organization which is qualified to do business in any State, and the premiums for which are paid directly by the employer or employee organization from its general assets or partly from its general assets and partly from contributions by its employees or members: Provided, That contributions by participants are forwarded by the employer or employee organization to the insurance company or organization within three months of receipt and, in the case of a plan that provides for the return of refunds to contributing participants, such refunds are returned to them within three months of receipt by the employer or employee organization; and [Amended April 19, 2000 by 65 FR 21805.]

The IRS has informed us that our EGTRRA Volume Submitter document is expected to be approved (like most other VS and prototype dox) sometime in the first quarter of 2008. Our VS document has had several IRS reviews and we believe the form it is in is close to the final version that the IRS will issue the letter on.

Is there any downside to preparing the new document for all of our clients right now? Basically our plan is to have them signature-ready so that literally within 2 weeks after the IRS letter is issued, we plan to send out all of our EGTRRA dox for signatures. I'm used to being involved in dox being restated in the last few minutes before the RAP deadline, not doing them in the first few minutes. Any thoughts?

Thanks

I have a question regarding the 415 limits in DB plans - specifically (I think) under 1.415(f)-1.

Lets say I have a business manufacturing widgets - 100% owned by me. I sponsor a DB plan for myself and my three employees. We go merrily along our way, and after 10 years or so, I liquidate or otherwise cease to operate the business, and terminate the plan. I then start a new business, selling portable lie detectors to be used when interviewing politicians.

Do I have to count the benefits earned in my widget plan toward my 415 limits in my lie detector plan? And would it make any difference if the businesses were incorporated v. unincorporated?

Although it seems a little "facts and circumstances" - it seems to me that if there's no continuation of prior plan, no CG/ASG issue, no relationship/continuation of prior business in my new business, that I don't have to count it. However, I'm far from certain that this is correct! Any responses appreciated!

I know this topic has been approached before, but I'm still a little confused. Here goes:

I established a simple IRA in 2006 for my self-employment income.

For 2007, my self-employment income has increased, and I would like to essentially replace the simple IRA with a simple 401K to increase my contributions. However, I already put in $3000 in April 2007 as an Employee contribution to my Simple IRA. From other posts, it seems like there is still a way around this.

1. Can I withdraw the $3000 + earnings and count that as excess contribution? (I know I will have to pay a steep penalty for this)

2. Then, can I establish a simple 401K for 2007?

3. If I do establish a Simple 401K for 2007, am I penalized for not contributing to my Simple IRA?

Thanks.

A small employer sponsors a defined benefit plan that is offset by employer contributions in a 401(k) plan.

They would like to add a hardship provision to the 401(k) plan.

Even though a 401(k) plan on its own can have a hardship provision, I dont believe it can when it is being used to offset benefits in a DB plan. Perhaps the plan can allow in-service distributions but only at NRA.

Does anyone disagree with this?

A calendar year fully-insured plan begins in 2000. The sponsor makes their first annual premium payment in September 2001 and deducts it on their 2000 corporate return. This pattern continues. Then when it comes time to make their premium payment due September 2007, they cannot do so.

My question is when is the plan considered to have lapsed from being a fully-insured plan - 2006 or 2007?

My current employer has no retirement plans. We're considering using a profit share to move part of what's currently paid as annual bonus to a retirement contribution. I'm aware that the plan has to be in place before year end for the contribution to be deductible this year.

Since we have no current plan, some employees have already funded their IRAs for this year. As W-2 box 13 is a primary indicator of whether an employee is subject to limitations on deductible IRAs, I'm trying to understand when box 13 gets marked for the first year's PS contribution.

The thing that confuses me is the instructions for W-2 say: "Generally, an employee is an active participant if covered by ... a defined contribution plan (for example, a section 401(k) plan) for any tax year that employer or employee contributions (or forfeitures) are added to his or her account." If the contribution is made in 2008 after the 2007 W-2 is prepared and distributed, the box would not have been marked because the contribution would not have been made yet. Instructions for W-2C address correction of errors and not subsequent events like first year profit share contributions.

So my question for the forum is: if a first time PS contribution is made in 2008 based on employees' 2007 eligible compensation, how would you handle box 13 for 2007 and 2008?

I read a news release that said effective 1/1/08, Missouri will require employers to have a cafeteria plan if they provide health insurance and if the employer pays any portion of the premium.

I can't find more information. Does this impact all very small employers - no minimum # of employees - if they have an insured health benefit program? What if the employer pays 100% of the premium? It's bizarre that the rule references employer payment of premiums as being one of the criteria for the requirement.

As we know PPA 2006 was signed in August 2006.

I am interested in knowing the follow up guidance associated with the Act.

That is what significant regs, model notices, IRS notices, etc. in connectioon to PPA 2006 or just since PPA 2006 have been released?

Also, were there specific regulations for cross tested plans (and when) or are they just part of 401a4s most recent regs?

Thanks.

Has anyone heard of if and when 5500s will need to be filed electronically?

Is it for plan years beginning in 2008?

Thanks.