In 2006, Client completed forms directing the 401(k) plan trustee to do a direct rollover to her IRA. The rollover was received by the custodian of her IRA and recredited to her IRA account. The client just found out that her IRA was a Roth IRA and not a tranditional IRA.

The client did not intend to convert this distribution to a Roth IRA, and would have told the IRA custodian to open a separate traditional IRA if she had been advised at the time of the rollover.

According to the IRS Notice on Distribtuions, the direct rollover should not have been made to a Roth IRA.

So, besides telling the IRA Custodian to transfer the distribution plus earnign to a tradtional IRA, what else has to be done to correct this error?

Hello,

I am contemplating turning my traditional IRA into a ROTH and can't find a solid answer surrounding what is a qualified ROTH IRA withdrawal (not subject to 10% penalty)

Here's my scenario:

Under 59 1/2

had Roth IRA for LESS than 5 years

If I convert my traditional IRA into a ROTH IRA tomorrow, I want to have the option WITHIN the next 5 years to either:

1. Withdrawal money to buy a house

2. Withdrawal money to pay for higher education expenses from an accredited institution.

Can someone please tell me exactly what the tax implications are for each of these scenarios for a ROTH IRA that you've had for less than 5 years?

Thanks

Notice 2007-6 described three safe harbor rates for interest credits, one of which is "the rate of interest on long-term investment grade corporate bonds (as described in § 412(b)(5)(B)(ii)(II) prior to amendment by PPA ’06”.

The cited code section in turn refers to "the weighted average of the rates of interest on amounts invested conservatively in long-term investment grade corporate bonds during the 4-year period ending on the last day before the beginning of the plan year."

So does the 2007-6 safe harbor refer to actual interest rates on corporate bonds or 4 year averages?

Any comments appreciated.

As I understand it, in-service distribution options are a protected benefit that cannot be removed upon plan restatement. Salary deferrals cannot be withdrawn until age 59 1/2 per IRC.

When restating a document in a take over situation, how do I reconcile those statements with the exisiting document's provision allowing in-service distributions from all money types at age 55?

Can you do a SH Match Wait and See Notice or does it have to be a Safe Harbor Nonelective Minimum 3% contribution for the Wait and See?

Thanks

I have a participant in a 401(k) PSP (earmarked accts) that took out a loan back in the 1990's to purchase his principal residence for him and his spouse. This loan is scheduled to be repaid in another ten or so years. He got a divorce a while back, his account was divided between him and his spouse, and now he would like to take out another loan to purchase his primary residence since his spouse got the other house. So, now he would have two primary residence loans at the same time (plan allows for 2 loans at a time). Is this ok or does this violate the tracing rules, or any other rules out there? I never do administration on participant loans and now I know why...what a nightmare they can turn into!!

Any input would be greatly appreciated ;-) Thanks!!

Can a QDRO be modified/interpreted after the Alternate Payee has died? The Participant thinks that he is entitled to something, which in and of itself is questionable and a whole other issue, but the participant wants to take the QDRO to the domestic relations court and have them modify/interpret the QDRO to reflect what he says was the intent of the QDRO. If this does not make much sense, then I guess, generally, can a QDRO be modified/interpreted post-death of the alternate payee?

Any ideas are welcomed.

Thanks

Does anyone have a sample financial statement for an ESOP plan that also has a 401(k) provision?

Are these tracked somewhere? Can somebody give me a link please? Thanks.

Employer has 90% of their payroll considered "contracted employees" NOT Independent Contractors since they are on the payroll.

Can they establish a 401k Safe Harbor Pla, where the only employees eligible are all the Administrative and Internal Operations employees, can they exclude "contracted employees" eventhough they are on the company payroll?

Do I qualify for NUA treatment from my 401k?

Here is my situation:

My client retired in 2003 at age 55 and was in four plans at that time. She took a lump sum distribution from the retirement plan and rolled it over to an IRA. She elected a deferred distribution from the severance plan and the supplemental retirement plan. She retained her 401k. She has taken partial distributions and dividend distributions from her 401k in the past. She will not take any partials in the future. She will turn age 59.5 in late 2007. Immediately after that (early in 2008), she wants to take a lump-sum distribution from her 401k, take the company stock in-kind, and claim NUA. Will she qualify?

Will her past partial distributions disallow her from claiming NUA even though she will do the lump-sum after turning 59.5? Will her previous participation in “other plans” disallow her from claiming NUA from her 401k?

Thanks,

401(k)/404© plan SPD contains a listing of investment funds and it looks out of place to me for some reason. Is it advisable to list the available funds as long as the SPD notes that the funds are subject to change w/notice, or should just general information about specifying/changing investments be included.

This does not appear to be an attempt at a 404© notice. Is it ok to try and use the SPD to satisfy the 404© notice disclosure?

We have a client with a strange provision in its plan that credits participants with an extra year of service for each five years of actual service they complete. Is this a protected benefit under Code Section 411?

Technically, the "extra year" doesn't accrue until the participant has completed each 5 year segment, but from a practical standpoint it seems pretty harsh to yank this benefit from someone with 4 years and 6 months of service. Any thoughts?

We have a client who consults with troubled suppliers to automobile manufacturers. Our client has been asked by an auto manufacturer to acquire the assets of one the manufacturer's troubled suppliers in order to keep it operating until a suitable business purchaser is located. Our client will continue operating the troubled supplier for a consulting fee, as it had been doing for some time as unrelated companies.

Our client wants to avoid including the newly acquired auto supplier in it coverage testing. The auto supplier appears to meet all the requirements of a QSLOB, with one possible exception: the separate management group requirement. Our client will not only be acting as the consulting firm for this troubled auto supplier, as it has been doing, but managing the company until it can be sold. While the auto supplier have its own separate management team, it will be taking direction from our client.

Under these facts, does our client meet the separate management team test?

An employer wants to set up a shared leave program - where an employee can donate some of their vacation time to a pool so others (who are out of vacation time) can pull from the pool.

For example, employee A has 100 hours of vacation. He donates 16 hours to the pool. Employee B has no vacation and becomes ill. They take 16 hours from the pool and are able to take 16 hours of paid time off.

The employer does NOT want employee B to be able to defer from this 16 hours of pay they received from employee A. Can they exclude this pay from their definition of compensation in their 401k plan?

A 401k plan fails testing and two owners take a corrective distribution.

The TPA has instructed these two owners they must re-distribute these corrective distributions amongst all other employees.

How is it that the owners take salary deferral and give these monies to eveyone else as an employer contribution?

I have a small plan (<20 participants) with a funding ratio of less than 5%. Due to their size AFC's never applied and they had a large credit balance so they never had to make a contribution. Benefit accruals were frozen years ago (pre 1980). Don't ask me why they still have the plan 'cause I don't know - they just don't want to terminate it.

The plan also pay's lump sums, so basically, they make a contribution whenever they need to pay someone. I was thinking PPA would put an end to that since lump sums would be restricted if funding ratio was less than 60%, BUT, it seems they are exempt from that rule since the plan was frozen on 9/1/2005 (ERISA 206(g)(5)©(ii). So, I think they can keep doing the "same old same old" and continue to pay lump sums.

Their required contributions will go up post PPA, and they can't use their credit balance anymore (it is gone anyway), but they can continue to pay lump sums even though their funding ratio is basically 0%.

Agree?

We have an employee who worked for one employer from Jan 1, 2007 until May 31, 2007 and during that time he deferred $7,100 into a 403(b) plan and the plan had a limit of $15,500 for the year. He stopped working for this employer 5/31/07.

July 5, 2007 he started with a new employer and he is eligible to participate in the new employer's SIMPLE IRA with a $10,500 limit for 2007. Since he already deferred $7,100 into the 403(b), what is his limit for the SIMPLE IRA for the remainder of 2007?

Thank you for any help you can provide.

i have a doctor group client. one of the dr. participants (employee non owner) wants to remain an employee but receive some income as an independent contractor (from the same company). the dr. wants to set up another plan to deal with that income. would the IRS frown upon this type of duel relationship ie. employee/indpendent contractor?

We have a participant who is requesting reimbursement from her health fsa for a bicycle.

She has already been reimbursed for a recumbent bicycle - the medical necessity statement from her doctor has already been supplied for this item.

We are questioning the reimbursement of the second request - possibly not a medical necessity for for recreational purposes. Any thoughts???