I have a participant in a 401k Profit Sharing Plan who went out on disabililty in March 2007. She had an outstanding loan at the time and has submitted paperwork to have her loan balance offset due to disability. She is age 47.

Two questions:

1) What is the proper tax code to use for the 2007 1099-R to be generated for the loan offset.

2) Is she subject to the 10% early withdrawal tax penalty for the loan offset.

I think she should receive a 1099-R coded as '3' and she would not be subject to the 10% penalty, but I would like to see if anyone agrees.

Mahalo!

We have a rich 401k/profit sharing plan, and a middle-of-the-road health plan. The idea has been floated to give employees the option of choosing between receiving a full match/profit share or receiving a partial match/profit share, and in exchange we the employer will pay more towards their health care coverage.

In preliminary discussions our TPA says this can be done; however they have no clients who do this right now. They can investigate further for a fee.

Before we proceed, I'd like to know if anyone has or administers such a plan. We want to be innovative, but not bleeding edge.

Thanks!

In 2006, company went to trouble to set up a cafeteria plan to deduct medical premiums on pre-tax basis. Made all proper notifications and elections but then failed to set it up on payroll system as a pre-tax deduction. Error is not found until 2nd quarter of 2007. What's the correction?

Does anyone have any suggestions for a TPA for FSA and DCAP benefits for a small school district? Thanks.

This might be a silly question, but I want to do it right. An owner is 70.5 july 10th 2007 has an account balance as of the last valuation date(9/30/06) of 2,913,757 and his wife, who is the beneficiary, her DOB is 11/2/43. It states if the participants spouse is the sole beneficiary, then you use the divisor in the joint life expectancy table, in this case 25.4, but only if that amount is larger than the amount from the Uniform table. Well the DIVISOR in the uniform table is 27.4. However, when using these divisors the RMD in the Uniform table is 106341 and the Joint Last Survivor is 114715. I am thinking the rule means the highest RMD amount not the highest DIVISOR. Also, wouldn't you use the Joint Last Survivor table unless the spousal beneficiary is more than 10 years younger than the participant?

Thanks.

I have a 401k client whose plan allows for loans and hardships. The only source of funds in the plan are salary deferrals. This client has a participant who has already taken a loan and now wants to take out the rest of his money. The participant claims he doesn't fall under the hardship rules but says it's his money so why can't he have it?

The client is considering adding the in-service distribution provision so the participant can get his money but when I told him the participant would need to continue paying back the loan, he went ballistic and said that didn't make sense.

I figured the participant made an agreement to take a loan against his account balance and just because in-service provisions are added to the plan that doesn't negate the loan agreement. Am I way off base on this? Does the participant stop making the loan payments and then get 1099'ed for the entire amount at the end of the year?

Plan is invested in a CCT that is subject to the new 94-4-1 requirements. CCT files as DFE.

What amount is reported on the Schedule H & D, FMV or Contract value??

I have a 401(k) plan that makes a Prevailing Wage contribution in addition to a 3% Non-elective Safe Harbor contribution. The adoption agreement specifies that the prevailing wage contribution may be used to off-set a profit sharing contribution and that the Prevailing Wage contribution is a Qualified Non-Elective Contribution. Looking at prior yr it appears the prior TPA used the Prevailing Wage contribution to off-set the 3% Safe Harbor Non-Elective.

I can't find any support for that position or any thing to prohibit that.

Any one have an idea where to look for guidance on same??

Employer set up a new enhanced safe harbor match 401(k) plan in April with a July 31 plan year end. Enrollment forms were distributed and returned in May. With the opportunity to defer in May, June and July, we're good so far.

Payroll person fails to begin withholding for NHCEs until June 30, but does deposit $15,500 each in deferrals for the owner and his wife in May. So HCEs have three months to defer but NHCEs effectively have only one month plus one pay period to make deferrals in the first year of the plan.

I've seen other threads that debate whether or not the EPCRS correction for excluding an employee applies when the employer failed to act on the deferral election. I didn't see any that addressed the safe harbor match that would have been due, had the election been followed. I also didn't see anything relative to the safe harbor requirement that employees have at least 3 months to defer in the first plan year.

The consensus among my co-workers is that the client has not met the safe harbor for this first year and should be subject to ADP/ACP testing, but we aren't able to find anything to support that conclusion.

Any suggestions about where to look?

How do you require that a participant put in a change of address? We currently have the participant put it in writing and forward it to us. We have a new employee here who thinks that it would be better to have the change of address come thru the employer... what do you all think??

Plan does not have the "cashout" rules for balances under $1000 (client has us send paperwork out to EVERY terminated participant regardless of balance).

There are a few termed participants with balances under $200 who are not responding.

Since there is no required withholding under $200 and the participant can rollover the whole amount, could the plan send them a check (provided the participant has received the special tax notice and a letter stating that non-response will result in a check being sent?)

I realize that the client can amend the plan to add the cash out rules, but I was wondering what others thought about sending a check.

But I can never seem to find the time to read them all. And putting them in a 'to be read' folder does not work as I never get back to them.

Tell it, brother. Information overload. How can I make it easier to digest, in the BenefitsLink retirement and health & welfare newsletters? Narrow the focus even further somehow, by topic or audience?

One strategy I use is to create folders in my bookmarks, in the Steven Covey way (I think): I, II, III and IV.

If I see something in a newsletter that I want to read and it's both urgent and important, I click on the item and then bookmark the resulting web page in the "I" folder. I need to go through it by the end of the day. (I haven't figured out a way to bookmark a "favorites" folder in Firefox, though. I'd like to stick a bookmark on my desk.)

If it's important but not urgent (i.e., would increase business or be a valuable contribution to the community, but it doesn't have a short deadline), it goes in the II folder. I try to schedule time to go through the II folder.

Stuff in "III" is urgent but not important... e.g., I can get a new piece of interesting software if I use the coupon by Monday (the software would be nice to have, but not really important to have). Maybe I'll get to it if I get through I and II, but I won't feel like I've missed an important opportunity if I don't get to it.

And IV is stuff that's neither urgent nor important. Maybe it's something that caught my eye because one of these days I might find it to be important (if my business takes a different direction, etc.).

I basically never get to stuff in III or IV, but it makes me feel good to have stuck it somewhere

Of course, it's not necessary to click on every item. Skimming is perfectly OK; click on only a couple that look like candidates for the I folder. Don't get stressed out because you can't analyze every item. You can always use the search engine (http://benefitslink.com/search) if you want to circle back about some issue. (Though I need to improve it further, I know.)

Another tip is to try to "handle" something only once. Putting stuff in a "look at this eventually" folder means you end up handling it twice.

I know I am in the majority when I say the BenefitsLink Newsletter is the best.

Like many, I subscribe to many Newsletters that I think carries information that is or will be of interest to me. But I can never seem to find the time to read them all. And putting them in a ‘to be read’ folder does not work as I never get back to them. So, inevitably, steps must be taken to either:

• Unsubscribe
  
• Keep those that you know you must skim through- just in case
  
• Definitely keep the very few that you will read most, if not all of it
  

Cypen & Cypen is one that I really enjoy skimming through, and often find something in it that I must read. For instance, look at today’s issue:

Light------ a little bit of funny------a little bit of commentary ----good intro to topical issues ...

I also like PlanSponsor's Newsdash and CCH

Would you care to list your favorites? It’s time to shake up my list, and I need some good ones to replace those from which I will be unsubscribing.

Plan requires that participants pay 1.45% FICA/Medicare tax (Employer matches) on vested retirement credits made to the plan. If participant is terminated for cause and benefits are forfeited, is the amount of the payroll taxes withheld refundable to the participant from either the plan or the employer?

Hello,

What does it mean when ESOP assets are non-transferable? Can it be rolled over to an IRA? Distributed from the ESOP and sold in a brokerage account?

Thanks

Our employee has custody of his nephew. We have received a national notice ordering us to provide health insurance to the nephew. The employee has custody of the nephew but not guardianship, nor has he adopted the nephew. The state is saying that because a court ordered the employee to provide coverage, we have to comply and enroll the nephew. Doesn't a QMCSO have to be for a "child" of the participant?

We have a local company maketing the follow plan. Any ideas on what they are doing? I do notice that they do not mention any tax advantage.

The advantages of the Corporate Savings Account vs. other savings and reimbursement accounts include:

The CSA is owned and controlled by the business owner, not the insurance company or the employee.

The CSA provides benefits for the business owner, other reimbursement accounts specifically EXCLUDE the owner.

The CSA allows for two levels of reimbursement, one for the owner and one for the employee.

The CSA is a custom benefit plan with unlimited options. Other savings and reimbursement accounts are pre-packaged with only one or two options.

A participant in a US defined benefit plan has Canadian real estate as an asset in the plan. He knows that if he takes the real estate out of the plan it will be a distribution for US tax purposes. But does anybody know what the tax consequences would be for Canada?

Does an impending sheriff's sale of a primary residence fall under the category of eviction for purposes of a hardship withdrawal? We are assuming it does, but can not find a solid answer. The sheriff's sale is a result of not paying township/county taxes.

I don't do any safe harbor match plans so forgive me if this seems too basic.

Employer uses the safe harbor match of 100% of the first 3% and 50% of the next 2% for everybody, including HCE's. Is that a problem? He is being told he has to give more to the NHCE's if he gives anything to the HCE's