Is anyone aware whether the Schedule T will again be required in 2008? A three year break was nice but I hope it's longer!

I have a 401(k) profit sharing plan whose document reads that only participants who have a year of service and are employed on last day of plan year receive a profit sharing contribution (it's a calendar year plan). Plan sponsor gave me incorrect census information (did not note a participant was terminated before the end of the plan year on the census request). Therefore, I calculated a profit sharing contribution for him and it was deposited before their corporate return was filed. Their Corbel plan document seems to address the situation of when an "ineligible employee" has erroneously been included as a participant and receives a contribution (employer can recover if it's within 12 months -- it's only been one month), but I'm not sure it this fits the situation; he was rightly a participant, but was not eligible to receive the profit sharing contribution. Any thoughts?

An employer provides each eligible employee with $2,400 a year on a prorata basis to use toward their cafeteria plan. If an employee chooses to use this money toward their medical flexible spending account, do they have access to the full $2,400 on the first day of the plan year? Also, what happens if this employee goes out on an unpaid medical leave (not subject to FMLA)? Do they still have access to the full $2,400? Can they continue to submit claims incurred while out on leave?

A client is considering a health reimbursement arrangement which will also provide retiree coverage. The employer has two classes of retirees – one eligible for benefits and the other group not eligible.

Any thoughts an how the nondiscrimition rules of Section 105(h) and 1.105-11©(3)(iii) would apply in this case?

Any opinions/guidance is appreciated.

Hello, i have a question about ROTHs. There seems to be some very intelligent people here so i appreciate & look forward to your help.

My wife is 44 and our plan is for her to retire between 55-57 yrs old.

Social Security is all she will have, and that of course won't be til 62 or older.

I just want to set up a simple CD type ROTH at our local credit union for her so that when she retires, she will have some monthly spending cash for a few years (from about 57-62)

Once she reaches 62 we should be fine then. I will be 56 and just retiring myself and will be eligible to withdraw from my 457k at that time. To compensate for the fact that i can start withdrawing at 56 instead of the normal age of 59 1/2, i contribute ALOT more. Anyway, thats another stary and slightly off topic from what my question is.

If she opens up a ROTH now, the plan is for her to begin withdrawing at 57.

Correct me if i am wrong here...

- Until she reaches 59 1/2, she will ONLY be able to withdraw contributions, right?

- Any interest money she makes will have to be left in til 59 1/2 otherwise it would be subjected to the 10% penalty, right?

If the answer to the above is YES & YES, then my plan is for her to contribute an amount accordingly so that from 57 to 59 1/2, whatever amount we decide that she can take out per month as spending money, it will not surpass the amount she has actually contributed, therefore insuring to avoid any 10% penalty.

Thanks.

The final 415 regs posted by J4FKBC is timely for this question.

Suppose a county employee retires with full pension benefits and then establishes a very profitable business at age 68.

If his corporation adopts a DB plan, must the 415 limit be adjusted for the benefits he accrued under the county plan? I would think not because the two entities are not related in any way.

Thanks much.

http://benefitslink.com/taxregs/td9319.pdf

Looks like the final regs will keep the 401(a)(17) comp limit as an extra limit for 415 as well. This will limit the maximum accrued benefits for older employees so the actuarial increase in the 415(b) limit (post age 65) is also capped at the high 3-year average of the 401(a)(17) comp limit.

It allows a grandfathering of accrued benefits earned under plan provisions in place before April 5, 2007.

Anyone else looked at this yet? Agree? How do you perceive the grandfather provision working?

ak2ary - when do you anticipate being able to present on this topic?

IRA's not my area of expertise so I'm looking for some guidance!

I believe a trust can be named as beneficiary for an IRA. Our client would like to set up a IRA with the beneficiary as a trust for his 10 year old son (the client is unmarried). He would like to stipulate there be no access to the money until his son is 25. Here are the questions we have:

1) Is this possible?

2) If the client dies, will the IRA then pay a benefit to his son (regardless of his age)? Or will the funds stay in the IRA until the son reaches Age 25? If there is a payout, can it be lump sum or does it have to be calculated and paid out according to the son's life expectancy?

3) What are the trigger that require money to be paid out to his son (generating a taxable event)?

4) Once there is a distribution, how are the taxes calculated? Based on current rates? Any excise tax?

Your help is appreciated!

Hello,

We have a union plan and non-union plan currently on separate prototype documents. Consideration is being given to merge them together, but seem to be having one issue that does not seem to fit on the prototype.

The CBU calls for a fixed match formula, while the non-union plan also has a fixed formula but the match formula for the non-union is different than the union.

I do not see a way within the prototype we are looking at to provide for the two different match formula (union vs. non-union).

Even if the single plan is established with a discretionary matching formula, the prototype does not appear to provide for the ability for diffferent match formulas for different groups within the plan.

I guess my question ultimately is whether this a specific prototype design restriction, or is it a general prototype restriction whereby no prototype can provide for the different match for a union/non-union group within the same plan using a prototype?

Thank you in advance for any insight/confirmation you might be able to offer.

Andmik

Section 401(a) reuqires spousal consent when a participant wants to name a beneficiary other than the participant's spouse where the plan's only form of distribution is a lump sum. I'm not sure that makes much sense when no consent is required to receive a distribution. I doubt there is a way around this requirement, but I'd like to hear any suggestions.

We have a 401(k) Plan with three doctors, each has Schedule C income (no W-2 income). There are other employees (paid via W-2) that participate in the plan.

It is our understanding that because this is a Title I plan, the 401(k) deferral deposit deadline applies to the self-employed individuals as well as the employees. So, if one of the doctors didn't defer the maximum during 2006, (s)he can't fund the additional deposit now in order to get to the max for 2006 (even though it's still before the due date of his/her tax return). If the deposit is made now, it's considered a "late deposit" and is subject to the 15% excise tax, "lost earnings" calculation, VFCP submission, etc.

Are we correct in our assumptions? All of the regs I can find regarding the timing of deposits for self-employed individuals imply that the plan is not subject to Title I (in which case they have until the due date of their tax return to make the deposit). Where can I find this this in the regulations?

Any input would be greatly appreciated.

Thanks!

Can anyone point me to any cases where an employer held to tried to hold a TPA responsible for top-heavy contributions when the TPA failed to inform the employer that the plan failed the top heavy test?

I'm not sure how to handle this situation, any thoughts? On 2/12/07 a participant paid for dental services for which she did not actually incur until 3/5/07; however, she terminated her employment (no COBRA) on 2/16/07. Should i reimburse? Thank you.

2 unrelated companies. Company B acquired Company A.

Plan A had a 10% match and Plan B has a 50% match. Plan A merged into Plan B on 4/1/06.

We are testing 2006 on an aggregated basis, for the entire year, for ADP/ACP/410(b).

Does the BRF test have to be done on a full-year basis also, with the overall match rate for those from plan A being pro-rated? Or - Do we put everyone from Plan A in the 50% match rate, because that is what they have in the new plan? Before the merger, plan A would not have had a Benefits, Rights & Features issue.

Takeover plan has a series of funding deficiencies being reported and corrected in 2007. Deficiencies being newly reported-prior errant Schedule B's being amended.

The 5330s will be filed in 2007 for 4 years-the deficiency will be corrected by 9/15/07. We're expecting upon filing of 5330s that interest and penalties will be automatically be assessed (beyond the intiial 10%).

Any suggestions for proactive action in anticipation of this?

I don't think that the initial 10% can be avoided but what about interest and further non-filing penalties?

Unique situation (I hope). Regular board members may remember prior discussion of this situation. The cleanup is now in it's final stages.

Thanks for any suggestions.

After 10% and then 100% taxes have been assessed pursuant to 4971(a) and (b), respectively, what lien priority does IRS have with respect to those liens?

I found literature discussing the IRS's position that it is entitled to administrative priority in bankruptcy proceedings. Some Circuits have accepted this while others haven't.

Has anyone heard anything recent about this?

Employer currently relies on an ADP/ACP safe harbor by making 3% non-elective contributions to its 401(k) plan. It would like to switch in 2008 to the new auto-deferral safe harbor created by the PPA, using annually escalating matching contributions with a 2-year vesting schedule. Per the current safe-haror rules, employees vest immediately in the 3% non-elective contribution. Will Employer run afoul of the post-Heinz regs on changes to the plan's vesting schedule if it imposes a vesting schedule on the new matching contributions? Section 411(a)(10) and the applicable DOL regs do speak in terms of "employer contributions," but one could argue that there's a difference between a non-elective contribution and a match.

[Edit] One more thing: the plan currently contains boilerplate allowing Employer to choose between safe-harbor non-elective contributions and safe-harbor matching contributions and stating (as is required) that either would be fully vested when made. Employer has never made a safe-harbar matchin contribution. So a related question would be whether the new PPA matching contributions would have to be treated the same as the safe-harbor matching contributions for which the plan currently provides. If so, the upshot would be that nobody using the current safe harbors could switch to any version of the PPA safe harbor that incorporates a vesting schedules--surely that wasn't the intent?

Thanks for any insight.

Suppose the employer accrued a discretionary profit sharing contribution for 2005 (showing the contribution on their statements), but failed to make the contribution prior to the tax return deadline and even worse, did not deposit the contribution by 12/31/2006 for the 2005 plan year.

Can the employer still deposit and allocate the profit sharing contribution for 2005, even if they cannot deduct it. If yes (however unlikely), should they make up earnings for such a late deposit?

My thought is no, a contribution made after the end of the plan year can only be considered as made for the prior year if it is deducted under Section 404(a)(6), or is it is required by the plan document.

What do you think?

Employer with 401k plan fails ADP by over 4% and refunds were made.

The average deferral percentage of the NHCE's was .70%.

Currently participation requirements are age 21, 1000 hrs in 12 month period and Jan 1 and July 1 entry dates.

Employer wants to do an open enrollment May 1 to encourage additional enrollments from the NHCE's with the inducement of a 2% match.

How do you test when the eligibility changes mid stream considering that employees leaving the company before May 1 would not be eligible and that deferring participants terminating prior to May1, would not get a Match whereas those eligible after May 1 will get a Match?

A company has 11 employees. 2 are 50% owners. The rest are HCE's. Plan allows 401k and profit sharing contributions.

The owners want 44k for themselves between 401k and profit sharing. If the plan is not top heavy, obviously due to high 401k participation of the non key HCE's, what is the minimum contribution to the non key HCE's?