Example: Plan is calendar year. Employee hired 7/28/04. First year of service is 7/28/05 and while hours worked from 7/28/04 - 12/31/04 on the year end census show 980, we assume the participant is full time and by 7/28/05 will have worked 1000 hours and is credited with 1 year of service. Now for the second year of service, is it ok to switch to the plan year, meaning 1/1/05 - 12/31/05, to determine the second year of service, basically using nearly 8 months(1/1-7/28) of service twice, OR should the second year just be determined from 7/28 - 12/31/05 and years of service thereafter follows calendar year

An individual owns company A which has a 401(k) Plan and in December 2005, the same individual buys 85% of company. We have a controlled group, but the transition rule allows exlcusion of Company B's employees through 12/31/06. A plan amendment is done so that Company B's employees are excluded from the plan, but we know that they must be counted for testing, starting 1/1/07.

By the end of 2007, the owner of company A is expected to decrease his ownership in Company B, to less than 80%. There are no other common owners. Ownership is expected to stay below 80% thereafter.

Is it correct that starting 1/1/08, there is no longer a conrolled group and we can ignore Company B's employees for testing purposes of the Plan? Also, if Company B started its own 401(k) Plan on 1/1/08, there are no combined issues relating to both plans. That is, because there is no controlled group, the plans are tested separately, no reason to look at employees of the other company.

Thanks

I have a 3 group plan, 1) owner, 2) Son, 3) All others

So 1 & 2 are HCEs. If son does not get a Profit Sharing contribution is the HCE ratio percentage 50% or 100%. There would be an elective declaration of $0 to his group for this year. He is not terminated or denied money by anything other than employer election.

My thought was 50%, but this case has me wondering.

http://www.investmentnews.com/apps/pbcs.dl...E/70323019/1037

Maybe it is 50% and he is still an active participant? (a combination of the two issues)

Thanks

Earl

We have a client with a DB and DC plan. The th min is provided in the DC.

The plan is top-heavy. A non-key employee participates in both plans, and works over 1000 hours each year, but does not accrue a benefit in the DB (don't ask--- long story).

Does the aforementioned non-key ee get a TH min of 3% or 5% of comp?

Trying to figure out the application of IRC 404(a)(3) to a short taxable year, and having no luck. Facts: Employer is on a fiscal year taxable year ending 9/30, but profit sharing plan is on calendar year; employer paid contributions for plan year 2005 and deducted for taxable year ending 9/30/2006. Now employer is changing to calendar year taxable year and has a short year 10/1/06-12/31/06. How does employer deduct contributions for 2006 plan year? I thought it would be deductible in the short year, and if this were a DB plan I believe this would be correct, but 404(a)(3) limits the deduction to 25% of compensation paid to participants during the taxable year, and imposes an excise tax on the excess. Because of the short taxable year, the contribution is well over this 25% limit.

Certainly this is not a situation in which an excise tax is appropriate, and I feel that I am overlooking some fundamental aspect of this situation.

Has anybody had this issue?

My client wants to amend their existing SEP, which does not have an eligibility requirement, to a less than 1 year eligibilty requirement. The information that I have been able to find says amendment is okay up to the time of filing the corporate return with warnings about the possible discriminatory nature of such an amendment.

There are no HCEs in the plan so the discriminatory issue does not apply. My questions are:

1. Can they amend in 2007 for employees hired after the efffective date of the amendment? New employees in 2007 hired before the effective date would be immediately eligible.

2. What are the mechanics? The 5305 only allows a years of service option; can you enter a partial year?

Thanks for any and all help. I do not wade into the IRA world often.

Anybody out there "in the know" about when we might expect any information on the new rates for 2008? I am interested in particular about the relative increase in the 417(e) rate once phased in, and how that might compare to both the Treasury rate and the segmented yield curve rates. But I guess everybody else is also.

Brand new plan provides for immediate entry if employed by 8/1/2005. Only the two owners meet this requirement. The other participants were hired one month later and in this first year would not be eligible. Other than this "looks" funny, is this immediate entry a BRF that would fail coverage?

Would anyone be willing to share a crystal report that would prepare labels for participants with account balances? The savvy users will know the trick is not to get a label for every account, but just one per person. I talked to Relius who said it cannot be done, BUT at my last job we had reports that did this. At the risk of being picky, we use Avery 5160 labels.

Thanks!

I am getting more and more questions from employers who, for one reason or the other, would like to essentially provide each employee a health insurance "stipend" that could be used to pay for coverage under the employer's group plan or, alternatively, for premiums for other coverage if an employee elects not to participate in the employer's group health plan. In most cases, this seems to arise as a matter of "fairness" for the owners. The thinking is basically that they are willing to pay $X amount for group health insurance premiums for those employees participating in the employer's group plan so, therefore, they should be willing to pay the same amount to employees who forego coverage under the employer's plan when they have health insurance coverage elsewhere (e.g., spousal coverage, individual health insurance plans, etc.).

I have worked with employers who have established "opt-out" or "cash-out" programs under their cafeteria plans to make sure that those employees who actually elect coverage under their employer's plan are not subject to constructive receipt concerns by the IRS. One of the challenges of that approach, however, seems to be that the employees getting the stipend amount rather than coverage under the employer palnn must recognize the stipend in income and pay taxes on it while employees covered under the company's plan basically get the stipend on a pre-tax or "tax free" basis. The "fairness" rationale then leads the business owners to consider providing a tax "gross-up" or additional amounts to the non-electing employees in order to make up for the different tax treatment.

Also, as I understand it, having the employer contribute the stipend as an employer contribution or flex dollars to a health FSA for those employees not electing employer plan coverage poses big problems because the health FSA rules do not permit participants to use the account to pay for health insurance premiums.

All of this has me wondering if the better approach is not be to establish a simple medical reimbursement plan whereby the employer agrees to reimburse all eligible employees for amounts spent on health insurance premiums up to a maximum monthly stipend amount. For example, if an employee is willing to give each employee up to $300 per month to cover the cost of major health insurance premiums (whether under the employer's group health plan or through other coverage), as long as the employer requires proof that the amounts are essentially being paid in arrears to reimburse the employee for legitimate health insurance costs, shouldn't those payments be tax free?

Would this vary if the amounts being reimbursed were premiums paid by a spouse on a pre-tax basis under a cafeteria plan sponsored by a spouse's employer? Would this potentially be discriminatory if the reimbursement formula provided for payments of 50% of monthly health insurance premium costs up to a maximum of $300 per month? Perhaps that depends on which employees are getting the maximum reimbursement amounts and which are not.

Granted requiring a receipt / proof of premium payments would be a real pain but it seems to me it's preferrable to having the stipend treated as taxable income to those participants that do not elect coverage under the employer's plan. I don't see many folks with these sorts of reimbursement plans these days--at least not outside the very small company / nonprofit sector. Admittedly, I also don't see many employers who are willing to pay a stipend or otherwise make a contribution to the cost of health insurance coverage outside of the employer's own plan but the interest in such programs seems to be on the rise.

I would be grateful for any thoughts on the best or most tax-efficient way to make these sorts of programs work. Thanks.

I am a 2 person office and I am the owner or the S Corp. The other employee does not have dependents. Can I set up a 129 where I can have money taken from my paycheck each period and administer the plan myself? I've read different things about this plan and am not sure if I can participate.

A company sponsors a DBPP for its two employees and excludes himself, the owner.

The company is dissolving and is in the process of terminating its DB plan.

The plan is covered by the PBGC or at least has been paying annual premiums.

The plan assets are $300k and the plan benefits on termination basis are 450k.

The employees are willing to just take the benefits covered.

To my knowledge an employee cannot waive benefits even if they are willing to and thus as far as I can see the only way to terminate the plan is in the form of a distress termination.

Any other creative ideas out there?

Thanks.

I just want to confirm that a 501©(6) (e.g., business leagues, chambers of commerce, professional football leagues) can have a 401(k) plan. Is there any special recordkeeping ot tax reporting that needs to occur?

If a person is paid indirect compensation, in cash or some other form, under an agreement with an insurance company based on volume and/or profitability of business placed with the insurer and some of this business involves ERISA covered plans, presumably (based on DOL AO 2005-02A), a portion of this compensation has to be allocated to the ERISA plans and appropriately reported by the insurer to each plan for Schedule A purposes. At the least, this needs to be done for compensation paid to external persons, e.g., brokers, etc. Noncash compensation reported should reflect the cash or fair value of whatever is provided. What about similar indirect compensation paid to internal sales persons, i.e., employees of the insurer? For example, an insurance sales employee gets such additional indirect incentive compensation over and above any set base salary. Does this additional compensation for such employees need to be allocated and reported for Schedule A purposes?

1. Radiation Therapist

2. Nurse Paralegal

3. Genetic Counselor

4. Legal Nurse Consultant

5. Art Therapist

6. Computer Forensic Expert

7. Medical Illustrator

8. Veterinary Physical Therapist

9. Animal Defense Lawyer

10. Animal Assisted Therapist

(According to CareerBuilder.com)

Is this correct?

http://www.post-gazette.com/pg/06299/732847-28.stm

If so, does it affect every lump-sum payout?

Thanks

Particpant in divorce proceedings. Has requested hardship distribution for purpose of buying out spouse's interest in their home. Participant claims he will loose the home if hardship not allowed. I am inclined to disallow; however, could this be construed as a distribution to prevent foreclosure on the mortgage?

It has been a while since I had a top heavy plan. As of 12/31/2006, owners had greater than 60% of total plan assets, creating a 2007 top heavy plan. For 2006, the only contributions made by all participants were salary deferrals. I know the original 416 regulations said count key employee deferrals and ignore non-key employee deferrals.

Have there been any changes? So we can count non-key deferrals, for insatnce.

Jim

Company maintains a 401(k) plan for its employees. One of the provisions states that if the plan administrator is unable to have a check to a participants or beneficiary cashed, after the use of reasonable diligence in attempting to locate the person, then the check amount is forfeitred until or if a claim is made for the amount, in which case it will be fully restored without earnings. Similarly, if a benefit is required to be paid by the plan, but cannot due to inability to locate the participant or beneficiary, then the account balance is forfeited until a claim is made, in which case it will be restored. Based on IRS regulations, I am comfortable with this approach.

The question that arises is how is the Schedule SSA reporting handled? If the participant terminates employment and does not take a distribution, then the participant's account balance is reported on the Schedule SSA. If there is an uncashed check or an account balance that is forfeited because the participant could not be located, are you now required to enter Code B or C in line 4 box A? What if the check remains unclaimed or the account balance remains unclaimed? Do you enter Code D in line 4, Box A?

The participant's designated beneficiary is his estate. The participant died in 2007. The 401(k) plan allows nonspouse beneficiaries to directly roll over the death benefit to an inherited IRA. Can the executor of the estate directly roll over to an inherited IRA?