Client was hit with random IRS audit for 2003 plan year. Plan year ends 6/30. Turns out that 3 employees were missed on the contribution allocation. My recommended correction (vested portion of contribution plus income) was accepted by IRS and money will be contributed to plan. My only question is...is it a deductible expense for 2007 py or do they miss out on the deduction altogether.

If it's deductible...for what year?

Greetings,

I'm curious - can an ERISA-covered qualified retirement plan that is not an ESOP borrow money (e.g., take out a loan from a bank) in order to make plan investments? Is this a prohibited transaction?

Does anyone have experience here? Thanks so much!

Has anyone heard of any transitional relief thaqt will give Massachusetts employers additional time to adopt and file the Section 125 Plan required by the Mass. health Care Reform Act? As of now plans need to be adopted and filed by July 1, 2007.

We have a SHNE 3% plan that failed to allow a rehire to defer to the plan when she came back. We need to calculate the deferral contribution based on 3% of compensation for the 2006 plan year plus earnings through the date deposit is made. She was offered the plan effective 4/1/07. I don't think the ER has to make up the deferral for the first three months of 2007 because she was offered the plan with at least nine months left in the plan year. I looked at Rev Proc 2006-27 and I think my assumption is correct for 2006 and 2007, but just wanted to make sure. Thanks for any insight.

Employer made nondeductible contributions for several years (since 2001). They have never been carried forward and absorbed in succeeding tax years. Could the aggregate nondeductible amounts be applied to 2007 tax year for purposes of determining the 10% excise tax under Code § 4972? Can one Form 5330 filing be made to report nondeductible amounts and the excise tax? Would this require filing amended returns for the respective tax years? Any help would be greatly appreciated.

Is a plan permitted to limit participation to salaried employees who are HCEs? I'd like to focus on the eligibility rules, so please assume that the plan has no testing problems.

We currently allow employees to contribute to their HSA via payroll deduction. I understand that there are many benefits to associates as it's done one pre-tax basis. Are there tax-advantages to the employer as well? For example, if the associate contributes $100 bi-weekly to their HSA, from the employer's perspective - does that reduce the amount of taxable wages the employer has to pay? Thanks!

We are taking over a plan of an Employer has a volume submitter profit sharing plan. The prior TPA did not have the ER sign Form 8905 and the EIN ends in 6. My first reaction was panic, but maybe I overreacted. Am I correct that this Employer will still be eligible for the 6-year cycle provided he meets the requirements outlined at Section 17 of Rev Proc 2007-44? Just because the ER did not sign Form 8905 by 1/31/2007 (Cycle A deadline) does not mean that the plan was not timely amended for EGTRRA?

Thank you

A self-employed individual makes a required DB contribution that exceeds his Schedule C. The individual intends to take the nondeductible portion against future Schedule C. However, the individual quits working altogether so there is no future Schedule C. The Plan is terminated.

In looking at this, it appears you consider the individual as employer and also as an employee. As an employer, he has made a nondeductible contribution so tough. As an employee, he receives a totally tax deferred distribution.

Question 1: Is anyone aware of an exception that would deem the portion of the distribution attributable to the nondeductible contribution as nontaxable, so the individual would not be taxed twice on the same monies? I.e., he would roll part to an IRA and take part in nontaxable cash.

Question 2: How should the contribution in excess of Schedule C income be reported on 1040? Do you report a contribution to the extent of Schedule C (less 1/2 ss) or do you report the entire contribution?

If a client is considering the new automated enrollment PPA Safe Harbor (enroll at 3%, increase up to 6% cap) to eliminate nondiscrimination testing requirements. Their current match is 100% up to 7.5% of compensation (eligible for match after one year, 100% vested, same distribution reqs. as pretax, etc.). Do they have to change the current match formula in order to meet the new PPA Safe Harbor?

Is a loan trust agreement for 403(b) clients is required? Or can one use a 401(k) loan trust?

Hello all,

I have an IRA that was rolled over from an old 401K plan. It has around $24 k in it and it's mostly cash right now because I had to liquidate in order to move it to my new brokerage account. I want to open a Roth IRA and I'm trying to decide if I should convert this traditional IRA into a Roth. I am an MBA student so my only income this year will be a couple thousand from my internship- putting me in what I think is the 10% tax bracket (plus I am taking TONS of loans for grad school so I'm thinking I should not owe taxes for this year)

Here are my questions:

1. What kind of taxes will I owe if I convert to a Roth- also- some of the money in my IRA right now is after tax already, so will I get hit with taxes again on it? I mean, how do they determine on conversion what money is before tax and what money is after tax?

2. Is it worth it to convert or should I just open a Roth seperately now with whatever other money I can scrounge together (or just roll over some of my traditional- not all of it) and continue investing with my traditional IRA as well?

3. Will I even owe taxes this year if I convert to a Roth? My income for the year will literally be like $7500 and I have taken out tons of student loans in order to attend a top MBA program.

4. Is this the best year to do this since its the lowest tax bracket I'll ever be in (I will being working full time again in the fall of 2008)

5. Do I have to liquidate everything in my traditional IRA into cash in order to convert it to a Roth?

thanks in advance for all your advice!!

A small employer maintained a profit sharing plan, and of course, complied with ERISA's bonding requirements. By the end of the 2005 plan year, all employees were terminated. A contribution was made to the plan in March 2006 (for the 2005 plan year). The owner and his wife were the only employees in 2006. Contributions for 2006 were made only to the owner and wife's account. Again, in 2007, the owner and the spouse are the only employees. The ultimate question is:

Does ERISA's bonding requirement continue to apply if the only employees are the owner and the spouse? What if a former employee still has an account balances in the plan?

Any guidance is very much appreciated!! Thank you.

We have a client that just discovered that for the 2006 calendar year that two employees enrolled for dependent care, were reimbursed for dependent care expenses (the employer "fronts' the money for dependent care), but they never withheld money from the salary of these two individuals (this is a large employer and they do not distribute pay stubs - employees go online to see deferrals).

Any ideas on what can be done to rectify this situation - the employer wants to take missed deferrals during the remainder of 2007.

We need to retrieve a 2003 filing for a new client. Old TPA can't/won't provide it, client claims no knowledge of ever filing, but the EFAST system (I think that's who operates that database) says it was filed. Anyone know how to get copies from either IRS or DOL? How long it takes?

Did the PPA change how distributions must be made for an inherited IRA where the only beneficiary is a non-spouse beneficiary? I keep hearing that it did, but I can't find it.

from my research i can see these are subject to 415 limits. does anyone know how they are tested. it looks to me like you perform the adp 401(m) test.

An employer (company A) sponsors a 401(k) plan that has always been top heavy. They have always made the 3% top heavy minimum. Their last plan year end was 6/30/2006. 100% of the company was purchased on 8/31/2006 by another larger company (company B) that also sponsors a 401(k) plan. The company B 401(k) plan is not close to being top heavy.

Company B now sponsors two 401(k) plans, the former company A plan and the company B plan. Both plans are required to be aggregated for 416 purposes since both plans are now sponsored by one company. If they are aggregated they are not close to being top heavy.

Question: is a top heavy minimum contribution required in the (former company A plan)? We think yes because the top heavy determination date would be 6/30/2006 and the company was not purchased until 8/31/2006.

Does anyone disagree with this?

Thanks much.

Hello All:

An S-Corporation adopted a defined benefit pension plan ("DBPP") on December 28, 2006, that was effective January 1, 2006. DBPP was drafted by client's new law firm/CPA firm. As he was set to be terminated, the client's existing CPA, who did not know of the DBPP's existence, prepared the 2006 Form 1120S and sent it to the client on March 8, 2007. Client filed said return without realizing that no DBPP contribution was included on the 2006 Form 1120. As the Form 1120S was filed prior to March 15, 2007, no extension to file the corporate return was filed. Any arguments that client can make and deduct a DBPP contribution for 2006?

I had to try.

Thanks in advance for your comments.

Ed

Does anyone know of guidance on the issue of whether a defined benefit pension plan may permissibly condition the receipt of optional forms of benefits (i.e, forms of benefits other than the QJSA) on the good health of the participant at the time of election? The good health requirement is enforced by subjecting the participant to a medical examination.

Here's an example- what if the plan was to say something like this:

"In addition to the QJSA form of pension, there are other options available to you. Your spouse's consent is required for any of these options. In the case of each of the following, you must be in good health at the time of your application or have chosen the options at least 12 months before the effective date of your normal pension. If you do not elect one of the following optional ways to receive your pension at least one year before the effective date of your pension, you will most likely be asked to take a medical examination. The optional forms of payments are....."

Lets assume the participant has the ability to choose an effective date.

Any thoughts are appreciated.