I was reading commentary which indicated that Code Section 410(b)(4) provides a special tax rule for HCEs when the reason for a plan disqualification is a failure to satisfy coverage under 410(b) or the minimum participation test under 401(a)(26). Under the special rule, the HCE's entire vested benefit is taxed as if were distributed in the plan year of disqualification.

Why, when I look at 410(b)(4), do I not see this...what am I missing?

I have a single employer/employee money purchase plan in which the employer died last year. I'm assuming this becomes an orphaned plan. My question is would his beneficiary have to assume sponsorship of the plan as a successor employer in order to sign the final 5500? There is no one else beside his beneficiary who would have any vested interest in this plan. How is this accomplished? A board resolution assuming sponsorship? Thank you.

Linda Michals

I'm not seeing final regs for Roth 403(b) anywhere. Is it just implied that Roth 403(b) will mirror the Roth 401(k) regulations?

For 2006 and 2007, does the 150% of unf CL 404 limit apply to a one person plan?

Are IRA distributions subject to Generation Skipping Tax (GST)?

Sec. 26.2611-1 Generation-skipping transfer defined.

A generation-skipping transfer (GST) is an event that is either a

direct skip, a taxable distribution, or a taxable termination. See Sec.

26.2612-1 for the definition of these terms. The determination as to

whether an event is a GST is made by reference to the most recent

transfer subject to the estate or gift tax. See Sec. 26.2652-1(a)(2)

for determining whether a transfer is subject to Federal estate or gift

tax.

Just got in the best (worst) VCP problem I've ever handled. A governmental agency has maintained a "plan" since 1992 but has never had or cannot find a plan document. The mutual fund company that holds the assets says that each participant's contributions are held in two IRAs - one for the employer's contributions (sounds like a SEP) and one for the employee's contributions. The client says that the participant contributions are pre-tax (sounds like a SARSEP). The real problem (leaving aside the absence of a plan document) is that governmental agencies are not eligible to maintain a SARSEP. So, I look at 2006-27 and find "Employer Eligibility Failure" (see 5.01(2)(d)). The permitted correction of an EEF under 6.03 is pretty easy - stop making contributions to the plan. Unfortunately, an EEF is limited to employers not eligible to adopt a 401(k) plan. I can't find a similar provision for employers who can't adopt a SARSEP. Any ideas about how to approach the IRS about correcting a defect in a plan (some combination of non-amender/non-adopter) that the client wasn't even eligible to maintain? Thanks.

an adviser(age 59) deferred appx 19,000 in his financial company's 401. $14K was pre tax and $5k was pure after tax dollars, not Roth. could he defer the additional $6k pre tax into his own companies plan?

I know this has been asked plenty, but....

I'm 53, and started my roth in 2000 with a conversion from a traditional IRA. Made a $3000 contribution in 2002. I want to take out the contribution and original conversion amount this year, it comes out to app. $12000.

The way I understand it, the $3000 contribution is completely tax and penalty free. The original $9000 conversion is tax free, but subject to a 10% penalty and would show up on line 60 of the 1040 form.

In other words, I'd owe about $900 by taking this amount out in a distribution. Does that sound accurate?

I know there will be questions as to why I would take any out of the roth in this way, but I have my reasons.

Thanks folks!

Hello!

I have a Roth IRA, and I contribute the maximum to this account every year ($4000 this year). I am wondering whether I can try to augment the growth of this account by buying an additional $1000-$2000 worth of equities or mutual funds on margin. In other words, can I contribute $4000 and use this to buy $6000 of securities--$4000 with cash and $2000 on margin? I realize that this strategy could lose money if the extra investments did not outperform the interest + inflation on those margin purchases, I am just wondering whether such purchases would even be allowed.

Thanks!

-Mike

Also, can I own options in a Roth IRA account?

Anyone have any experience with a health plan (or any other welfare plan) with eligibility to particiapte based upon productivity criteria? Full time versus part time to be determined not by hours worked, but by amount of work produced.

Has anyone received the study guide yet?

1.416-1 M-12, states that the 2% DB minimum can be offset by the DC balance to determine if TH is met. A literal reading is that the cumulative DC balance can be used. Thus, if the DC plan was around for years and years and the DB is new, a large offset is available for many. It's almost as if the DC TH is doing double duty and it doesn't make entire sense to me, but...

Anyone disagree or know of a Gray Book answer either way?

We have quite a few profit sharing plans that have 3/20 vesting and were wondering if the plans had to be amended currently to reflect the 2/20 minimum vesting requirement under PPA, or could that change just be made part of the PPA restatement that will happen a couple of years from now as long as the plan operationally uses the 2/20 schedule from now on? All help is appreciated.

I'm aware than when a major change happens within the medical benefits a new SPD should go the employees within a certain amount of time. Does anyone know what constitues a "major" change? Does changing a plan from paying 90% after deductible to paying 80% after deductible constitute a "major" change? Any information would be greatly appreciated. Thank you,

If I decide to retire and withdraw $50000 in 401k funds at age 59 1/2, I understand that 20% will be withheld for taxes, leaving me $40000 for the remainder of the year. However, If I take out a 401k loan for $50000, then after attaining age 59 1/2 I default on the loan, will I have had full use of the $50000, without any pre-paid taxes or penalties??

Let's say a Corporation with a calendar year Fiscal year and Plan year does not go on extension and files their 2006 tax return by 3/15/07. If they prepare an amended 2006 tax return filing prior to 9/15/07, can they increase the profit sharing deduction that they had taken on the original filing as long as they contribute this increased amount by 9/15/07. Is this allowable/deductible/possible/plausible....?

Hi there,

Just found out that we have a DOL audit headed our way in about a month. We are a Trust Company provider of plan administration and trust services for qualified DC and Non-Qual deferred comp plans. Does anyone have any recent experience with a DOL audit? If so, what were the focus areas? I feel good overall about my department's documentation (plan doc's, procedure manuals, etc.), but what are they possibly going to find that I am not thinking about?

Thanks for any help!

I submitted an on-cycle (cycle A) application for a determination letter. It was an up-to-date and restated plan. However, I received the entire application back, with a letter 1014. Letter 1014 is a form letter that states that the plan was either submitted off-cycle or not restated for EGTRRA and other required changes. I have called the agent, but not heard back yet. Has anyone else had an application returned inexplicably?

Do multi-employer health and welfare funds track or have the ability to determine employer-specific data -- such as the total amount of claims paid out to/on behalf of all employees/beneficiaries of a specific employer, and how many employees have actually received benefits for spouses, children, etc., in addition to themselves ? Is there any requirement that this be done ?

Background:

5 individual unrelated doctors with separate practices entered into an overhead cost sharing arrangement. They created an LLC to pay the overhead costs and bill each practice for their respective share of the costs.

Facts:

1. Overhead LLC is owned 20% each by Doctors A,B,C,D & E.

2. Dr. A owns 100% of his own LLC.

3. Dr. B. owns 100% of his own S. Corp

4. Dr. C. owns 100% of his own S. Corp.

5. Drs. D&E each own 50% of their own LLC

6. Drs. D&E also each own 50% of their own S. Corp.

7. Both practices owned by Drs. D&E are covered under the same plan.

8. Overhead LLC has no HCEs.

9. The doctors are the only HCEs in their separate practices.

Issue:

Currently there are 5 separate plans. One each for:

1. Overhead LLC

2. LLC for Dr. A.

3. Scorp for Dr. B

4. Scorp for Dr. C

5. LLC and Scorp for Drs. D&E.

Assume:

1. The plans are dissimilar

2. The plans will not pass coverage or discrimation testing allowing them to be permissively aggregated.

Question:

Do I have an affiliated service group that needs to be covered under one plan? What regs and code sections do I need to quote?