If the ISO grant is:

150,000 at $.81 vest over 3 years

Does this exceed the $100k rule? I am confused on this. I was calculating by multiplying the option amount by price and then making the excess options NQ's.

If someone has an excel sheet or web site that would help me calculate.

Any insight would be great!

Regarding the participant notification requirements for automatic enrollment - if a participant is given notification on their date of entry and allowed the 30-day opt out period, is this sufficient? Can the level of automatic contributions be withheld for payrolls during the 30-day period OR is the 30-day notification period defined as the 30-day period prior to the participant's date of entry?

THANKS!

I have been contacted by an attorney with a question I have never had. He has a physician client, a Puerto Rican native, who is moving permanently to the US. He has what sounds like a prototype money purchase pension plan with a Determination Letter from PR Dept. of Treasury. He wants to establish a U.S. qualified plan and transfer the substantial assets from the PR trust to the US trust.

Can this be done?

Does anyone have experience with an employer reducing compensation to pay long term care premiums pursuant to a comp agreement for physicians that says the employer may reduce salary to pay "expenses." The employer wants to deduct the premiums for the long-term care for the physicians and doesn't want the benefits to be taxable to the physician. This doesn't seem right to me and sounds like a cafeteria plan election, which long-term care is not a qualified benefit under 125(f). I'm afraid if the IRS interpreted that way that they would also run afoul of the nondiscrimination rules under 125. Any help would be appreciated!

Thanks

I have a new plan which uses prior year testing according to the document. I know I can use 3% as the first year percentage for the ADP portion. This may be a dumb question but what do I use for the ACP portion? Thanks

I know that the form 5500EZ requires that the plan sponsor have an EIN... the EZ will not accept a SS#. BUT, up to the point where the sponsor must file the EZ I cant see that it is required that the plan sponsor must apply for an EIN. A self employed individual filing a Schedule C can use their SS#.

So... am I safe to understand that (as stated above) a SoloK client does not have to apply for an EIN for their business until they are required to file the EZ?

Thanks

In the park HR.... evil empire in the basement. Fun ball to watch.... hope it lasts!

Does anyone know the proper correction for a plan which has charged an incorrect interest rate on participant loans?

Hypothetical situation: Plan's loan program indicates a "reasonable rate of interest". Plan intended to charge prime +2, but recordkeeper's sytem mistakenly "froze" the interest rate in for a period of time 2005 (no interest rate updates were made when prime changed). In 2006, a system update was made which caused future interest rate changes to be made to the plan, but the "base" interest rate was now off the mark because of the time it was "frozen". (system calculates new interest rates by looking at the old one on the system and adding or subtracting the rate increase or decrease). So if prime went up by .25%, the interest rate for the plan also went up, but it never caught up to prime +2%.

So, the plan charged an interest rate that was below what it intended, and at times below prime. Does a correction need to be made?

Also, prior to 2005, all loans issued were prime +2%.

Does anyone have a link or perhaps the file for an old DC-2 Sample Exam? I didn't see them on ASPPA's website this year and have a friend who would really appreciate a pre-test.

Thanks!

Vicki

My father, mother, sister and I all work for our family business (S-Corp) along with several other employees. A year ago we instituted a Section 125 Premium Only Plan so that everyone could have their health insurance deducted pre-tax. At that time we were told that my father and mother could not participate however nothing was said about my sister or I. We are now planning on adding a Health FSA to the POP plan and were just informed by the person preparing the documents that since my sister and I are family members we can't participate in either program.

I had orginally thought that you had to be a 2% or greater shareholder and since I am not, thought I was eligble. We were informed that family members who work for S-corps are automatically excluded from these types of benefits because S-corps are "pass through" corporations. I could understand this if I was still a dependant but I have my own family now.

After digging and talking to several accountants it appears that my sister and I can participate however our net gain will only be the savings of 7.65% due to the Social security we won't have to pay. The company will also save the same in matching funds.

My questions are:

1) Am I correct in my thinking up to this point?

2) Is there a way my sister and I can participate in these programs and actually receive the full benefit?

Thanks in advance!

I'm doing a research comparison between profit sharing and employee share ownership plans in US, EU and Slovenia. I'm currently writing chapter about profit sharing and employee share ownership shemes in US, so that I can compare them in the next chapters with countries in EU and my country - Slovenia. Since I'm not familiar with your laws and regulation my question may seem very unexperinced. Anyway I would like to know who is a highly compensated employe. I have a data back from 1996, that this is an employee which ows more than 5% of a company which finances a retirement plan, has earned more than 80.000 USD a year and is included in a group of 20% employees with the top earnings. I assume that this terms change every year, so what is the latest version?

Thank you for your help.

N.

An employer maintains a qualified 401(k) plan for its employees to which any combination of before-tax 401(k), Roth 401(k) and/or after-tax contributions may be made. Participants contribuing up to a specified percentage of compensation receive an allocation of matching contributions. Under the 401(k) plan, once a participant's compensation reaches the 401(a)(17) limit, all further contribution cease for the remainder of the year. Thereafter, the equivalent amount of matching contributions that could have been made to the 401(k) plan but for the limit are continued to a spillover nonqualified plan. Under the plan, the sole triggering event is separation from service. In spite of the final 409A regulations, there is no initial deferral period -- instead, employees are paid in a lump sum at separation from service unless a transitional election of time and form of distribuxtion was made prior to 2008. In bringing the plan into compliance with the final 409A regs, an issue has arisen on when a participant must make the subsequent deferral election.

Based on counsel's interpretation of the proposed 409A regulations, the spillover plan proposed adopting a "push-out" rule in which a participant could make a subsequent deferral election up to the date of his/her separation from service, with the election becoming effective 12 months form tthe date it was made. The spillover plan would like to continue using the "push-out" rule when the plan is restated to comply with the 409A final regulations. An examination of the text of the final regulations on this issue provides conflicting interpretations. For example, in Reg. Section 1.409A-2(b)(1), the following language, which arguably supports the continued viability of the "push-out" rule, was added by the final regulations to what had appeared in the proposed regulations: "For purposes of this paragraph (b), except as otherwise provided in this section, a subsequentl deferral election is not considered made until such election becomes irrevocable under the terms of the plan. Accordingly, a plan may provide that a subsequent deferral election may be changed at any time before the last permissible date for making such a subsequent deferral election." This is contradicted by Reg. Section 1.409A-2(b)(9), Example 23, which was also added to the proposed regulations and involves a subsequent deferral election to change the payment trigger from separation from service to payment at the later of separation from service or the attainment of a specified age. The example provides as follows: "Employee W participates in a nonqualified deferred compensation plan that provides for a lump sum payment at separation from service. Employee W wishes to make the payment payable upon the later of separation from service or a predetermined age. Provided that Employee W makes such election on or before the date 1 year bfore a separation from service, Employee W may elect to receive a lump sum payment upon the later of the date 5 years following a separation from service or at a specified age."

Does anyone have any thoughts about whether the plan can continue using the "push-out" rule in the 409A compliant plan?

Is there any exception to the 5 year rule for Roth 401(k) Contributions in the case of disability ?

In other words, if I have not completed 5 years of participation since my first roth contribution and I take a distribution due to disability, will the income on my roth account be taxed?

I can not find an exception to the 5 year rule, so I think it would be taxed.

I should have known better than to delve into this on a Friday afternoon. I started off thinking I knew what I was doing, and have managed to confuse myself. This isn't a real plan or document, just hypothetical.

Suppose you have a 401(k) that provides a dollar for dollar match, up to 3%, and also provides for an employer discretionary contribution on a cross tested basis.

Let's further assume that for a given year, the employer makes no discretionary contribution but the plan is top heavy. Some participants have deferred, some have not. The employer wants to use the match as counting toward the TH. Clearly this is allowable. Question is, is this satisfying the "multiple allocation" exception for TH in 1.401(a)(4)-2(b), and thus does not require general testing for the additional employer contribution to bring everyone up to 3% who doesn't already get 3% from the match?

Part two - assuming for the moment that the above is ok and general testing of the additional required top heavy isn't necessary, now the employer wants to contribute an additional discretionary contribution to be allocated on a cross tested basis. Can this be allocated on a cross tested basis separately, or must the rest of the employer constribution for TH be brought in? All subject to gateway, of course...

By the time I come back on Tuesday, maybe I'll no longer be confused. In advance, wishing you all a good long weekend.

Is there a regulation (new or old) that states a non spouse beneficiary must distribute the assets from the deceased retirement account within 5 years?

If so,

Does this apply to a spouse beneficiary as well?

What happens if the distribution is not made within the 5 years?

Thank you.

I'm having a little trouble thinking a situation through and need some help.

Fiscal Year 125 program 6/30 pye

2 components (1)Health FSA (2)DCAP

Client starts out in June at 500/mo dcap pre-tax, anticipating claims beginning in the Fall for dependent care expenses - so accumulates, say, 4 mos x 500+2000.

Likewise employees elects 200/mo health fsa. for $2400 coverage.

Along comes October and client's spouse, with respect to whose work the DCAP funding was anticipated, decides to be a stay at home mom.

It seems to me that, prospectively, employee can stop DCAP contributions.

Question concerns the 2000 "accumulation" of DCAP money. To wit, can the employer increase the health fsa coverage to $2400+$2000=$4400, or is the $2000.00 DCAP necessarily lost under the use-it-or-lose-it concept?

Appreciate your thoughts.

Is there any prohibition against an employer entering into an employment agreement that will make a partner whole for any forfeitures from a qualified plan? The employer would reimburse the partner with assets outside the plan and such reimbursement would be taxable to the partner. Does this violate any qualified plan rule?

Plan sponsor has an existing age-weighted Profit Sharing plan, which has been around for a number of years. The time has come to adopt a DB plan, in addition to the PS plan. All the same folks in the PS plan will also be in the DB plan. The PS plan is, of course, Top Heavy. When the DB plan is adopted, must all prior service be counted for vesting or can the plan exclude service prior to adoption for vesting purposes?

Thank you to all who take the time to help out on this website!!

Craig

Maybe a silly question but want to verify I am not missing anything.

Client has VEBA and for the first time, the participant count is under 100 and will not be going back over 100.

Since the plan is funded through the VEBA trust, I know there is a 5500 requirement regardless of the count. But do they need an audit if the count is now under 100. I believe no but want to confirm.

Thank you

Can a plan document exclude a class of employees (highly compensated employees) from the matching portion of a plan while still allowing them to participate in the 401k deferral portion of the plan?

Clain