Facts:

Roth IRA holder is over age 59-1/2

Roth IRA opened with contribution on 5/15/1999

Took total distribution of entire Roth IRA balance on 6/22/06

Rolled over total amount of 6/22/06 distribution to new Roth IRA on 7/30/06

Took total distribution of entire Roth IRA balance on 1/25/07

Is the 1/25/07 Roth IRA distribution qualified?

Pub 590 and other guidance states the five-year clock starts the year for which a Roth IRA contribution is made. It does not say it starts the year the Roth IRA contribution is made, so it appears to be a loophole in which a person can open a Roth IRA, however small, take a distribution after five years, even closing the Roth IRA, and this preserves that taxpayer's qualified status for all subsequent Roth IRA distributions.

What am I missing? Any help is appreciated.

Thank you.

Two questions.

I have a plan that has 88% of the ownership in Trust under a deceased persons name but for the benefit of his wife who is living and owns 3% on her own. Should I be counting the Trust shares under her for a total of 91%?

Also, when determining the top paid group - 20% comes out to 3.2 employees. Do you round up to 4 or down to 3 in this case?

Thanks!

We have a new 401(k) plan effective 1/1/2006. Participants were eligible to make contributions until 7/1/2006. As of 7/1/2006 there were 100 participants. Is an auditor's report required to be filed with the initial Form 5500? Technically, as of the first day of the plan year there were no plan participants?

How restrictive should a 457 plan be for granting a hardship withdrawal for imminent foreclosure on a participant's primary residence. Would a default letter from a mortgage company or bank threatening foreclosure proceedings will begin by a certain date if the mortgage is not brought from arrears be enough to grant a hardship or would foreclosure proceedings actually need to begin?

I have noticed that when the bank actually begins foreclosure proceedings it goes to an attorney and the participant incurs substantially more debt to pay for attorney fees and other expenses to begin the public sale of the home.

Thanks.

First paragraph of letter received from the Department of the Treasury dated 2/2/07:

"This letter is to acknowledge the receipt of your letter dated July 27, 2006. I apologize for the long wait of the response for your request, we are currently in a pilot program for 6 months that will end in March, only until September a decision will be made, and then letter forwarding will be input with this pilot so hopefully we will be able to work efficient, thanks for your patients."

Do you think its time for us to use a lost participant service?

Company A had a 401(k) plan. In 2006 employees of Company B, which is considered a single employer with Company A, were allowed to make elective contributions, but Company B had not adopted the plan in 2006.

Is there some way to correct this (now in 2007) without a huge amount of effort?

I see that you can correct inclusion of employees who did not meet age and service requirements by a retroactive amendment and a determination letter request, but the reason these employees shouldn't have been included is because the employer hadn't adopted the plan (not because they didn't meet age/service conditions).

Is it too late to make a retroactive amendment under general remedial amendment period rules? I think it may be because this would probably be characterized as a discretionary amendment and we're past the end of the Plan Year.

I'm not even sure if this qualifies for VCP.

This seems like something that ought to be correctible because the companies are a "single employer," and employees weren't hurt.

Any words of wisdom would be appreciated.

A DC plan wants to offer everyone the right to receive an in-service distribution but only for a limited period of time. Do you see this as a 411(d)(6) violation once the period ends? I can't find anything yet that makes me think this is allowable.

Under the new executive compensation regulations, do issuers have to disclose ESOP allocations in the "All Other Compensation" column of the Summary Compensation Table? My reading of the regulations indicates that they do, but I have not seen one proxy statement filed under the new rules that include such disclosure (although issuers do disclose company contributions to 401(k) accounts). Any advice would be appreciated.

I understand that, while all participants have to be given the right to open an IDA inside of plans that allow for them, there are certain restrictions, such as asset level that can keep participants from opening an outside brokerage account. For instance, I have heard of plans requiring participants to have at least a $25,000 account balance in order to open an account. Is there a maximum on this minimum account balance requirement?

What other types of restrictions can a plan sponsor place on IDA's?

Thanks in advance!

When PPA originally came out, I know that it said that guidance would be forthcoming, with regards to the default investments used inside of Safe Harbor plans. Basically, this was citing the use of overly conservative default investments, which were keeping participants from realizing a reasonable amount of growth. I have not yet seen that guidance. Have you?

I've been reading 105(h)(5) and 1.105-11, and I just can't find any clear answers about who is "among the highest paid 25 percent of all employees" ?

Is it nothing more than looking at the number of employees as of the end of the plan year, ranking them by 415 comp, and calling the top 25% highly compensated individuals? Or, do you need to include the comp of any employee who received a reimbursement but may have left before the end of the plan year? Is it possible to make a determination who is top 25% in the middle of the plan year?

XTitan

I have a contractor client who has union employees and office staff. The union employees participate in a union sponsored DB plan and the employer contributes $4.8 per hour to the union db plan. I am comfortable with the deductibility issue for the company. My question is how do you calculate the 415 limit for each participant? I have 401(k) contributions and a modest employer profit sharing. I would appreciate any thoughts you could provide to help. Many thanks for your efforts on our behalf!!!

A prospect with a 32 participant DB plan indicated to us that:

1. Their plan does not allow any more new entrants hired on or after [date].

2. The usual benefit accrual formula continues for all who entered the plan before [same date].

To me, it seems likely that this plan will eventually fail the ratio percent test when testing all employees who would normally have have entered without regard to #1 above (it might already fail, I have yet to see the data). When that happens, even if we run an average benefits test, how will such a plan continue to satisfy 410? I'm not sure that a 'hired after' date works as a reasonable business classification...

Can we just ignore all of the employees hired after [date] when we do the coverage tests? If so, where's the code/reg or other cite for that? If the benefit accruals were frozen, sure, but that's not the case here. Am I missing something?

I have a client that wants to cause his IRA to purchase property from a 501©(3) non-profit organization.

The non-profit was organized several years ago by the IRA owner as a corporation without stock.

The IRA owner does not serve on the board of directors, but serves at the board's pleasure as the executive director.

Because there is no stock, it seems 4975 technically does not apply to cause the transaction to be prohibited and disqualiy the IRA under 408.

I must be looking in the wrong places as I cannot find any thing on point.

If anyone knows the cites to any rulings that address this, such would be greatly appreciated. Thank you.

Can an employer have different eligibility provisions for different groups of EE's in a safe harbor 401(k) (assuming they pass coverage)?

For example: one plan, two employee groups. Group A is eligible to contribute and receive standard safe harbor match after 3 months of employment and age 21. Group B is eligible for the exact same contribution rate and match but not until after completing 6 months of employment and age 21.

If the two groups pass coverage, is this permissible?

A client wants to start a business but has no liquid assets. He does, however, have an IRA. He would like to direct his IRA to purchase stock of the company he wants to start. I am looking at IRC 4975 and am thinking that this would be a prohibited transaction but IRC Section 4975©(3) has a special rule for IRAs that might (??) allow it?

How do you read 4975's application to this idea? thanks in advance.

Sorry, posted this somewhere else but it probably should be here:

Can a non-parent company in a controlled group arrangement file for a QSLOB election?

I am advising a plan sponsor that is part of a control group, which I think is in an industry outlined in Rev. Proc. 91-64 and I believe the plan sponsor is the only one in that industry in the control group -- so I believe the safe harbor is satisfied. My client, near the bottom of the food chain, has qualified plans and the only other qualified plans in the control group are sponsored by the parent.

Can my client file the 5310-A or does the parent company have to do it? Any input would be appreciated.

I'm not sure this is the right place for this question, but here goes.

What is the meaning of average annual compensation? Does it include salary, overtime and other benefits? Is it just yearly salary or any combination?

Thanks in advance

Can a non-parent company in a controlled group arrangement file for a QSLOB election?

I am advising a plan sponsor that is part of a control group, which I think is in an industry outlined in Rev. Proc. 91-64 and I believe the plan sponsor is the only one in that industry in the control group -- so I believe the safe harbor is satisfied. My client, near the bottom of the food chain, has qualified plans and the only other qualified plans in the control group are sponsored by the parent.

Can my client file the 5310-A or does the parent company have to do it? Any input would be appreciated.

I am advising an insurance agent who is working with an employer who offers domestic partner insurance benefits, both same and opposite sex DPs. Employer has structured the cafeteria plan so that an employee with a domestic partner in the health plan must pay the entire insurance premium after-tax (rather than allowing the employee's share of the premium to be paid pre-tax through the cafeteria plan and the DP's share paid post-tax). I assume this is to avoid administrative issues and costs in keeping track of split payments but have not discussed with the employer directly.

Is there anything prohibiting this arrangement? One concern I have is whether, based on employer census, this violates the cafeteria plan nondiscrimination rules. Effectively, this structure means that employees electing coverage of domestic partners under the health plan are ineligible for the pre-tax premium payment portion of the cafeteria plan. If a disproportionate number of so-electing employees are non-highly compensated employees, then there may be a (HCE/NHCE) discrimination issue.

Has anyone else run into a similar arrangment?