I have an employee who is asking if airfare for him and his wife can be reimbursed under an FSA. They are traveling with their 1 year old son for some follow-up medical care. I'm fairly sure that expenses can be reimbursed for one parent (plus the child), but not sure about BOTH parents. Also, what about hotel expenses?

Here is the situation:

I have both a traditional and a Roth IRA. I have just recently rolled a 401k plan into my traditional IRA. I am over 59 1/2 so I understand I could start taking withdrawals and I am retired/semiretired at this time.

I would like to make contributions to my Roth IRA using money taken as withdrawals from my traditional IRA. I would do this at the 5K annual max contribution limit to the Roth. I may or may not have earned income during this period.

The traditional IRA is currently 15 times larger than the Roth due to the influx of funds from the 401k. I would like to eventually have the funds more equally distributed or even all in the Roth.

OK experts, what is the verdict? Can I or can't I proceed with my plan?

Thanks

JD Thelen

I know this is a very basic question, but I can't seem to verify it anywhere else.

Hypothetical: A qualified plan is started with automatic enrollment and no age or eligibility service requirements. Would it be possible for an individual under 18 years old to participate?

I know custodial IRA's can be set up for this purpose. Or perhaps 529 savings plans. I know you can't require an individual to be older than 21 in order to participate, but is it possible for minors to participate?

Every possible answer to this question I've found simply states that having "no" age requirements is "not recommended," but nothing else is said about it.

Any thoughts?

I have a take over plan (12/31 yr end) where the only contributions are 401k ctbs, the company hasn't made any employer contributions for serveral years. Due to an acquistion (over 2 years ago) there is a control group relationship with a company that is currently not a participating employer and does not have a separate plan.

In running the 410b test on an annual basis it fails. Is the snapshot testing method available?

If it's not available and the employer has to make an employer contribution are these their correction options:

1) Make a PS contribution to the covered NHCE's which allows the plan to pass the ABT. If they are making a QNEC because of a failed ADP test, can the QNEC plus the regular PS be considered for the ABT or only the PS contribution?

2) Though the employer wouldn't like it, the cheaper route would be to give the non-covered NHCE's from the other company a QNEC in the amount of the covered NHCE's average deferral percent, which is only 1.87%.

Other considerations? Thanks!!

If an individual is participating in his employer's 401(k) plan but also has legitimate self-employment income from other activities, does anything bar that person from setting up a Keogh plan for the self-employment income?

A distributing plan administrator refuses to make a statement as to whether the plan is intended to be qualified.

Does anyone have any thoughts/experience on alternative acceptable documentation - SPD, check stub with "XYZ 401(k) Plan" showing the distributing plan's name - so the recipient plan can "reasonably conclude" that the distributing plan was qualified?

I have a plan with over 100 doctors all earning more than $100,000. The cross tested plan has 3 classes. one for Dr -owners, one class for other Dr's and one class for everyone else.

Does the 20% cap on the number of HCE's apply to cross testing?

An employer maintains two separate plans: a SH 401(k) plan and a 401(k) plan. In July, the employer is going to merger the two plans.

What does the contribution rate become starting July 1? (Can one merge a SH plan before the end of its plan year?)

I haven't been able to find any IRS guidance.

Employee executed a salary reduction agreement requesting X% be withheld but throughout the plan year (calendar year just ended) a lessor percentage was actually withheld. The employee (HCEE nonetheless) didn't realize the error. Should the correction method under 2006-27 be followed with respect to making up the "missed opportunity" similar to not including an eligible employee? Or should the entire difference be made up by the employer? Or no correction?

I know there is an exception to the 10% early withdrawal penalty due to death. However, I could not find if the exception applies if the deceased participant has an outstanding loan balance. Any help will be greatly appreciated....

3 sole props (no employees) decide to merge and form an LLC. 2 of them have their own 1-life 401k plans. They will all be equal owners (33%). Their intention is to "run" things as separately as possible, yet share employees, building space, etc. They also may want different contribution levels for themselves for retirement plan purposes. For example, the older owner wants to put away as much as he can, while the younger owner may want to fund his plan minimally.

Can they maintain 3 separate plans, 1 for each of them, with different levels of funding? I assume the answer is no since when they become an LLC, I assume the sole prop are no longer in existence and hence, there is no sole prop income from which to fund the plan.

However, could they set up a 401k with with separete classifications for the 3 owners, much like a new comp plan. Each classification is funded however much each owner wants to put in for himself. A 4th group would be all other employees. We would have to test for 401a4, but if they would pass, then this would work?

Is there a better way to accomplish their goals?

We have taken over two plans that are 100% owned by the same individual. The former TPA never aggregated the tests and treated the plans as entirely separate (two documents, two 5500s, two plans at the fund company).

The owner participates in only 1 of the plans. The plan the owner participates in does a matching contribution. The other plan has deferrals only and all NHCEs for 2006. I know we need to aggregate the 410b test but someone mentioned aggregating the ADP/ACP testing which I had never heard of - anyone know anything about aggregating ADP/ACP???

Let us say that you have a DB plan with only HCEs that has life insurance providing the death benefit. You have a profit sharing plan with only NHCEs and no life insurance. You meet 401(a)(26) minimum participation rules; and you meet 410(b) and 401(a)(4) with respect to benefits and contributions by testing the plans together and cross testing. But it would appear that you do not meet the benefits/rights and features requirement since the HCEs have life insurance and the NHCEs do not. In the profit sharing plan, would you need to provide the contribution needed to pass 410(b) and 401(a)(4) with respect to testing benefits/contributions PLUS an additional amount to provide equivalent life insurance, since the insurance in the DB plan is in addition to the accrued benefit? Or, because these are different types of plans, could you simply allow participants to invest part of their contribution in life insurance up to an equivalent amount and subject to the DC limits?

Employer just adopted the 401(a)(9) amendment in August 2006. It is my understanding that this still must be corrected under VCP as a non-amender. Am I totally off, but just adopting the amendment is not enough right? And the IRS will discover the error when the plan is submitted for EGTRRA right?

This probably seems like an easy question for you but I am trying to tell some people that plans cannot be ignored for years.

Company X has sponsored a stand alone 401(k) Plan for several years. Now, Company X wishes to "do away" with its stand alone plan and adopt a multiple employer plan.

If Company X adopts the Multiple Employer Plan, do the account balances of the existing stand alone plan need to be transferred into the Multiple Employer Plan? Or, could that existing stand alone plan be terminated with balance paid out to members?

I believe that under "successor plan rules", balance need to be transferred to the Multiple Employer Plan, but am foggy on that specific topic. Any help would be greatly appreciated.

A commission based employee has had his draw reduced to zero. He currently has benefits with the company and a 401(k) plan loan. Pursuant to the terms of the 401(k) plan, loans can only be repaid through payroll deductions. Does he default on the loan? How are his benefits handled? (he pays for the premiums) Any ideas??

I have a brokerage client who has termed in a db plan, and has a lump sum distribution from a plan that appears to have an asset shortfall. The plan's attorney wants the participant to secure a bond for the distribution in case the company bellies up. I am no db maven, but I did a quick read of para 215 of PPA and can't find any data to support this. As a matter of fact, it appears that the plan may be restricted from making a distribution.

DC/broker guy needs some help...

I searched and could not find a thread although I'm pretty sure this has been discussed before...

Plan excludes union employees from everything except the ability to make 401(k) deferral contributions. All union employees eligible to make 401(k) deferrals are then part of my participant count, correct?

This makes the count 122 as of 01/01/2006; I want to be sure I advise the client properly that they do, in fact, need an independent audit for 2006.

Thanks in advance.

I have a terminated employee in a DC plan that requested $10,000 a year in installments. With actuarial assumption for earnings, the installment period is less than 10 years. (These also did not go beyond her life expectancy.) Each year the individual has been directly rolling over the $10,000 into an IRA. (Don't ask me why she doesn't roll the whole thing in.)

After 5 years, she has now requested the installment amount be reduced to $3,000 a year. My question is, are these still subtsantially equal payments attached to the first series of $10,000 a year installments? Treasury regulation 1.402©-2 Q&A 5© states that if the payments change so that subsequent payments are not equal to the prior payments, you would make a new determination.

If they are linked to the prior $10,000 yearly installments, the combined period would be over 10 years and not eligible for rollover. If they are not linked and a new determination is to be made, then the new series of $3,000 a year installment would be less than 10 year and eligible for rollover.

I have not been able to find any examples for this. I looked at Revenue Ruling 2002-62, which defines substantially equal payments, but this type of scenario is not described.

Thanks!

A customer pays the taxes on the UBTI from withhin their IRA, the customer gives the Trustee of the IRA approval to liquidate an investment that is in the IRA. The check from the liquidation comes to the Trustee, the Trustee then deposits the check into a Federal Reserve for payment of the UBTI for the customer. I want to know is the money from that came from the liquidation considered a reportable distribution to the customer/IRS or would it be considered a transfer since the customer did not take receipt of the money?