I have a 401K plan that failed the ADP test the last two years. I told them the amounts to refund but they have failed to do so at this time. What do I do next? How can this be corrected? Any insight would be appreciated!

I do not have much experience with Multiple Employer plans. A client is considering separating its DB plan into a multiple employer plan. There are 4 separate plans involved (they do not meet requirements for controlled group status). Does any one have a reference for procedures involved in restructuring the plan? Are separate agreements regarding funding obligations or termination liability of each company required or are these issues addressed within plan document?

A one participant owner/employee client has a plan year through 3/31.

They had large windfall and are trying to maximize deduction.

I prepared a 3/31/07 valuation and said based on estimated assets the max deduction (150% UCL) was $500k.

Apparently the CPA reports this to the client. The client is happy.

The CPA gets back to me later in day with actual assets. The assets have a large gain and the max deduction goes down to 400k.

A week later, the CPA tells me that I need to use the 500k results.

Any ideas?

I suppose I can check into changing the asset valuation method from market value to a smoothing method. It's a year-end valuation.

The plan is at 415 limit and an amendment to a lower ret age has to be in effect for two years, per 404. So that won't help right now.

The facts above have been simplified for purposes of this thread.

Now the kicker is that the CPA's referred to above work at my firm, thus the demand is coming from internal management.

Thanks.

A colleague who does a lot of work on participant-directed DC plans told me earlier today that virtually all DB plans have adopted an investment policy statement. In my experience, I have not seen any DB plans with investment policy statements (granted, I work on smaller DBs--generally under 500 participants). I am just wondering whether other DB folks (1) see IPSs on their DBs and (2), if they do, how they go about defining the investment objectives. In the case of a DC plan, it is easy to see a disgruntled participant suing the plan for breach of fiduciary duty resulting in poor returns. In the case of a DB plan, the company simply puts more money in the plan if the assets underperform the actuarial assumptions. Anyone care to comment?

interesting - the 'correction methods' under the old regs 1.415-6(b)(6) have been eliminated. (these included the return of deferrals for 415 violations.) however, the news regs say you can use the old rules pending further guidance, but only if you qualify under the EPCRS program.

and those comments are only found in the preamble not in the actual regs, so when you get a new copy of the regs and throw out your old one, hhmmmm. lets see, you might not have the preamble, and if the old regs aren't included somewhere in your new copy, you won't even have that.

gotta love it!

oh, the further guidance depends on comments received via EPCRS (Rev Proc 2006-27, section 2)

If an eligible employee fails to submit the necessary paperwork to establish the HSA, what happens to the employer's contribution if the employee is now terminated.

The employee did not elect to contribute to her HSA, but did elect employee and spouse HDHP coverage.

The employer contributes a certain amount for employee and spouse coverage under a HDHP so it submitted her contribution to the financial institution each month (2 months).

It was just discovered that her account was never established as a result of the financial institution sending the employer contribution back to the employer.

How must this refund be handled:

1) Sent on to the terminated employee without tax consequenses since it was all employer contributions

2) Employer keeps reimbursement since employee failed to establish HSA

3) Must terminated employee open the HSA so contributions can be deposited.

I do see in 26 CFR Part 54, III that an employer is not required to make comparable contributions for a calendar year to an employee's HSA if the employee has not established an HSA by December 31st of the calendar year.

The employee was hired on 12/4/06. She was eligible for the HSA on 2/1/07. She terminated employment on March 10, 2007. The employer had submitted their contribution to her account for February and March 2007.

Your help and guidance in this matter is greatly appreciated.

My client divorced her spouse in 2002 and a QDRO was ordered but because of subsequent litigation and other problems the full QDRO right has still not been satisfied. Recenlty, a court ordered a significant interest award because of the delay. The other party proposes to pay the interest in QDRO form. My client's accountant is concerned that the portion of the QDRO attributable to interest might be taxed when the QDRO is entered even if the full award is rolled over to an IRA (DC plan is involved that allows immediate QDRO distribution). -- Is there any way the QDRO might be taxed when entered? 1041 provides for no gain or loss with respect to distributions pursuant to a divorce, but case law says that 1041 does not apply to any portion of such distributions applicable to interest. Will that case law apply to the interest portion of a QDRO?

Thanks in advance.

Need to know! Is there a time frame that an employer has legally to adhere to when reimbursing your FSA monies? I was told I would have a check in two weeks. I submitted all receipts last week of December and as of the date of this post still have not received the $600 from my account. I have also willfully left my employment with the company the middle of February, but have maintained contact. I keep getting "oh the check is in the mail for the amount of $600, or the check was misplaced, and so on and so on. Are there penalties or fines the employer or managing agent of the FSA account can face by not expediting this return of my money in a certain amount of time? I'm very frustrated. Too, I now live out of the US and feel that I am just getting the run around. Thanks for your time. Not sure what my next step should be here but this just doesn't seem right.

is it sufficient to list the participants actual vested percentage or must the plan's vesting schedule be listed on the statement as well?

A participant's child has been diagnosed with Celiac disease; are books on coping/living with the disease, and cookbooks reimbursable through the FSA?

Please confirm that only the Employer EIN is now required on the 5500 filings now that Schedule P is no longer required. Few of our plans have a Trust EIN but I want to make sure it no longer is needed for the filings. Thanks in advance

Employer who sponsors a fully insured health care plan is switching health care providers. Currently, the employer provides retiree medical benefits based on a very informal policy. I believe there are currently 4 people who are receiving such benefits. Most of whom were executives of the company. The new provider is requiring the employer define who is (or who will be) eligible to receive retiree medical benefits.

The twist is that employer wants to provide retiree medical benefits to "only those people selected by the Board of Directors." In other words, the employer does not want to say only select management or certain officers but wants to be able to provide retiree benefits to a person if they have been with the company for 20 years (as an example). However, employer does not want to provide retiree medical benefits for all of its employees, it does not want to lock itself into providing benefits to all, and it does not want to lock itself out of providing benefits to certain rank-and-file.

Employer wants to know if is it possible, under law, to provide retiree medical benefits as it wishes? If so, what is some language they could use to define the "group" who is eligible for retiree medical benefits.

Thank you!

First time here and can't seem to find an answer to my question in the archives, so hoping for a little help. My husband is starting a new job tomorrow. We are right now trying to fill out the paperwork on the 401 plans the company is offering. Based on years of service, they are offering to match up to 8% on either a 401k or 401a. From what I am reading, the 401k is pre-tax and the 401a is after-tax. We have never had this opportunity and clueless as to which is best and looking for some direction. Thanks to anyone who might be able to offer us some help.

Hello, I found this message board very helpful and intersting. My question is as follows:

We are testing 2006 and in 2005, we had a restructuring that eliminated many of our HCE's. Due to this, there is a large count for people employed in 2005 to compute our Top Paid 20%, since they all left after more than 6 months of service.

When I prepared the look-back list of everyone that received compensation in 2003 and listed it in decending order and apply the 20% limit, 14 of the top 25 (my 20% number) had no service in 2006, but they and the remaining 11 are HCE's by definition.

The question is does this mean that I only use those 11 HCE's for the testing in 2006 (we are on the current year testing method)? Any employee below the 11 that remained in 2006 that earned >90K, was not in the top 20% for 2005.

Note: We have no 5% owners in either year.

If a plan is a safe harbor plan with all accounts 100% vested, would a generic quarterly statement stating that all accounts for all participants are 100% vested fulfill the new vested account balance requirement?

Hello!

I withdrew all monies in my Roth IRA account in 2006 as a first time home owner. I'm confused about the various components of the distribution and would very much appreciate some guidance on the tax ramifications.

The IRA was opened in 2001. A total of $15,000 was contributed from 2001-2005. Additionally, I rolled monies from a former 401K plan in January 2006 into my Roth IRA in the amount of about $6,800 via a rollover IRA. My Roth IRA was valued at about $28,900 when I closed the account in May 2006.

I understand that I can take out the $15,000 tax- and penalty-free. What about the amount rolled over from the 401K and all earnings on the account, which equal about $7100?

Thanks in advance for your feedback.

A question has arisen as to a taxpayer who initiated a Roth Conversion in November, 2005, when the taxpayers AGI was $90,000. The taxpayer paid the tax on the conversion with their 2005 return. However, the new custodian of the IRA failed to complete the conversion until January, 2006, and has issued a 2006 Form 1099-R stating that the conversion occured in 2006. The taxpayers AGI in 2006 is over $100,000, so a conversion could not occur in 2006.

The question is whether the taxpayer can leave things as they are; that is, the conversion occured in 2005, or do they have to file an amended return removing the conversion in 2005, and then having to go through a recharicterization of the Roth in 2007, due to the inability to convert to a Roth in 2006.

Any replies would be helpful! Thanks much.

I know in a KSOP you can't fund the Safe Harbor with employer stock, but if you've got a properly functioning leveraged ESOP, can you have the 3% contribution go into that Plan?

Thanks

Christopher

Had an interesting experience this morning

Had someone tell me that their lawyer told them (yes, 2nd or 3rd hand information)

1. Even if the Employer has been sponsoring a 401(k) Plan for many years that it is okay for the Employer to establish a new qualifed ESOP with years of service starting from plan effective date; and

2. That when an Employer is sponsoring both an ESOP and a 401(k) Plan, that the 415 limit applies to each individual plan. In other words, it could be $45,000 in the ESOP and $45,000 in the 401(k).

Before I'd had this meeting I would have thought the answer to both was obvious --- no. But now I'm not sure about anything anymore.

Thanks

Christopher

Can a participant make a hardship withdrawal from ER dollars held within a MPPP as long as it is for an immediate and heavy financial need on the participant? Or, are hardships not allowed with MPPP plans?