Getting some conflicting information - can an employer change their safe harbor match to an enhanced match during the plan year. For example, calendar year plan year and from 1-1 to 6-30 the plan is providing a basic S-H match. Effective 7-1 the employer wants to use an enhanced match for the remainder of the plan year. Plan is amended effective 7-1 and revised Notices distributed.

I thought changing the S-H match (other than eliminating it with proper notice, amendment) during the year was prohibited?

And if changing the basic S-H match to an enhanced match is allowed, is changing a S-H nonelective from 3% to a higher percentage during the year allowed (again with proper amendment and notices)?

An employee in Company A also received some compensation late in 2006 from Company B. The companies are unrelated, but participate in the same 401(k) plan. The employee had made the maximum 402(g) contribution relating to Company A compensation before receiving the compensation from Company B, so did not defer based on B compensation. The employee is an HCE wrt Company A, but is a NHCE wrt Company B.

Company B's ADP test fails due to the employee's zero deferral. Can the employee be treated as not eligible to make deferrals wrt Company B, and therefore be excluded from the ADP test? Seems only fair and logical to do that, but we know IRS rules don't operate on that basis.

Thanks

Can a participant rollover their Roth 401(k) account to a Roth 403(b) and vice versa. I was under the impression this was not permitted. I thought I read recently, that the PPA contained language permitting rollovers between roth accounts. Any information and supporting regulations are appreciated.

Thank you

One of my clients - who has terminated employment - is being told that his 401k plan limits his ability to rollover or withdraw his salary deferrals to $15,000 prior to age 55.

Is this legal? I was not aware that plan documents could restrict terminated employee access to salary deferral contributions.

A small 401k plan had 1 payout (rollover) in 2006. By accident, our office and the accountant separetely prepared identical 1099-R's, which the owner/Plan administrator promptly filed both copies with the IRS and sent both versions to the former participants.

Can anyone advise on how to fix this? If we file an amended 1099-R showing $0.00, I'm concerned that might wipe out both 1099s. To do nothing would make it seem that there were 2 distributions. Since this was a rollover with no taxable event, is it best to just do nothing?

Thanks

In trying to figure out a way for some owners to maximize their annual additions, I came up with the idea of using employee contributions to get there. I would appreciate any comments if what I have is way off base.

Company has 9 employees, with 2 owners (brothers), plus 5 more lineal family members, for a total of 7 HCEs, with 2 non-related NHCEs. Plan is a Roth 401(k) 3% safe harbor. No other contributions so far. New Comp. won't work in this plan if we try to favor the 2 owners. Everyone has elected to make Roth contributions rather than pre-tax 401(k).

What if the plan allowed for both Roth and after-tax employee contributions? The 2 owners (with comp of $225,000) make $15,500 in Roth contributions, get $6750 in s/harbor contribution, and a contribution of $22,750 in after-tax employee contributions, getting them to $45,000 in 2007. If none of the other 5 HCEs make after-tax employee contributions, the 401(m) HCE ACR would only be 2.89%. If the 2 NHCEs were to put in on average 1.45% after-tax (but not Roth) or if the company put in a 1.45% QNEC for NHCEs only, then 401(m) passes (1.45 *2= 2.90%).

Granted this is a pretty narrow set of circumstances, but does this work as well as it seems to work? The owners, who already favor after-tax plan money (compared to pre-tax) can hit $45,000 by either making a small QNEC or possibly no additional ER contribution if the NHCEs put in a small EE contribution.

Is there any difference tax-wise between after-tax employee contributions and Roth contributions? Am I correct in that both contributions go in after-tax, earnings grow tax-free, and both are not subject to income tax upon distribution? I know there are some differences regarding when and how withdrawals are made.

Suppose an employer sponsors a safe harbor unit benefit DB. If the same employer adopts a safe harbor 401(k) are we required to general test accross two plans?

I make over 100k and I'm currently doing 15% per paycheck. Last year I had reached my 15k goal by end of October. I want to save as much as possible for my retirement, but this 15,500k limit seems low. What is the best way to save more, does it make a difference if I go traditional 401k or Roth, what is the best for my situation.

Thank you.

I am new to this board but I am aware of the impact that fees have on retirement accounts which has led me to ask this question.

If an individual has access to a 457 plan but the plan has high expenses, is the individual better off taking advantage of his/her Roth Ira and after maxing that out, investing the remainder in a taxable index fund(s). Are the contributions a participant makes before taxes so significant that it outweighs the possible high expenses in the plan.

Here are the expenses in the 457 plan.

Bond Index .40

Int'l Stock Index .60

Midcap Index .50

S&P 500 Index .50

Small Cap Index .50

In addition to the above basis points, the plan also charges .57% for administration, no other fees.

This is not an annuity. It's a 457 offered thru AIG/Valic invested directly in mutual funds.

I have tried to google search a financial calculator to answer my question. Does one just pass up this 457 plan and invest directly in Vanguard's Index Funds that range from 19 to 32 basis points, and do so in a roth Ira first and then in a taxable account.

I am single, 25 years of age, earn between 40 and 45K and live in Florida.

Any help is appreciated.

Please help with the following scenario to determine if an excluded class of employees must receive a gateway minimum:

Plan type: Cross-tested 401(k) plan, no match - plan is top heavy

Plan document Eligible Employee exclusions:

Excluded from Elective Deferrals - Union, Non-Resident Aliens and Other: Employees who are classified as paid on a "per diem" basis and not regularly scheduled to work over 999 hours during the plan year.

Excluded from Employer contributions - Union, Non-Resident Aliens and Other: Employees who are classified as paid on a "per diem" basis and not regularly scheduled to work over 999 hours during the plan year and Contract employees except to the extent to satisfy top heavy requirements under Section 416.

For purposes of performing the cross-testing would the Contract employees who receive a 3% top heavy contribution be required to receive a minimum gateway contribution?

Or, is this category of employee is treated as not benefiting for cross-testing purposes and therefore not required to receive the minimum gateway?

I have not found any examples addressing a situation exactly like this so any input would be greatly appreciated.

Moved question to cross-tested board

A small non-profit wants to establish a non-governmental 457(b) top hat plan for a key executive. They would like to include a rabbi trust. My understanding is that the trustee of a Rabbi Trust has to be a corporate entity and not an individual. Most of the entities which would provide the trustee services are cost prohbitive, especially for an employer of this size. Other than going without the Rabbi Trust, are there any vendors out there who will provide a simple corporate trustee service for a 457(b) that isn't going to charge a huge sum?

A small 401(k) plan has a participant who went to the financial advisor to request a distribution of $1500 of her account. The advisor processed the request and no taxes were withheld. This was done without the trustees knowledge. Obviously the advisor was in error, but ultimately the trustee/plan administrator is at fault.

What options are there to the plan?

1) Retroactive amendment to allow for the distribution?

2) VCR filing?

3) Fire the advisor

Any thoughts? I looked back at about 18 months worth of topics but did not see a pertinent one.

What form is California's state equivalent to the federal form 945?

I don't have all details yet, so I'm just asking a question in general, since I know practically nothing about ESOPs.

We have a PS plan, sponsored by an S-corp that has been around for many years. They just sent us data to do the 12-31-06 valuation, and informed us that they "established an ESOP as of 1-1-2006." Based upon verbal communication to one of our analysts, which may not be accurate, they assert that they made no contributions to the ESOP in or for 2006, yet the ESOP owns 100% of the S-corporation. We're attempting to get some clarification.

In the meantime, I have two questions.

1. Is the above situation even possible? I mean, how can 100% of the ownership be transferred to the ESOP without this being considered a contribution?

2. I know there has been a lot of press about "abusive" ESOP/S-Corp situations, which I honestly haven't folowed much becasue we don't administer ESOPs. In general, I understand that this deals with not allowing an allocation to "disqualified persons" during a "nonallocation year" and that this becomes effective in, I think, 2005. Although the ESOP isn't our responsibility, I wondered if there was a specific red flag that I should be aware of to instruct the client to double check wth their legal counsel? Presumably they have already done this, but I'm often amazed at the crazy schemes that cleints buy into because some "advisor" convinced them it was a good idea, and they didn't seek competent counsel before digging their grave.

Thanks for any input!

Individual A owns 100% of Company A. He also owns 50% in LLC B. The other 50% of LLC B is owned by an unrelated individual. LLC B employs 20 indviduals. Company A is interested in establishing a defined benefit plan covering the only two employees of Company A .... A and A's spouse

I know that I have certain affiliated service group rules based on my understanding of the relationship between Company A and LLC B. However, I want to be sure that I do not have any controlled group issues.

I believe that a controlled group does not exist.

Thanks in advance for your comments.

Ed

Client failed their ADP test for 2006. I will refund the necessary HCE's and give them 1099's, but when do they need to be completed by? I thought it was 3 months after the plan year ended. Also, what year do I issued the 1099 for, if I'm correcting the 2006 ADP test, but refunding them in 2007?

Thanks

At the May 2006 Multiemployer Audit program sponsored by the IFEBP, Diane Bloom of the IRS stated that stamp programs (and the crediting of service) are high on the IRS's radar for audits.

Is anyone out there currently on the receiving end of such an audit? Any dire predictions for stamp programs in general? Some of us think this is the beginning of the end for stamp programs. Curious to hear what others have heard/seen/know etc.

Would anyone happen to have it or help me find it?

I am self-employed and had a prototype Profit Sharing plan with a popular investment company. The plan began in 1992. In the fall of last year, I made the decision to terminate the plan by the end of 2006, after making a final contribution for '06. I made the final contribution on 12/1/06 . On 12/06/06, I mailed my broker the transfer instructions to rollover to an IRA with the reason being termination of the plan. On 12/11/06 the assets were transfered out of the PS plan's account and directly rolled over to an existing IRA. My PS account balance was zero at the end of that day. Yesterday I received an end-of-year statement, and I was frustrated to discover that a money market fund made a $29 interest payment to the PS account on Friday, 12/29/06 (even though all the assets had been rolled over into the IRA). This resulted in an end of year balance of $29 in the PS account. I checked online, and the investement company directly rolled the $29 into the IRA on 1/2/07 which was the first business day of 07.

Is 2006 still my final plan year for the PS plan, and on what day did my plan offically terminate (or does an exact date not matter)?

If 2006 is still my final plan year, then how does the end of year $29 balance affect my filing a 5500-EZ for the final play year. Do I report 2006 as the final plan year, with $29 as an end of year balance or can I report a zero balance? If I do need to report the $29 as end of year balance for a final plan year of 2006, will the IRS, or anyone else, try to claim my plan did not end in 2006 as a result of the $29 balance?

Thanks,

J.

Thanks