Let's say Mongo Company wants to offer a safe harbor 401(k) plan to its employees. Mongo is actually made up of 3 different companies.

Mongo wants to offer Companies A and B a safe harbor w/4% match. But they want to offer Company C the 3% nonelective safe harbor design. Company C is significantly smaller in headcount than A&B.

Is it possible to offer different safe harbor designs within a control group?

I've heard the IRS requires or did require IRA investments to be diversified, but I can find no guidance. Does anybody know of any?

If an ongoing plan currently offers a lump sum as an optional form for a terminating or retiring employee, does that same plan have to be amended again before "plan termination" to be able to provide lump sums for current active and vested terminated employees at "plan termination" ??

Client has a SIMPLE-IRA, has been withholding deferrals since mid-2004 but not making deposits to EE accounts. 3% matching contribution has also not been made. Have notified employer previously that these are serious errors that need to be corrected, only now has they contacted me to rectify things. I have had EE's contact me about their missing depsoits but I've always told them that they need to talk to employer. Kinda suprised that there hasn't been any complaints to the DOL or IRS about this yet. Can this type of error be corrected thru EPCRS &, if so, how should employer proceed. This is my first time dealing with this type of situation so any guidance is appreciated.

We had a client who received a payout i 2006 prior to the enactment of PPA. We reported the excess distribution on a 2006 1099R as a 303 excess amount using code E in Box 7, taxable income not subject to 10% penalty. The client is withdrawing the excess distribution from his IRA prior to March 15, 2007. He is being told by the investment company that a 1099R will be issued for 2007 as this will be considered as taxable income in 2007, with the caveat to contact their financial advisors. Two accountants did not know which method is correct. Would anyone care to confirm that we handled this distribution correctly and advise that the excess withdrawal is indeed a 2006 taxable event and not 2007.

Has anyone ever had the problem where a Trust EIN is rejected on a 1099-R? This does not make one bit of sense. The employer gets a qualified plan, a ein is issued for the trust, a participant terminates and is paid out, the trust issues a 1099-R, the participant files his/her tax return and the 1099-R gets rejected. Is this due to inactivity with trust. This seems to happen from time to time especially with small employers who have few and far between distributions. Makes absolutely no sense :angry:

What next? Apply for a new EIN? Use employer EIN on 1099R?

A non-qualified stock option granted in 2007 is exercisable in the 12 month period after January 1, 2010. If optionee terminates employment before 1/1/2010, option expires. If optionee dies before 1/1/2010, executor has the 12 months to exercise. Will this design pass muster as "not having any element of deferal" and therefore 409A exempt? What say you all?

we have a client that told us they want to make a PS for 2006 plan year. When I spoke with her today I told her that it had to be funded by the time they file corp income taxes. She thinks it has already been file. Can they still fund the PS contribution until the filing deadline of 3/15/07 or did they have to fund by the time they filed the return? Thanks for any input.

Do either of the following allocation group structures violate the definitely determinable rule for a profit sharing allocation or any other provision for that matter?

Group 1: physicians receiving 10% profit sharing allocation

Group 2: physicians receiving 6% profit sharing allocation

Group 3: physicians receiving 4% profit sharing allocation

Group 4: all other employees

OR

Group 1: owners electing to receive the maximum allocation under section 415

Group 2: owners electing to receive $0 profit sharing allocation

Group 3: owners electing to determine their contributions each year and allocate on a pro-rata basis

Group 4: all other employees

Employer A has a 401(k) Plan that includes a 2/20 graded vesting schedule for PS contributions. Some of the owners of Employer A are planning on leaving the company, and starting Employer B. Employer B plans on having its own 401k plan, but wants to count service from Employer A for those employees who leave Employer A to join Employer B. This appears to be an amicable separation, so far so good. Employer B's document can be drafted to count this service with Employer A.

But it is expected that some of the employees who switch from A to B will not be fully vested in their account balance in Employer A's 401(k) Plan. What both employers would like is for none of the employees who are transferring to have a forfeiture. Rather, they can move their entire account balance over to Employer B's plan, and continue to vest in it. So if an employee has a $10,000 account balance in Employer A's plan, but is only 60% vested, the entire $10,000 can be moved to Employer B's plan, and the employee would still be 60% vested. Can this be done?

I suspect the answer is No, because if for example that same employee terminated employment with Employer B, still at 60% vesting, it doesn't seem right that the non-vested portion would now go to Employer B's participant, when it should go to Employer A people. Would you agree?

Finally, if the above ownership was slightly different and the owners of Employer A also had common ownership control of Employer B. Would the above transfer of the non-vested amounts now be acceptable?

Thanks

Question - if they set up a profit sharing plan, then terminate it after two years (which is what it will take them to use up the excess assets) is this likely to create a problem? I know with a PS plan you have the "substantial and recurring" contribution issue. While I wouldn't expect a challenge from the IRS on a subsequent termination, I just wondered if anyone had thoughts on this. Would it be better to simple set up a money purchase plan instead?

I appreciate any thoughts on this. Thanks.

I've got a basic age weighted plan that has a 1,000 hour/last day requirement. There are 5 NHCE's. One terminated with more than 501 hours . One worked less than 1,000 hours, but gets the top heavy minimum. The other 3 get an allocation, but out of those 3, 2 of them are bumped up more to meet top heavy minimums.

I want to avoid the gateway. Age-weighted plans are generally exempt from the gateway, but are the top-heavy minimums nullifying that exception?

Thanks in advance for any guidance.

So... I'm going in circles on figuring out the 415 maximum to figure out the level I should be trying to hit for the owner in a new Cash Balance Plan.

I've got a 45 year old owner that I'm trying to max out (I'll worry about the NHCE percentages later). The owner makes well over the $225,000 comp limit. Calendar year 2007, NRA 65 with no early retirement provisions. Actuarial Equivalence will be equal to GATT

Can anyone tell me what the owner's limit would be (*hopefully* with calculations)? I mean, what is the max the owner can put in, moreover what the limit that I should be trying to hit?

Any and all assistance will be greatly appreciated.

Here is the situation. One of the owners took no compensation in this plan year. If I pull him into the ADP test, they will pass. Without him, they fail. I don't want to take a chance and do the wrong thing. How is a participant who was eligible in prior years but has no comp in this year treated?

The acceptable percentage of employer securities in a DB plan is 10% - if the plan reaches 20% and you advise them of the 15% excise tax, are your consulting duties complete ? in other words is there any requirement under the minimum funding rules that would compel you to remove the excess from plan assets ?

One of my new plans is an LLC with a 50% owner who is not collecting a salary. Income from the LLC is $130,000 for this owner. He has made a deferral contribution of $7,692 to the safe harbor plan.

My question is this, is this allowable? Is the income from the LLC a wage? Can they receive a safe harbor contribution?

The inquiry is coming from their accountant.

Is there an exception for temporary employees to providing benefits? We're small (under 20 employees) and have a clerk who wants to work until he goes back to school in the Fall. He'd be working on a specific project mostly at a client's warehouse but also filling in at our office as needed. He'd be working more than 25 hours per week (our plan's definition of threshhold for coverage). Can we classify him as a temporary employee and not provide benefits? If so, is there a state or federal reference you can provide me as support?

Thanks in advance.

Have a client who has a 90 day service requirement to become eligible for the 401(k) and then entry on the 1st day of the month after the service requirement is met. Plan also states immediate vesting.

Once in the plan, the client offers a 10% employer PS contribution....question.... since the plan reads immediate vesting, should the PS contribution be calculated taking in account the 90 days that the participant was not in the plan? Or, should the PS amount only given for the time the Participant was actually in the plan? Appreciate the assitance...

I've read a few different things online, and I just wanted to double check something.

As far as the determination letter process is concerned, if you're initiating a new retirement plan for your company and you have fewer than 100 participants, the user fee is waived for the first 5 plan years? So all you would pay would be a filing fee (is it $125?)?

And as far as the employer tax credit goes, is it up to $500 for the first 3 years of the plan or is it now up to $1000?

Thanks so much.

ok - I'm sure there was a thread on this but as usual I can't find it...

Owner defers $15999.88 for 2006 (is over age 50). There are other HCEs, and ulitmately owner has to take refund to correct ADP of $3,035.26 (includes gains).

Owner is getting $93.86 in ps forfeiture reallocation. New comp formula, profit share has not yet been declared for 2006. Originally, I was allocating a profit share of $28,916.14 to bring owner to total allocations of $44,999.88.

So....can I give the owner $31,941.40 in ps allocation to "make up" for the refund he will be taking? His actual total allocation in 2006 would then be $48,035.14 which is still under the $49,000 (if you consider catchups), but he didn't make the full $5,000 catchup; I'm thinking he is limited to an overall allocation of the $44,999.88.

Any input appreciated.