We have a DB/DC combo that is aggregated for purposes of 410(b) and 401(a)(4). (It is crosstested.)

Originally, both plans had eligibility parameters of 21 and 1 with entry date the first day of the month following satisfaction. (The DB had further restrictions according to job classifications.)

During 2006, the DC plan was amended to change eligibility to 21 and 3 months. Therefore, as of 12/31/06 (the end of the plan year), some people participate in the DC who are excluded stautorially in the DB (i.e. without even considering job classifications).

My question is: When determining the excludable employees for purposes of 401(a)(26) for the DB, do we exclude everyone who has not satisfied the 21 and 1 parameters that are still in the DB, or can we only exclude those who do not meet the less restrictive requirements in the DC?

We have been asked to consider a new client who wants to startup a 401(k) plan.

The client has about 40 employees, including, we are told, 3 leased employees.

The client would like to cover the 3 leased employees in his plan.

Our experience with leased employees is limited, so I was hoping we could get some guidance with the following questions:

1. Assuming these truly are leased employees, is it accurate that the client will need to get the actual compensation paid to the leased employees from the leasing company, who may or may not want to give up that information? I am also assuming that any benefits paid to the leased employee by the leasing company will need to be provided to the client as well?

2. Let's assume, instead, that the 3 leased employees are actually mis-categorized and really should be considered as common law employees. (According to the financial advisor on the case the employees have been leased from the leasing company for over 3 years.) Now the Plan will need to cover the employees as common law employees, and again assuming that the client does want to cover the employees, am I right back where I was in question 1 with having to get compensation information from the leasing company?

Thanks!

OK, now I've gotten pointed to the IRS regs making it clear that an employee may leave having been reimbursed more than was withheld for their medical FSA. So next question:

If an employee terminates with a negative balance in their FSA, i.e. having been reimbursed more than they had withheld, is the amount of "overage" a taxable fringe benefit to that employee? If so, is it reported on the W2?

This question probably reveals how novice I am to 401K:

My employer will match 40% to each dollar I contribute to my 401K. Does this mean that I can contribute X amount of dollars from my checking account to the 401K and receive the 40% match from my employer (providing that X doesn't exceed the limit, of course)? Or does the employer matching strictly occur when the contributions I make are taken directly from my pay check at each pay period?

Inherited money now makes it possible for me to increase funding of my 401(k). With max contribution now set at $15,500 -- plus a catch-up of another $5,000 -- I approached my HR dept to get the necessary paperwork.

I was told the $15,500 limit and the $5,000 catch-up didn't matter. I was limited to 15% of my yearly gross, or, roughly, $8,500 max. Further inquiry on my part led to this response from them:

I'm not sure if our Plan is a "Profit Sharing Plan", a "401k", some combination of both, or whether such distinctions make a difference.

The company does make an annual profit sharing contribution into everyone's account -- in an amount that is determined by (1) company profit, (2) years with company, and (3) what your salary is -- but they do not now, nor have they ever, matched any employee contributions.

Does what I have been told sound legitimate? If so, is there any other way to increase my tax-deferred contributions toward returement? I had been led to believe the Plan at work disqualified me from contributing to an IRA (since W2 box 13 has "retirement plan" checked). Is that really true, and does being 50 make any difference in my eligibility for tax-deferred IRA contributions?

Thanks.

If a tax filer needs to pay the penalty for an early distribution, where on his tax return does he report it?

Facts - A pension plan paying benefits to a pensioner determined that participant received overpayments in a prior year and the participant refunded the overpayment in 2006.

Questions - On IRS form 1099-R may the plan net the payments to the participant for the 2006 pension payments by the amount refunded to the participant or must it report on 1099-R the gross distribution to the participant?

How does the participant treat the refund on his/her tax return?

The PA was presented a separate interest DRO that provided the AP a pro-rata interest in any COLA, early retirement subsidy, or other future benefit enhancement. The plan in question does not provide for a COLA or early retirement subsidy. The PA has told the AP that the DRO can not be qualified because the DRO seeks to provide the AP benefits that are not otherwise provided for under the plan. The AP has objected and stated that if the COLA or early retirement subsidy is never paid, then the matter is moot, but that the provision in the DRO protects the AP in the future should the plan be amended to provide for such benefit enhancements.

The PA has an addtional concern - if the AP commences before the participant, wouldn't the AP's benefit need to be re-calculated? This seems to provide the AP another bite at the apple? Before any one responds, this is not a California DRO (so I don't believe the PA has to worry about the Marriage of Lehman). So, who is correct on this one - the PA or the AP?

Is there a violation in submitting trade requests for a client to a Bank that holds a plan's assets?

Here is our procedure:

Each payroll period, the company calculates the total 401(k) deferrals based on participant rates of deferral. They then write a check for the full amount to the Bank. The bank deposits the check and notifies us, the recordkeepers, that the check was deposited and sends us a listing of each participant's 401(k) amounts. We run the numbers through our recordkeeping system, which allocates the amounts based on each participant's investment elections. Our system then gives us the total amount that needs to be bought into each of the investment funds. We then send over a spreadsheet which lists the account number, cusip, fund, and dollar amount, and whether to Buy or Sell (for distributions) a certain amount.

Do we need some kind of license or certification to be doing that?

12/31 PYE 401k that is top heavy. All ees termed on 09/20/06, owners remain and contributed to 401k. Actual plan term date is 12/20/2006. Would a top heavy contribution be required for the employees through 09/20/2006? ( the date of partial termination)

With the elimination of Schedule P what are you doing with regard to running the statue of limitations? I saw the post by Kirk Maldanado referencing the GCM. Are you filing a separate statement as outlined? (Not to date myself, but didn't we do this in the old days?)

Do I have to claim a pension distribution of 1200 per year on my michigan state income taz?

I am an employee of a local county government. I am in the 457b deferred comp program. The correct amount is being with held from my pay each pay period. However, the money is not being sent to my custodian (Nationwide) in a timely manner. The posting to my account is up to three months late.

What rules can protect me from this very late payment into my account? I have read the contract and there is nothing in the contract to state how long the county has to send the money to Nationwide.

Thanks for any help.

Wayne

Should a forefiture account have earnings or not? We have a plan that paid out an employee, there was a forfeiture. The funds were moved into a suspense/forfeiture account. The plan doc says forfeitures are to be allocated after a 5 year break in service. Must the account be earning? Can anyone direct me to where I can find the answer? Thanks

If a participant wants to take a loan in February, is there a specified amount of time when the loan repayments must begin? The participant wants to start repayments in June and the loan procedures are silent on this.

Thanks

OK been reading like crazy about a Roth, but no one really spells out this "tax-free" earnings thing (I haven't flipped through Pub 590 yet). Now lets say I put $2000 in a Roth, and buy 100 shares of XYZ Corp at $20 per share. 10 years down the road, XYZ is trading at $60. Assuming I have made no other contributions, my Roth is now worth $6000 ($2000 Contrib, $4000 earnings). Lets also assume I am over 59 1/2 now. Can I sell my 100 shares of XYZ, and close the Roth, and get $6000 tax free? No paying capital gains? Seems like the IRS would want a piece of those capital gains...

Is there any issue with bonding or fiduciary liability with the following procedure:

Whenever a participant retires and begins monthly payments from a certain plan, the first check is sent from the bank to a retirement (non-actuary) consultant, who then sends that check directly to the participant, with a letter indicating that all future checks will come directly from the bank.

HSAs are not our primary area of business so I only know the basics. I understand there is no formal correction procedure for HSAs. A company implemented a premium only Section 125 plan a few years back. In 2005, they established an HSA account. They have been funding the HSA account on a pre-tax basis. From what I've read, the HSA can be funded on a pre-tax basis (vs an above the line deduction) only if it's done in conjunction with a Section 125 Plan. However, their 125 plan does not mention or address HSAs.

1.) Is there any way other than a 125 plan to fund an HSA on a pre-tax basis?

2.) Does the 125 plan have to specifically address the HSA?

3.) What possible corrections/repercussions might exist for the company if they impermissibly funded their HSA on a pre-tax basis?

Thanks,

Melanie

When will FAS158 be required for us? (We are a non-public company.)

Our fiscal year is the calendar year through 12/31/06, followed by a short year 1/1/07 to 6/30/07, then full years thereafter from 7/1 to 6/30. Our pension plan year remains as the calendar year.

As I understand it, we don't have to adopt until the year beginning 7/1/07. Is that right? Or do we get until 7/1/08?

Does anyone have an answer to my previous question regarding the mortality table to use for lump sums in 2007?

Thanks for your help.

Can an employee take a loan from their Safe Harbor source/account? The document allows it but I seem to remember that source being restricted (example Hardships). Just wanted to double check.

Thx