Have a client that is asking whether they can declare a match for the 2006 plan year (ending 12/31) by 3/15 (tomorrow), have us post this as an accrual, then actually fund at a later time? Is this possible? If so, what is the latest they can fund the match?

Facts: Married couple

Income: Husband's earned income over $4000 under $8000

Wife's earned income $0

Question: Can a husband make a contribution to a Roth IRA of maximum amount (therefore $8000) for both him and his wife, even if his earned income less then $8000?

Thank you.

Yulia.

Would be interested in opinions regarding the correct "ordering" for a plan that fails an ADP Test which then results in the need to forfeit some matching contributions to the HCEs who get refunds of deferrals due to the failed test. The real question is how to properly run the ACP test in that instance.

It seems that some folks believe that you run the ACP Test without netting out any forfeited match and if it fails and if the refunds due to the failure exceed the amount of match to be forfeited due to the ADP Test refunds, then you are done. I believe that, as per the 401k regs, you must run the ACP Test net of the forfeited match and then, if it fails, make your refunds as necessary. The difference is in the amount of match that the HCE will ultimately receive either in the plan or as a taxable refund.

I also believe that if the match has not yet been made at the time the ADP test is run, you must calculate the employer match based on the deferrals NET of any refund required due to a failed ADP Test.

Do others agree with this procedure?

We have had a safe harbor 401k since 2004. At the time the plan was written, very late December 2004, it was inteneded that the one employee who was highly compensated not be included, at least not to the degree his compensation would dictate. We are trying to cut down the match for him.

The plan is not top heavy as the sole owner is third or fourth on the compensation list. We believe we can cut his match by re-defining compensation to exclude commission which is the bulk, but not all, of his compensation.

Questions are...

Can this amendement be done?

What form of notice needs to be executed?

What time lag between notice and amendment effective date must there be?

Thanks

If a QNEC for ADP/ACP failure is made by the employer's extended tax filing deadline, is the contribution tax deductible? Or must it be made by the original filing deadline without extensions?

A company has ceased doing business for all intents and purposes and one employee that terminated employment has requested an immediate distribution. Is an immediate distribution required? The trustee would like to wait until the expiration of one year before making any distributions in order to ascertain the employees' exact interest in the plan.

I began working for a small law firm June 2005 and was promised benefits after 90 days. The firm doesn't have a group plan and each individual needs to get benefits on their own. Well, being that I had surgery 3 years ago no insurance plan would pick me up. I explained this to the firm and they said they'd look into a group plan. Well, fast forward 20 months. I'm still without benefits and everyone here has been given benefits except me. I don't think this is fair. They told me that going to a group plan is just way too expensive and right now they can't afford it. Is it legal to provide everyone in the company benefits, except 1 employee? I don't want to jump and say it's discrimination, however, I don't feel it's fair. Any advice on this issue would be greatly appreciated as we have no HR person in the firm for me to go to. I've come to the realization I may be working for a shady firm.

I have a client that has an S-corp that he is the sole employee and shareholder (100%) and he also is a 77.5% shareholder of a C-corp that has 25 employees. Does this constitute a brother-sister group under common control?

I don't believe it does because the C-corp has a minority stockholder of 22.5% and no ownership in the S-corp, and he doesn't own 80% of the C-corp.

He would like to initiate a SEP or SIMPLE plan in the S-corp and not have to contribute for the employees in the C-corp. His accountant has told him he would have to include the employees of the C-corp.

Thanks for your help.

Regarding Q&A 8 of Notice 2007-28, from what I read the following example would apply:

Total Comp = 500,000

DB MRC = 100,000

PS Contribution = 50,000

6% of Pay = 500,000 x .06 = 30,000

25% of Pay = 500,000 x .25 = 125,000

The 404 deductible limit would not be exceeded because 100,000 + 50,000 - 30,000 = 120,000 which is less than 125,000 (25% of Pay). The actual 404 limit would be a total DB + PS of 155,000.

Agree or Disagree?

I think there was some uncertainty amongst practitioners (or maybe just me) before this guideance. I had thought that the consensus on this board was that the limit was the DB min + 6%, but if 6% was exceeded then the 25% applied (no "free" 6%). In that case, in the example above, the limit would be 130,000.

I notice that throughout Notice 2007-28, the author (Jim Holland) uses the phrase "6% of compensation of participants in those plans" everywhere except at the end of the last sentence in A-8 where he says "6% of compensation of participants in defined contribution plans". .......Hmmm.

When is the latest than a non-profit has to make an employer contribution (403(b) Plan) for the 2006 plan year? Is it 3/15 (unextended) like for profits or something else?

Thanks

Could someone clarify this issue for me?

I set up a Roth IRA for my 12-year old who receives income for delivering papers and refereeing soccer. His total income for 2006 was about $1200 . I happily "matched" this amount and placed $1200 in a Roth in his name. This is obviously well within Roth limits.

It turns out that he needs submit a 2006 tax return since both "jobs" classify him as self-employed and no taxes were paid on his income. So, he will have a tax bill of ~15% hit to cover FICA & Medicare (poor kid!).

So did I make a mistake putting the full $1200 in the Roth? Or should it have been 15% less than that? Presumably I have until April 17 to remove 15% if $1200 was too much.

Thanks for clarifying

Dave

In general, I understand the due date for the final 401k regulations amendment is the employer's tax return date for calendar year plans. On the other hand, plans are required to amend by end of plan year if the amendment is discretionary.

Would the election of the additional safe harbor reasons for hardship withdrawals be considered a "discretionary" amendment? If a client's final 401k amendment contains these new reasons, is that piece of the amendment considered late?

Non-spouse beneficiaries no longer have to take distribution of a participants account balance within 5 years. Is this correct and if so, was this part of PPA? Also, if true, is a plan amendment needed to allow for this? Does the answer change if this is a 403b rather than a DC plan?

Thanks

I am a part-time employee. I will be changing both my current work hours (will work different days, hours) and also, my day care provider. Will either of these qualify me to change my dependent care cafeteria plan election?

Thank you!

We have a number of 401(k) clients for which the investment advisor established inidividual retail accounts at Fidelity. The invetments are participant directed in that the participants must choose among various portfolios that the advisor predesigned using about 12 mutual funds. The participants receive a monthly statement from Fidelity that shows their account value in each of the funds in which they are invested. The Fidelity statements show only the funds and do NOT break out their accounts by source of money (e.g. deferrals, match, PS, etc.)

My TPA firm provides the year-end Administration services, including year-end vesting statements for the participants. Our statements show their values by source of money, both total and vested amounts, but we do NOT show the funds.

Do the participants now have to receive quarterly statements that breaks down their accounts by both funds and source, or do the above combination of statements from Fidelity and from us suffice?

I've tried several searches, but was unable to locate this specific circumstance, so here goes.

Participant requests a hardship withdrawal. The Trustee signs the withdrawal form and sends it to the funding institution/broker, who processes the withdrawal, withholds 20%, and sends the balance on.

This raises all kinds of problems. First, the participant was only eligible for a hardship withdrawal of $1,200, but the withdrawal was $2,500. So there's an impermissible distribution of $1,300. Then, 20% withholding was done on the whole amount, which is also wrong. And while we don't know, the reporting by the funding institution is almost certainly incorrect.

The fix under Revenue Procedure 2006-27 is fine. My question is: since this participant has (apparently) no money whatsoever, what happens when the participant refuses to repay the plan? The standard language in the Rev. Proc. would require the sponsor to repay whatever the participant does not. However, this contemplates a different situation, and I don't believe it is appropriate to give the participant a windfall.

Whether the employer can require withholding this from the participant's pay is probably a matter of state law. Just wondered if anyone had encountered a similar situation, and if so, how did you handle? I've seen no IRS guidance on this.

Thanks!

Plan has payroll based match - do I strictly use amount employer submitted for 2006 Plan Year using Employer report and pay no attention to what investment firm received during calendar year?

ESOP currently excludes 1042 seller (and family member) because of stock sale. Company also has 401(k) and exluded EES are eligible to make 401(k) contributions but there are no other ER contributions to 401(k) plan.

Are we allowed to consider the "ESOP excluded EES" compensation in the 25% contribution limit (all will be contributed to the ESOP) since they are eligible for the 401(k) plan (combined plan limit) or must we disregard since they are only benefitting under the 401(k)?

Would this be solved by making $10 employer match to 401(k) plan?

many thanks for any help!!

I have a 1 person DB plan (can't file Form 5500 EZ because there is another entity in the control group, even though controlled by him) that was frozen and terminated pending 5310 application as of 12/31/05. We received the favorable determination letter.

We're in the procees of distributing all the assets.

We filed a Schedule B with the 2005 Form 5500, right before the rates changed due to the PPA.

Do we have to file Schedule Bs for 2006 (pending termination) and 2007 (got favorable letter so now we can terminate)?

Thank you for the help - it will be much appreciated.

I apologize if this specific question has been handled previously. I have a situation in which a Company A is owned equally by 3 siblings. Each of the siblings has children in the following amounts.

Sibling 1 has 5 kids.

Sibling 2 has 2 kids

Sibling 3 has 3 kids.

The children of the siblings own companies B and C.

The 5 kids of Sibling 1 own one-third of Companies B and C.

The 2 kids of Sibling 2 own one-third of Companies B and C.

The 3 kids of Sibling 3 own one-third of Companies B and C.

The ideal situation is that Companies A, B and C are part of one controlled group, so that all 3 companies may adopt 1 plan and be tested together.

These 3 companies are each a manufacturing plant and do not perform any services for each other.

Can it be determined with the above information that this is a controlled group?