Hi! I'm looking for the language that states that when an employee terminates;

1. S/he is eligible for payment of the entire annual election as long as expenses were incurred during the plan year and while employed

2. The employer is not due repayment for any amounts over the contributions into the plan (i.e. annual election= $2000.00, terminates after only contributing $300.00 submits valid claim for $1500.00 - the employee does not have to pay back the employer the $1200.00 that was not contributed into the plan, but still paid out to the employee.)

If anyone can direct me to the IRS language that describes this, I'd be greatful!!! Thanks in advance.

Jeremy Davis

My employer made a contribution in March of 2007 for a profit share plan for the calender year 2006. For IRA deductibility purposes am I considered covered by a defined contribution plan for the year 2007 or 2006?

In 1.410(b)-7©(1), a "plan that consists of elective contributions under a section 401(k) plan, employee and matching contributions under a section 401(m) plan, and contributions OTHER THAN ELECTIVE, EMPLOYEE OR MATCHING CONTRIBUTIONS is treated as three separate plans for purposes of section 410(b)."

Does anyone have thoughts on what the capitalized lang has been interpreted to mean?

Facts: Company A and B are part of a controlled group that sponsors a single 401(k) plan. There are two separate lines of business, and the company qualifies for QSLOB status but has not yet declared as a QSLOB.

The Plan states in the section regarding the employer contribution formula that "For each Plan Year, the Employer shall contribute to the Plan ... on behalf of each Participant who is eligible to share in matching contributions for the Plan Year, a discretionary matching contribution equal to a uniform percentage of each such Participant's Deferred Compensation, the exact percentage, if any, to be determined each year by the Employer ..." A participant is eligible for a match if he has attained age 21. Companies A and B are both "Employers" under the plan.

Company A is doing well and wants to contribute a match for 2006. Company B cannot afford to. In order to contribute a match for one group and not the other, I believe the plan's match formula or match eligibility provision would have to be amended (otherwise, under the above formula, all participants would be entitled to the match once the percentage is declared).

Question: can a plan be amended retroactively to revise a matching formula -- i.e. to state that the match can be provided to employees of one Employer and not the other? Something tells me it's too late to amend to do so for 2006.

Thanks in advance for any thoughts.

I was reading commentary which indicated that Code Section 410(b)(4) provides a special tax rule for HCEs when the reason for a plan disqualification is a failure to satisfy coverage under 410(b) or the minimum participation test under 401(a)(26). Under the special rule, the HCE's entire vested benefit is taxed as if were distributed in the plan year of disqualification.

Why, when I look at 410(b)(4), do I not see this...what am I missing?

I have a single employer/employee money purchase plan in which the employer died last year. I'm assuming this becomes an orphaned plan. My question is would his beneficiary have to assume sponsorship of the plan as a successor employer in order to sign the final 5500? There is no one else beside his beneficiary who would have any vested interest in this plan. How is this accomplished? A board resolution assuming sponsorship? Thank you.

Linda Michals

I'm not seeing final regs for Roth 403(b) anywhere. Is it just implied that Roth 403(b) will mirror the Roth 401(k) regulations?

For 2006 and 2007, does the 150% of unf CL 404 limit apply to a one person plan?

Are IRA distributions subject to Generation Skipping Tax (GST)?

Sec. 26.2611-1 Generation-skipping transfer defined.

A generation-skipping transfer (GST) is an event that is either a

direct skip, a taxable distribution, or a taxable termination. See Sec.

26.2612-1 for the definition of these terms. The determination as to

whether an event is a GST is made by reference to the most recent

transfer subject to the estate or gift tax. See Sec. 26.2652-1(a)(2)

for determining whether a transfer is subject to Federal estate or gift

tax.

Just got in the best (worst) VCP problem I've ever handled. A governmental agency has maintained a "plan" since 1992 but has never had or cannot find a plan document. The mutual fund company that holds the assets says that each participant's contributions are held in two IRAs - one for the employer's contributions (sounds like a SEP) and one for the employee's contributions. The client says that the participant contributions are pre-tax (sounds like a SARSEP). The real problem (leaving aside the absence of a plan document) is that governmental agencies are not eligible to maintain a SARSEP. So, I look at 2006-27 and find "Employer Eligibility Failure" (see 5.01(2)(d)). The permitted correction of an EEF under 6.03 is pretty easy - stop making contributions to the plan. Unfortunately, an EEF is limited to employers not eligible to adopt a 401(k) plan. I can't find a similar provision for employers who can't adopt a SARSEP. Any ideas about how to approach the IRS about correcting a defect in a plan (some combination of non-amender/non-adopter) that the client wasn't even eligible to maintain? Thanks.

an adviser(age 59) deferred appx 19,000 in his financial company's 401. $14K was pre tax and $5k was pure after tax dollars, not Roth. could he defer the additional $6k pre tax into his own companies plan?

I know this has been asked plenty, but....

I'm 53, and started my roth in 2000 with a conversion from a traditional IRA. Made a $3000 contribution in 2002. I want to take out the contribution and original conversion amount this year, it comes out to app. $12000.

The way I understand it, the $3000 contribution is completely tax and penalty free. The original $9000 conversion is tax free, but subject to a 10% penalty and would show up on line 60 of the 1040 form.

In other words, I'd owe about $900 by taking this amount out in a distribution. Does that sound accurate?

I know there will be questions as to why I would take any out of the roth in this way, but I have my reasons.

Thanks folks!

Hello!

I have a Roth IRA, and I contribute the maximum to this account every year ($4000 this year). I am wondering whether I can try to augment the growth of this account by buying an additional $1000-$2000 worth of equities or mutual funds on margin. In other words, can I contribute $4000 and use this to buy $6000 of securities--$4000 with cash and $2000 on margin? I realize that this strategy could lose money if the extra investments did not outperform the interest + inflation on those margin purchases, I am just wondering whether such purchases would even be allowed.

Thanks!

-Mike

Also, can I own options in a Roth IRA account?

Anyone have any experience with a health plan (or any other welfare plan) with eligibility to particiapte based upon productivity criteria? Full time versus part time to be determined not by hours worked, but by amount of work produced.

Has anyone received the study guide yet?

1.416-1 M-12, states that the 2% DB minimum can be offset by the DC balance to determine if TH is met. A literal reading is that the cumulative DC balance can be used. Thus, if the DC plan was around for years and years and the DB is new, a large offset is available for many. It's almost as if the DC TH is doing double duty and it doesn't make entire sense to me, but...

Anyone disagree or know of a Gray Book answer either way?

We have quite a few profit sharing plans that have 3/20 vesting and were wondering if the plans had to be amended currently to reflect the 2/20 minimum vesting requirement under PPA, or could that change just be made part of the PPA restatement that will happen a couple of years from now as long as the plan operationally uses the 2/20 schedule from now on? All help is appreciated.

I'm aware than when a major change happens within the medical benefits a new SPD should go the employees within a certain amount of time. Does anyone know what constitues a "major" change? Does changing a plan from paying 90% after deductible to paying 80% after deductible constitute a "major" change? Any information would be greatly appreciated. Thank you,

If I decide to retire and withdraw $50000 in 401k funds at age 59 1/2, I understand that 20% will be withheld for taxes, leaving me $40000 for the remainder of the year. However, If I take out a 401k loan for $50000, then after attaining age 59 1/2 I default on the loan, will I have had full use of the $50000, without any pre-paid taxes or penalties??

Let's say a Corporation with a calendar year Fiscal year and Plan year does not go on extension and files their 2006 tax return by 3/15/07. If they prepare an amended 2006 tax return filing prior to 9/15/07, can they increase the profit sharing deduction that they had taken on the original filing as long as they contribute this increased amount by 9/15/07. Is this allowable/deductible/possible/plausible....?