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

Controlled group of corporations covered by one 401k plan that provides for a 2% matching contribution. May one of the corporations adopt a separate plan that does not include matching contributions?

When an employer is giving the employees a choice to remain in DB plan or go into DC plan prospectively, what information does employer need to provide participants to make choice? Specifically if lump sum is not available under DB plan would employer still be required to provide a hypothetical lump sum present valueof the DB benefit so that ee can compare that with projected DC account balance?

Has anyone had any claims for Cranial Sacral Therapy? It is one of those strange ones that I am not sure if it would be a eligible expense? Can anyone shed any light on this for me? Thanks

Client needed to take a RMD for $40,000 in 2006...he only took $39,500...what happens if he didn't take the additional $500 that was required?

Thanks

The 2006 compensation cap is $220,000 for a PSP and a 401(k) Plan elective deferrals.

For a Simple-IRA the compensation cap is $unlimited.

What about a Simple-401(k) .... is the 2006 comp cap $220K or $unlimited ?

Form 945 has been filed for a plan in the past due to taxes withheld from distributions. However, no distributions took place in 2006. Should a 945 showing $0 still be filed?

Thanks

Takeover case.

A plan covers an owner, his wife and a previously terminated employee. Owner and wife are not active but the business is still in existence. So they are not getting service/participation credits and hence no additional accruals.

Prior year’s info: Individual aggregate method. Present value of future benefits (PVFB) = $320k and assets = $272k.

In a nationally marketed software, the prior actuary coded the owner and the wife as “inactive”. As a result, the individual normal costs computed by the software are zero, which the actuary used for preparing the Sch B.

I think this is wrong as there are unfunded benefits which cannot never be funded under this calculation method. Anyway, it does not satisfy the funding equation for a reasonable funding method of regulation 1.412©(3)-1:

PVFB = PVNC + Net balance of bases (= 0) + (Assets – Credit Balance)

Do I need to go back and redo the prior year valuation and Sch B and file an amended return? Or can I simply redo the calcs and carry forward information based on recomputed numbers.

A husband and wife have a DB plan that covers only the two of them.

The IRS disqualifies plan for not covering employees.

The IRS states that according to 402(b)(4) present value of accrued benefits are now taxable on personal tax return for the two HCEs.

Say PVAB = 500,000 and plan deductions total $200,000 over the years and current value of assets is $250,000.

Is there anything that would limit the amount subject to taxes to be no more than the value of say the greater of plan deductions or actual value of plan assets?

It seems a bit quirky to b e taxed for amounts in excess of what was contributed into the plan, plus investment earnings.

Thanks.

Participant made $15,000 in 401(k) Deferrals during 2006 and it turns out he had a loss for the year.

Is the correction simply refunding the $15,000 or should earnings on the $15,000 also be distributed?

Does anyone know if a pastor can make a SIMPLE IRA contribution based on income reveiced as a housing allowance?

Thank you for your help.

403(b) plan had language prohibiting any distributions before 59 1/2.

administrator has allowed distributions before 59 1/2.

i have read rev proc 2006-27 and am thinking that VCP (versus SCP) is the way to go.

can you confirm?

thanks in advance for your help.

Employee is turning 65 and will now get his insurance through Medicare. However he will stay be able to maintain his spouse on the Employers group policy under COBRA. He will continue on as an employee and have the Cobra premiums deducted from his paycheck. Do these premiums still qualify under the section 125 plan as pre-tax even though he is the employee and will not be covered under the policy?

Thanks,

Roger

We have a client who provided us incorrect census information on an ineligible participant. This information allowed the participant to erroneously enter the plan and defer. When it was discovered, there was a distribution made from the plan to the participant, and we are not sure how to 1099R the participant.

I am of the mindset that we should not have distributed the $$ as we did, but stated a Mistake of Fact and had this handles through payroll. Of course it is too late for that course of action, so I am not sure what code to use if we 1099 the ineligible participant.

Any recommendations or suggestions would be greatly appreciated.

A prospect is under an IRS Audit. They have asked us to look at the situation.

1. The IRS Agent's review states the merger of a Profit Sharing plan into a 401(k) plan constitutes a plan termination. They use Rev Ruling 2002-42 and they say that because the Profit Sharing plan had a 5-year vesting schedule 20, 40, 60, 80, 100 but the plan it was merged into (the 401(k) plan) had a 6-year graded schedule, 0, 20, 40, 60, 80, 100, that this a complete termination of the PS plan. At the time of the merger, language was added to the 401(k) to maintain the vested percent from the PS plan but only for purposes of the merged PS balances only, so the reports show everyone's prior PS balance continued upward on that old schedule.

2. Also, the PS plan excluded some employees, but still passed the 70% coverage (ratio percent) test. But, the IRS agent writes "there are no provisions under the Code that allow you to include only employees who have certain job titles", stating that we cannot use language that says "The following Employees are not eligible: All employees other than Employees with job title a)___, Employees with job title b)___, and Employees with job title c)___" even though this passed the 70% coverage test. This document is a Age Weighted formula document (volume submitter).

Any comments/thoughts would be great.

Facts:

Current AGI is >160K

Currently maxing out contribution limit in 401K ($15,500)

Need to rollover former 401K plans to a traditional IRA.... value in excess of $200K

Married filing jointly

Non-income spouse

Investing background is limited to 401K investing. Recent job change and promotion have created new investing opportunities

Have $1500 per month to invest beyond 401K & IRA contribution limits.

Questions:

Can new IRA be opened to transfer old 401K's and then begin transfer to ROTH in 2010 with a transfer of only a portion of traditional funds? (to limit tax liability)

Can we both contribute $4,000 each to IRA's for years 2006 through 2010 and then convert to ROTH's in 2010 and only pay taxes on earnings if we do not deduct the contributions in tax years 2006-2010?

If old 401K's are rolled into new IRA account, should separate IRA's be opened to convert to ROTH's in 2010 (ie $4,000 annual contribution x 5 years per account would mean each IRA would have $20,000 plus earnings at time of rollover)?

Advice and/or ideas welcome.

Thanks!