Owner A owns 100% of Corporation XXX and 85% of Corporation YYY.

Owner B owns 0% of Corporation XXX and 15% of Corporation YYY.

Does a controlled group exist? I would say yes given Owner A's ownership percentages in both companies. But with Owner B owning 0% of Corporation XXX, I am not sure that the 50% identical ownership test is satisfied.

Also, assume a CG exists between XXX and YYY. XXX has only 2 employees (Owner A and Owner A's wife) and both are in the XXX Profit Sharing Plan. YYY has 22 employees (Owner A, Owner B, and 20 NHCEs), all of whom are in the YYY 401(k) Plan. Am I correct that both plans have to be tested as 1 employer for plan testing purposes? If so, would it be true that XXX could not provide a high allocation to the owner and spouse, while providing for only a 3% safe harbor contribution in the YYY Plan?

Thanks

According to the an article I saw earlier today (web link: aishealth article), one of WalMart's medical plan for 2007 (called "Freedom Plan 2") is a high deductible health plan with a family deductible of $6,000. As you know, this exceeds the maximum permitted deductible for HSA compatible plans, which is $5,650. I am hoping that the plan description in the article is incorrect.

However, in case the deductible is indeed too high, someone with a contact at WalMart may want to warn them that HSA contributions would generally not be permitted for any participant that elected Plan 2 for next year (unless the deductible is changed to not exceed the $5,650 threshhold).

So PPA 2006 requires full vesting within 3 years on new cash-balance plans.

Does that mean if we permissively aggregate a new cash-balance plan with an existing profit sharing plan, and the HCEs are the ones primarily benefiting under the cash-balance plan that we're likely to have to make the profit sharing plan vesting schedule match the cash balance's vesting schedule ? Seems like we would need to but I'd love an out. Any thoughts ??

If an organization has both a 403(b) plan (to which contributions are made by employees only) and a Defined Contribution (Money Purchase) plan (to which only the employer contributes), is an employee subject to a specified overall aggregate contribution limit for both plans combined? Or may the employee contribute up to the maximum allowed contribution for each plan considered separately?

Thank you.

A participant in a qualified plan died in 2004. The beneficiary is a nonspouse. The plan states that all beneficiaries must receive their balance within 5 years. The beneficiary elected to defer receiving the balance as long as possible and has not yet taken any distributions. May the beneficiary roll the balance over to an "Inherited IRA" in 2007? Or, since she has not taken the RMD in 2005 and 2006, is she ineligible for the rollover?

A small employer with say an owner and 5 employees wishes to implement a combination DB/DC plan and intends to pass non discrimination by using cross testing.

The owner sees he can get a lot of mileage out of a DB plan since he has many years of past service as compared to the employees (no other employees previously worked in company other than the current five), and is older than the 5 employees.

Say the employer implements a DB plan with a unit credit accrual of 2% per year for him and 1% per year for the employees and by implementing a DC plan and using cross testing and combining plans he intends to pass 401a4.

So what happens is the owner enters the DB plan with an AB of 20% of comp due to his past service, subject to 415.

The question is can the owner be deemed to have an accrual of 2% on the annual accrual method or do we need to base the accrual on the fact that it is a new plan and he had $0 at start of year and now has an AB of say $15,000 at end of year due to past service leverage.

So based on one method his accrual is 2% and say his compensation is $75,000 then his accrual would be 20% based on the change in AB from $0 to $15,000.

Any thoughts? Obviously a key technique re: ND testing.

Thanks.

A participant wants a 90-24 transfer of assets from one ROTH 403(b) institution to another. If the participant has a basis of $10,000 and a loss of $500, the receiving institution will only recieve $9,500. Does the receiving instituion record $10,000 in basis and a loss of $500 or only record the actual money received?

A 401(k) plan that provides a 3% safe harbor nonelective contribution is also a cross tested plan. In order to receive the profit sharing contribution, you have to be employed on the last day of the plan year. A terminated participant receives the 3% safe harbor nonelective contribution. Would he also have to receive a 2% profit sharing contribution to pass the gateway test even though he terminated employment?

What are the options when a participant has underspent the health fsa account. elects COBRA and period runs beyond run-out period?

New to this and need some assistance - thanks!

I hope this is a simple question for you 125 Gurus.

A plan (FSA) allows, but does not require an individual to "pre-pay" her entire annual election. Say, for example, the plan allows a maximum election of $5000. The "premium" may be paid in one payment, out of the first plan year pay or in installments, regular or scheduled (e.g. monthly pay [$5000/12], or, by way of further example, One in January and one in July. Another option, for purposes of discussion might be in 6 installments-Jan through June, and then stop. Conceptually, I think any of therse payment options will work. However, I'm a little troubled with the one time up-front payment. Her is why. Reg 1-125-2 says the following:

A health FSA will not qualify for tax-favored treatment under Sections 105 and 106 of the Code if the effect of the reimbursement arrangement eliminates all, or substantially all, risk of loss to the employer maintaining the plan or other insurer.

Does anyone else think that the one time payment option, at least when it is only offered at the beginning of the year, runs afoul of this proscription?

Is it allowable to amend a cross tested plan to allow owners (through family attribution rules) to opt out of participating in the plan, so as to allow higher allocation rates for those remaining? If so, what are the operational requirements (signed opt out forms, etc.)? Any cites also appreciated.

I want to make sure I understand something. Is there ALWAYS a short plan year (meaning that limits are prorated as applicable) in a termination year if the plan does not terminate as of last day of the plan year?

I dont have too many specifics but was asked this question.... in general...

If one company is merged/purchased with/by another company and the plans are merged... I was told no but, do the participants of the plan being merged into the purchasing company plan have the option to take a distribution instead of just rolling their balance into the new plan?

I ask because a question came up that maybe the investment choices in the new plan are not desired by the participants of the plan being merged.

Thanks

For self insured plans, how are the monthly rates (accruals) calculated?

I know that the insurance provider would develop the administration and stop loss fee however for the monthly rate required to cover claims (and charged to employee and employer) is this developed by the insurance provider, or by the company or companies broker?

Employee left company in March 2006. Became eligible to defer 1/1/06 but chose not to. Employee did not earn $5000 in 2006. Employer makes 2% nonelective contribution after year-end. Is employer required to make a 2% contribution for this employee?

A new client has let us know he is extremely behind on filing the Form 5500 EZ for his plan. He is the only employee and assets are well over $100,000. In reviewing the information for the DFVC program, it appears it only applies to Title 1 plans. Obviously, this plan is not a Title 1 plan.

Is anyone aware of a voluntary correction program for non Title I plans?

Thanks!

I am not clear on the difference between the life expectancy table in 1.401(a)(9)-9 and 1.72-9. I am attempting to determine the life expectancy of the beneficiary of a participant who recently died. I would have thought that the 401(a)(9) minimum distribution regs would control, but I noticed the plan cites to 1.72(p) regulations (the plan permits a payout over the life expectancy of the beneficiary). I'm not sure if this is optional, or if I am missing the amendment to the plan for the 401(a)(9) regs.

Also, which table would apply if this were an IRA?

Thanks for your help!!!

Employee deductions were made from their payroll, but a check from the year 2005 which was mailed was never received by the carrier. Some of the employees have left the co. How do we resolve this?

(non-erisa plan), about 20 EE's.

A specified employee terminated in November, 2006. The plan provides that individuals will receive distributions upon termination; however, a specified employee must delay payment for six months.

Is the distribution amount reportable as income for the specified employee in 2006, when there apparently is no longer a substantial risk of forfeiture, or in 2007 when the amounts are actually/constructively received?

The IRS recently highlighted the treatment of required minimum distributions for defined benefit plans.

In particular, cash balance plans were singled out for these calculations because of the confusion they cause.

A cash balance plan is a defined benefit plan. When a participant is required to take a minimum payment, the account is converted to an equivalent monthly benefit using the plan's actuarial equivalence assumptions.

That monthly benefit is paid as an annuity form of payment for RMD purposes.

A cash balance plan is not a defined contribution plan. You do not have the ability to use DC rules on the RMD.

The only way to use the DC rules is if the CB plan is paid out into a lump sum distribution as a rollover during the year that payment is due.