I have a new client who started their business in Aug. 2005. They started a 401(K) Plan as of 1/1/06. I understand that the owners of the co. will be HCE for the first yr based on the ownership of 5% or more of the co.

My question is in using the look back year, can a determination of HCE be made for any other ee's based on prorated compensation from Aug 2005-Dec2005? Or for the first year of a plan is it owners only?

Under PPA maximum deductible amount includes a "cushion" amount if the plan is "at-risk". There is special rule in determining the cushion amount if a plan has 100 or fewer participants. But under the definition of "at-risk" plan doesn't a plan have to have 500 or more participants. So how could a Plan be "at-risk" with 100 or fewer participants and have the cushion amount at all?

A plan is sponsored by a company that is 100% owned by a husband and wife. The plan covers three of the owners parents.

If a plan covers only substantial owners then it is exempt from PBGC coverage.

It seems that the attribution rules of IRC section 1563(e) apply in this case. And those rules seem to indicate that if the adult couple directly owns 100% of the stock then the parents would not be considered to own any of the stock in the plan and thus would not be considered substantial owners for purposes of the PBGC requirements.

Thus this plan would not contain only substantial owners and would not be eligible for that particular exemption.

Any comments on the use of section 1563(e) and my interpretation of such section?

Thanks.

Say we have a plan that is sponsored by a married couple who fully own (100%) a company.

The other three plan participants are the parents of the couple.

For purposes of determining 5% ownership as applicable to the RMDs, it seems that IRC section 318 provides that the parents would be 5% owners. Let me know if anyone disputes this reasoning.

With that said, it would follow that once the parent reaches age 70 1/2 he would be required to receive his RMD.

However, let's say that the participant enters the plan at age 74 and the normal retirement provisions provide for age 65 & 5th anniversary of participation.

Could the plan provide that the participant can wait until he reaches NRD before being required to receive his RMD?

That is, could the plan enable the participant to defer his pension at least until NRD?

Thanks.

I know it is possible to exit a safe harbor matching 401(k) plan mid-year by complying with 1.401(m)-3(h).

Does anyone know if it is possible to exit a safe harbor 401(k) plan with a 3% nonelective contribution duirng a plan year?

I have a client who matches 50% on the first 6% of comp deferred and 100% on the next 2% of comp deferred. Is this still allowed? Someone mentioned that it might not work any more.

Thanks!

Employer has several hundred loans outstanding from qualified retirement plan. Employer is changing its payroll practices, and will switch from monthly payroll to bi-weekly payroll.

Plan loans were issued with amortization schedule reflecting monthly loan payments. In the future, employer would like to have plan loan payments made from each bi-weekly paycheck.

Employer's concerns include (i) the requirement of Code section 72(p)(2)© that substantially level amortization must be required over the term of the loan, and (ii) the fact that under the loan agreement, loan payments are required on a monthly basis.

Employer believes that the fact that the loan agreements in place REQUIRE monthly payments satisfies item "(i)" above (because the literal reading of the Code simply requires that the loan CALL FOR substantially level amortization). However, employer worries about the permissibility of unilaterally requiring that employees make loan repayments on a schedule that differs from what is required under the loan agreement.

How should employer handle? (Any citations to authority for the approach you recommend would be appreciated.)

The ERISA Outline book talks about the ability to recharacterize ADP refunds to after tax contributions. In order to do this, the plan document must allow Employee contributions.

The EOB also says that the recharacterized after-tax money is subject to be tested in the ACP test.

My question has to do with WHICH ACP test this money is tested in.

For example, say a 1/1/06 to 12/31/06 ADP test fails. HC Employee A elects on 2/9/07 to recharacterize all of his $1000.00 ADP refund to an after-tax contribution.

Is that $1000.00 EE contribution then retested in the 12/31/2006 ACP test? Or is it treated as a 2007 plan year contribution and tested in the 12/31/2007 ACP test?

Suppose you have a pooled profit sharing plan with a 9/30 year end. When determining the 2007 minimum distribution for the age 72 owner-participant, must we adjust his 9/30/06 balance to 12/31/2006? If so, by what interest rate? The 10/1/05-9/30/06 rate of return for the plan?

Does anyone know what the implications are if a DB plan sponsor makes contributions to a trust that doesn't have a tax ID ?

In other words does the actuary for the plan still have to recognize the contributions and assets in this trust ?

Is the plan sponsor faced with any penalties ?

Is the ID just a nice to have rather than a need to have ?

I'm looking for a 2-3 day seminar on remedial amendment periods, determination letter requests, the new cycles, etc.

Does anybody know of one?

Plan has a last day rule; participant terminates employment on 12/29/06 (last day of the plan year). Do they get a profit sharing contribution? I seem to remember it being a gray area and am not sure if there is any specific guidance.

Thanks for your help.

Our firm has taken over a 401(K) plan that allows for salary deferrals, 3% Safe Harbor & Discretionary P/S. In reviewing 2005 testing performed by another firm it was discovered that they were eliminating the salary deferral from the rate group testing and just testing on the Empolyer contribution(SH & P/S). Is this permissible? I was always under the impression that all contributions were tested.

Any feedback would be appreciated.

Client gave a Mortgage Note to someone for $100,000 out of their profit sharing plan. The lender is paying $500 a month in interest into the plan, but the prinicipal is not required to be paid until 2011....are you allowed to do this type of investing?

It is my understanding that a pension plan sponsor should obtain a Trust Tax ID Number for say a brokerage account set up in the name of the plan - is this the same as the EIN number used on the sponsor's 5500 ? Form SS-4 seems to indicate that ??

A multiemployer pension plan stopped using an equivalency method in which hours of service were calculated into units and converted into years of credited service to credit participants. Recently, the plan began to credit participants with their actual hours of service. The plan now credits a Participant three cents (3¢) per hour for each hour worked in covered employment for each calendar year. Is the plan now considered to be a cash balance plan?

I'm looking for a good, 2-3 day, in-depth seminar on remedial amendment periods, determination letter cycles, etc. I don't want an overview. I want nitty gritty deep down and dirty, preferably with someone from the IRS there.

Does anyone know of any?

If a participant files for bankruptcy can they continue to defer.

Does anyone know if a plan that uses annual valuation can simply issue the same quarterly benefits statement prepared for a plan participant four times during the year, until the next annual valuation changes the values of each investment in which the participant's benefits are invested?

Or is the IRS interpreting this new requirement in a way that makes annual valuation incompatible with plans that permit participant direction (i.e., in essence requiring at least quarterly valuations)? If so, are values of any date within the calendar quarter okay?

Hi - I have a couple of questions related to a 457(f) Plan.

Here is the situation: The organization is a hospital and wishes to benefit two groups of physicians. One group is comprised of non-employed independent contractor physicians. The other group of physicians is made up of hospital-employed physicians.

1. Is there any reason that a 457(f) plan cannot cover both non-employee independent contractors as well as employees?

2. Am I correct that all deferred amounts for key employees must be reported on the organizations Form 990? And this applies for amounts deferred whether or not vested? So that means, every year the hospital would have to report amounts credited to the key employees' accounts whether or not vested, and whether or not distributed?

What if there are no key employees that benefit under the plan? The two groups of physicians in this case are not part of management and don't seem to fit the definition of "key employee". Does that mean that none of their deferred amounts need to be reported?

Thanks.