A Clinic 401k plan uses the Safe Harbor Basic Match. However, pursuant to severe cash flow problems wishes to only provide the safe harbor match to NHCEs but still allow HCEs to defer only not receive the SH Match for the next year until their cash flow problems subside. This year HCEs had to stop deferring because employer could not afford their match payment and still provide the match to the staff (3 Doctors with 11 staff - all deferring). Doctors still want to defer but are willing to forgo the SH match for next plan year. My understanding is that the Safe Harbor Basic Match (and/or the SH Non-Elective) cannot be restricted to just NHCEs. Is there a way around this so that they can keep the plan a safe harbor? Also, this would be a top heavy plan without the SH Match so they would be required to provide the minimum 3% to NHCEs if the plan were not a Safe Harbor, but Drs still couldn't defer as much as they could under a Safe Harbor. Any suggestions?

Owner maked $41,000 in compensation for plan year. He is over age 50 & he puts $15,000 in 401(k) and $5,000 in catch-up contribution into plan.

He wants to maximize the amount he gets into profit sharing.

The 415 limit is $44,000 for the year. Can he get $21,000 in profit sharing or can he get $26,000 in profit sharing?

General question - is it possible to establish a new plan with a unique, 9-digit plan tax ID, separate from the company's EIN? In other words, not a 3-digit number attached to the company's EIN, but the plan's own unique 9-digit TIN?

Thanks to anyone who can help!

Individual owns 70% of Co. A - a real state company (remaining 30% owned by unrelated individuals). Same individual owns 100% of Co. B - a manufacturing company. The real estate company owns the land on which the manufacturing company sits. Affiliated service group? Does it matter if the real estate company is a corporation or partnership?

I have a client that is a S corporation. The corporation has been in business for 14 years and has now sold most of its business assets. For this year and next year it expects to only have investment income (e.g. interest, dividends, passive real estate, etc.) and will not have active trade or business income. It has two employees who manage its investments, evaluate new business possibilities, manage corporate matters, etc.

For tax purposed, the investment income and related investment expenses (including employee costs) are passed through to the shareholders on Form K-1. The shareholders deduct the investment expenses as Miscellaneous Itemized Deductions on their individual returns, to the extent they exceed the limit.

I have two questions:

1. Can the S corporation, with only investment income, set up a qualified 401k profit sharing plan? If not, why not? (I can not find any authority prohibiting a corporation, with only investment income, from establishing a qualified retirement plan for its employees. However, there are limits on the corporate deduction for the employer contribution to the plan and a possible excise tax on a non deductible plan contribution.)

2. If the corporation can set up a 401k plan, is the employer contribution an expense that will pass through on the K-1 to the shareholders and be deductible as an investment expense under the Miscellaneous Itemized Deductions on the individual returns of the shareholders? If not, why not?

All ideas and comments are welcomed.

A 33% shareholders has a daughter working in the business. He dies in 2005. As of 11/06, he (his estate) still owns the shares of the company. Is the daughter still considered an HCE?

Thanks,

Tim

Company acquired 11/15/2006. Is the company considered part of the controlled group for 2006 H&W nondiscrimination testing? Or, is there a transition period?

Company "disposed of" on 3/15/2006? Is the company considered part of the controlled group for 2006 H&W nondiscrimination testing?

In either case, please confirm, if included in testing, that the value of total 2006 nontaxable benefits is included in testing (not just the portion of the plan year in the controlled group).

Thanks!

My cross-tested 401k PS plan is top heavy and fails the adp test. Eligibility is: k - immediate; PS - 1 year dual, 1000 hours and last day required; QNEC - 1 year dual.

4 ees; 2 hces 2 nhces (1 nhce is t<501, so no TH or PS for her)

A 5.48% qnec satifies ADP test.

qnec satifies TH.

qnec can be used in Gateway.

qnec cannot be used in 401(a)4.

Relius is giving me 2 issues:

1) It's putting my t<501 into 401(a)4 (but correctly excluding her qnec)

2) It's putting my t<501 into Gateway test as a 0, incorrectly excluding her 5.48% qnec

Am I right, t<501 shouldn't be in either 401(a)4 or gateway?

But, even if she was in gateway, can't her qnec count towards it?

the non-discrim test page that shows employees included/excluded under IRC 410(b) shows "term" under remarks, which may or may not be correct - I'm not sure. But the page that shows who benefits has a "yes" under benefiting 401(a). I'm thinking it should show *** for excludable...what do you think of all this? Am I way off base, or is Relius screwing up?

thanks!

PPA requires (efective 1/1/2007) a notice to participants of the right to defer receiving distributions and the tax and retirement savings consequences of not deferring distribution. No guidance expected until later in 2007. Is anyone considering altering the 402(f) Special Tax Notice to accomplish this notification or, if not, what other forms?

I know this has been discussed before but not sure if it has been completely resolved.

Suppose you have a partnership of three doctors who sponsor a money purchase plan through 2006. They terminate the plan on December 31, 2006 but do not distribute benefits until mid 2007. Furthermore suppose they adopt a DB plan effective 1/1/2007 for calander year 2007. Does the 31% limit apply in 2007?

In reading 404(a)(7)© it seems that if any one participant is a beneficiary in a DB and DC the 31% combined limit applies. Even though none of them will receive contributions in the MPP in 2007, it appears that just because they have an account balance in 2007, they are considered beneficiaries and therefore the combined 31% limit applies.

does anyone disagree with this?

Just looking for clarification on who actually is supposed to be given a Relative Value Statement for their benefits from a defined benefit plan. I was under the impression that any time there is more than one option available for payment of benefits, then a relative value statement was to be prepared. I understand that it is part of the QJSA requirements. Does a single participant who can take either a single life annuity or a lump sum have to be given the statement of relative value as well?

Also does an active married participant who is starting to receive an MRD and is being given a single life benefit have to be given a relative value statement?

Thank you.

If a plan terminates and makes two or three distributions that will span over two taxable years (for example a large distribution in December and smaller distributions in January) is there any limitation regarding rolling the distributions over? (Prior to 1983 the rule was that you had to make the distributions within one taxable year for them to qualify for direct rollovers. I believe this has changed and that the distributions would be deemed to be partial distributions and therefore could all be rolled over, but I cannot find any authority directly stating that.)

Is anyone Amending their plans right now? If one has a Defined Contribution Plan and the plan is not electing to have Automatic enrollment is there any urgency to amend? What is the time line you are all on for the PPA?

thanks

Does anyone know if HSA catch-up contributions are included in cafeteria plan nondiscrimination testing, or are excluded like 401(k) catch-up contributions?

We've got a plan that had the annuity and QJSA accidentally removed from the document during the GUST restatement.

Unfortunately this was found because the plan is going to be audited. Part of the audit request is that the spousal consent forms to waive the QJSA form is provided. I don't believe that form was provided to the particpants (Plan has been in existance prior to '89 and plan sponsor has never had an annuity payment) after all it was removed....

What should we do prior to audit to show we are trying to be compliant here.

We have a terminated employee who insisted on having his account balance transferred from our 401(k) plan directly to his IRA via a trust to trust transfer. Our current recordkeeper will not do trust to trust transfers; they issue a check to the IRA, send it to the participant, and then it's the participant's responsiblity to get it to the IRA or new plan. From what I understand, the majority of recordkeepers do not do trust to trust transfers. Now this terminated employee is threatening to sue us and our recordkeeper for lost interest.

I'm curious to see if my understanding that the majority of recordkeepers do not do trust to trust transfers is correct. Thanks.

This may have already been discussed, and I know there has been no guidance yet. But does anyone know how to handle participant statements where the participant is already receiving a monthly statement from their investment company? Would the investment company be responsible for adding the correct verbage, etc? I guess the TPA would have some responsibility/involvement since the investment company may not have vesting, etc. Just kicking it around. Thanks.

Assuming a SINGLE (for ERISA purposes) group heath plan subject to COBRA provides identical benefits to all participants including active employees and retired employees not eligible for Medicare, is it permissible under IRC Section 4980B(f) and Revenue Ruling 96-8 to separate the two classes of participants for purposes of determining COBRA rates (hence arriving at COBRA rates for retired employees materially greater than non-retired employees on an actuarially certified basis)?

Please accompany any responses with citations.

Happy Holidays, Ira

Does anyone have a listing of the Amendments since the GUST restatements for 401(K) Profit Sharing Plans and the deadlines for each?

Thanks!

Is there any regulatory requirement that a catch up eligible participant needs to make a separate election to have salary deferrals count as catch up? We currently have employees complete 1 salary reduction agreement with 1 deferral election. This election is then in place for the plan year and will continue until they meet the 402(g) limit and then our payroll system will continue deductions until they hit the $5,000 catch up limit (if over 50). Someone is telling me that we need to have catch up eligiblel ee's complete another reduction agreement and make a separate election for catch up. It's my understanding that salary deferrals are salary deferrals whether they are normal deferrals or catch up deferrals. Our plan matches all deferrals, normal and catch up.