Our plan does not currently permit many dual purpose items, but we are going to open it up for massages. What types of requirements are normally imposed?

Licensed massage therapist?

Doctor's note?

Should that include Chiropractor?

In a previous posting regarding the new tax law in 2005 that eliminates the 100,000 AGI threshold for doing a conversion to a ROTH IRA starting in 2010, there was the following response:

"The taxability of Roth conversions is based on the deductible/non-deductible history of ALL of an individual's IRA's. If you built up an IRA with deductible contributions in your old low-income days or you rolled over a large amount from an employer plan into an IRA, then most of the amount you convert to Roth will be taxable even if you start making non-deductible contributions now. This is true even if you keep your non-deductible IRA separate.

So for many if not most people, the new ability to Roth convert is NOT the equivalent of removing income limits on Roth contributions. Each individual's situation must still be considered to determine whether a Roth conversion is a good idea."

I can not find where the law says that you consider all of an indivudal's IRAs to determine the taxability of the Roth conversion. Can someone direct me on this? So if someone had a IRA rollover from a qualified plan of $400,000 and then did a nondeductible IRA from 2006 -2010 totaling $32,000, what are you required to look at for the taxability?

Let's say I have a short limitation year because I'm switching my limitation year from calendar year to the plan's (non calendar-year) plan year. I know that I need to prorate the 415 limit for the short limitation year. But, have you come across anything that tells me how to allocate employer contributions to that short limitation year in order to test 415 compliance? I make my matching contribution after the end of the plan year. I'm not coming up with anything yet in the regs and Q&As.

Related question:

Doesn't it seem strange that I could have someone who front-loaded his elective deferrals in the short limitation year -- then get hit with a return due to the short plan year proration of the 415 limit? I guess the anwer to that is -- well, "that's the law"!

This is a non-stand prototype plan. No break-in service rule. Calendar year plan with dual entry dates.

Example: DOH 07/06/06. DOT 09/06/06. DOH 07/06/07. DOT 09/06/07. DOH 07/06/08. DOT 09/06/08. etc....When does this employee satisfy the the service requirement? Would the 6 month elig computation period end 01/06/07, regardless of employment and he would therefore become eligible the later of entry date or rehired date which would be 07/06/08? Or does this employee satsify the 6 month requirement when he actually complete 6 months of service, which would be 09/06/08 so his entry date would be 07/06/09? I know it's a real gripping issue, but I keep thinking about the 12- Month Year of Service option, which continues regardless of employment. Does the same apply for the 6 month serice?

Does anyone know where the SEC stands regarding the remedy under 409A to replace discounted options with non-discounted options? It appears that you would be granting a new option that is backdated--is there any SEC exemption for doing this in order to fix a tax problem? Any idea is appreciated.

Employer wants to fully vest all existing participants in the company retirement plan as of the date of sale to a new owner. Then revert back to the existing schedule for all new participants after that. As long as the change applies to everyone equally this should be OK, correct?

Thanks

Need some help. Not sure how this works. In preparing my Qdro it ask. " the alternate payee's award is or is not entitled to earnings( dividens,interest,gain and losses) from the valuation date to the date the award is segregated from the participants account.

We seperated in 10/7/03 and were divorced in January 06. the court papers say that any and all moneys earned after date of seperation 10/7/03 belong to whom ever earned the money.

Our daughter got married in October 2004 and we withdrew about 20K from the plan to pay for her wedding. So the 401K savings plan would be less at the end of 2004.

So where do I go from here? I also started contributing to the plan again in 2005 but have since stopped.

Need help

Employer has three plans; a frozen DB plan, a safe harbor 401(k) Plan only for participants eligible for the DB Plan, and a 401(k) for everyone else. The safe harbor plan has a 3% non-elective contribution, the non-safe harbor has an employer match.

I assume I would do separate coverage tests for each of the 401(k) Plans treating the participants eligible for the other plan as not benefitting under the Plan I am testing. If they fail the ratio percentage test I could do an average benefit test and would need to test all three plans together. If they failed coverage an employee might get both an employer match under the non-safe harbor plan and an employer non-elective under the safe harbor plan. Is this correct? Would it make any difference if the match was a safe harbor match?

Thanks!

The participant has a loan. The plan only allows for one loan. The participant now wishes to take a hardship distribution under the safe-harbor provisions for hardship, for medical bills. The bills have already been turned over to collection.

The client asked several questions, and please let me know if I am wrong with my responses to the client:

Exhausting all other options/loans from the plan is the only requirement? In other words, they do not have to obtain denials from outside of the plan (i.e., banks)? My response...correct

Loan payments will continue to have to be made? My response...correct

Personal review of the medical bills is required? I told the client that would be the prudent thing to do. (although I do not see where it is required) I also suggested copies of the EOB's.

Does the participant need to provide proof that the money was used to pay the medical bills, or is he on his honor to do that? My repsonse...I believe he is on his honor. I have never seen an employer go through proving it was used for its intention.

I would like to know what your thoughts are on this...thx

What if I suspect he may be trying to get the distribution prior to the issuance of a QDRO? My response...the spouse needs to sign off on the hardship distribution, which should eleviate the concern. As well the distribution forms ask the question is a QDRO pending.

I also told the client that the participant may not contribute (deferrals) for 6 months after the hardship.

Please let me know if there is any disagreement to my responses. In particular, the proof of payment of medical bills and the QDRO question.

Thank you so much!

Can my 403(b) tax paid contributions be rolled over to another retirement plan?

Is a defined contribution plan that calls for forfeitures to be used to reduce employer contributions permitted to forfeit unvested amounts in terminated employee accounts before they have had a 5 year break in service? In other words, if the terminated employee does not request/receive a distribution, does the employer have to wait 5 years to access the nonvested amountsi n such terminated employees account? I am aware of the requirement that nonvested amounts be restored if the employee is rehired.

Thanks!

I understand that the HIPAA Portability Regulations, issued Dec. 30, 2004, changed the special enrollment rules so that loss of coverage under Medicare, Medicaid, CHAMPUS/Tricare or other publicly sponsored or subsidized health plan is no longer a loss of coverage that would trigger a special enrollment right. Does anyone know WHY that change was made? I advise an employer who is not satisfied just to know what the rule is; the employer wants to know why the rule was changed. Any thoughts?

$59,000/$74,000.

A 501(c )(3) hospital has a 403(b) tax-sheltered annuity plan and a 457(b) deferred compensation plan.

In 2006, a 50+ year old employee can contribute $20,000 ($15,000 max + $5,000 catch-up) to the 403(b) plan. In addition, the employer could theoretically separately contribute (assuming discrimination reqs can be met which is a big assumption) $29,000 to the 403(b) plan to max out the 415(c ) annual additions limit for 2006 of $44,000.

The 457(b) plan does not need to take into consideration the $44,000 annual additions limit. Thus, the employee could defer $15,000 to the 457(b) plan over and above the 403(b) contributions. (The 414(v) catch-up allowance is not available since this is not a governmental employer, but if it were, the employee could contribute $20,000 each to the 457(b) and 403(b) plans.) Thus, the total amount that can potentially be deferred by the hospital employee is $59,000.

If the employee is in his final three years before retirement (and assume he's a long-term employee who has been eligible but never contributed to the 457 before) he can double his max 457(b) deferral to $30,000, bringing the total potentially deferred in 2006 to $74,000.

Am I missing anything?

The spectre of 'disqualification' haunts many of our plan committee meeting. Sometimes I think it is used too frequently. Anyone have an idea of how many plans actually do get disqualified? And for what reasons?

I have a company that is looking to hire a new VP. The company wants to grant the new hire a 10% of the company's stock after 4 years of service. This is not a stock option, but a stock grant. Is such a grant subject to 409A since it is a direct grant of stock and not an option to purchase. Also, how is such a grant tailored to satisfy 409A (assuming it applies) and/or how is it tailored to circumvent 409A.

Any help is appreciated. Thanks

Does anyone know where the SEC stands regarding the remedy under 409A to replace discounted options with non-discounted options? It appears that you would be granting a new option that is backdated--is there any SEC exemption for doing this in order to fix a tax problem? Any idea is appreciated.

All of the commentators I've read (including the joint committee) have indicated that qualified charitable distributions count towards required minimum distributions. However, the PPA provision doesn't specifically address this issue. In fact, the RMD rules in IRC 401(a)(9) refer to distributions made "to such employee," and the qualified charitable distribution rules are quite careful to require that the distribution be made to the charitable organization and not to the employee. Can someone help me connect the dots here?

Sole shareholder of corporate plan sponsor deposits $75,000 (personal funds) into the pension account. This is immediately followed by a $75,000 investment in a limited partnership, which is held in the name of the plan.

The individual states that the intention was to make a $75,000 personal investment in the partnership - this investment should be held for him personally. It should never have run through the pension plan.

By way of correction, we would like to simply retitle the investment to him personally. Does this seem reasonable? It doesn't seem like the plan was really affected either way.

There are obviously excise taxes due. Is the amount involved the entire $75,000? I can't think of what else it would be.

Any suggestions would be appreciated.

Med

Company X buys Company Y. One year later, Company Y's defined benefit plan is merged into Company X's defined benefit plan. Included in Company Y's DB plan is a frozen voluntary employee contribution account. Go ahead five years. Now the insurer that supported the administration of the frozen voluntary employee contribution account has sold a line of business and will no longer be able to support it after 2006.

What Options Do I have?

Although there is a 401(k) plan, spinning off the voluntary contribution account is not a viable option since the account assets have to be distributed under the defined benefit plan's distribution options. While the DB plan is overfunded, I would hate to have to go to the PBGC with this.