A participant has a Simple IRA, a traditional IRA, and a Rollover IRA. He wants to roll them into a qualified plan and have them be considered "Roth" contributions. He from that point forward wants to make Roth contributions to the plan.

Can these IRAs be rolled into the plan and be considered Roth? Will he have to pay any penalties? (to convert to Roth)

Thanks

We have a take over plan that consist of two components. Employee Deferrals and Safe Harbor Match. The eligibility under the plan is 3 months of service with quarterly entry dates. The plan defines compensation for the Safe Harbor Match as Pay Period Compensation. The questions is, does this definition of compensation exempt the plan from Top Heavy requirements?

Suppose you have a DB plan with a 12/31/2005 year end that was amended 2/15/2006 to increase the retirement age from 64 to 65 effective for the 2005 year.

412©(8) allows for retroactive amendments as long as

1) It was executed within 2 1/2 months after the close of the plan year.

2) The amendment does not reduce the accrued benefit of any participant as of the first day of the plan year to which it applies.

If a participant had an accrued benefit of $1,000 on 1/1/05, he would still have an accrued benefit of at least $1,000 after such amendment. However, his PVAB might be less valuable on 1/1/05 because of another year of discounting. Would this negate the amendment?

I have a 403b client in one city who was asked to assist a similar type charity in another city on some similar administration issues in general that they were having problems with (bookkeeping kind of stuff). While he was visiting they expressed that they would also like to have a pension plan. So, he invited them to participate in his plan. NOBODY TALKED TO US! Somehow they enrolled several folks from the second city payroll with the annuity company that holds the assets. During 2005 a check was cut from the second charity payroll to my client's payroll and deposits were made for both deferral and match. This amazes me because they are unable to enroll their own folks without our assistance. How they were able to get these 10 other people from a totally unrealated company enrolled is beyond me.

Of course, no documents were done or amended to adopt the plan by the second charity. We did not include any of these folks in testing because we were unaware of the situation until we did trust accounting and 10 people showed up with accounts that were not on my clients payroll.

And finally my questions. How do I fix this? I believe that once I explain how nasty the ACP testing results will be (they fail every year and now they want to add another 100 people with only 10 actually deferring). Can we just make distributions to all the "illegal" folks? Do I need to file VCP, which is totally cost prohibitve for this charity client? I do not believe they had any idea that these actions were not compliant. They just wanted to give the folks in the other city an apportunity to have a plan, and figured, use ours, it's already set up. Don't just love our jobs? Any input would be appreciated.

Basic Facts: Parent Company A owns Company B. Company B has no employees. Company A has employees and maintains a 401(k) plan.

On October 1, 2006, an unrelated party is buying the stock of Company B. After the sale, the new buyer will hire some employees from Company A. The new owner wants to establish a safe harbor 401(k) plan for these employees effective October 1, 2006. It would be a calendar year plan.

Before the sale, even though Company B had no employees, it was part of a controlled group that did have employees.

The final regs say: A plan is a successor plan if 50% or more of the eligible employees for the first plan year (10-1-06) were eligible employees under a CODA maintained by the employer in the prior year.

For the successor plan rules, before the sale, is Company B considered an employer maintaining Company A's plan?

Any cites would be helpful.

Thanks in advance.

I believe that it is pretty common to use permissive disaggregation in ADP/ACP testing, where the disaggregation is done using the twelve month rule to determine the excludable group.

I also understand that there is a possibility of applying an eighteen month rule to determine the excludable group. The theory behind that of course is that someone can be excluded from participation for 18 months by having a one year wait and and dual entry dates (six months apart).

So the question is whether anyone is actually using the 18 month rule as a bais sfor disaggregation.

We seem to be flunking by a few basis points with the 12 month disaggregation, and since we have over a thousand HCE's I would rather not have to do refunds or the dreaded bottom up QNEC. Thoughts?

Does anyone know of any online seminars for plans in Puerto Rico?

Thank you!

Is a plan required by law, unless otherwise provided by contract, to credit interest on pick up contributions of a participant prior to the particpant becoming vested in a pension benefit under the plan? Participants who terminate employment prior to becoming vested and withdrawal the monies, to include interest can receive a hefty payout...taking the interest with seems to erode the funding position of the plan and therefore not in the best interest of the plan. Any thoughts?

A plan offers employees $300 per month. They may use this towards benefits (insurance) or else they may use as deferrals. Is this okay?

Ineligible employee deferrd in 2005. We followed the instructions in the ERISA outline and forfeited the account and the employer wrote a check to make him whole outside the plan. The Accountant is now asking me how this should be reported. Does she have to amend the w-2, 941 etc. for 2005? This would require him to amend his 2005 tax return?

Can she issue a 1099 of some sort for 2006? Which one?

We have a situation where we prepare many PBGC filings for our clients. We currently prepare the filing, send it to the client for signature and delivery. Our clients are not prepared nor do they desire to fill out forms electronically or otherwise.

However, with the new electronic filing rules to take effect, I am not yet sure how this process can be handled.

Is anyone else in a situation like this thought of a technique to handle this?

Hi All,

If you are an IRA Custodian, this may be on interest to you.

http://www.irs.gov/newsroom/article/0,,id=161331,00.html

It seems OK to me. One concern we had was how to apply the refund if it came in after the tax filing deadline, but that has been addressed. Also, the responsibility for ensuring the custodian codes the amount as a carry-back contribution rests with the IRA owner- which seems like a good thing.

Some fund companies are no longer providing plan documents for SIMPLE IRA's auch as AIM.

They advised to use 5304 from now on.

What is the difference between 5305 and 5305 ?

Which do I use ?

What needs to be written in Section V of the 5304 and provided to employees by November 1st ?

Many THanks

I have a prospective client that is interested in a Section 132 parking and Transit plan but at this time, we are not administering this plan.

Where can I get the best information either online or by manual on administering these plan ?

I contributed to Compay A's Def Comp plan for approx 5 years. At that time Company A spun off the operation I was associated with and the Def Comp balance and liability for payment shifted to the new Company B. This company put in place an identical Def Comp plan to the parent CoA (seamless transition) and I continued contributions of salary and annual bonus for another 5 years to Company B.

Company B suspended the Plan at year end 2005 due to concerns over 409a.

Over the last 3 years both Company A and B have slid from investment grade to junk.

My investment elections ( non changeable) were for 10 equal installments after retirement.

Realizing the risk to my "savings" from potential bankruptcy of Company B I have requested that the plan Administrator ammend the plan as allowed (I think) by the Transition regulations for 409a to allow a one time change in the payout election schedule. This was done by registered letter to the Company B legal address.

FWIW I am currently eleigible for retirement and expect to do so in the next 6-12 months.

So far, I feel am being stone walled by the bureaucracy. This is a large company and they have little incentive to "do" anything other than ignore me. My intuition is that the functionaries inside the Company finance dept could care less about the jeopardy of plan participants and would prefer to run out the clock rather than actually act on my request. I have sent registered letters and email notes and solicited the intervention of HR, but so far all the response I have gotten is that the Company is "studying" the impact of 409A and if there are any changes to the plan I will be notified.

MY QUESTION IS... in these circumstances does the Plan Administrator have any fiduciary or other legal or ethical obligation to consider my request that I can appeal to in an effort to get the plan ammended?

Thanks for your time!

A plan recently transferred to our TPA firm with a large forfeiture account balance (approximately $100,000). According to the document, forfeitures should be reallocated annually. We have no way of determining the last time the forfeiture account was reallocated but it is safe to say that it has been several years. To complicate things, we are only able to obtain information for the 2005 plan year. How do we reallocate the forfeiture account? Also, what penalties would result from failing to comply with the document?

404(a)(1)(D)(i) IN GENERAL. --In the case of any defined benefit plan, except as provided in regulations, the maximum amount deductible under the limitations of this paragraph shall not be less than the unfunded current liability determined under section 412(l) section 412(l)(8)(A), except that section 412(l)(8)(A) shall be applied for purposes of this clause by substituting '150 percent (140 percent in the case of a multiemployer plan) of current liability' for 'the current liability' in clause (i).

This paragraph shows the change in the law. The old rules determined the UCL at the EOY. I know this was clarified in Gray Book answers. Now the new rules specifically point to 412(l)(8)(A).

(A) Unfunded Current Liability

The term "unfunded current liability" means, with respect to any plan year, the excess (if any) of--

(i) the current liability under the plan, over

(ii) value of the plan's assets determined under subsection ©(2).

412(l)(8)(A) is clearly the current liability at the beginning of the year. On this alone, I would take that the new UCL calculation is based on beginning of the year current liability and ignoring the current liability normal cost.

However, being that the old rules referenced 412(l), which then referenced 412(l)©(8), and because the old rule was an EOY determination, I feel fairly confident the new rules are too an EOY determination.

Anyone disagree?

Husband and Wife, 2 companies, both want a plan. Wife is a pediatrician owns 100% of her practice. Husband is a neurologist owns 100% of his practice. Based on controlled group rules at first look I figured controlled group, but now not so sure because they are competely seperate businesses and neither is employed, manages, or has any decision making capabilities in the other's business. Maybe that is irrelevant though.

Regardles. we have 2 companies with no other employees and it seems silly for them to have two plan documents, and pay for two completely seperate administrations. I know that one company could sponsor the plan and then the other company could adopt the plan as an affiliated entity.

My confusion comes up in how many 5500s are required? One person in my office says that she has this same situation for one of her clients and they only file one 5500. Another person in my office says she would file two 5500s.

I am trying to quote a price and of course it depends on how much work is involved here. So...

1) 1 document or two?

2) 1 adminstration package or two?

3) 1 5500 or two?

What is typical practice for attaching an audit report to the Final Form 5500 for a short plan year? For example, a merger occurs on 5/31. For the plan that doesn't survive, is it typical for the auditor to complete a five month audit and attach a separate audit report to the final Form 5500 or would it be acceptable to attach the audit report for the surviving plan.

The PFEA replaced the 30-year treasury rate with a rate of 5.5% when determining maximum benefits under 415 w/r/t lump sum payouts.

This meant for lump sums with ASDs during the 2004 and 2005 plan years, a rate of 5.5% had to be used when determining 415 limits. However, my understanding has been that this change was only for the plan years 2004 and 2005 and that for plan years beginning in 2006 the rate for lump sums under 415 reverts back to the 30-year treasury rate.

Does everyone agree or does anyone know of legislature that requires continued use of the 5.5% rate?

Thanks.