$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.

I'm a plan administrator/plan sponsor seeking any info about an issue we've run into. Not entirely sure I even have a problem here.

We changed from semi-montly to biweekly payroll in 2003. The result to employees to shore up the payroll calendar would have involved a short paycheck. An executive decision was made to provide a one-time payroll advance to ease the financial impact to employees. The advance was subject to 401(k) contributions and match.

The advance was to be paid back upon termination of employment - and over 160 people have done so since 2003. A few employees are also making payments without terminating. It has recently come to my attention that 401(k) contributions are also coming out of the earnings before the payroll deduction to pay back the advance. Sounds like maybe that should not be happening, and maybe it results in improper contributions to the plan, like double-dipping or something.

Plan doc: payroll advance is not included or excluded from the definition of compensation or deferral pay.

What do we have here? Is it wrong to take the 401(k) deductions before the repayment of the advance? Am I looking at refunds, forfeiture of match, retesting, refiling, and re-examining my career choice?

My next step is to consult with ERISA counsel, but looking for a preview of what is to come from board members.

Thanks for any comments.

I have a client that owns an aviation company that sponsors a safe harbor 401(k) plan. He's 100% owner. Earlier this year, he acquired an 82% interest in another aviation company that does not sponsor a 401(k) plan. I believe he has a controlled group situation. Am I correct?

Prior to 2006 under the good faith application I determined RMDs based on the account balance method.

The final regs seem to indicate that for a DB plan the account bal method is no longer available, thus requiring that the RMD be an annuity amount essentially equal to the vested accrued benefit.

With that saif, for one of my clients, the RMD goses from about 40k (under account bal method) to 110k (equal to his accd ben).

That's quite an increase to communicate to a client.

Is my general impressions on point and any observations out there to add?

Thanks.

Should've posted here first......

Plan participant has purchased beach property through his directed investment account in PSP. He does not personally use it or otherwise benefit from it. Plan allows for in-kind distributions. Would IRC §4975(d)(9) exempt the distribution of the beach property to him assuming there is an otherwise distributable event (ie, termination of employment, retirement....)? He has been told that to receive the real estate even as part of his distribution would be a prohibited transaction..... Thanks.

Company X requires employees performing certain functions to sign a contract providing that upon their satisfaction of the eligibility requirements to participate in the X Profit Sharing Plan, the employee will receive 90% of the amount s/he has earned working in the stated function. The contribution is treated by X as an employer contribution and is thus not included in the employee's gross income at the time it is made. Sometimes an X employee will perform an unrelated function before being transferred into the function requiring the signing of the contract. I am very concerned on how this contribution should be treated for tax purposes, because any of such possible treatments have vastly different tax consequences. Here are the three alternative ways I see this contribution being treated:

(1) For those employees who previously worked for X in another capacity, I can see the contribution being treated as either (a) a 401(k) contributions, since it is made under a cash or deferred arrangement (since it fell outside of the one-time irrevocable election exception) for which ADP testing would be required or (b) a mandatory employee contribution which would be subject to ACP testing.

(2) For those employees who had to sign the contract at the time they were initially hired by X, I can see the following possibilities: (a) the contribution is an employer contribution since it was made under the one-time irrevocable election rule; or (b) the contribution is a mandatory employee contribution, subject to ACP testing. For (a), unless the contribution could satisfy a safe harbor, the contribution would have to be subject to the general test to determine whether it satisfies the nondiscrimination test for the amount of such contributions.

Any thoughts?

Considering a policy to restore benefits to employees coming back w/in 6 months of leaving the company. One suggestion that has come up is if, when they left, they went on our COBRA plan - paying the higher premiums - and then when they came back w/in 6 mos, we immediately began charging only the employee level premiums for their coverage.

However, if they weren't on our COBRA plan, they would be subject to our standard waiting period (less than 2 months) before being covered. Other than premiums, our COBRA plan is identical to our employee plan. Since the differential treatment is based on whether or not they took our COBRA, and not necessarily on a health condition I'm thinking there probably isn't a problem with this.

Does anyone see an issue with this? Thanks.

This is bugging me because I feel like I should know the answer ....

Standard FSA medical reimbursement account - can it be drafted to require the participants to show proof of payment of the expense prior to reimbursement of the medical expense under the plan?

The employer is a medical facility that is mad about several employees who have turned its bills into the FSA and been reimbursed but then never paid their bills at the medical facility. The question was whether the employer could "force" the participants to use the reimbursements to pay their medical bills. Two options came to mind: require proof of payment prior to reimbursement or require that all unpaid medical bills be paid directly by the plan.

Any thoughts (with cites to supporting law, if any)?

To clarify treatment of corrective distributions under PPA, would taxation in year of distribution for calendar year plans begin with distributions occuring in 2009 for the 2008 plan year?

Plan participant has purchased beach property through his directed investment account in PSP. He does not personally use it or otherwise benefit from it. Plan allows for in-kind distributions. Would IRC §4975(d)(9) exempt the distribution of the beach property to him assuming there is an otherwise distributable event (ie, termination of employment, retirement....)? He has been told that to receive the real estate even as part of his distribution would be a prohibited transaction..... Thanks.

this report will generate a list of the plans on the system (only the most recent year shows)

it also pulls a vesting schedule name(e.g. 3/20).

I suppose since plans will have to go to a new vesting a 2/20 (or better) in 2007 it could make it easier to spot those plans.

Of course, this only works if you have a legitimate name for the vesting schedule.

this report only works in crystal.

in other words open in crystal and print preview.

Hello,

For school, I need to write a 20-page paper on any ERISA topic. Most my current knowledge is in the pension portion of ERISA and I would like to write my paper in that realm. However, I cannot think of a topic worth 20 pages of discussion. Any suggestions would be appreciated!

Thanks,

Eric

2006 COLA 3.3

2005 avg wage index 36,952.94

2007 Bend 1 680

2007 Bend 2 4100

Taxable Wage Base 2007 97,500

if for whatever reason you are missing values for prior years,

the table can be found at the govt web site

http://www.ssa.gov/OACT/COLA/autoAdj.html