What is the general concensus out there regarding paying audit fees out of forfeiture dollars. If your plan allows administravtive fees to be paid from forfeiture dollars, would an audit fee fall into this category? Per the regs, it states that compliance costs include the preparation of the form 5500 annual report (and other tax forms) and nondiscrimination testing. If administrative services are provided seperately, compliance expenses are generally included in the base charge rather than seperatley priced. (Which still leaves a grey area).

My opinion regarding the audit fees falls into "it's a required expense" When plan participants fall over a certain threshold, an audit is required. And because it is required, wouldn't that be classified as an administrative expense? I was just wondering what other plan administrators are thinking about this or if this has been addressed before.

Any feedback would be appreciated.

Thanks,

Cynthia

Normally we work with a "Wrap Document" and have to file only one 5500. We have been posed with questions regarding filing when three separate cafeteria plan documents are maintained.

I am told that the first document covers: Medical insurance premiums, the second cafeteria plan document covers: Long Term Disability and the third document covers Life Insurance.

They have just crossed the 100 participant threshold and will be filing for the first time.

My questions in regards to filing are:

1) The number of participants in the medical plan (under Document #1) has greater than 100 participants and the number of participants are less than 100 in the LTD(Doc #2) and and less than 100 participants in Life Insurance(Doc #3).

Am I correct that they would be required to file a 5500 for the medical plan under Doc #1 and not have to file for the LTD and Life under the other two Docs?

2) Same situation as above, but the employer funds the LTD and Life Insurance.

Since it would be ALL employer funding and NO employee pre-tax money, is it necessary for a cafeteria plan document at all?

Are there filing requirements for LTD and Life Insurance components if premiums are paid by the Employer?

I would appreciate any help with this.

Thank You

I posted this on the Distribution Message Board but thought maybe I'd get a better responce here:

A company has a profit sharing plan that has annuities as a distribution option. In the past they have bought an annuity from an insurance company when a participant wants an annuity. They are thinking of offering a rollover to their DB plan and paying the annuity from there based on the DB plan's lump sum factors. This would be totally at the option of the participant.

Has anybody seen this done? What issues should they be considering before allowing this?

Company has a defined benefit plan and a defined contribution plan (401(k)) stand alone. I do record-keeping for the 401(k) plan - they have a different TPA/Actuary work on the DB plan.

The company is excluding employees hired after 04-30-2006 from participation the DB plan. Therefore, they want to allow these employees to receive a match in the 401(k) plan.

They would have to amend the 401(k) for a match - which is fine - but they want to exclude any employee hired before 05-01-2006 from sharing in the match.

In essence, becuase they are excluding new hires from the DB they want them to be able to get a match - but becuase the old employees are still in the DB plan - they don't want them to get a match.

Can a plan exclude existing employees based on these circumstances? The plan is a prototype plan. Can I amend a prototype to "EXCLUDE EMPLOYEES HIRED BEFORE 05-01-2006?"

I am not worried about testing becuase they will be excluding all their HCE's - but can you exclude based on a service item such as above??

Can a company who does not currently offer a qualified profit sharing plan, start one now and make a 2005 contribution if they have not yet filed their 2005 corporate taxes?

What are you required to file...a 5500 and Schedule C only?

Hi All!

I need some help with my retirement planning. (Time is running short)

For the last years I have always contributed the max to my roth ira, but would like to save some more in tax deferred plans.

With my house cleaning (4 - 5K per year income minus expenses) internet sales ( 1 K per year), does it make sens to have a SEP or SIMPLE plan?

How much would I be able to contribute? 25% of profit from each business, or a total amount per year? How do I start up a plan for myselve? Does it even make sense to have one, or is the cost more than it's worth?

[Also posted on 403(b) Board]

I am reviewing the 403(b) plans for two religious schools--one a Jewish high school, the other a Catholic elementary/secondary school. The Catholic school is not operated by a parish or archdiocese, nor by a religious order, but the head of the school is a sister. There is daily religious observation and instruction. The school is listed in the official Catholic Directory.

The Jewish school is not affiliated with any temple or synagogue, but it has daily morning prayers and instruction in Hebrew and Torah, observes the laws of kashrut, is headed by a rabbi and has several rabbis on its board. To be admitted, a student must be Jewish (as defined by principles of reform Judaism).

Each plan is administered by a committee appointed by the board of directors of the respective schools. I am fairly certain that both plans would be "church plans" for purposes of ERISA and Code section 414(e) as the schools are "associated" with a church or association of churches.

But....

Are these plans subject to the ACP and other discrimination requirements of 403(b)? I am having a hard time figuring out it they are qualified church-controlled organizations--it appears that the standard for this is narrower than for "association" with a church. Would these plans be retirement income accounts under 403(b)(9) or custodial accounts under 403(b) (7)? Does it matter for any reason other than investment options? Any advice about useful research sources would be greatly appreciated.

I am reviewing the 403(b) plans for two religious schools--one a Jewish high school, the other a Catholic elementary/secondary school. The Catholic school is not operated by a parish or archdiocese, nor by a religious order, but the head of the school is a sister. There is daily religious observation and instruction. The school is listed in the official Catholic Directory.

The Jewish school is not affiliated with any temple or synagogue, but it has daily morning prayers and instruction in Hebrew and Torah, observes the laws of kashrut, is headed by a rabbi and has several rabbis on its board. To be admitted, a student must be Jewish (as defined by principles of reform Judaism).

Each plan is administered by a committee appointed by the board of directors of the respective schools. I am fairly certain that both plans would be "church plans" for purposes of ERISA and Code section 414(e) as the schools are "associated" with a church or association of churches.

But....

Are these plans subject to the ACP and other discrimination requirements of 403(b)? I am having a hard time figuring out it they are qualified church-controlled organizations--it appears that the standard for this is narrower than for "association" with a church. Would these plans be retirement income accounts under 403(b)(9) or custodial accounts under 403(b) (7)? Does it matter for any reason other than investment options? Any advice about useful research sources would be greatly appreciated.

Can someone please confirm for me that if an employer makes a top heavy contribution after the due date of their tax return they will still get the deduction, but the deduction will be for the year the contribution is made rather than the year to which the contribution relates?

Assume the following:

A owns shares in the ESOP company (S Corp) outside the plan. Therefore, he has no deemed owned shares.

B is A's nephew, is a plan participant and owns shares inside and outside the plan.

C is B's son, is a plan participant, and owns share in the plan only.

If we analyze A through the 409(p) family rules, B and C are included as family even though A has no deemed owned shares. However, since A has no deemed owned shares, he is not a DQP. If we do the same analysis for B, C is included but it does not appear as if A would be included in a family group b/c he is not a spouse, ancestor or lineal descandant of the individual or spouse, brother/sister or lineal descendant of a brother/sister, or spouse of any of those people. That is unless he is included as a non-lineal ancestor. Is he?

Assume B has 11% deemed owned. As a result, B and C are DQPs. Assume for purposes of the 50% test, they are at 20% when outside shares are included. If the answer to the first question is yes, then A's outside owed shares come into the test as part of an aggregate A,B,C family group. If the answer to the first question is no, then A's outside shares stay out of the test and there is only the B and C group. Agree?

DB plan fails 401(a)(26), which is discovered upon submission of the plan to the IRS. The plan was adopted in 2000 and submitted to the IRS before 1/31/04 to be timely under the GUST RAP. (Yes, they are just getting to it now.)

Let's say it fails 401(a)(26) because it's an offset plan and doesn't meet those requirements operationally. My understanding is that's a demographic failure and upon IRS discovery must be handled through Audit CAP. The IRS agent doesn't have authority to correct on their end. (Of course I am also assuming we are past the -11(g) period.) Agree?

However, let's say it fails 401(a)(26) because the document benefit is below the "magical" 0.5% benefit for enough people. I have to think this is a plan document failure that can be corrected without going through Audit CAP. I say document failure because under the terms of the plan with the participants eligible, there is no way to satisfy (a)(26) if you consider under 0.5% not benefiting. Agree?

Now what if it's a combination of the two. However, to correct the plan document failure the plan increases benefits to 0.5% and removes the offset altogether solving both problems. (a)(26) is saved! In other words, is the correction of the plan document failure limited to increasing that benefit and cannot change provisions that would solve other problems or is this allowable?

Has anyone else experienced a custodian that will not issue 1099 from IRA to reflect roll-over to 401(K) plan? I have a client who's employee signed up for an annuity with (please do not laugh) a 16 year surrender period. Employee may withdraw 10% per year so she has taken one and rolled it over to her employers plan (IRA rollovers accepted in doc), custodian issued 1099 as premature even tho they knew it was rollover and refuse to issue check to new plan. Now IRS wants around tax and penalty even tho it was rolled over 10 days etc. Anyone have any thoughts on this.

Say a self-employed has net earned income of 150,000 (after 50% SE reduction).

Say he bases his contribution on earned income of 50,000 and the computed maximum deduction is 150,000.

Say he contributes 150,000.

Then 100,000 (150,000 - 50,000) is deducted on that year's 1040 and 50,000 is not deducted and is a carry over. Assume that he is not subject to excise tax.

We know carryover's can be applied to future year's as a deduction, but does anyone know if such carryover can be applied to a prior year's tax return, instead, to reduce a prior year's tax bill?

Thanks.

A company has a profit sharing plan that has annuities as a distribution option. In the past they have bought an annuity from an insurance company when a participant wants an annuity. They are thinking of offering a rollover to their DB plan and paying the annuity from there based on the DB plan's lump sum factors. This would be totally at the option of the participant.

Has anybody seen this done? What issues should they be considering before allowing this

I have a company that has laid off an employee who is enrolled in an FSA. What our my options regarding her FSA since we don't know if this is going to be permanent or not. Any help would be grateful:)

Are the proposed regs effective for plan years beginning on or after 1-1-2007 or do they have to be finalized before they are effective?

Part 2 question 2e(2) under benefit payments has a line "To insurance Carriers for Provision of Benefits".

Any help on what this line means would be appreciated.

We will be offering nutritional counseling with an on-site dietician as part of our "wellness" programs. From what I have read, unless these services have been prescribed by an MD for treatment of a specific medical condition, they would not be reimbursable. Is my interpretation correct or is there some wiggle room?

A husband and wife each own 50% of Company A and there are no other employees. Company A (not the indivudual owners) owns 56% of Company B which has several employees. To me this looks like a parent-subsidiary group and a controlled group situation does not exist.

However, there's been recent evidence that instead of A owning the 56% ownership in B, it's actually one of the 50% owners of A that owns 56% of B. If this is true the two companies would be classified as a brother-sister group and a controlled group situation would exist due to the attribution of spousal ownership (each spouse would be deemed to own 100% of A). Am I interpreting IRC sec. 1563(a) correctly?