Correct me if I'm wrong...

When you open a Roth and contribute money to the account, that money is used to invest in a fund (a mix of stocks, bonds, and other investments) of some kind.

Mutual funds usually have an minimum investment amount; i.e. you must have at least $1000 (for example) to invest in the fund.

At Fidelity, there are two options

If you opened your account with at least the minimum amount ($1000), you can immediately invest in the fund and your money starts growing.

If you opened your account by making automatic contributions on a monthly or quarterly basis (say, $100 a month), you can avoid the initial $1000 investment. But, the money just sits there until there is enough accumulated to make the initial investment of the fund of your choice.

Without having enough money in the account to make an initial investment in a fund, the money itself is not growing.

Right?

That said, should one open an account with a mutual fund company by making small monthly contributions and allowing the money to accumulate until you reach the minimum investment requirement? Or, should one just save money on their own (savings account, short-term CD, etc.) until they have enough to make the minimum account opening money, and then open the account?

I guess I don't understand the value of opening an account by automatic contributions if you can't afford to invest in any of the funds. For example, if the minimum investment for a fund is $1000, and you are contributing $100/month, it would take 10 months before you could invest in anything.

Since this will not qualify for the DFVC program, is there any voluntary IRS program that will provide penalty relief for filing 2 or 3 years late, or is the $25/day $15K penalty the only option for an EZ non-filer who wants to become current?

Does anyone know of any guidance out there addressing being compensated in foreign currency while participating in a domestic corporation's 401(k)?

COULD SOMEONE PLEASE INFORM ME OF AN EMPLOYEES OPTIONS FOR THE FSA & DCA ACCOUNTS WHEN GOING ON AND RETURNING FROM FMLA?

I have a client who has not amended their plan since ERISA. I've been able to put together all the documents. However, the TEFRA,DEFRA, REA Restatement is an individually designed document and the Tax Reform and GUST are regional prototypes. My question is - which 5300 series form do I use to file for the determination letter with the VCP filing? This is a straight forward profit sharing plan. Can I use a Form 5307 since the last document is a Regional Prototype?

I have a question about Medicare as secondary-payer exception for a group health plan of an employer with at least 20 employees. If there are 6 non-union and 50 union employees and the plan is for the non-union employees, and they have a non-union employee turning 65, would Medicare be the primary or secondary payer for that employee?

Thanks for any help.

Filing an amended 2004 5500, after affecting corrections to SCH I.

Although I've researched significantly, both on line, and "hard copy" materials, including government filing instructions, I've yet to see addressed reporting requirements RE (amended?) SAR:

- is amended SAR required? (logically, it would seem so);

- if so, form of reporting requirement?;

- if so, timing of handout to participant?

Appreciate review and feedback.

Geo

Former hourly employee became union employee and no longer eligible for the 401(k) plan. This individual has an outstanding loan from a plan in which he no longer participates.

How should this be handled - full loan repayment now or can employee still repay over original period?

Not addressed in the plan loan policy.

Any assistance is appreciated.

Nonqualified deferred compensation agreement provides for payment of benefits only upon separation from service or death of employee. No mention is made of change in control. Can the parties now amend the agreement to provide for a payout on the earlier of change in control or separation from service, without violating the non-acceleration rule (or any rule)? (A change in control is being negotiated.) I thought the answer was clearly "yes," but I can't find an explicit statement to that effect in the proposed regs. Citations would be appreciated.

Safe Harbor 401k plan has basic match and an additional fixed match. The add'l match has a last day rule and was not amended prior to the beginning of their 2006 plan year. Can this be amended and still have reliance on the ADP/ACP safe harbor? Unless they've blown the SH, seems like there are 2 options...

Amend the plan to retroactively eliminate the fixed match? Since no one has accrued a benefit and you are amending during the year to comply with final regs, is this ok? Does plan continue to be safe harbor as long as the basic SH match is still made? I'm having a hard time with this - seems like you can't have it both ways... ie can't have a SH plan w/ a LD rule, and then say that you can remove the add'l match because of the LD rule.

Or - is it possible to rely on the safe harbor if you operate properly and sign the amendment removing the LD rule prior to year end? This seems safer to me. Thanks!

Hello,

I found out I was supposed to have filed a 5500-EZ for the last 3 years. I need to know the best tactic to handle this. I have recieved no letter from the IRS but my accountant sent an extension for 2005 and I am afraid they will contact me before I can contact them. I have read about sending a letter. What is considered the best reasonable cause. Is being clueless and not aware good enough? Any tips on writng the thing would be great and any other tips. I understand the fines can be huge if I don't do this correctly. I have estimated aprx 60,000!

Thanks,

Pattie

Eligibility for PS & Safe Harbor 401(k) Contribution is Year of Service, dual entry

Eligibility & Entry for 401(k) Deferrals is immeidate

Plan is Top Heavy

Any way to avoid providing TH minimum and/or Gateway minimum to Participants only eligible to make deferrals? Can we somehow disaggregate the Plan?

If Top Heavy 3% is unavoidable, anyone buy the argument that the Gateway minimum is 5% of 0 for the otherwise excludable employees, because we exclude pre-entry compensation for the Employer Contributions?

Has anyone had any experience with an Incorrect Form 5558 and can advise on the best way to handle the situation?

We prepared an extension for an 11/30 PYE and sent to the client; of course, their auditors prepared a "corrected" form listing the plan as a 12/31 PYE and extension deadline of 10/15/06!!!!

Will this date issue cause a problem with the IRS/DOL? Can we just put a copy of the correct 5558 on the 5500 when we file it, or do we need to send a reasonable cause letter?

I've never had this happen before, fortunately!

Thanks for any suggestions.

Vicki

I have an ER who contributed a promissory note to its retirement plan. The promissory note is now in default. The ER wants to terminate the plan and distribute to the participants a pro rata share of the (defaulted) promissory note.

1) Can an employer distribute, pro rata, a defualted note (let's assume the note qualifes as a "qualifying employer security" although I doubt it does); and

2) Could the participants roll that pro rata share into an IRA?

Thanks to anyone who can help in this matter. The porposed distribution of a defaulted note seems crazy. Any thoughts?

Can someone confirm that a 5500 is not required for a ps plan with one participant until the assets reach over 100,000? Also, what happens when there are two participants, does that change the filing requirements.

I think this is a fairly interesting situation. I'm pretty sure I handled this as would be standardly done in the industry but maybe I am all wet. We had a transfer plan that had a match formula based on years of service. Per 1.401(a)(4) regs, non-uniform match is a benefit, right or feature. I performed a current availability test on the match and it failed for several years. The client determined a reasonable business classification to give certain people additional match to make the current availability test pass. We filed VCP since we were outside of the correction period of 9 1/2 months. After several discussions with the IRS agent regarding whether or not the client did an ACP test (they did) and whether or not this was really a demographic failure, the IRS sent the VCP back saying the submission is ineligible under EPCRS. So in the eyes of the IRS, if the match is tested in ACP, no further testing is needed. However, whenever I file these tests on schedule Q for Form 5300, the IRS has never come back saying the testing is not needed or the testing methodology is incorrect.

You would have handled the same as me, yes or no?

Thanks!

First year of plan is a short plan year 2/1-12/31. Plan has 6 mths entry requirement w/ entry dates of first day of plan year and first day of 7th mth of plan year. If an employee has met the requiremetns and would come in on the first entry date, is the entry date 2/1 or 1/1? Plan uses compensation from date of entry so I need to decide if I only want comp from 2/1 or 1/1. I don't know why I'm getting myself confused on this issue. Thank you.

SH 401(k) plan has 3 month eligibility and SH is given to all who are eligible. The plan sponsor wants to change eligibility to 1 year and do it mid-year. This would prevent some recent hires from entering the plan in the next few months of 2006 and push them back to 2007. Is this permissible?

I tried some research and couldn't find anything definitively prohibiting it, but yet I remain unconvinced that is correct.

I am a producer who is looking to build the 401k part of my business. Is anyone familer with a company that sells leads of companies who are looking to change providers?

Here are the facts.

1. Plain vanilla profit sharing plan covers two 414-related employers.

2. For reasons (i.e., multi-state tax planning) explained to me that if true are valid business reasons, client wishes to get the employees of one of the employers completely out of the plan, so that the departing employer will not maintain a 401(a) plan. I am told that spinning off and setting up a clone, separate plan won't accomplish what the client wishes to accomplish. Let's assume client is correct; I'm not sure he is, but let's assume he's correct.

3. We can spin-off the piece of the plan attributable to the departing employees and terminate the spun-off plan. However, that will result in full vesting of the departing employees and all or most of them are HCEs, whereas the remaining employer has a fair cross-section of HCEs and NHCEs.

Will the spin-off termination, which must result in full vesting of the spun-off employees, be an amendment that is discriminatory on account of timing? Client is not willing to fully vest the employees who will be left in the plan.

Any other ideas?