Employer has a 401(k) plan. Employees are paid a low base wage and also collect tips. Although the full amount of the tips are reported as income, the employer allows the employees to take cash tips home with them the day they are earned. This leaves very little actual compensation for purposes of elective deferrals and the payment of participant loans.

In a case where there is insufficient compensation to make the deferrals AND the loan payment, I believe the employer is responsible to contribute the compensation toward the deferral first. Anything left over would then be used to pay the loan. Someone is telling us that if there isn't enough compensation to make the full deferral that the employer is responsible to make up the difference. This makes absolutely no sense to me. Does anyone have any thoughts on this?

I'm having an interesting discussion with an ERISA attorney, and anyone's thoughts or input would be appreciated.

The attorney believes that Schedule C, Line 2, Box (b) can never be answered "None". She argues that the ERISA definition of a "party-in-interest" includes a "person providing services to the plan". If an individual or company is being listed as a Schedule C service provider, the entity is, by definition, a "person known to be a party in interest".

This is the first time that I've ever encountered this interpretation. I've worked with countless Schedule C filers that, on advice of and review by legal counsel, answered "None" if the service provider isn't a plan fiduciary.

What's your take on this?

We have section 105 health care reimbursement plan which reimburses employees for out of pocket medical expenses. We have a plan document for this benefit and it extends to all full time employees.

However, we also have an arrangement with some employees to reimburse them for individual health insurance premiums but we have no plan document as I did not believe one was required.

Can anyone confirm this for me?

Would such a plan allow for the reimbursement of "group insurance" that was not the employer's? For instance, some of our employees are covered through Tricare (Retired military) and they pay Tricare premiums to the government. It is a group plan but I do not believe their payments are pretax so would we be allowed to reimburse them for this expense as though it were an individual health care cost?

Thanks for any help/guidance.

Lisa

Below is the applicable ERISA statute and the relevent underlying reg. that applies to general account contracts:

103 (a)(2)

(2) If some or all of the information necessary to enable the administrator to comply with the requirements of this subchapter is maintained by—

(A) an insurance carrier or other organization which provides some or all of the benefits under the plan, or holds assets of the plan in a separate account,

(B) a bank or similar institution which holds some or all of the assets of the plan in a common or collective trust or a separate trust, or custodial account, or

© a plan sponsor as defined in section 1002 (16)(B) of this title,

such carrier, organization, bank, institution, or plan sponsor shall transmit and certify the accuracy of such information to the administrator within 120 days after the end of the plan year (or such other date as may be prescribed under regulations of the Secretary).

2520.103-5

***

© Contents. The information required to be provided to the

administrator shall include--

(1) In the case of an insurance carrier or other organization which:

(i) Provides funds from its general asset account for the payment of benefits under a plan, upon request of the plan administrator, such information as is contained within the ordinary business records of the

insurance carrier or other organization and is needed by the plan administrator to comply with the requirements of section 104(a)(1) of the Act and Sec. 2520.104a-5 or Sec. 2520.104a-6

I'm wondering about the "upon request" wording in the reg. It has always been my understanding that the information must automatically be sent out regardless of whether requested by the administrator. This seems to be the DOL's position and the statute seems to bear it out. But the reg seems to say that it is required but only if a request for the information is made, i.e., no request insurer does not have to provide. So what is it, automatic or not. How does the "on request" wording in the reg square with the other guidance. The schedule instructions are ambiguous on this issue, i.e., just say "required"

I'm looking for some clarification on the distribution codes that are applicable on a distribution of excess contributions from a ROTH IRA. The instructions for the 1099R lead me to believe that code J is always used for this distribution with either 8 or P. Is this the case, or should code J not be used if the participant is 59 1/2?

Quoted from the instruction: "However, for the distribution of excess Roth IRA contributions, report the gross distribution in box 1 and only the earnings in box 2a. Enter Code J, and Code 8 or P in box 7. "

I've heard differing opinions, just wondered what anyone here thought.

Can someone point me to a good source to explain 403b plans... the ins and outs... differences between a 403b and a 401k?

Appreciate it!

Can I use VCP in this situation: a 401(k) plan was never properly adopted, but was operated for several years, then terminated. Distributions are now being made, and the adopting employer no longer exists. Can VCP be used to fix this situation? Thanks for any advice.

I just read something that stated that after tax contributions (not Roth contributions) are limited to 10% of total compensation. I always thought it was just limited to the 415 limit. Does anyone know anything about this?

We have an accounting client that has recently asked me to look at their options for retirement plans. They told me they had a Simple Ira in place. After reviewing, this is the list of problems they have:

1. There plan document is a SEP plan document.

2. They have been remitting employee deferrals "when they get around to it" - maybe once a quarter...randomly at best.

3. They have excluded a part time employee that should have been included for 3 or 4 years.

4. They have been withholding employee deferrals AFTER TAX - yes - I said after tax!!!!!

5. The match for 1 employee has been done consistently incorrectly.

I know this "plan" is screaming for the VCP - I just have never had to do that before. Can someone give me ideas on how to file - or if I can with a Simple Ira - and what they would be looking at for maximum penalties??? what is the basic process for going throught the VCP?

thanks for any help-

Beth

Company put a 401(k) plan into place on 1/1/05 - that is the effective date in the Plan document. In addition to an employer match , the Plan also provides company contributions to all eligible ee's (those with 1,000 hours of service) whether or not they make a deferral contribution. The company contributions are to be made each "payroll period" - a term that is not defined in the Plan document.

The company(which pays biweekly) did not start salary deferrals until the 2nd payroll paid in 2005 (1/20/05) and they did not make the employer contributions for the 1st payroll (1/6/05). I believe that decision was based on the fact that the wages being paid on 1/6 were for time worked in 2004.

It seemed to me that the discretionary contributions were due to the ee's for the first payroll paid in the plan year and we raised that point with the TPA. They suggested we consult our ERISA attorney. The response I am getting (filtered thru the HR Director) is that we owe the ee's the matching contribution on the deferrals they should have been allowed to make for that first payroll (plus earnings) But no opinion is being given on the employer contributions.

Your thoughts ?

Thanks in advance

Company has a safe harbor 401k plan. They give 3% to all eligible participants. If an employee becomes eligible on Dec 1st - do they only receive 3% on December comp or comp for the entire year? Thanks.

Facts : for the 2004 plan year a DB client pays the max deductible amount of 3 million; past errors are uncovered while doing the 2005 work & the 2004 max should have been 2 million ; 1 million is returned to the client in late 2005 and then a Private Letter Ruling (PLR) is subsequently submitted for IRS's blessing of the return transaction; client now wants to file the 2005 Schedule B before the results of the ruling are known.

Question : Should the 2005 Schedule B be based on a 3 million 2004 contribution or a 2 million 2004 contribution ? and depending on the answer to this question, the 2004 5500 filing might need to be amended as well to show a revised 2004 Schedule B ?

Has anyone had the need to add Roth to a plan, and if so, have you had to process distributions yet, specifically in Relius? I have a client who wants to add Roth and am working through testing the set up in Relius, but am also hoping the Relius users can help out with sharing any experiences with distributions (or any insight into pitfalls or issues (with reports or other fun daily processing))?

If a former employee lives in an area affected by Hurricane Katrina can he take additional distributions from a 403(b) without the distributions being considered a modification to the SEPP? I haven't seen any guidance on this specific topic but I may just have missed it.

Thanks for all your help.

I am a relatively new Relius user and need help finding a report that will show all transactions (buys, sells, fees, dividends) for a given security, including confirmed and non confirmed transactions.

I am trying to prove to our our outside Mutual Fund companies.

Thank you in advance for your help.

AJM

Disclaimer: I am not an expert in ESOPS, so it wouldn't surprise me if there is something I am overlooking. I am having a disagreement with a potential client's CPA on if the client has a controlled group between two companies.

Facts: Company A(C Corp.) is owned 50/50 by Jim and Joe. Company A employs 15 people and is currently sponsoring a 401(k) plan. Company B (C Corp.), a staffing firm, was established by Jim and Joe 50/50. Jim and Joe are the only employees. An ESOP was established for Company B and Jim and Joe sold their stock to the ESOP. The ESOP now owns 100% Company B of which Jim and Joe are the 50/50 accountholders of the ESOP. The ESOP only benefits Jim and Joe and is not setup as a controlled group with Company A. Conversely, the 401(k) plan under Company A does not include Company B as a controlled group either.

The disagreement comes from the attribution rules. The CPA says you use code section 318(a) for ESOPS on controlled group determinations of which the interest in of Company B held by a tax-qualified retirement plan is excluded. Therefore, the companies are not a controlled group for retirement purposes.

I say you use code section 1563(e)(3)(A) for attribution which if a trust has ownership interest in another organization (in this case - Company B) that the interest is attributed to the individuals who have more than a 5% interest in the trust (Jim and Joe). Further, code section 1563(e)(3)© has the same stock exclusion referenced above in section 318(a), however section 414(b) states to disregard this code section in applying the controlled group rules to retirement plans. In affect, Jim and Joe own 50/50 of Company B through attribution of the ESOP stop and the stock exclusion is ignored for a controlled group determination - therefore Company A and B are a controlled group.

Who is right? Do ESOPs have different considerations than 401(k) plans? I know there are CPAs and ESOP experts on this board so I am hoping to have various opinions.

If you are offended by irreverent humor, please stop reading now.

While drinking a 1977 Taylor-Fladgate Port, I saw God last night. I have determined that it is only possible to see God while drinking a vintage Port from a great year.

For those of you who haven't had the good fortune to experience this, let me describe Him to you.

He's apparently in His mid-50's, with a short, grizzled beard. He wears sandals, faded and comfortable looking blue jeans, and a fisherman's hat festooned with corkscrews. He also wears a Taylor-Fladgate T-shirt that on the front says, "Starboard, Hell - head to the Port!" and on the back says," A Port in any storm."

He also has the best looking wife I've ever seen - mid-30's, 5'-10"; glorious red hair; long, beautiful legs in REALLY short cut-off jean shorts, and a skin tight Hooters T-shirt. Sort of a taller Marilu Henner type.

I've seen Jesus through an occasional Rhone, Zinfandel, and on one notable occasion through the last of several brandy snifters of The Macallan 18 year old Scotch, but if you want to see God, you've got to drink the good port!

Here's another post that will surely contribute to the delinquency of some out there.

Make sure you click on manic mode try that too.

http://resinrealm.net/indexpics/bubblewrap.swf

Accounting client is retired, he received a 1099 from his Defined Benefit Plan Distribution and also a W-2 showing wages paid to him coded as Defined Benefit Plan/Nonqualifed Plan....should a DB Distribution received be recorded on a W-2? That doesnt seem right to me that he would have a 1099 and a W-2...any thoughts? My next thought was maybe the W-2 is actually for a deferred comp plan arrangement or something, because its coded as NonQualified Plan and DB Plan, my gut is telling me the coding was incorrect on the W-2? Bottomline..can you W-2 someone for receiving a DB Distribution? And if someone did receive a deferred comp plan, would it be reported on a W-2?

Can someone please point me to the actual regs stating the 3%Nec or SH Match so I can send it to a CPA and educatge him? He is not beleiving me. I am not in my office and need to answer him ASAP. A link would be great!

Thanks!