How are you defining this in your documents?

Can it be something as simple as 0% vested while employed and then they become 100% vested upon separation of service?

thanks

I finally have an opportunity where I might be able to do a NQDC design for a prospective client.

The prospect has many employees and essentially no one, other than the HCEs, is deferring. They like the idea of restricting eligibility in the 401k plan to only NHCEs and opening up a NQDC for the HCEs.

I found the audit guidelines on the IRS website and it points to a section in 401(k) that states that eligibility can't be limited to participants who elect not to participate in the 401k.

If I read this literally this doesn't apply to my situation. These participants are not being allowed to opt out of the 401k plan. If they're an HCE, they're excluded from the 401k plan.

Am I reading this right?

Thanks

Being a novice as well as skeptical I have been told that there is no problem in setting up a DB with maximum funding for a year or two then terminating the plan and rolling into IRA if $ become tight. Are there any repurcussions for this and is this in fact allowable?java script:emoticon('', 'smid_1')

I have a client prospect who wants to put in a $2000 deductible PPO plan. They plan to reimburse each employee up to $1500 of this deductible through regular business reimbursement procedures. No plan document, no TPA.

This doesn't sound good to me....

1. What are the ramifications?

2. Is this reimbursement considered taxable income to the employees?

3. Can the employer deduct these dollars as an eligible business expense?

Client has a Safe Harbor 401(k) Plan and just added a companion Defined Benefit Plan. The 401(k) plan would be Top Heavy but is deemed not Top Heavy due to Safe Harbor.

The question is - do we still combine the 401(k) with the DB plan to determine if the aggregated group is Top Heavy? Of course the key employees benefit in both plans.

Unfortunately the 416 regs have not been updated so there is no 'official' guidance, but maybe the IRS has said something at one of the conferences??

Is anyone aware of any exceptions from the Form 5500 and/or audit requirement for a pension plan that has been involuntary terminated by the PBGC pursuant to Section 4042?

I have an employee who has terminated effective July 18th. We will be paying this person for the last time this week. I currently have the FSA deduction deducted from the last paycheck. I have another employee that states that we shouldn't take the last deduction from the paycheck because COBRA is based on the amts. on the last day worked and that would change if a deduction was taken from the last paycheck. Please advise.

Can I get some feedback on what people do when they have to issue corrected 1099s to participants due to clerical errors, ie internal coding incorrect, etc.? When the 1099s were sent to participants with standard advice to consult tax professional, there have been questions about "Who is supposed to pay for this?" There are a limited number of amended 1099s, plan administrator is interested to see what others' "best practices" are in this situation. Should plan or employer offer to cover some portion of expenses to avoid unhappy employee calling IRS/DOL?

Is anyone aware of any good journal or other articles about the benefits issues raised by spin-off transactions or other types of business separation transactions? Thanks.

A local ERISA attorney is taking the position that a self employed individual is limited in how much he can benefit from a New Comp plan in any given year.

In particular, he feels that a partner's New Comp contribution counts towards his 402(g). Thus a partner's deferral + New Comp can not exceed $15k for 2006.

I think he is full of beans. Has anyone had a partnership or sole prop plan audited and has this issue came up?

thanks

Alan

The plan document allows forfeitures to be used to pay plan expenses. No plan expenses were assessed during the year-end valuation that we are currently working on but there was a forfeiture balance. Can we leave the forfeitures in the plan assets and report the entire account balance on 5500 for the 2005 plan year? Should we show the forfeitures as a liability for the 2005 plan year because we will be using them to pay the plan expenses in 2006 for the 2005 plan year - the 5500 is on an accrued basis. I have handled both ways but want to know legally how we should be doing this. Thanks for any thoughts on this subject.

I know that a loan in a qualified plan can be rolled over to another qualified plan, provided the receiving plan allows loans and will accept a rolled over loan. My question is this: since the promissory note is between the participant and Plan A, will a new promissory note or some other type of agreement need to be executed between the participant and Plan B in order for it to be "enforceable" and a legitimate asset/loan of Plan B? In the situation we have, the participant terminated from Company A and hired on with Company B, which are unrelated employers. The participant has a loan against his account with Company A's plan and rather than have the loan distributed to him (he cannot pay the outstanding balance all at once) would like to roll the loan with the rest of his account in Plan A to Company B's plan and continue to make payments through payroll withholding. Plan B allows loans and loan rollovers.

Thanks for your help.

We have a client who terminated their defined benfit plan in 2003. The plan was underfunded by about $1M, which the client contributed and presumably deducted on their tax return under 404a1D (they were covered by PBGC). Distributions were made through an annuity purchased from a carrier for $16M. All plan assets were distributed by 2004. Some time later, the Attorney General of the state of CT brought a complaint against the carrier for inadequate disclosure of the commission structure, as a result of which the carrier agreed to make refunds to its affected customers. Our client is due a refund of $44K under this agreement. The question is how to treat it? Is it an excess plan asset, to be returned to the trust (that no longer exists) to be reallocated to the participants as per the plan? Is it a refund that should go to the sponsor to be taxed as ordinary income? Could the refund be considered a reversion subject the 4980A excise tax?

Participant in a 401(k) plan dies with an outstanding participant loan. Beneficiaries are the two children. Is the outstanding participant loan taxable to the two beneficiaries, or to the participant's estate?

I haven't had this situation arise before, so any comments would be appreciated.

OK, this 401(k) Profit Sharing plan purchased some land in 2004, built a house and started renting it out in September of last year. The rental payments go into the plan's account, i have no problem with that part. Since it is real estate, it doesn't get assessed every year. Does the plan sponsor need to have the property appraised at the end of every plan year? I see that the plan sponsor w/d the taxes for the property ffrom the plan's account. I am ok with that part.

The client's advisors sent me a copy of the lease and what looks like info from the county property appraiser's books (which you can get online, something I learned last year when I tried to buy a home). Is the county appraiser's value ok to use? I think the answer is no?

Thanks for your help!

Participant terminated employment in 2002. Attained age 70 1/2 in 2004. Required beginning date was 4-1-05 so needed to receive a distribution as of 4-1-05 and 12-31-05. Participant did NOT receive either distribution. The participant died in 2006. The participant's non-spouse beneficiary is going to elect distribution over lifetime. What about the excise tax? Who pays? Participant's estate?

Is it possible to set up one safe harbor 401(k) under which salaried employees are eligible after 30 days of employment and hourly employees are eligible after 12 months of employment? Are there any possible complications that this could cause?

Any help would be greatly appreciated!

Thanks.

We have a 100% S-corp owner who wants to buy insurance from his company's Cafeteria Plan. We know he's ineligible to do this on a pre-tax basis. Is it permissible for him to do this as long as we treat it as an after-tax deduction?

The situation is a bad investment in an IRA, a pyramid scheme that got shut down. The investment is frozen while the authorities try to figure things out, and it is probably valued at $0, but the custodian won't formally revalue - plus no payments can be made.

My assumption is that the custodian is responsible for valuing the IRA for purposes of calculating the required minimum distributions. Is this correct? (If not the custodian, who?) I suspect that the custodian just accepted whatever value was placed upon it by the investment company, and now it just wants to avoid the situation completely.

Do the IRS reporting rules now require a custodian to report the amount of minimum distributions due? Or the amount not distributed?

Is there a way to file with the IRS to indicate that no payment can be made from the IRA? Maybe file a Form 5330 with an explanation?

I am a self employed individual with a individual 401K plan. I know I am able to contribute $20,000 (I'm over 50 yrs old) + additional amounts up to approx. 25% of net income (less the write off which makes it approx. 20%) not to exceed $45,000. Okay, here it is - my income is very low this year and my net income will probably be around $30,000 (I hope), or less - will I be able to contribute 100% of my net income? I believe I can. I just can't contribute more than my net business income. Please confirm and thank you for a response.