Hi. I am looking for advice on my next savings strategy in general and specifically if opening a Roth intentionally to save money for a future home is a good idea.

I am 23 year-old female. My income is $36,000. I currently contribute 8% to my company's 401K to get the maximum 4% match.

I opened an ING Orange Savings account six months ago and have managed to put $1,000 into it without making any real modifications to lifestyle/spending habits other than becoming educated on how money works (i.e. getting rid of credit cards, paying bills electronically/automatically to avoid late charges, consolidating student loans, etc...) I have made a commitment not to make any withdrawals from my Orange account and have not done so since opening it.

I think that with some changes to spending habits and some creative budgeting, I have the ability to save even more. My next two savings priorities are: 1) Open a Roth IRA 2) Save money for down payment on a house. I am attempting to kill two birds with one stone.

I currently rent a shared two-bedroom apartment with a roommate. Buying a house is somewhat long term (five to ten years away) at this point, since there are still too many variables in my life. Will I have enough of a down payment? Will I go back to school for an advanced degree? Will I change my job? Will I stay within my industry? Will I move out of state? Will I get into a serious relationship that changes my perspective? Etc...

I am looking to open a Roth IRA with the intention of using some of the money later on for down payment on buying a house. I figure that in five years time, I can take advantage of penalty-free first time homebuyer withdrawal. I have done research on the value of a Roth IRA and have decided to open one no matter what and would continue to contribute money to it towards retirement even If I do buy a home. For now, I am hoping to put $2,000 to $4,000 in a Roth for the 2006 tax year depending on how aggressively I can save. I would put even more money in the next few years as my modest salary goes up.

My question is: Is it a god idea to open a Roth and plan to use some of the money for purchasing a home? What are the possible problems with doing this? Should I keep down payment and retirement away from each other? Is there another, better savings vehicle for saving money for a home within my time frame? Another savings account, perhaps? My position is: I am in no hurry to purchase a house, but I know that it is something I will have to address eventually.

Sorry for the long and wordy post. I wanted to give as much details as possible. I appreciate any replies. Thanks, in advance.

I've got a client that is operating a simple plan that has 90% participation rate. Assuming similar participation in SH plan so choosing 3% NEC. They are looking at ways to better benefit a couple of their sales employees. Using the current scenario they are limited to about 15% and 12.5% in p/s contributions under a new comp plan. Can I put them under their own plan and test them separately?

Plan 1

2 HCE's 0 NHCE's

Plan 2

4 HCE's 18 NHCE's

In order to pass 401(a)(4) as a whole entity I had to reduce the 2 HCE's to 15 and 12 1/2% respectively. Simply not enough young NHCE's employed by the company. As their comp is in the 130k range they are about 7k each from maximizing.

Both plans would have same eligibility provisions, vesting provisions, safe harbor status, investment options, and distribution options. Only difference is that plan 1 would be new comp and plan 2 would have discretionary p/s. Eventually both plans will use new comp but as I said, not enough young NHCE's. 5 of 6 HCE's are age 37 or 38.

Please tell me if I'm off base here. Let me know if you need more information....

There used to be a phone number at the IRS specifically for 213(d) questions, but I can't find it. Does anyone have a phone number for 213 questions?

Just looking for some thoughts on this...We have a client that did not contribute a single payroll to the plan timely last year. My boss (the owner of the TPA firm) thinks we should complete the Schedule I showing the $93,000 in deferrals as being late. Then complete the 5330, making the client pay the excise tax, and calculate the gain the employees missed out on. I agree that this is the right thing to do.

The broker, on the other hand, wants us to prepare the Schedule I with that question unanswered, leaving it to the employer to answer it. Then include a letter of indemnification for the employer to sign clearly stating that they will not hold the TPA responsible for any issues that arise from the incorrect filing.

I know my boss is going to end up doing what the broker wants. Which leads me to this...any thoughts on what we should include on the letter of indemnification? I am going to include information on the DOL regs and am thinking that we should also state we will not represent them during any IRS or DOL audits.

I have a takeover Erisa 403(b) audit...with a calendar year end. The Life INsurance Company holds the assets and does the TPA work on this plan, but they said they will not any info until September?? How can that be? Don't they have to have all info released by April 30? Can someone help me understand why it might be taking them so long to provide the client with any year end information?

ABC, Inc. maintains the ABC 401(k) Plan. Plan is approaching 120 eligibles. Sponsor has formed a new company (DEF, Inc.) for valid business purposes, one person owns 100% of both companies.

In order to avoid CPA audit of plan (it's a cost issue), sponsor wishes to install a 401(k) plan for DEF that is identical to the ABC plan. ABC has two HCE's and DEF has none. This is likely to always be the case. The ee's of DEF used to be ABC's ee's, the sponsor simply carved off a specific business unit into this newly formed company.

Plans will provide the match etc (will be identical). ABC however will exclude ee's of DEG from participation and vice versa.

Plans have no problems passing testing etc on aggregated basis as controlled group.

Any problem w/ this? Just seems potentially abusive to design in this regard solely to avoid CPA audit. The plans are clean, the sponsor just doesn't want to pay the CPA fee.

Thanks for any help.

Has anyone heard of a "controlled plan" as it refers to fully-insured medical. I know about a "controlled group", but have not run into "controlled plan" and it being used when there is not an Er/Ee relationship. I have only run into such a term with workers comp programs for the most part.

I have an employer who asked about pre tax premuims and if there is a maximum. The story is the employee was out on FMLA and used all vacation, sick time etc. Now that all that has run out, the employee has to pay all her insurance premiums. She will be geting a paycheck over the summer. The employer asked if she could have it all taken out pre tax from those checks. The amount she pays will wipe out the checks completely and I didn't think you could do that? Any help or guidance would be great. Thanks

I recall a federal statute was passed several years ago that prohibits the state of employment (state 1) from continuing to tax the benefits paid to retirees who have moved out of the state (to state 2). Unfortunately, I can't put my hands on the statute.

What I can't recall is whether the installments have to be paid over "more than 10 years" or "10 or more years."

Can anyone help?

Based on the preamble, most split dollar (at least death benefit) is not subject to 409A, but I have heard people use it to justify ignoring 409A for the overall salary continuation agreements that are funded by split dollar.

They are really separate concepts, right? The split dollar is really a type of funding mechanism (not funded for ERISA of course) with its own tax features that has to be run through the 409A gauntlet. I also think any salary continuation agreement or other deferred compensation agreement that may be associated with the split dollar is separate and has to be analyzed independently? Is that right?

In light of this, is it smart to just try and get what you need from a split dollar policy without a stand alone salary continuation agreement to avoid 409A?

We have a client (a Canadian general contractor) that is winding down operations in the US. They soon will have no office here and only 1 active employee in the 401(k) plan. They want to leave the plan open to contribute to his account, but I don't think they can if they pay him through their foreign payroll (they used to pay employees through a US office and US payroll). Is there another type of plan that I should suggest?

To make matters worse, the client will not commit to never bidding US jobs again (and therefore adding US employees and a payroll). They might, they might not.

Good day to all, my daughter is finally going to start an IRA(she finally got a full time job after graduating from college). Unfortunately, her company tells her she needs to wait 1 yr before 401k contributions can occur so I thought that the IRA would be the best alternative. My understanding is she can contribute to a traditional IRA for $4k(to get the tax deduction) and then convert to a Roth for the tax free opportunities upon withdrawals in the future(sound advice I hope)? My questions are as follows:

1) How soon can you convert from the traditional to the roth(can this be an immediate pass-thru?(she is planning on monthly contributions not a lump sum since she's just starting out).

2) If she needs to touch the money, isn't there a 5 year holding period before she can touch her contributions(without the 10% penalty)?(I know she can't touch the interest/capital gains portion).

Anything else I need to inform her on? Thanks for your time. I try to visit this site frequently and find this forum to be exceptional in respect to helping folks like myself.

I have a closely held c-corp with several 30% owners. They are interested in starting an ESOP. One of the 30% owners would like to sell an equivalent of 5% of company stock to a new ESOP to start the plan. He would not be able to take the 1042 election.

I have several questions.

Is there a problem with the ESOP starting out with such a small percentage of outstanding stock?

Would the 30%, now 25% owner be prohibited from receiving allocations of stock if there is no 1042 election?

Would the employee-son of the selling owner be prohibited from receiving an allocation of stock if there is no 1042 election by the father?

It has always been my understanding that real property invested in a profit sharing plan must be appraised for its fair market value each year.

We recently received a call from a business owner with a one person profit sharing plan in which he says investments range from stocks, bonds, etc. to some real estate. He said that, per his accountant who has been administering the plan, his investments, including the real estate, were all being valued at cost, rather than the market value.

I've read in other posts that Rev Rul 80-155 specifically calls for the annual valuation at fair market value of plan assets. Is that not still applicable, or is there some mechanism for allowing assets to be valued at cost?

Thanks for any insight!

Is anyone running a Safe Harbor plan with a fixed and discretionary matching contribution. I'm curious as to the participation rate and the level of participation that a plan like this really has. Also, why use these formulas over other alternatives?

I've got it in mind for a client that doesn't fit into the new comp models and am trying to ferret out possible issues; good and bad. (besides no adp/acp and top heavy).

AAA and BBB each maintains a single-employer retirement plan. AAA merges into BBB, with BBB as the surviving entity.

Surviving organization BBB continues to sponsor both the AAA and BBB retirement plans. The two plans will eventually be merged, but probably not until a year or two from now.

1. When the AAA plan files its Form 5500, it has to use surviving organization BBB's EIN. AAA no longer exists as an entity, and BBB now sponsors the plan. Agreed?

2. What about the plan number? BBB is now sponoring two plans with plan number 001. Can one of the plans automatically, and without Department of Labor approval, change its plan number to 002?

I know that a single sponsor can't have two plans with the identical plan number, but I can't find any guidance about the mechanics of making a change.

Does anyone have a pdf file that has a blank 5500? Not the hand written form, but the one that prints out nice for filing? I can't find a blank one anywhere!!

Traditional Capitalism: You have two cows. You sell one and buy a bull. Your herd multiplies, and the economy grows. You sell them and retire on the income.

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American Capitalism: You have two cows. You sell one, and force the other to produce the milk of four cows. You are surprised when the cow drops dead.

French Capitalism: You have two cows. You go on strike because you want three cows.

Japanese Capitalism: You have two cows. You redesign them so they are one-tenth the size of an ordinary cow and produce twenty times the milk. You then create cow cartoon images called Cowkimon and market them World-Wide.

German Capitalism: You have two cows. You reengineer them so they live for 100 years, eat once a month, and milk themselves.

Italian Capitalism: You have two cows, but you don't know where they are. You break for lunch.

British Capitalism: You have two cows. Both are mad.

Russian Capitalism: You have two cows. You count them and learn you have five cows. You count them again and learn you have 42 cows. You count them again and learn you have 12 cows. You stop counting cows and open another bottle of vodka.

Swiss Capitalism: You have 5000 cows, none of which belong to you. You charge others for storing them.

Chinese Capitalism: You have two cows. You have 300 people milking them. You claim full employment, high bovine productivity, and arrest the newsman who reported the numbers.

Cuban Capitalism: You have two cows. They try to swim to Florida.

Irish Capitalism: You have two cows. You feed them potatoes and wonder why they emigrate.

Israeli Capitalism: So, there are these two Jewish cows, right? They open a milk factory, an ice cream store, and then sell the movie rights. They send their calves to Harvard to become doctors. So, who needs people?

Iraqi Capitalism: You have two cows. They are biochemical weapons.

Australian Capitalism: You have two cows. You try to wrestle them.

Cambodian Capitalism: You have two cows. The government takes both and shoots you.

Politically Correct Capitalism: You are associated with (the concept of "ownership" is a symbol of the phallo centric, war mongering, intolerant past) two differently - aged (but no less valuable to society) bovines of non-specified gender.

Real Capitalism: You don't have any cows. The bank will not lend you money to buy cows, because you don't have any cows to put up as collateral.

Real-World Capitalism: You have two cows. You share two cows with your neighbors. You and your neighbors bicker about who has the most "ability" and who has the most "need". Meanwhile, no one works, no one gets any milk, and the cows drop dead of starvation.

Totalitarian Capitalism: You have two cows. The government takes them and denies they ever existed. Milk is banned.

Bureaucratic Capitalism: You have two cows. They are cared for by ex-chicken farmers. You have to take care of the chickens the government took from the chicken farmers. The government gives you as much milk and eggs the regulations say you should need.

Bureaucrat Capitalism: You have two cows. At first the government regulates what you can feed them and when you can milk them. Then it pays you not to milk them. Then it takes both, shoots one, milks the other and pours the milk down the drain. Then it requires you to fill out forms accounting for the missing cows.

Surreal Capitalism: You have two giraffes. The government requires you to take harmonica lessons.

Disney Capitalism: You have two cows. They dance & sing.

Microsoft Capitalism: You have two cows. You patent them and sue anyone else who has them.

Enron Capitalism: You have two cows. You sell three of them to your publicly listed company, using letters of credit opened by your brother-in-law at the bank, then execute a debt/equity swap with an associated general offer so that you get all four cows back, with a tax exemption for five cows. The milk rights of the six cows are transferred via an intermediary to a Cayman Island company secretly owned by the majority shareholder who sells the rights to all seven cows back to your listed company. The annual report says the company owns eight cows, with an option on one more. Sell one cow to buy a new president of the United States, leaving you with nine cows. No balance sheet provided with the release. The public buys your bull.

Martha Stewart Capitalism: You have two cows. After decorating them, you sell them because a farmer told you the price of milk might go down.

How can we determine if an employer passes the Benefits Test for a self-insured medical plan that provides different benefit levels based on bona fide business classifications of employees. This specific employer offers a self-insured plan that provides a $1 million life-time max for exempt employees and a $100,000 annual max for non-exempt employees (with no lifetime limit). Obviously, the benefits are different between the two groups, and the exempt group includes all of the HCEs. However, the non-exempt group has a higher lifetime max than the exempt. Any feedback on whether that would pass the Benefits Test under section 105? Thanks

I was wondering if anyone had any good references of places that train TPA's how to run the required Non-Discrimination Testing on Cafeteria Plans more easily? The process seems almost unbearable, to have to do them 3 times per year atleast for each client is extremely tedious and frustrating. Is there anyone that can help eliviate some of the confusion surrounding these tests ?