Can we mix our 401(k) contributions with our catch-up contributions as long as we maintain separate recordkeeping, or should we maintain actual, separate sub-accounts for each?

A participant terminates from employment prior to age 59.5 but does not take a distribution from the employer's 401(k) plan. Several years later, the participant becomes disabled and would meet the definition under 72(m)(7). He has requested a lump sum distribution of his 401(k). Assume that none of the other exceptions to the 10% penalty apply to his situation.

Which distribution code should we use on his 1099R? Would we use code 3 for a disability or would we use code 1 since the participant was not disabled at the time of termination. I am inclined to use the code that applies at the time of the distribution rather than the code that applied at the time of the distributable event. Your thoughts?

An individual owns 9% of a corporation (with her brother owning 82% and sister owning the other 9%). This business has a 401(k). She also owns 100% of a side business as a sole proprietor. She wants to establish a SEP IRA for the side business. Is there a rule that would link the two plans together because of Family aggragation or a control group relationship? Should she not establish the SEP IRA?

Thanks,

Haven't been able to find the answer to this: client wanted to know if use of a signature stamp on the Form 5500 / Schedule P / SSA was ok, or whether signature must be hand signed. Any thoughts?

I recall that someone once told me that a professional service employer was required to have a 12/31 year-end. However, I do not believe that is the case. If a small law firm (10 attorneys) with a 3/31 year-end maintains a DB plan, I believe the DB plan is exempt from PBGC coverage. Any thoughts?

Thanks in advance. Ed

A and B both have Safe Harbor Plans.

B is purchasing A via a stock purchase and the intention is to amend to terminate A's plan prior to stock purchase date.

After the stock purchase, A is to go away(almost immediately) and only B will survive. All employees will be B employees.

Given this scenario, just wanted to check and see if I was thinking right....

A employees can choose to take their monies or roll into B's current plan as rollover contributions. A employees can be immediately eligible under B's plan once signed up as B employees. (Not planning on A adopting B plan since A is going away.)

The A plan will totally go away once all distributions paid out. B will go on like nothing happened?

I don't have to worry about a successor plan, do I? B already has plan but this wouldn't limit distributions from A if A terminated before stock purchase. Right?

(I have chased myself in a circle over this ...... someone get me off this ride!!!)

I am working with a company that was just created within the past few weeks (May 1) that was established as an LLC. Right now the only "employees" are the 3 members/owners, with other employees expected later this year.

They want to start a retirement plan, likely to be a 401(k). But as an LLC, they do not/cannot receive salary and receive no W-2. They can take draws that will be reported on Schedule K-1. Can this form of compensation be used for plan purposes? Are there any potential "issues" that this may involve? Other subsequent employees will receive regular W-2 wages.

Thank You.

Is a school district considered a governmental employer and thus not offer a 401(k) plan? Seems to me that, given the salaries and contribution levels involved that the participants would be better served combining their buying power and thus recieiving a better class of funds.

To me, and I'm strictly looking at it from the side of the participants. I'd much rather have a 401(k) and have access to the institutional class funds than a 403(b) where they hit me up with loads and higher expense ratios. Surely it can't be for the financial advice they are receiving on an individual level as most of the people that hit up these teachers are true ninnys looking for an easy trail.

Hello,

Small business has 10 employees who are over 21 and work full time. Two of the employees are HCE and 8 are non-highly compensation. Plan is going to allow 6 of the NHC employees to participate in the 401k and only 1 of the highly compensated. This would seem to pass the ratio percentage am I right to say it wouldn't pass the average benefits test since there is no distinct class of employees?

a sole employee of a c-corp. what is the most he can contribute? 25% of his comp from the corp? and deferrals of 100% of comp up to 15k for 2006?

Last time I checked it was .14 cents per mile. Is it still that or has it gone up??

Two questions, how far back do we need to go to correct late deposits and was there a time when the DOL was okay with deposits being made by the 15th of the month following rather than the earliest date they can be segregated? For example, I'm sure that it was more reasonable to contribute deposits near the 15th of the month following back in 1994 than it is today because of the technolgical advances since that time.

We have a client that wants to put as much $ away as possible in the next 5-10 years. He is a sole prop. His only employee is his wife. They are both in their 50's. If he establishes a 412(i), can he also set up a 401(k)? (I believe he can, but want to be sure.) More importantly, if he sets up the 412(i) and maximizes his and his wife's contribution, what will they be able to contribute to the 401(k) (deferrals, employer contribution)? What do you guys think about this? Opinions? Other options?

If more info is necessary to answer my questions, let me know.

Thanks in advance for the help.

The separate accounting requirement of the Final Roth 401(k) regulations state that "gains, losses and other credits or charges must be separately allocated on a reasonable and consistent basis to the designated Roth account and other accounts under the plan." (Treas Reg 1.401(k)-1(f)(2))

Further, the proposed Roth regulations warn that "any transaction or accounting methodology involving an employee's designated Roth account and any other accounts under the plan that has the effect of directly or indirectly transferring value from another account into the designated Roth account" would violate the separate accounting requirement. (Proposed 1.402A-1, Q&A-13)

To the extent that a plan permits designated Roth 401(k) contributions, and to the extent that the plan has self-directed brokerage accounts (SDBA's) in which designated Roth 401(k) contributions are being invested, is it necessary to have 2 SDBA's? Or can both regular 401(k) and Roth 401(k) be invested in the same SDBA assuming that the plan has a "reasonable and consistent" method of allocating investement gains/losses to these sources?

During the ASPPA webcast on February 22 regarding Roth 401(k), the speaker made a point to indicate that 2 SDBA's were not required. However, during a recent ALI-ABA webcast, a speaker from the IRS seemed to indicate that 2 SDBA's were required.

I am trying to find out how recordkeepers in the industry are handling this issue. Any responses are greatly appreciated.

I understand that some sole proprietors who use their SS# as their Employer Tax ID would need to set up an EIN to establish a plan. Is this correct? Does anyone know where I can find this language?

Treasury Regulation 1.401(k)-1(d)(3)(iv)(D) of the Final 401(k) Regulations generally states that participants need not take a participant loan prior to taking a hardship withdrawal if by taking the participant loan, it would increase the amount of the participant's financial need.

Since the IRS only gives 1 example in the regulations (regarding purchase of principal residence and bank financing), how narrowly or broadly do you think this should this be interpreted? What do you think the IRS' intention is regarding this exception?

Further, what documentation should a participant provide that substantiates that taking a participant loan would "increase their financial need?" Any help is greatly appreciated.

Plan year ends 3/31/2006. In determining HCE's using the compensation test for a non owner/officer, the lookback year is the plan year. Therefore, anyone making over 95k is used in this example? If the lookback is the calendar year, it would also be 95K?

A company has three shareholders - a majority partner, a minority partner and the ESOP. Can the minority partner purchase shares from the ESOP? I assume the answer is no because of the prohibited transaction rules. Would the minority partner have any other options of acquiring shares from the ESOP?

An employer with a frozen DB plan is considering terminating the plan with a plan to plan transfer (rolling DB assets as a whole) to a start up DC plan. Does the plan to plan transfer require IRS approval or any other special requirements? I assume the DB plan must be sufficiently funded before the transfer can take place. Thanks.

Hi I just wanted to verify something. I was under the impression that only active participants could receive a hardship distribution from the elective deferral portion of their account. I was just asked to prepare a Hardhip distribution request form for a terminated participant.

Am I correct that this cannot be done?

I was thinking that they should probably just amend the plan to allow for immediate distributions upon termination (since they currently have to wait until the plan year end following term.) However I have been informed the employer does not want to do this. I guess this may need to be turned over to their plan attorney

Thanks in advance