Employer maintains a safe harbor plan. They are acquiring a number of new employees via an asset purchase. They do not want to provide the safe harbor contribution to those newly acquired employees and have been told they can operate part of the plan as safe harbor but yet go through all of the testing requirements for the "non-safe harbor" part of the plan. I have never heard of 1/2 safe harbor plan. Any comments?

Same employer as above wants to include a related employer (does not rise to controlled group or affiliated service group) creating a multiple employer plan. Their intent is NOT to have the part of the plan for this other employer be safe harbor. Since each employer in a multiple employer plan is basically considered maintaining a separate plan for testing purposes, can a multiple employer plan operate as safe harbor for one employer and not safe harbor for the other?

Company B terminates defined contribution plan. Company B is owned by Company A and part of a controlled group. John Doe worked for Company B now works for Company A who maintains a defined contribution plan also. Under a regular plan termination, John Doe would be eligible to receive a distribution, however, since he works for Company A, he would not be eligible to receive a distribution due to the successor plan rules. Is there any way John Doe could receive a total distribution from Company B's plan?

A sole proprietor employs his wife. She's the business's only employee. The sole proprietor recently adopted a SEP, and he wants to make a contribution for himself, but not for his wife.

I've never heard or read about any family exception to SEP participation. But, the FUTA exception for a family employee keeps popping up in my head, so I thought I'd post this issue just to be sure.

Could someone confirm that there are no special SEP rules for a family member, and that the owner's wife is covered by the same rules that affect any employee?

I am trying to figure out a way for an s-corp owner to receive tax-free dependent care assistance. I know that the owner cannot participate in a cafeteria plan, but is it possible to have a dependent care assistance program under section 129 where the company provides dependent care benefits to the owner, but all other employees (non-owners) must salary-reduce under section 125 to receive the benefits under the DCAP? Does this violate the discrimination rules in section 129? (Technically, the employer is providing the benefits in both situations since the 125 plan converts the employee contributions to employer contributions, right?) Any thoughts would be appreciated!

Participant is unmarried and fills out a beneficiary designation naming his sister as the beneficiary of his qualified plan account. Participant subsequently marries, doesn't change the beneficiary designation and then dies shortly thereafter. Assuming that the qualified plan is subject to the annuity rules, was wife required to consent to the designation of the sister upon marriage or is wife out of luck because the designation was completed prior to her marriage to participant? I don't see anything in 1.401(a)-20 addressing these facts. What if the plan isn't subject to the annuity rules?

Plan has discovered that company match has been capped at $5500 ( 1/2 of 11,000 2002 limit) since 2002. There are two very highly compensated participants affected..one being the CEO. Any issue with making corrective contributions with earnings assuming that there are no ACP issues. The match is computed payroll by payroll and is 50 cents on the dollar up to 6%. Any assistance appreciated

Has anyone sent in a form 5558 to extend the 5500 due date without a signature? I just read the summer IRS Employee Plan News ( http://www.irs.gov/pub/irs-tege/sum06.pdf ) and on page 3 they say a signature is not required if you are extending a 5500. The only time you need a signature is when you are extending a 5330.

My concern is, the instructions state you need a signature. If we send in all our 5558's without a signature and then the IRS decides not to accept them...ugh!

If this is correct, it is going to save us a lot of time on July 27th!

I've got my head spinning on this one for some reason. 401k plan wants to make a discretionary PS contribution but they are planning to terminate by 9/2006. My first thought is sure they can as long as they declare the contribution before the plan terminates. Then, I think, no, the declaration isn't made until the end of the Plan Year and the termination will have happened before that date. Can someone clarify this for me?

I have a situation where a small business owner that has had a DB plan for a number of years and is now past NRA could maximize his LS distribution if he were to take it right now while PFEA is expired and prior to new regs, assuming the new regs make the 5.5% interest rate on 415 lump sums permanent. The plan would continue and the plan assets would just barely cover 110% of Current Liability (based on the Treasury rate CL interest rate corridor as applies since the expiration of the PFEA bond rate corridor, and prior to any pension reform legislation).

Being cautious, I am uneasy about having him take the distribution right now because of the black box of pending legislation. On the other hand, how can there be a problem if the distribution meets all of the applicable criteria based on the law in effect at the time of distribution?

I would appreciate any input and thoughts that will help me sort this out. Thanks.

2004 calendar year 401(k) Profit Sharing Plan (earmarked accts.) that has a discretionary matching contribution. The client deposited the match into the trust (non interest bearing cash account) before the due date of the Corporate tax return (9/15/2005), but the allocation to participant accounts didn't take place until 3/15/2006.

What issues do we need to look at here? This doesn't pass the smell test.

Thanks in advance for any input!!

What is the general concensus out there regarding paying audit fees out of forfeiture dollars. If your plan allows administravtive fees to be paid from forfeiture dollars, would an audit fee fall into this category? Per the regs, it states that compliance costs include the preparation of the form 5500 annual report (and other tax forms) and nondiscrimination testing. If administrative services are provided seperately, compliance expenses are generally included in the base charge rather than seperatley priced. (Which still leaves a grey area).

My opinion regarding the audit fees falls into "it's a required expense" When plan participants fall over a certain threshold, an audit is required. And because it is required, wouldn't that be classified as an administrative expense? I was just wondering what other plan administrators are thinking about this or if this has been addressed before.

Any feedback would be appreciated.

Thanks,

Cynthia

Normally we work with a "Wrap Document" and have to file only one 5500. We have been posed with questions regarding filing when three separate cafeteria plan documents are maintained.

I am told that the first document covers: Medical insurance premiums, the second cafeteria plan document covers: Long Term Disability and the third document covers Life Insurance.

They have just crossed the 100 participant threshold and will be filing for the first time.

My questions in regards to filing are:

1) The number of participants in the medical plan (under Document #1) has greater than 100 participants and the number of participants are less than 100 in the LTD(Doc #2) and and less than 100 participants in Life Insurance(Doc #3).

Am I correct that they would be required to file a 5500 for the medical plan under Doc #1 and not have to file for the LTD and Life under the other two Docs?

2) Same situation as above, but the employer funds the LTD and Life Insurance.

Since it would be ALL employer funding and NO employee pre-tax money, is it necessary for a cafeteria plan document at all?

Are there filing requirements for LTD and Life Insurance components if premiums are paid by the Employer?

I would appreciate any help with this.

Thank You

I posted this on the Distribution Message Board but thought maybe I'd get a better responce here:

A company has a profit sharing plan that has annuities as a distribution option. In the past they have bought an annuity from an insurance company when a participant wants an annuity. They are thinking of offering a rollover to their DB plan and paying the annuity from there based on the DB plan's lump sum factors. This would be totally at the option of the participant.

Has anybody seen this done? What issues should they be considering before allowing this?

Company has a defined benefit plan and a defined contribution plan (401(k)) stand alone. I do record-keeping for the 401(k) plan - they have a different TPA/Actuary work on the DB plan.

The company is excluding employees hired after 04-30-2006 from participation the DB plan. Therefore, they want to allow these employees to receive a match in the 401(k) plan.

They would have to amend the 401(k) for a match - which is fine - but they want to exclude any employee hired before 05-01-2006 from sharing in the match.

In essence, becuase they are excluding new hires from the DB they want them to be able to get a match - but becuase the old employees are still in the DB plan - they don't want them to get a match.

Can a plan exclude existing employees based on these circumstances? The plan is a prototype plan. Can I amend a prototype to "EXCLUDE EMPLOYEES HIRED BEFORE 05-01-2006?"

I am not worried about testing becuase they will be excluding all their HCE's - but can you exclude based on a service item such as above??

Can a company who does not currently offer a qualified profit sharing plan, start one now and make a 2005 contribution if they have not yet filed their 2005 corporate taxes?

What are you required to file...a 5500 and Schedule C only?

Hi All!

I need some help with my retirement planning. (Time is running short)

For the last years I have always contributed the max to my roth ira, but would like to save some more in tax deferred plans.

With my house cleaning (4 - 5K per year income minus expenses) internet sales ( 1 K per year), does it make sens to have a SEP or SIMPLE plan?

How much would I be able to contribute? 25% of profit from each business, or a total amount per year? How do I start up a plan for myselve? Does it even make sense to have one, or is the cost more than it's worth?

[Also posted on 403(b) Board]

I am reviewing the 403(b) plans for two religious schools--one a Jewish high school, the other a Catholic elementary/secondary school. The Catholic school is not operated by a parish or archdiocese, nor by a religious order, but the head of the school is a sister. There is daily religious observation and instruction. The school is listed in the official Catholic Directory.

The Jewish school is not affiliated with any temple or synagogue, but it has daily morning prayers and instruction in Hebrew and Torah, observes the laws of kashrut, is headed by a rabbi and has several rabbis on its board. To be admitted, a student must be Jewish (as defined by principles of reform Judaism).

Each plan is administered by a committee appointed by the board of directors of the respective schools. I am fairly certain that both plans would be "church plans" for purposes of ERISA and Code section 414(e) as the schools are "associated" with a church or association of churches.

But....

Are these plans subject to the ACP and other discrimination requirements of 403(b)? I am having a hard time figuring out it they are qualified church-controlled organizations--it appears that the standard for this is narrower than for "association" with a church. Would these plans be retirement income accounts under 403(b)(9) or custodial accounts under 403(b) (7)? Does it matter for any reason other than investment options? Any advice about useful research sources would be greatly appreciated.

I am reviewing the 403(b) plans for two religious schools--one a Jewish high school, the other a Catholic elementary/secondary school. The Catholic school is not operated by a parish or archdiocese, nor by a religious order, but the head of the school is a sister. There is daily religious observation and instruction. The school is listed in the official Catholic Directory.

The Jewish school is not affiliated with any temple or synagogue, but it has daily morning prayers and instruction in Hebrew and Torah, observes the laws of kashrut, is headed by a rabbi and has several rabbis on its board. To be admitted, a student must be Jewish (as defined by principles of reform Judaism).

Each plan is administered by a committee appointed by the board of directors of the respective schools. I am fairly certain that both plans would be "church plans" for purposes of ERISA and Code section 414(e) as the schools are "associated" with a church or association of churches.

But....

Are these plans subject to the ACP and other discrimination requirements of 403(b)? I am having a hard time figuring out it they are qualified church-controlled organizations--it appears that the standard for this is narrower than for "association" with a church. Would these plans be retirement income accounts under 403(b)(9) or custodial accounts under 403(b) (7)? Does it matter for any reason other than investment options? Any advice about useful research sources would be greatly appreciated.

Can someone please confirm for me that if an employer makes a top heavy contribution after the due date of their tax return they will still get the deduction, but the deduction will be for the year the contribution is made rather than the year to which the contribution relates?