The ESOP document says all family members will be excluded from the plan starting with the year of the 1042 sale and for the next 9 years. I think I know the answer (or fear the answer) but does this have to apply or is the rule that the family members just can't be allocated any of the 1042 stock?

If the ESOP is buying the stock outright (with the existing cash in non family member accounts) and then makes a cash contribution, does the law precude the family members from getting a cash contribution under the ESOP?

Many thanks for all the help.

When determining ownership percentages for Key employee (or HCE) determination, do you count just shares owned, or should share options also be considered?

Help! Who is a family member for purposes of the nonallocation of 1042 stock? I can't find my reg book.

Many many thanks

Lori

Employer maintains a self-funded health plan for >100 employees.

The plan is not part of a multi-employer benefit plan that files 5500’s on behalf of all employers.

They use the services of a TPA

There is no trust account for the plan. Benefits are paid entirely from the general assets of employer and stop-loss insurance.

Employees do not make contributions to a trust account. However, employees do pay a monthly "premium" to employer

Question: Is this subject to the Schedule H and audit requirements?

I am taking over a defined benefit plan. For the 12/31/04 to 12/30/05 plan year the employer made a contribution and then took some back on the grounds that it was nondeductible. The plan document says that nondeductible contributions MUST be returned to the employer. The schedule B was not filed, because assets are less than $100,000. In reviewing the work, I find that the maximum deduction was overstated. So the amount returned to the employer doesn't cover the whole nondeductible contribution. The amount is small - say $500 difference. The client will need to pay an excise tax on the amount of nondeductible contribution remaining.

I will need to file a Schedule B so that I can attach the required attachment to back up the return of excess contributions. Since I haven't yet filed the schedule B I can change the RPA current liability interest rate to increase the deductible limit, to avoid the excise tax. But can I use any rate in the range even though it looks ridiculous, to come up with the number I want - and if I do that, would I still be right that the excess I come up with is the nondeductible contribution that can be returned. I don't see anything to prevent that action, but it doesn't seem in the spirit of things?

Ive heard that there's a book out - there may be more than one - that covers 412i plans quite well - does anyone know where I could get it ???

Just trying to find out if any of you work with plans that let participants manage beneficiary designations online. For those with spousal consent requirements I assume you are still requiring paper?

Just curious to see what is being done out there.

Thanks

A 401(k) plan was using the SHNEC up through 2004. For 2005 they amended the SH out of the plan. The 2003 SHNEC was deposited in early 2005 (obviously late) with lost earnings calculated and deposited as well. The owner of the company has refused to pay the 2004 SHNEC that is owed to the participants despite our repeated and well documented attempts to get the $ from him.

Recently, he shut down the company and wants to terminate the plan. We finally convinced him that he needs to deposit the SHNEC before he can terminate the plan (or things are going to get ugly, very soon for him). He would now like to take the money out of his own account in the plan to pay for the missing SHNEC and lost earnings (he has pleanty of money in the plan to cover this amount).

My initial thought was to let him take a taxable cash distribution from his account. He could then turn around and pay it back to the plan. One concern of course is allowing the owner to take a distribution prior to receiving the final determination letter. Particularly, when the plan does have the late/missing SH contributions that will affect qualification. Would you allow the distribution? Other alternatives or concerns?

This plan did fine last year with cross-testing with the goal to get the most $ to DAD of the contribution . For the current PYE, they lost a NHCE who was younger and increased salaries on the younger sons (who are owners). I gave everyone 5% except Mom & Dad (who are 63 and 66 respectively) and gave them 15%. All of my tests fail miserably no matter how I run (accrual vs. allocation), etc. (I use Relius)

Here are the demographics:

HCES:

SON - AGE 33 COMP $150400 - GREATER THAN 5% OWNER

SON - AGE 39 COMP $168600 - GREATER THAN 5% OWNER

SON'S WIFE - AGE 47 COMP $13,000 - OWNER BY ATTRIBUTION

MOM - AGE 63 - COMP $9600 - GREATER THAN 5% OWNER

DAD - AGE 66 - COMP $147000 - GREATER THAN 5% OWNER

EMPLOYEE - AGE 36 - COMP $91828 - HCE COMP > LIMIT IN PRIOR YEAR - NO OWNERSHIP

NHCES:

EMPLOYEE AGE 31 COMP $48443

EMPLOYEE AGE 55 COMP $51571

EMPLOYEE AGE 59 COMP $56606

I'm thinking maybe I'm not using Relius correctly to test because it seems like if I give everyone 5% except Mom & Dad, I should pass easily. What am I missing? Any suggestions appreciated!

ok, just what does TPF & C Forecast Mortality Table stand for?

I don't need the table - that is programmed into the system, but was looking for a description to put on the relative value notice.

(I'm almost positive it is not Tom Poje Failure and Catastrophe, though that might be appropriate in reference to me!)

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?