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 ?

Should be a simple question. We were asked if there is an owner and his daughter in the plan ,do we file a 5500 or 5500EZ. The daughter owns 5%. We weren't told whether or not this is incorporated or a partnership. My thought is we do a 5500EZ since it covers only owners. Any other opinions?

I am just now looking at the 401(k) testing for a plan with a 12/31/05 year end. The document says to use prior year testing and the test is failing, however it would pass on a current year basis. I haven't been able to locate anything definitive on the deadline for amending the plan to current year testing.

One source says the plan MAY have 12 months which is the correction period for 401(k) test failures and the amendment is a correction method.

Notice 2005-95 makes a distinction between amendments necessary to meet qualification requirements and discretionary amendments. It is not clear to me on which side of the fence this amendment would fall, since there are other ways to correct the test failure (refunds), I'm not sure it would fall under the "required for qualification" heading.

I have a client that has a ROTH-IRA with 1-1/2 years left on the 5-yr requirement on distributions. The client is interested in rolling over the ROTH-IRA into an annuity. I assume since it is a ROTH-IRA, the funds are "non-qualified". (If the client had a Traditional-IRA, I would assume the funds would then be "qualified")? My questions are: 1) Can one rollover a ROTH-IRA into an annuity; 2) If so, would the annuity be "qualified" or "non-qualified"; and 3) Am I correct in the assumption that the 5-year holding period does not apply to this transaction, since it is actually a "rollover" of the ROTH-IRA and not a "distribution or withdrawal"? Thank you, Jeff Blanchard (E-Mail: jeffreyblanchard@msn.com)

I am a depositor in a thrift institution which has announced an IPO. I have the opportunity to order shares of stock at the IPO price. The stock will be traded on the NASDAQ beginning in early July.

I have received an "Outside Purchase Agreement" from my broker that will allow me to purchase shares for my IRA wiht funds from my IRA. The Outside Purchase Agreement indicates that I must turn over the stock certificate to the company within 30 days of their issuance of a check to purchase the shares.

Shouldn't I have 60 days to give them the stock certificate? The deadline for orders (and payments) to be received is about 2 weeks prior to the anticipated start of trading, and I'm concerned that I won't have the certificate in time to meet their deadline. Does anyone know if the 60 day "redeposit" rule also applies to the "deposit" of securities that are purchased using funds from an IRA?

Thanks for your help.

I've read through the Code, Regs etc.. and I believe that a "statutory employee" could also be considered "self employed" and thus sponsor their own plan (other than certain life insurance salesmen). Could someone please confirm whether I am correct and let me know whether there are any special issues related to this odd situation that I should know about? Thanks.

This is somewhat related to what Sueczer posted.

We administer a 5 participant DB with 3 HCE's and 2 NHCE's. The plan has provided a benefit of 8.25% of average salary for all participants. The employer now wishes to create two groups of participants. Group A will receive 5% and group B 8.25%. The one participant in group A is a 45 year old highly compensated participant. It turns out the group A participant will be terminating employment this year. So the reduction in benefit will mean she will not accrue a benefit this year.

Is there anything wrong with doing this given:

1) A 204(h) notice was given in time (prior to 1,000 hours).

2) The plan will pass 401(a)(4).

3) The amendment was properly executed in time.

Thanks very much.

We heard something to the effect that the IRS will be stepping up the number of audits they do on plans that terminated without IRS filing. Has anyone heard the same? is it rumor or some thing more official?

In my employee presentations, I like to use quotes, analogies, etc. to try to "translate" some of the more arcane (and there are SO many!) and complicated aspects of our business into a simpler message that might actually be understood - and retained.

In an attempt to dilute some of the vitriol coursing through these Message Boards of late, I would like to invite readers to submit quotes, song titles, song lyrics, etc. that have any sort of a tie in - however loose - with retirement plans.

Examples:

"You can lead a horse to water, but you can't make it drink."

"Time Is On My Side" (Rolling Stones)

"You Can't Always Get What You Want" (Rolling Stones)

"You Got Another Think Comin'" (Judas Priest)

And my corporate theme song: "Roll With The Changes" (REO Speedwagon)

Thanks - and have fun!

Other than 404 deduction limitations are there any other plan limits or individual limits to be aware of when the employer has both a defined benefit plan and a Safe Harbor 401(k) plan with new comparability non-elect allocation formula?

Perhaps all of this is obvious, but I thought I'd post it to get some thoughts from those in the hinterlands.

There was a post on the 403(b) forum that lamented the fact that some school districts didn't get the benefit of a Vanguard or Fidelity for their teachers' 403(b) accounts. 403(b) vendors are protected by states and other governments, which are inherently conservative in choosing their vendors for political and other reasons.

But that's not the case with 401(k) plans (even governmental ones) that are moving quickly towards standardization and lower costs and arguably better services. The question is what has been lost in this process. I live in a city that used to have several bank trust departments that did 401(k) administration and there were several regional consulting firms, and these are now gone, absorbed into bigger banks and bigger national consultants. Colleagues have moved to Charlotte, Atlanta and Philadelphia. Who's left are financial advisors who pretty much provide the same services and make the same recommendations (and shift the technical work to those financial centers).

It's like Wal-Mart isn't it - a relentess move to a bigger distribution system with more uniformity and lower costs. It may be good for the participant, but you lose the regional flavor and the local expertise (which I guess wasn't really all that good). I assume that every 401(k) plan in every part of the country will be substantially similar provisions, so the main job of the local advisor will be to sell a fungible product.