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

In this situation, the employee is timely paying his COBRA premiums to the employer. However, the employer is not promptly forwarding the premiums to the insurer. The employer's arrangement with the insurer is to cancel coverage if premiums are not paid when due, but coverage will be retroactively reinstated if premiums are then paid within the following 30 day grace period.

Even though the employee is timely paying the premiums, his coverage is being canceled each month because the employer is holding the check. This causes much inconvenience for the employee who has to pay for doctor visits/procedures out of pocket and then must seek reimbursement once coverage is reintstated. Can an employer be liable for this? Any other remedies?

Thank you.

Does the trustee of a qualified plan have to be a U.S. citizen? Could a non-U.S. citizen be the named Trustee on a qualified plan?

Can you provide any insight into what I think is an iteration if spousal carve-out?

The spouse whose bday is first, and who has employer coverage, must cover the dependents. Their employee, if his or her bday is last, is not eligible for the family plan but only eligible for ee-only.

Am I crazy? Any thoughts?

Two quick questions...

1. In 2002 the IRS issued a model amendment for use by DB plans pertaining to the minimum distribution requirements....Is there an updated version available that incorporates the changes made by the final regs issued in 2004?

2. My understanding is that DB plans have to be amended to comply with the minimum distribution rules no later than the last day of the plan year beginning in 2005...Is this correct?

A friend of mine has a limited pay hospital plan (pays a $ benefit for each day as an inpatient). Long story short, he was offered a lump sum of $35,000 to turn in the contract. I have limited experiences with these types of plans, but was quite suprised. Does anyone have any comments about this? I find it unusual to say the least. Is it legal? Is it common? Thanks for any feedback.

I have a question hopefully you can answer.

We operate a qualified cafeterial welfare plan. Occasionally, we get court orders (from the DA office) telling us we have to begin covering the child of one of our employees under our health plan. What happens if the employee is not enrolled in a health plan? Are we required to enroll the child AND the employee (this is the only way a child could be covered under our plan)? In what plan? We do not have a default plan of any type.

Your perspectives and guidence would be appreciated.

Thanks

Cafeteria plan has health FSA, DCAP and pre-tax contributions for health plan premiums. Am I correct that we look at each benefit individually to determine whether we exceed the 100-participant filing requirement?

I'm just curious if anyone does much with these. My knowledge of them at this point is nearly zilch - about 10 minutes of fast reading. In the small employer market, are there certain basic situations where they might be useful? A very cursory skim makes it look like they can't be used for ASG's (but can for CG's) and groups of <50 can be used for DB 401(a)(26) testing, but coverage testing would be applied across the whole group, (the <50 exception doesn't apply) so offhand I don't see the big attraction, but that's a guess based upon pure ignorance!

My client did a VCP filing because forfeitures had not been allocated since the plan year ending in 1998. They received approval to proceed with their correction method. 5500s were filed each year in a timely manner. However, when the forfeitures were allocated, the number of active participants receiving allocations is different from the number shown on the 5500s. Do they need to go back and amend all of their 5500s?

An owner of a small company says he wants a retirement plan with a large amount going to him and as little as possible to his employees.

Below is the story and any observations would be appreciated.

Company: One owner and 13 other employees

HCEs: One owner and 3 other employees

Plan proposal: Combined DB/ 401(k) 3% safe harbor plan

Both plans exclude the 3 HCEs.

401(k) plan includes only 2 NHCEs and passes ND on its own as follows:

Coverage:

NHCE % = 2/9 = .22

HCE % = 1/4 = .25

Passes ratio test

ND:

HCE accrual = 2.4%

One NHCE > 2.4%

Ratio = 1/9 divided by 1/4 = .44

NHCE concentration = 9/13 = 69%, thus mid point = 38.25% and safe harbor = 43.25%

HCE ABP accrual = 3.08% (combining PS contribution, DB accrual, 401(k) deferral, and 3% safe harbor)

NHCE ABP accrual = 4.3%

Passes ABT

DB plan includes 5 NHCEs and the owner and passes ND on its own as follows:

Participation:

6/13 = 46%

Passes 40% test

Coverage:

NHCE % = 5/9 = .56

HCE % = 1/4 = .25

Passes ratio test

ND:

HCE accrual = 8%

one NHCE accrual =8%

Ratio = 1/9 divided by 1/4 = .44

NHCE concentration = 9/13 = 69%, thus mid point = 38.25% and safe harbor = 43.25%

HCE ABP accrual = 3.08% (combining PS contribution, DB accrual, 401(k) deferral, and 3% safe harbor)

NHCE ABP accrual = 4.3%

Passes ABT

As a result it appears that both plans are in compliance and provides a significant amount to the owner and little to the employees.

It seems that it might be best to assign employee groups or classes to avoid the need to specify employees by name in the plan document.

Any observations from a practical perspective regarding the above analysis and its credibility would be appreciated.

Thank you.

Saw artilcle online that stated that all defined benefit plans need to be restated by the end of 2006 but did not give the reason - anyone know?