Anyone know of a good reference for explaining how testing is done?

Thanks.

This is probably a dumb question, but I'll ask it anyway.

I am running an earned income calculation for a partnership. There are two partners (50-50), each has K-1 self-employment earnings of $120,321 (line 14A); however, they both have a Section 179 deduction (Line 12) of 1,656. When calculating the partners' earned income, do I subtract the 179 deduction from their self-employment earnings or not? I guess my question is: is my starting point $120,321 less the staff's contribution, etc. or is it $118,665? I've seen it done both ways, but I don't know which way is right.

Thanks for your help! Any input would be greatly appreciated.

Has anyone updated their Special Tax Notice (402(f) notice) to reflect Roth 401(k)s? If so, would you be kind enough to post it for myself and others.

A TPA is offering HSA claims adjudication as a service. The client employer writes it's checks (which include employee/employer contributions) directly to the TPA. The TPA deposits the money into an "HSA account".

All employers and employees monies are commingled in the HSA account. Is this type of account required to meet ERISA trust requirements?

Say a plan does not have language to exclude NON-residents with no U.S. income from a 401(k)/Profit Sharing plan.

1. Does that mean they would have the right to defer into the retirement plan & their income would be included in the ADP test? I know they would be included in coverage.

2. Would they be eligible for a profit sharing allocation based on their foreign source of income?

3. If Q1 or Q2 could be no, then what would happen if the plan failed coverage due to these NON-residents with no U.S. income?

Single location employer is adopting a new plan and applying for a determination letter. Under Treas Regs 1.7476-2, the notice to interested parties allows for this notice to be posted in a place which is 'customarily used for employer notices to employees with regard to employment and employee benefit matters'.

Anyone know how long this notice must remain on the wall in the break room, so to speak??

I have an employer who wants to switch from a simple IRA to a 401(K). What are the necessary steps in accomplishing this switch. I understand that if the simple has started the calendar year you cannot have a qualified plan during that year. Would the employer be able to start the 401(K) as of 1/1/07?

A 401(k) plan has an immediate distribution option for terminated participants, regardless of any other factor. To be eligible for a distribution, they are hoping to change the plan:

A. to require 5 one-year breaks in service, with the exception of reaching Normal Retirement and mandatory cashouts. But, if that is not an option, then instead:

B. to require the payment to be delayed until the first quarter after the plan year in which the participant terminates, again with the same NRD and cashout exceptions.

Can (A) be done to affect all accounts of all participants now (actives and term vesteds alike)? What about (B) instead? Or would current accounts retain a right for immediate distribution upon termination of employment?

Hello,

I am looking for a seminar or a 1-2 day course on international benefits (preferably Europe). I have seen the message regarding the seminar provided by International Foundation. However, this is not what I would need since the course is covering too much information that I will not need.

I appreciate any recommendations for the seminars that will cover benefits for European countries.

Thank you.

I'm reviewing an actuary's draft of a SERP that has been proposed for the boss of a governmental hospital. It provides for 100% vesting of the benefit immediately, but the formula is a defined benefit formula based on final pay at normal retirement with an offset for a qualified plan benefit and Social Security. Payment is made in a lump sum (actuarial equivalent of benefit) right after retirement.

The assumption I think is that the executive won't be taxed for income tax or FICA until he retires, because the amount payable to him won't be "ascertainable" until then.

I know that the FICA rules do not require taxation until the benefit is ascertainable, and that won't occur until the boss terminates employment. [However, I believe that the rules allow the employer to include in FICA when earned, even though not ascertainable.]

But what about for income tax purposes? There's an IRS Technical Advice Memo (Ltr 199903032) that says that the rules are different and that in this situation, the executive is income taxed when he is vested - which would mean in this situation that he's taxed every year that he accrues benefits. You'd have an unusual situation - income tax in one year and FICA taxes later.

Question: What is the practice out there for defined benefit 457(f) arrangements? Would you feel comfortable with delaying income tax until the benefit is "ascertainable"?

I originally posted this in the 401(k) Forum but thought it may also be appropriate here:

I have a question regarding the handling of a nonqualified wrap plan linked to a 401(k) plan. The current design calls for irrevocable deferrals into the nonqualified plan with a "pour over" at the end of the year into the 401(k) of the maximum amount possible. Because of the screwy 409A guidance that limits the amounts deferred under the nonqualified plan to the 402(g) limits, we want to "delink" the plans. Basically the thought would be to prohibit anyone who defers into the nonqualified plan for a year from making any change in his deferral election under the 401(k). However, I am concerned about the rule in the new 401(k) regs. that says that participants must have an effective opportunity to make (or change) an election at least once during each plan year. See Reg. Sec. 1.401(k)-1(e)(2)(ii). I think an argument can be made that those who elect to defer under the nonqualified plan voluntarily waive their right to make any change to the 401(k) deferral election for the upcoming year and this is not a violation of that rule. In effect, it is a voluntary choice made by the participant. Does anyone know whether the IRS has any viewpoint on this? Or does anyone have a better idea?

If an eligible plan expense is paid from Roth 401(k) contributions / earnings, would the basis recovery rule apply?

Assume employee has no W-2 income for a year b/c on leave without pay. Employer provides domestic partner benefits and employee has a domestic partner, so FMV of coverage is imputed income. How does employer meet withholding obligations (fed. inc. & FICA) if there is no cash to withhold from? Anyone ever run into this?

I have a question regarding the handling of a nonqualified wrap plan linked to a 401(k) plan. The current design calls for irrevocable deferrals into the nonqualified plan with a "pour over" at the end of the year into the 401(k) of the maximum amount possible. Because of the screwy 409A guidance that limits the amounts deferred under the nonqualified plan to the 402(g) limits, we want to "delink" the plans. Basically the thought would be to prohibit anyone who defers into the nonqualified plan for a year from making any change in his deferral election under the 401(k). However, I am concerned about the rule in the new 401(k) regs. that says that participants must have an effective opportunity to make (or change) an election at least once during each plan year. See Reg. Sec. 1.401(k)-1(e)(2)(ii). I think an argument can be made that those who elect to defer under the nonqualified plan voluntarily waive their right to make any change to the 401(k) deferral election for the upcoming year and this is not a violation of that rule. In effect, it is a voluntary choice made by the participant. Does anyone know whether the IRS has any viewpoint on this? Or does anyone have a better idea?

...understand that a QDRO is for a qualified plan- not an IRA…but I am looking for a specific case/ruling where it was specifically addressed ,that a QDRO that was issued for a qualified plan (QP)could not be used for the IRA to which the assets were rolled ( from the QP).

Thanks

To be more explicit, can a plan use assets from the forfeiture account to pay the 10% excise tax on failed ADP refunds?

Is it possible to design a plan that permits the participant to designate the portion (not necessarily percent) of the retirement balance that will be paid to a beneficiary.

Example, could the participant designate the Roth 401(k) subaccount will be distributed to the spouse and the balance to the child? (Let's forget spousal rules for now.)

Ok, this should be a very easy question to shoot down, but I searched this board and didn't find anything.

Partner of a service partnership gets K-1 and "friends" have told him he can set up a uni-DB plan with the self employment income. Partner particpates in the partnership 401(a) plan. Assume no income other than the k-1, but does that matter? Is it a 415 problem or an affiliated service group, etc. issue? I know it can't be possible because everyone would do it, but can't figure it out this morning.

Thanks!

How are excess deferrals (excess of 12,000 limit, including catch up) treated in a SIMPLE IRA? Should they be refunded and a 1099 issued? Do penalties apply?

Plan states death benefit payable to - the designated beneficiary, and if none, to the spouse, if no spouse to the participant's estate.

Unmarried participant dies. His brother is his named beneficiary. The deceased participant does have minor children. The beneficiary brother wants to know, can he now decline to be the beneficiary entitled to receive the death benefit and instead have the death benefit paid to the children? Or is the brother "stuck" with being the beneficiary and if he wants to provide the death benefit to the children he needs to explore other "gifting" type avenues?