Employer has a Simple IRA. Now wants to establish a 401(k). No employee or employer contributions have been deposited into the Simple IRA so far in 2006.

If the employer failed to provide the 60 day 'EE Notice in Nov. '05, could the employer decide to discontinue/terminate the Simple IRA for 2006?

What if the Simple IRA was using the 2% nonelective? Would the employer still be required to make that contribution thereby precluding the employer from establishing the 401(k) for 2006?

Under ERISA Section 4203(b), a building and construction industry employer incurs withdrawal liability only if it both ceases to have an obligation to contribute to the multiemployer pension plan and continues to perform, in the jurisdiction of the cba that required contributions to the plan, work of the type for which contributions were previosuly required. The requirement that the employer continues to perform work of the type covered by the plan in the geographical jurisdiction of the cba seems to me to pose a problem when there is a difference between the jurisdiction of the cba requiring contributions to the plan and the jurisdiction of the plan itself. Assuming that the jurisdiction of the plan is wider, an employer arguably has a withdrawal when it leaves the jurisdiction of the cba but remains in the jurisdiction of the plan without making contributions. Any thoughts on what the geographical scope should be would be helpful. More particularly, if the cba at issue is a project labor agreement that only covers a particular project in one location this should seem to control so that the employer can perform non-union work 1 mile away at a different project without incurring withdrawal liability. However, the legislative history contains a phrase that says that the mere expansion of the plan's jurisdiction after the obligation to contribute ends should not create a withdrawal. This seems to imply that it is the plan's jurisdiction (covered by all its cbas) controls. Any further thoughts? Thanks!

Does any one know if the Mental Health Parity Act has been renewed past 12/31/05? And, would it cover a case of a plan sponsor wanting to exclude prescription drug coverage for depression? Thank you.

I have a client who dissloved a business (corp) midway thru 2005. He then established a new business (sole prop) in another state. He had a profit sharing plan for the old business. He established a new plan for the new business. He is the sole owner of both. Can he maximize to the 415 under both? My initial thinking is no, but wanted to be sure.

Thanks for any help.

Hi,

I am 29 years old, married, and looking into starting a roth ira. My husband has a state retirement plan through his place of employment, and I am self employed working out of my home. I don't have any retirement savings . I was originally going to have my husband start one for himself and one for myself, but since our income does not afford for us to be able to contribute the maximum amount annually to both ira's, would it be better for me to open one for myself and contribute the maximum, instead of us both opening one and only be able to put 2,000 a year in each?

Thank you,

Mandy

If the match is deposited after the close of the year, is it reasonable for earnings for a failed ACP test to be 0? (pre-final regs)

I have been in the TPA business for a long time but I have always worked for someone else. Now I have started my own business and am looking to buy an existing TPA?

I am very experienced and am located in CA .....

Any Takers????

I have a client with numerous plans. 3 of them cover ONLY nonunion employees. Each plan covers a different union organization.

I know that when a single plan covers more than 1 union group, the employer has the option of ADP testing each union group separately or combining them in any way they choose.

Since this company has 3 separate plans, can I apply that same logic here? The company would like to run 1 ADP test for all 3 of the union plans. I know that normally you can't combine for ADP testing unless you are also combining for 410(b) but union are excluded from coverage anyway so that doesn't seem to be an issue. My concern, though, is that the employer would be combining the 3 union plans but keeping their other plans separate for testing purposes. Is this OK?

If a plan excludes bonuses, what issues arise in regards to 414(s)?

1. If the bonuses are for HCE's only, and we exclude them, the safe harbor definition of compensation remains intact, correct?

2. If the bonuses are for NHCE and we exclude them, are we subject to further testing?

3. If the bonuses are excluded for all, is this still considered a reasonable definition of compensation or are we still liable for futher testing based on facts and cirucmstances?

Thanks!!

I have a crosstested, SH Match plan. 2 HC, 4 NHC - must be employed last day and have 1000 hours to share in PS 2 HC meet this, only one NHC is employed at end of year with 1000 hours, 2 NHC are still employed and have less than 1000 hours, 1 NHC has 1000 hours and termed in November.

Ratio is 2HC share, 1NHC share. If this was a regular PS, I would have to bring in one of the ee's with less than 1000 hours in order to pass ratio and/or average benefits test. But it would have be a straight PS allocation.

If I bring in the the other ee with less than 1000 hours I can crosstest and get the HC a much bigger allocation.

My question, for a crosstested plan, can I bring in all the "active" employees even though the document calls for 1000 hrs. Do I need to amend the doc.

Can I even approach this like I would if I was failing 410B for a non-crosstested plan. thanks

A plan is put into place in October, 2005 with an effective date of 1-1-2005. An employee terminated in August, 2005 and would have entered the plan had they still been employed. A SHNEC is being made for 2005. Should this terminated employee be entitled to the contribution?

I have a multiple employer plan with a 7/1-6/30 plan year. Employer A is spinning off from the plan while Employer B is continuing. The spin off date is 6/30/06. I don't have much experience with spin-offs and was hopigng to get a little help. Must all contributions to the plan for the plan year ending 6/30/06 be allocated to each employer? If the assets are actually spun-off by say 12/31/06 and the contribution for the year ending 6/30/06 is made after 12/31/06, how is the contribution allocated to each employer or does the contribution have to be made prior to the actual asset spin-off? That's a good enough place to start. Thanks.

A 401k plan with 3 key employees (all family) is top heavy. The father turns age 60, which is also the plan's retirement age, and the plan allows for distribution upon attainment of NRA. If the father were to take all of his money out of the plan, but continue to work and accumulate additional benefits, the plan would no longer be top heavy (excluding his balance, which would be paid out). Can we exclude his pay out after 1 year, or do we have to maintain that as part of the t/h calculation, since he would still be working?

Thanks

Plan year was 8/1-7/31, but now has a short plan year 8/1-12/31/05 as it changes to calendar year plan. Document says you have to work 1000 hours in the plan year to get a share of PS. Employer wants to make a PS Contribution for the short plan year. Can we pro-rate the hours requirement for the short plan year?

I have a top heavy plan which has deferrals, 3% non-elective safe harbor and integrated profit sharing – entry dates for the safe harbor and deferrals are monthly after one month of service and the profit sharing monthly after twelve months of service.

The employer hired several new employees who were eligible to defer and receive the safe harbor non-elective, but not the profit sharing. Since the plan is top heavy the new employees required an additional contribution for the one month they were held out of the safe harbor contribution.

When I add the tiny additional top heavy minimum employer contribution Datair spits out a special top heavy report stating I am failing the 410(b) minimum coverage test – 401(a)(4) Top Heavy Safe Harbor.

The verbiage on the report is as follows -

Top heavy plans using a 401(a)(4) safe harbor formula (e.g. proportional to salary or integrated) with participants who are not eligible for the employer contribution effectively have two formulas and must pass a special ratio percentage test where those who benefit only form the top heavy minimum are treated as not benefiting.

Is anyone familiar with this report????

I'm wrestling with a question here. Suppose you have the following scenario:

Plan established 12/31/2006 with a beginning of year valuation date (prior to when the proposed regs become effective) The limitation year is calendar year, so 12-31-2006 valuation is based upon 2006 calendar limitation year. The compensation averaging is based on service. The individual has been in business since January 1, 2000 and their high three year average salary was earned in 2000, 2001 and 2002.

Now, the second year valuation comes up - 12/31/07 and the new regs are effective since we are dealing with the 2007 limitation year. When preparing the 12/31/2007 valuation - the compensation averaging would be based on participation rather than service. Do you:

1. Only use compensation for the limitation year 2007, or,

2. Since 364 days of participation from the first plan year were actually in 2007, do you take into account 2006 compensation as "participation comp" since that is the limitation year that applies to the plan year containing, essentially, a year of participation?

Or something else? Originally I was leaning towards #2, but after discussing with some colleagues and letting it percolate overnight, I'm not sure why I originally thought that, and # 1 makes more sense. But I thought I'd toss it out to see if you agree and to see what discussion it generates. Thanks.

I have a plan that is top-heavy, has a 401(k) feature and is cross-tested. The eligibility for 401(k) is entry on the first of the month following date of hire - for the PS portion, participants enter on the first day of the Plan year in which they complete one year of service. To receive a PS contribution, you need to be employed on the last day w/ 1,000 hours.

As it is now, I have about 45 employees - with 3 HCE's. Only 12 of these employees have met the PS requirements and are eligible for the PS portion of the Plan. The 3 HCE's are wanting to maximize their PS - they did not contribute 4k for the year. Do I have to give the 5% gateway minimum to the 33 other employees who are employed but have never worked 1,000 hours and never met PS requirements, regardless of their employment status on the last day of the year?

Any thoughts would be appreciated.

We have a firm that sponsors a 401K and is 100% owned by a husband and wife. The wife works for the company, and takes a salary. The wife also has a side business that is totally unrelated to the firm sponsoring the plan. She has no other employees in this side business. Our question is this: MUST we include her earned income from the side business for plan purposes even though her side company hasn't adopted the plan? If the answer is no, my next question is this: can we? Would it require plan amendment, and can that amendment be retroactive to last year?

A school district is considering allowing employees to act as their own investment advisor and invest their 403(b) deferrals in no-load funds, outside of the approved service provider listing. Does anyone have such a waiver that they would be willing to share?

Thanks!

I have always advised against including non-employees in any ERISA plan, including nonqualified plans. Yet I often see NQDC plans that include outside directors. Any opinions on this?

Thanks.

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