I have tried looking for a similar question in the archives but don't see this situation being addressed:

We are working with an employer who maintains both a DB and profit sharing plan. The minimum contribution to the DB plan is zero, and the maximum is around $200,000 due to unfunded current liability. The 25% limit for compensation is around $150,000.

There are about $500 in forfeitures in the profit sharing plan to be allocated for the plan year.

The question is: Can the employer contributed the $200,000 for the DB, have the forfeitures be allocated in the profit sharing plan (without contributing anything else to that plan), and not be considered to violate the 25% limit due to the forfeiture allocation? I know the answer would be yes if $200,000 were the minimum required contribution in the DB plan, but can't find an answer when this isn't the case.

A family-owned business with a Safe Harbor 401(k) just sold the business. All the employees now work for the Buyer. The owners (siblings) want to allow the participants the opportunity to roll their money into the new employer's plan but don't want to close the old plan. They would like to keep the old plan for their accounts (5 employees with 80% of the assets). Is this allowable?

A 50+ year old participant defers $12,000 into the plan (limited because test would fail if greater amount deposited). His goal is to reach the total contribution of $46,000. The ADP test passes so none of the monies are reclassified as catch-up via the failed ADP test method. If he funds a $34,000 profit sharing contribution and "forces" the 415 failure, which would reclassify $4,000 as catch-up. Is this allowable? Is it a gray are?

Thanks!!

The question came up recently with one of my clients, and subsequently with members of our staff, about whether or not RMD notification is required to be provided to nonowner retirement plan participants who are still employed and have reached age 70&1/2 (just notifying them that they have the distribution option). A few of us have done some research but have not turned up anything. Does anyone know if notification is required or can anyone give me some idea of what their practices are?

If the plan doc states to allocate the Qnec in the same manner as the Non-elective(which requires 1000 hours) and the participant does not have 1000 hours, does he still receive the Qnec in order to pass ADP test?

Thanks,

Linda Michals

Trying to determine maximum employee elective deferral contribution if employer contributes 10%. Would the maximum employee deferral be 15% or 12%.

Example: gross comp = $10,000 with elective deferal of 12%. Max limit = $8,800 x 25% = 2,200. $1,200 EE + $1,000 ER = $2,200 max?

or gross comp = $10,000 with elective deferral of 15%. Max limit = 10,000 x 25% =2,500. $1,500 EE + $1,000 ER = 2,500 max?

CCH states the ER's deduction is limited to 25% of the aggregate compensation paid to the participating EE. Also, for tax years beginning after 12/31/01, the EE's compensation will include elective deferral for purposes of calculating the deduction limit.

Based upon that last sentence, would the employee's compensation including elective deferrals be $10,000 or $8,800 in the prior example.

Any help would be appreciated as I cannot find much on this subject since SARSEP's were eliminated after 96 except for grandfathered in plans.

Thanks,

RK

We recently processed a QDRO for the provision of child support. For the sake of argument, let's assume that the Order met the definition of a QDRO, establishing the former spouse as the Alternate Payee for the provision of child support.

This order was requested and drafted by a child support enforcement agency. However, the final order did not reference them specifically...only the former spouse as the Alt Payee.

Upon processing the order, we were contacted by the child support enforcement agency indicating that the distribution MUST flow through them. Otherwise, the Participant would not get "credit" for paying support in the amount assigned to the Alternate Payee.

I would assume that an amended Order is necessary to accomplish payment through the agency. However, I'm not quite sure how the amended Order should be drafted as, pursuant to applicable guidance, the alternate has to be a spouse, former spouse, child, or other dependent. How can I, as the plan administrator, facilitate payment to the former spouse throught this agency?

Any insight would be greatly appreciated.

Entity is a C-corp. There are 4 employees – the owner, her son, her daughter, and the owner’s brother. The son and daughter are year round employees – son (age 20) is full time, daughter (age 18) part time. The brother is a seasonal employee.

If they had a flex plan, would the son and daughter be considered to have the Mom’s ownership and therefore be Key and HC employees?

If they have a medical reimbursement plan (section 105) that would benefit all year round employees Mom/son/daughter, would it be discriminatory because only HCEs receive benefits? Even though plan eligibility would include non-HCEs if they hire other employees?

Assume that a 401(k) plan sponsored by Company A is also adopted by Company B. Is there anyway that Company B's termination of participation in the plan would constitute a distribution event that would enable Company B's employees to take a distribution from the plan? Unless there is some guidance out there that says this is equivalent to a termination of employment or a termination of the plan (with respect to Company B employees) I don't see any basis for a distribution. However, there is some language in the plan that appears to suggest that this is a distribution event.

Are premiums paid for hearing aid insuance a reimbursable expense under a health FSA? The insurance covers the repair and maintenance of a hearing aid. Any points of reference would be appreciated.

I have a 401(k) Plan with both HCEs and NHCEs eligible to defer, but the only ones who elected to contribute were HCEs. Is it possible to say that the Employer would make a Safe Harbor Contribution of 4% up to 100% of deferrals to all NHCEs, and therefore a Safe Harbor of $0 is required to correct for the failed ADP Test?

For some reason, that just seems to easy to me, so I wanted to see if anyone else had handled a situation like this in the past.

We have administered a cross-tested profit sharing plan for a small employer for several years. In 2005, they adopted a safe harbor 401(k) plan through their payroll provider without telling us. They still want the cross-tested allocation so we will need to test accross both plans.

Question: The safe harbor 401(k) plan does not restrict HCE's to the top 20% but our plan does. Which definition should be used when testing accross both plans?

Thanks much.

Hi Everyone,

We have always had our own homegrown .NET based web to use with Relus Admin. We are in the process of switching to Relius web and wanted to share our experience with anyone who would like to participate. Hopefully this topic will move to a new Product User Group. Let me know if anyone is interested in sharing Relius Web strategies.

Thanks

A 401(k) plan, with only 1 key employee (also the only HCE), became top heavy for the 2005 plan year. The top heavy contribution only has to go to those participants still employed on 12/31/05. If there were 10 non-key participants, and 5 were employed on 12/31/05, while the other 5 had between 501 - 999 hours but were not employed on 12/31/05, would only the first 5 get the top heavy contribution? Would the plan have 410(b) coverage problems since only 50% of the NHCEs are benefitting?

Thanks for any comments

I just received word that the owner of tow of my plans has passed away. I knew he was sick, but did not realize how bad.

He had been getting an RMD from each company's plans, as he was a more than 5% owner. At Company A, he and his wife are the owners. In Company C, he and another person are the owners. I don't know if his wife is his designated beneficiary for his ownership in either or both companies, nor do I know if his wife is his bene for his plan accounts (the client keeps copies of the enrollment forms), but for my quesiton, I will assume that the wife gets it all. The document states that a distribiton due to death may be processed as soon as administratively feasible after death. The plan is with American Funds.

If the accounts of the dec'd owner are not distributed before the end of the year, does an RMD need to be processed? I have been doing RMDs for 10 years, but never had this problem. Thanks!

How are most of you handling the reminder notice that needs to be sent out? Since there is no sample language provided, and the reminder needs to tell employees how to request another notice, isn't is just as easy to send out the full notice instead of the reminder?

I swear I read or heard somewhere that the IRS ruled that a change in ADP/ACP testing method was a discretionary amendment and must be executed prior to the plan year end in which the change is effective....

Can someone tell me if I'm just making this up? Or, if it is in fact true, can you point me in the direction of the regs so I can cite this?

Thanks!

Vicki

Partners make their salary deferral deposits in January for the 2005 plan year....(when their partnership income is determined). Employer deposited deferrals in excess of the 402(g) limit. Deposit went into the account in January, 2006. Can we use the amount of the excess toward 2006 deferrals? Both partners had draws in January sufficient to cover the excess.

Thanks.

I could use some feedback on the below. Thanks in advance

Account owner is age 73, not married, NY resident, living with non-spouse partner.

Account owner wishes to share proceeds of IRA with daughter and partner.

Advice of attorney is to change existing IRA beneficiaries (required minimum distributions began in 2002) to 50% to the daughter and the remaining 50% to the estate so the non-spouse partner can receive his share.

Is this plan the most tax-efficient way to accomplish the stated objective? Wouldn't the inclusion of the estate impact the daughter's ability to stretch out?

My thought is that naming the estate will result in a lump sum distribution with a large tax bill. If instead the individuals were named, they could take distributions based on RDM requirements and stretch out payments, thereby (potentially) lowering the tax bill

Under final 401(k) regs, does this still work?

SH QMAC is 100% on the first 4% - Not subject to vesting, no hours or employment status

Discretionary Match = 50% of deferrals up to 6% of comp. - Subject to Vesting, 1000 hrs. and last day

Is any of this subject to adp testing?

Is any of this subject to acp testing?