I'm not certain yet as to the reasons for this, but the employer of a 401(k) profit sharing plan wants to "freeze" the plan, but not yet terminate it. In other words, he does not want to let anyone else into the plan, and he also wants to prohibit current participants from making any future 401(k) contributions. I assume there will be no more PS contributions either (there is no match). They will eventually terminate the plan and pay out either later this year or sometime next year. I can't think of a good reason for the delay, but, assuming the proper plan amendments are made, do you see anything wrong with doing this?

We may not imagine how our lives could be more frustrating and complex--but Congress can.

Company X has an employee who became disabled and has been so now for more than 6 months (most of 2005). Company X pays for a disability policy with an insurance company to cover its employees. The insurance company had Company X act as the payor and they told Company X to also pay and withhold FICA for the first 6 months and to report the payment on the Form W-2 (box 1).

After 6 months, the insurance company explained that the FICA tax no longer needs to be paid, but that Company X must still report the amount paid on the W-2 (box 1).

Company X has a nonstandardized prototype Safe Harbor 401(k) plan that defines compensation as W-2 wages for allocation purposes. As you know, the 3% nonelective Safe Harbor contribution has no allocation conditions.

Company X has reviewed the rules for reporting the sick pay on the W-2. Company X explained to us that unless they have an agreement in place with the insurance company to act as their agent, the insurance company must provide Company X with a notice of sick pay payments (meaning the insurance company will not act as the payor for tax reporting purposes).

Company X will see if it is possible to make the insurance company the payor. However, for 2005, Company X believes that they still in an employer-employee relationship with the disabled participant (this individual is still covered as an employee in their medical insurance plan). Company X believes that they must continue to include these payments on the employee's W-2, including the payments made after six months disability.

Company X has asked us if the Safe Harbor contribution should be allocated to the participant for 2005 based on all of their W-2 pay, or just the portion before they were paid before they became disabled, or just the portion before the 6 months expired.

Is there a way to exclude this participant from getting allocation based on these disability payments that are being paid by the insurance company?

I work with employers that would like to obtain their claims data from their TPAs to use for various purposes like data analysis from external vendors, etc.

I have always believed that a self-funded employer "owns" their own paid claims data, however, there is a struggle right now with getting the TPA to actually hand it over.

I am wondering where the self-funded employer's ownership of their own data can be referenced in the law or other documents.

Does anyone know where this validation can be found?

Hi,

I'm new to the board, and I'm having trouble with determining some definition when it comes to retirement planning. Things like "active participant" and 'employer plan". I prepare income taxes.

Anyway I have a client who is 47, and makes about $140,000/yr and files Head of Household. The client is a union electrician and has a union pension. But the W-2 form he receives from his employer shows no contribution to any retirement plan, nor does it have the "retirement plan" box checked.

If he has no contributions is he considered an "active participant", and if the pension is from the union and not the employer paying wages, is this still considered an "employer plan"?

My client would like contribute to an IRA. His income would disqualify him from a Roth IRA, so I'm wondering if it's possible to contribute to a traditional IRA and take the deduction. I wouldn't see a point in making a non-deductible contribution to a traditional IRA.

Any guidance would be appreciated. I kind of have a feeling that there's no option here and the union plan would be considered an employer plan. But I'm not yet convinced beyond a shadow of a doubt.

Thank you.

We have been advised to recommend to a plan sponsor who offers its common stock as an investment in its participant-directed 401(k) plan to consider "unitizing" the stock. The stock is traded on the NASDAQ NM exchange. What is the difference in unitizing the investment from just purchasing (and selling) shares, at current market value, as contributions, distributions, investment exchanges, etc. occur in the course of normal plan operations? How does one go about unitizing the stock? Thanks.

A company sponsors a 401(k) plan for its participants. The plan is intended to comply with ERISA Section 404© and offers a number of funds as part of the plan's core funds for which the company's investment committee is responsible for selecting fund managers and monitoring their performance and a self-directed brokerage window, through which participants may choose from a universe of several thousand mutual funds.

A participant has written to the plan administrator requesting information on whether any of the plan's existing core funds or any of the mutual funds available through the brokerage window are designed to comply with Islamic law. According to the participant, a fund would be in compliance with Islamic law if it did not include investments in any business manufacturing or serving alcoholic beverages, providing pornography or charging or collecting interest, among other criteria.

Does anyone know of any Islamic based funds or any type of mutual fund that would otherwise satisfy the requirements of Islamic law?

Such worries!

Participant received a lump sum pursuant to a termination and as provided in the Plan. Problem: participant did not receive a lump sum of the entire amount.

Suggestions?

Please confirm which HCE threshold is used for 2005 tax year ADP Test. 2004 gross wages are used for HCE determination, but it's unclear whether 2004's $90K or 2005's $95K is to be used.

I got a response from IRS 401K department. However, they didn't seem confident in their response. It's hard to tell what the original 414 (q) (1) $80K base year was because that threshold remained constant from 1997 through 1999.

ASIDE: also, if you know...why did the threshold drop drastically from $100K in 1996 to $80K in 1997? 2006's $100K is quite low compared to the current job market wages high escalation (a lot of line staff, non-management, in oil & gas field are exceeding that with big 2006 raises needed just to keep necessary staffing levels).

When calculating earned income, it is necessary to allocate forfeitures between the employees and the owners. How is this done? Pro-rata based on the contributions allocated to employees? Profit Sharing only, or would you include all employer contributions (i.e., including safe harbor)?

Is there any published guidance on this?

An HCE is in the qualified election period and is able to diversify his plan holdings. A question has come up about whether or not he MUST make the election during the first 90 days of the plan year. Is he limited to that time period? If so, why is that the case?

A self-employed individual has earned income from a real estate business. She also has self-employed income from another business that she has. She has a solo 401(k). Does she need to include income from both entities to determine the maximum that she can contribute?

I've got a 457(f), DC plan where the executive vests in earnings each year. Because they are vested, the earnings get taxed each year. But what about the earnings (that are vested) on the vested earnings already taxed? I know they are not subject to employment taxes under the 3121 regs, but what about income? I can't find any guidance out there. Is it ordinary income or capital gain? I assume it is ordinary income under a plain reading of 457(f). But could it be capital gain taxed at liquidation of the assets, i.e., at distribution. Any thoughts?

I just got our new quote for e&o coverage for our tpa firm. premiums up 45% from last year? I realize that the premiums increase when our annual revenues increase, but this is unbelievable.

is this standard practice? a $15k deductible is in place and the vendors we work with (Nationwide, Hancock)_require 1million in coverage...

in business for 6 years and 25 years of admin. experience and no claims... this seems unreasonable.

any comments? thanks.

Client made 200K plus for 20 years. In 2005, starts a new DB plan with initial funding contribution of 110K/yr (50 yoa). However, in 2005, w2 income drops to about 50K per year. Client funded full contribution in 2005, now I'm uncertain how to fund for 2006 and 2007,etc.?

If a plan sponsor deposits their profit sharing contribution into a holding account in the plan in installments throughout the year, are the earnings on that account considered to be Annual Additions for 415 when they are allocated to the participants? Specifically, there are several participants at the 415 limit already--can they get an allocation from the holding account earnings?

Hi all:

I'm new here, and just looking for some advice. My company ( I am an officer and plan administrator) filed chap 7 BK about a year back and terminated all the employees. We were current with all 401K obligations at the time of BK, but the recordkeeper has refused to "decertify" the plan, and has kept piling up the billing anyway. Most, but not all of the employees have rolled out of the plan, but there are still 2 in it, that have not done so (despite my urging). I would like to leave this cleanly, but I am not going to pay the recordkeeper $3K+ just so they will decertify the plan (which, if they had done so at the beginning, they would not have racked up the $3k+)!

If the recordkeeper will not decertify, what are my options? Can I just walk away?

Thanks in advance for any and all suggestions Chris J

There are several active (non owner) participants who turned 70 1/2 in 2003. The client thought they had elected to defer receiving benefits, but we have determined that they never made such an election.

1. Must they be offered an election at this time, effective as of age 70 1/2, or can we simply wait until they retire?

2. If they are offered an election, and they choose to begin receiving benefits, must payment be retroactive to age 70 1/2 or can they simply start up at 4/1/06?

Can someone educate me on the proper calculation of Self-Employment Tax and earned income? Do the deductions for contributions to employees and for the self employed individual come before the calculation of the self-employment tax or after?

does anyone have a handy spreadsheet for calculating the SET & earned income when a self employed person has employees?

Thanks.

Expected changes to EPCRS Revenue Procedure 2003-44 included correcting the problem of excluding eligible employees from making deferrals. The expected change required a make up contribution of only 50% of the ADP for the employee’s category. Does anyone know if you can rely on the proposed change before it is finalized?