Okay been reading all the news about MP3 players or iPod players and their earphones. Seems one study done by American Speech-Language-Hearing Assoc. show that many listen for long hours and at high volumes and estimates that 22% of those 20 to 69 have suffered hearing damage form loud noise.

Am just wondering, do you think these music devices are the next tabacco. Are we going to have a bunch of 20 to 60 somethings with advanced hearing loss say no one warned them.

Will get off my cynical soap box so someone else can use it. Just for the record, I do not own an MP3 or iPod, I hate loud noise and can't stand those earbud things in my ear.

Pres. Bush is touting HSAs as a solution to our health insurance problems, and it is expected that legislation will be proposed that will increase the limits on contributions.

What do you think?

Personally the whole thing bothers me. It seems to be another political band aid that the politicians put together to avoid having to make hard decisions.

I admit that what also bothers me are the "true believers" out there who think that the free market will cure everything if it is just allowed to function.

An article recently in the Washington Post gave described an HSA participant who said he couldn't and didn't try to bargain with health care providers when his son had to go to the hospital - something to the effect that you can't bargain when a loved one is in an emergency situation. Doesn't this illustrate the fallacy of HSAs? Will anyone ever bargain on life or death decisions?

Aren't the major costs of the system in serious illnesses, end of life, coverage of the uninsured, and the adminstrative costs of the system (the costs of paperwork and administration by providers and insurance companies). Do HSAs do anything about these costs?

We just cut checks out of account for excess 401k contributions

However, we discovered that abunch of part-timers were inlcuded as eligibles and shouldn't have

thereby lowering refunds when test was corrected

Can we now put back into plan the excess refunded that shou;dn't have been?

thanks

I have a client who wants to amend it's traditional calendar-year 401(k) plan and make it safe harbor, and, of course, doesn't want to wait until next year to do it. Anyone know a reason why they couldn't amend the plan year to 7/1-6/30, issue safe harbor notices by 6/1/6 and add the safe harbor provision effective for the 7/1/6-6/30/7 plan year?

If you have one employer that sponsors two plans, one is a profit sharing plan with a 09/30 plan year end, the other is a Safe Harbor 401(k) plan with a 12/31 plan year end.

If the plans are deemed to be top heavy, the Safe Harbor 3% contribution will satisfy the top-heavy contribution as defined in the profit sharing plan's document.

Since the two plans have different plan year ends and the compensation will not be the same in each of the plan years, how do you satisfy the top-heavy requirement (other than the plans should probably be merged and have one plan)?

Thanks for any ideas!

We have a client who purchased another entity and amended the plans to merge in 2004. We took them over in 2005 and did the actual merger of plan assets. The one plan had forfeiture assets from 2004, 2005 - and an undetermined previous period. The question is do these assets need to reallocated only to the participants for the plan they came from or can they be used based on the terms of the plan they are now part of?

An employee terminated in January 2006, took a distribution immediately and rolled over the distribution to an IRA. After completion of the 2005 ADP test, it was determined that the test failed and the Plan wants to make corrective distributions. Since this employee already took a distribution and rolled the money to an IRA, there is nothing left to distribute to him. What happens in this situation? Can the money be removed from the IRA? What are the tax consequences?

Company X maintains a US qualified 401(k) plan for tens of thousands US employees and less than a handful of Puerto Rico-resident employees. This plan has never been filed in Puerto Rico for a determination letter. What are the tax consequences to Puerto Rico residents under Perto Rico's tax law if the plan is not registered? Are the before-tax contributions treated as after-tax contributions? If the plan is subseuqently registered, do these employees obtain a basis in the after-tax contributions prior to registration and a separate source for pre-tax contributions post-registration? It is my understanding that unless a separate Puerto-Rico based plan is established, Puerto Rico residents will be subject to US tax to the extent they receive earnings on plan distribution. Even though the Puerto Rico law has not been amended to recognize Roth 401(k) contributions, if Puerto Rico residencts make future contributions as all Roth 401(k) contributions and receive qualified distributions, doesn't this effectively put an end run around being subject to US tax on distributions of earnings?

A participant is going to be on medical leave for six months for surgery, and is wondering if he can take a plan loan, but not start repaying it for six months. Is it allowable to make the first repayment date six months in the future?

Can a simple IRA participant roll their account to a 401(k) plan. i read in cch that simple distributions can not be rolled to other qualified plans but EGTRRA IRA's can be rolled to qualified plans. does that include simple distributions?

Must the HCE Participant elect to have excess contributions recharacterized as an after-tax contribution, or can the current Trustee make this determination prior to March 15th? We have an LLC client where the HCE / former owner/ former Trustee sold his share of the business on June 30, 2005, but took a compensation guaranteed payment of $50,000 instead of the $100,000 scheduled for the entire year. Since he salary deferred $9,000 prior to termination, his final deferral rate became 18% instead of the planned 9%. A failed ADP test has resulted. This same HCE participant, the only HCE, rolled his money out of the Plan prior to 12/31/05 and there are now no funds available to process a corrective distribution. Other than some type of recharacterization, the client will need to make a $28,000 QNEC. Any thougts would be appreciated.

I am 28 years and I currently have $16,000 in my 401k, and I am contributing enough to get my company matching funds, which in total will add another $3500 this year. I recently convinced my wife that we should both open ROTH IRAs. We've been contributing into our individual ROTH IRAs for about 5 months. Then I came to the realization that our AGI for 2006 will exceed $150,000.

So rather than continue to contribute to the ROTH IRA knowing that we can only contribute for 2005, i want to re-characterize the ROTH into a taxable account or non deductible IRA before april 15th since I hate to have just $4000 sitting in a ROTH IRA. It seems like a waste of effort to only contribute $4000.

I am currently investing in T. ROWE price retirement 2040 in my IRA. Would it be wise to move this into a taxable account? Will that be tax efficient? Or should I just focus on maximizing my 401k and forget about all these other accounts? Please help.

thank you

We have a company that is for profit, and sponsors a 401(k) Plan (Company A). The 100% owner of Company A has started a non-profit foundation that is hiring employees starting in 2006. This non-profit has the owner of Company A and 3 of his children as its trustees and directors. Neither the owner or his children work for company A. Does this constitute a control group? The CFO wants to keep the two entities separate plan-wise, but we're thinking keep it one plan for simplicity. Any suggestions or observations are appreciated. Thanks.

We took over a plan that specifically excludes the HCEs from the 3% safe harbor QNEC. What is the advantage to excluding them? (May not be an advantage to *include* them either, but I am just curious. Just seems like one more distinction to keep track of.) Thanks!

The plan is drafted on a prototype. A plan sponsor was given a form to request that their plan be amended to a safe harbor plan. At the top of the form is a title "Safe Harbor Amendment," but when you read the form it states that the form is used to request the plan to be amended to a safe harbor plan.

The plan sponsor elected the basic safe harbor match beginning 1/1/05, signed the election form before 1/1/05, and provided eligible employees with the 2005 and 2006 safe harbor notices on time. Can the employer rely on this election form as a plan amendment?

If no, what has been the forum's experience where the plan provided the notices on time, administered the plan as a safe harbor, but failed to amend the plan? If the plan sponsor files under VCP, do you think the IRS would allow the plan sponsor to treat the plan as a safe harbor beginning 1/1/05? I have heard they are tough on this issue.

An employee participating in a DCAP must pay in advance (now) for the summer care of her children. Am I correct that she cannot be reimbursed until the care has actually been provided (meaning the end of the summer)?

If a Plan switches from the current year method of ADP testing to the prior year method, (after having been on the current year method for at least 5 years), can it resume current year tesing effective with the following year?

I only seem to find references that relate to how long a Plan has to be on the current year in order to switch, not the other way around.

The Plan I have states that it uses current year testing, "unless specified below", and then lists the 1996 and 1997 Plan Years as exeptions, when prior year testing was used. Therefore, all years from 1998 on have been tested on the current year. Would it be possible to amend the section to list the present year as an exception, and so the Plan would revert to current year after that?

Hi. Quick point of clarification -

1. Assuming a 401k plan passes 410(b) minimum coverage requirements using all eligible employees for testing, as well as testing separately using Otherwise Excludable option,

2. And, the plan fails the ADP test using both methods (testing using all eligible employees, or testing under the IRC 401(k)(3)(F) Otherwise Excludable option),

3. and, assumimg the all eligible EE testing method produced significantly greater excess contributions for HCEs than the Otherwise Excludable method,

Can you use the smaller excess contributions calculated using the Otherwise Excludable method as the basis for calculating the HCE's refundable amount. In other words, if HCE #1 has a refundable Excess Contribution of $5,000 under method 1, and an Excess Contribution of $500 under method 2, we can use $500 as the basis for calculating his Excess Deferral refund - ie: $500 plus earnings.

Is this correct?

Thanks.

Can a safe harbor nonelective contribution eligibility coincide with pretax eligibility or does it have to coincide with profit sharing eligibility?

Example:

Pretax eligibility: 6 months

Discretionary profit sharing eligibility: 1 year

Safe harbor nonelective: can this be 6 months or does it have to coincide with profit sharing?

I am aware that safe harbor matching must coincide with pretax eligibility.

Thank you

The existing 415© regs indicate that the deadline for treating a contribution to a plan as an annual addition for a limitation year generally is no later than 30 days following the end of the period in Section 404(a)(6) (which if I understand correctly is basically the tax return deadline relating to such limitation year, including any extensions, for the contributing employer). How does this work for a multiemployer plan? In other words, must the plan know what deadline applies to each employer, or does it use its 5500 filing date as the deadline?