Question for the group:

I have a ROTH account at ETrade that contains stock for company XYZ, bought at $50 a share. The stock goes up to $100 a share. Can I sell the stock without incurring a penalty? I'm guessing that I will have to pay the capital gains tax yet, correct?

Thanks in advance.

flynn

Client (will be 70.5 in December) and brother (younger) own a company and want to open a Profit Sharing plan - incomes drawn from Company high enough for each to contribute $44,000.....client realizes he'll need to take an RMD by next April, etc. Question - if he chooses, can he continue to make contributions to a PS plan for as long as the Company is in business and he's still alive? Thanks.

A COBRA qualified beneficiary has COBRA coverage which expires in September 2007. The individual was recently sentenced to 4 years in prison - does this coverage still need to be provided?

Any assistance in appreciated.

Qualfied plan allows self-directed brokerage accounts. Participant opens a SDB and has annual contributions deposited over several years. Plan is not in name of plan but in name of participant. Now participant is terminated and wants to rollover account, but investment company won't rollover the funds since the account is not titled in the name of the plan.

May the trustee correct this by having the SDB account retitled in the name of the plan?

Are there more serious consequences?

By the way, I have no idea how this happened. Not a client, but one of my partners posed the question.

A client with just 2 employees, both owners, has a corporate tax year equal to the calendar year and they set up a defined benefit plan as follows:

1. The effective date of the plan is November 1, 2005

2. The plan document was signed before 12/31/2005

3. That plan document contains a formula of 0.50% x avg pay x participation

4. The only other plan they have is a deferral-only 401(k)

A design is done and it is determined that the formula that suits the client best, based on their goals, is 4.00% x avg pay x participation ($380,000 contribution).

The client wants to deduct this entire $380,000 contribution on their 2005 tax return.

By what date must this amendment to the formula be signed in order to deduct the entire $380,000 on their 2005 tax return?

There are only two participants in paired MP and PS plan. The Plan Sponsor has been short on its MP (10%) PSP (15% discretionary but traditionally always awarded since 2000) since 2000. The Plan Sponsor now wants to make all its contributions as well as return the lost earnings to the master trust. Can we just correct without submitting this as a qualification failure? Thanks in advance!

I have already maxed out my health FSA elected reimbursement account. I have a baby and want to increase the elected amount under my health FSA as a result of the status change. I've sumbitted the election change form within 30 days after birth. I want the increased amount effective as of the date of birth, so that expenses incurred on and after the birth (and before the date that I actually submit the status change election form) to be covered. Do FSA administrators allow this, since it seems (from a policy perspective) so similar to a retroactive pre-tax contribution change under the special enrollment reg (1.125-4(b))?

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