Employer runs a SEP on a calendar year and funds the SEP in 2006 for the calendar year 2005 .For which year is a person considered an active participant for IRA deductibility purposes, 2005 or 2006?

Interesting question came across my desk from one of our advisors . . .

His client, a Non-Profit with only 2 employees (Exec Director & P/T Assistant), established a Non-ERISA 403(b) 2 years ago, nearly to the day. Only the Exec participates in this and is eligible for benefits.

Our advisor told the Non-Profit to gross up Exec's salary so that Exec could make the full deferral. Instead, the Non-Profit did not gross up the exec, and made all contributions employer contributions.

My questions is, what is the best way to fix, or is it even a problem?

Would restating the plan as something besides a Non-ERISA 403(b) (like 401(k) Profit Sharing) prevent damage to the Exec and/or Non-Profit?

Any advice on this would be great as this is a tough one.

Thanks,

James CFP

Is it permissible to set up groups based on age?

For example :

Group A : HCEs

Group B : NHCE < age 40

Group C: NHCE > age 40?

Can we do this for HCEs as well?

We have a plan which did not correct excess contributions within 12 months after the close of the plan year.

An acceptable correction method under EPCRS is to return deferrals to the affected HCEs and contribute a QNEC for the same amount to the NHCE group, this is known as the one-to-one correction method. Cite is EPCRS, Rev. Proc. 2003-44 Appendix B, Section 2.01(b) (page 53-54).

EPCRS further states:

The QNEC contribution is allocated to the account balances of those individuals who were either (I) the eligible employees for the year of the failure who were not highly compensated employees for that year or (II) the eligible employees for the year of the failure who were not highly compensated employees for that year and who also are not highly compensated employees for the year of correction.

Alternatively, the contribution is allocated to account balances of eligible employees described in (I) or (II) of the preceding sentence, except that the allocation is made only to the account balances of those employees who are employees on a date during the year of the correction that is no later than the date of correction.

Regardless of which option the employer selects, the contribution is allocated to each such employee either as the same percentage of the employee's compensation for the year of the failure or as the same dollar amount for each employee.

Does this mean the QNEC is given only to NHCE with account balances or to any NHCE who is eligible?

So far, we've learned that Charles Schwab includes the 401(k) or employer sponsored retirement plan investments against unauthorized transactions with limitations and conditions (of course) for protection of login ID and PIN# security by the participant/investor.

Wells Fargo does not cover brokerage and investment accounts in their "Online Security Policy."

We're asking Fidelity, and several others, but I thought this would be a timely and appropriate topic for discussion.

Have any of your clients asked for a guarantee against un-authroized transactions and distributions?

Thanks.

Plan processed a lump sum cash distribution (eligible for a rollover) but did not withhold 20% mandatory taxes. 1099-R reflects no taxes withheld. How should plan correct?

Doctor owns 50% of a C-corp and maxes out his PS contribution each year. This doctor also receives self-employment income unrelated to his medical practice.

Can he establish and fully fund a SEP based on his self-employment income?

Retiring under FERS from Federal Gov on 2 Jan 2007. Cashing out accumulated leave - about $10,000. Only other compensation for 2007 will be my pensions which are not eligible for IRA contributions. Would the accumulated leave cashout qualify for an IRA? I believe I get a W-2 showing the leave cashout as earned income?!? and taxes are taken out. IRS Pub 590 does not address this. If I took terminal leave starting 2 January, I know it would qualify. But then I wouldn't be drawing any pension while on terminal leave and my total net would be less for the year.

Several participants who work for company A have outstanding loans in the Company A's 401(k) plan, Plan A.

2 employees are leaving company A (amicable) to form their own company, Company B and a few of the other employees will be joining company B as well. Company B will be completely separate from Company A, no controlled group. Company plans to adopt a new 401(k) plan, Plan B immediately.

Some of the partiicpant in Plan A have plan loans. Can Plan B be written to allow for rollovers of loans from Plan A? Can Plan B allow such a transaction to occur? The desired result is that most of the Company B employees wish to rollover their Plan A account balances to Plan B. They'd also like to avoid taxation on the remaining loan balance they have in Plan A.

Thanks

Client (incorporated dentist) is winding down his practice and will likely shut down entirely and "unincorporate" in the next year or so. Currently sponsors a PS Plan and would like to maintain the ERISA protection of the plan assets for as long as possible.

Once the "sponsoring employer" ceases to exist, wouldn't the plan have to be terminated and assets distributed? If so, he'd do a rollover to an IRA, which has protection in the event of "bankruptcy" - but not the extent of protection against "creditor's claims" as his qualified plan - IF I understand the current state of such things(?).

Any other possibilities for continuing to maintain the plan - and/or continue ERISA asset protection?

Thanks to all who take the time to respond!

HIPAA permits plans to offer incentives such as smoker vs. non-smoker rates, paying a monetary incentive (through cash contributions to an FSA/HRA or lower cost-sharing) for participating in certain programs such as weight loss, tobacco cessation, disease management, etc., as long as they are done through a bona fide wellness program. However, we've heard that certain states prohibit some of these practices, but we're unable to locate anything. Does anyone know of a resource (online or printed) that could lead me to these types of state laws?

Employees are participating in the employer's Premium Only Plan. I understand that FICA should not be withheld from those salary deferrals, but what about FUTA?

I'm from MA and have worked in Plan admin for a good 5 years. A few years ago I left my career to help the family business. Now the business is sold and would like to go back into my old career. I am currently completing the CEBS cert and am moving to South Carolina.

Any suggestions on what employers are looking for and how can I explain leaving my career to help out my family.

Can anyone point me to a survey that would show types of benefits and designs (if possible) offered to part-time employees. I'm having a heck of a time finding that data.

Thanks for your help!!

Does anyone want to take a stab at whether or not a Med Time Planner or pill storage box is an FSA eligible expense? The box contains a compartment for each day of the week in which the patient is to place medicine / pill(s) for each day. Personally, I use my pants pockets to keep track, but thats just me.....

Does anyone know if the IRS is planning to release a model 402(f) notice updated for Roth(k) deferrals? I was just starting to draft one, and it's rather a bore. Would be a lot easier to wait if they are going to be doing one!

the initial and only plan document was never executed. what is the proper correction method. one of the trustees is now deceased.

A group health plan has 70 employees covered on the plan, but 130 covered units.

All information says that a 5500 needs to be filed if there are 100 "participants" or more on the plan.

The DOL (via a phone call) indicates that a "participant" is an employee. The insurance carrier indicates that a participant is a covered member, which makes sense from the insurers standpoint.

Does this group health plan need to file the 5500? Is a plan participant the employee only?

Thanks very much!

One man money purchase plan pays an in service distribution to a sixty year old participant in 2005. Plan does not allow for in service distributions. The amount paid was $600,000. No withholding no spousal consent. What should we do? I know that we can obtain spousal retroactively but what about the plan provision and the withholding?

Any help appreciated

What books/publications are out there that are recommended for a broad discussion of ESOPs? I'm thinking of ordering The ESOP Handbook by Steven Etkind. Thanks.