May a S Corp owner (more than 2%) contribute to a FSA?

Client is the sole shareholder (and sole employee) of an S corporation. S corporation is going to set up a Cafeteria Plan and a profit sharing plan. Client's accountant suggested that the entity covert from S to C status before doing so to gain tax advantages. From the side of Section 125, I can see the advantage since a more than 2% shareholder of an S corporation would not be permitted to participate in a Cafeteria Plan. But from the side of a profit sharing plan, what advantages would there be to convert from S to C status?

Can a career average pay pension plan be amended to retroactively apply the $200,000 compensation limit to determination periods beginning before 1/1/2002?

For example, if a final average pay plan is amended for retroactive application of the compensation limit, the accrued benefit starting with the plan year beginning in 2002 will use a final average pay that is calculated using the 200,000 limit for determination periods beginning in 2002 and prior.

Does the same thing happen with a career average pay plan? If the participant earned $180,000 in the determination period beginning 1999, is the amount of benefit earned in that year calculated using the full $180,000, or is it still limited by the old $160,000 limit?

I guess I'm confused because of the following wording in the definition of compensation in the plan document for this client:

"In determining benefit accruals in Plan Years beginning after December 31, 2001, the $200,000 annual compensation limit described in the preceding sentence shall apply for determination periods beginning before January 1, 2002."

It seems to me that in a career average pay plan that the benefit accruals in plan years beginning after December 31, 2001 do not take into account the benefit accruals for prior years and thus there would be no effect of retroactively applying the $200,000 comp limit.

I'm so confused....any help would be greatly appreciated.

Facts:

large TH self-funded H&W arangement with over 200 participating employers

an employer with more than a POP 125 plan - full FSA

COBRA elections and notices?

Okay - obviously the H&W and FSA are seperate trusts, would the FSA be required to offer COBRA or more specifically where can I find the regs on how to qualify for the HIPAA exemption.

I'm new to H&W and FSA's - so by default also COBRA - any good links to reference sites for research would be much appreciated (not saying that BenefitsLink is not a good source).

Thanks.

My firm does the audit of a large 401(k) plan that is sponsored by a company that has several entities. We find several mistakes in the third party admin every year. The TPA has suggested to the plan sponsor that they should establish a plan for each entity seperately in order to avoid the large plan audit.

Can this be done?

Our initial thoughts are that 1)he wants to avoid anyone overseeing his work 2) he has found a way to switch the income paid to us for the audit to go into his pocket (how expensive it would be to set up plan docs, and annual admin for 5+ plans!)

Please give me any thoughts and suggestions. Thanks.

If a plan's EGTRRA amendment is silent as to whether or not the plan matches catchup contributions, should this be interpreted as they are matching catchup contributions?

a couple of foibles we discovered, without any fixes forthcoming from relius

You have to click on compute comp in match and safe harbor allocations to get those compensation fields to populate, even though you already have an eligibility transaction run.

When batch printing, we are getting 2 copies (hope they fix this)

otherwise havent had many problems

Hi,

I'm looking into starting up a Roth account and am 27. My question is, when you retire and start withdrawling from the Roth does it still earn an annual return? OR, when you start withdrawling, does interest stop?

-Matt

I wonder if anyone has knowledge or understanding of how court orders and QDRO's funtion. My divorce decree stated that my retirement plan was marital property but that any premarital portion was to be offset and the rest divided equally. The problem was that the other attorney filed paperwork to have the QDRO divided equally, without following the wording in the final decree.

Does anyone know what recourse I have to receive the premarital portion. Is there any relevant or existing case law that addresses this. Thanks

I was reading a webpage where the author of the page stated that businesses with partners can no longer use a form 5500EZ... Actually didnt state it that direct, but in essence that was the point conveyed. Is there a change for 2006 with regards to the form 5500EZ? The 2005 directions state that an EZ can be used with partners.

Thanks!

The regulations in effect as of January 1, 2006 state that, to remain except form ACP testing, all matching contributions must be allocated on a nondiscriminatory basis. Placing an allocation restriction, such as a last day rule or a 1,000 hours-of-service requirement, on any matching contribution provided by the plan is discriminatory unless all non-highly compensated participants satisfy the restrictions.

The plan I am looking at has the 3% nonelective safe harbor provision with an additonal discretionary match which has no allocation conditions for active employees but requires terminated employee to work 501 hours to receive the match.

Someone in our office is agruing this regualtion would not apply to this plan.

Your thoughts would be appreciated.

At what time(s) can the Negative Election - Automatic Enrollment be introduced to a 401(k) plan? I have a client that is a service company with participants scattered throughout the country on jobsites. We're trying to overcome consistently failing ADP tests.

It is common in the construction industry for employers to take Davis Bacon fringe benefit credit for dollars contributed to a welfare benefit plan (funded through a 501©(9) trust) for periods that the employee is not eligible to participate in the plan. For example, the plan requires completion of 300 hours before eligibilty kicks in, and the employer takes DB credit for the dollars contributed to the trust during that 300-hour period of ineligibilty (including where the employee never becomes eligible to participate because he terminates before eligibility). This contradicts the holding in DOL Opinion Letter No. 1253 (WH-201), February 28, 1973 (old law but I have found nothing later to contradict it). I recently had a DOL agent bring this opinion letter to my attention during an audit, but it does not seem to be followed or applied with any uniformity. Has anyone had any experience with this rule or are you aware of any subsequent guidance that holds to the contrary? Or, was I lucky enough to just get an especially well-read DOL agent?

I have a new client that has been audited for a plan year in which we did not provide service. But apparently, the client experienced some financial difficulties and suspended their discretionary match contributions beginning Jan. 01, 2003. Mid year, their finances improved and they decided to resume the match contributions as of July 1, 2003. Since the match was discretionary, they thought this was okay. However, the prototype document states that the match contributions are based on the "Plan Year" deferrals. So the IRS is saying the plan is disqualified.

Any solutions to this or creative suggestions we might use to disagree with the IRS's conclusion? any other suggestions?

Does an Indian Nation have any kind of Form 5500 filing exemption for a welfare benefit plan? Group has over 100 insured in medical, dental and group term life insurance as of the beginning of the plan year, and has for many years. They file for a 401(k) plan, but have never filed for their welfare benefits. I can't see any exemptions, only for governmental and church plans (and plans covering less than 100 participants). Help?!

Is there a logical reason the income limits are set so low ($0-$10,000) for phaseout of the ability to make a contribution to a Roth IRA for married taxpayers filing separately? Where is the potential for abuse?

A self employed doctor owns a C-corp. that sells software. The doctor practices as a self-employed physician, but also takes some compensation from the software business.

The doctor maintains a db plan that covers his income from self employment and his income from the c-corp. All employees of both entities are covered. There are 4 other employees, all working for the C-corp. The C-corp. by itself is not a professional services employer.

Do you think they are exempt from PBGC coverage because the physician owns the C-corp? What if most of the income came from the physician practice?

"A professional service employer is any entity owned or controlled by professional individuals where both the entity and the professionals controlling it are engaged in the performance of the same professional service" Since the C-corp doesn't perform the same service, I think I'm sunk, but I wondered if anyone else had another opinion.

This is kind of a picky, technical question about an example in the comparability regulations.

Under the comparability regulations, one can test a DC plan with a gradual age schedule using a minimum allocation rate on a benefits basis if the schedule satisfies one of two conditions. The second condition is Treas. Reg. 1.401(a)(4)-8(b)(1)(iv)(D)(2). There could be an employee in each age band with an allocation rate greater than the minimum allocation rate who has an equivalent accrual rate that is less than or equal to the equivalent accrual rate that would apply to an employee whose age is the highest age in the band receiving the minimum allocation rate. (I'm paraphrasing a bit.)

This provision is illustrated by an example in Treas. Reg. 1.401(a)(4)-8(b)(1)(viii)(Example 4)(vi). It states that the steepness condition is not satisfied because the equivalent accrual rate for an age 39 employee (the oldest employee receiving the minimum allocation) is 2.81% but that the lowest equivalent accrual rate for the oldest employee in the next band is 3.74%. Since 3.74% is not <= 2.81%, the steepness condition fails.

I think I understand the provision and the example, but I can't figure out how the IRS came up with exactly those figures (to make sure I completely understand the example). Has anyone figured out the standard interest rate and standard mortality table used to compute the 2.81% and 3.74% equivalent accrual rates in this example? I already checked The ERISA Outline Book and it didn't address this detail.

A company that we provide TPA services to for their safe harbor 401(k) plan has been purchased by another company, which has a SIMPLE. Some people have deferred (I am assuming into their respective plans) for the current year. The question I am being asked is can the SIMPLE be dropped and the SH 401(k) plan be adopted for everyone? What about new hires? These issues were apparently not addressed by the merger/acquisition lawyer that they used. My boss (who asked me to post this) knows that they can merge on 1/1/07, but she is concerned about this year.

The TPA firm that I used to work for was originally bought out in January, 2003, and we were required to stop contributing to our SH 401(k) as of the date of aquisition. We were then allowed to enter the purchaing company's 401(k) plan on the next quarterly entry date (which was 4/1/03). I would think that the answer to my boss' question above would be similar to the experience I had in 2003, but since I have never worked with SIMPLEs, I wanted to get some opinions. Any thoughts? Thanks for your help.

Does anyone know how much a Relius Administration license costs per user (defined contribution)?

Also, I'm wondering if other firms experience limitations on access to Relius, as employees. For example, we have a schedule, where we can only be on the system (without "squatting") at 3 intervals of 80 minutes. I'm trying to talk my boss into more licenses, so I'm curious to see if we're behind others or equivalent to others (I hope we're not ahead!).