Picked up a new client. Client hasn't filed 5500s or PBGC Forms since 2001. I know that client can go under the DOL Deliquent program for the 5500s. Does the PBGC have something similiar? What would be the fines be for not paying PBGC premiums and not filing with the PBGC?

An employer would like to change their plan's Health FSA limit from $3,000 to $5,000 mid-plan year. May they make this mid-year amendment? Can they allow participants to make a mid-year election change based on this amendment? Or is the new limit ($5,000) only available to those who have a qualifying mid-year change in status event or those who become newly eligible after the effective date of the amendment?

ok. I should know this, but.......can you use different eligibility provisions for different groups of employees? I'm thinking of one Y of S and 5 year graded vesting for one group and 2 years/100% vesting for another group. First group is predominately NCE - passes 410/401(a)(4). Second group all NCEs.

A client has immediate eligibility for the employee salary deferral portion of their 401(k) profit sharing plan, but a 1-year service requirement for the employer cross tested profit sharing. The plan is top heavy.

Would a "participant" hired October 1, 2005 that salary defers beginning October 15, 2005 get a 2005 top heavy minimum of 3%, or the 5.2% gateway cross tested contribution, or no employer contribution at all?

Would an "employee" hired August 1, 2004 that never salary deferred get a 2005 top heavy allocation or would that employee need to wait until 2006 for their first top heavy allocation? In this instance I presume they'll need to wait until 2006, but thought I'd double-check to be sure.

I have a plan with a new comp allocation in which there are 3 designated groups. Group A is all of the HCEs, Group B is all of the other full time emplyees (NHCEs) and Group C is the other NHCEs. The allocation rate are as follows: Group A 1.47%, Group B 1.97% and group C is .5%. I say that this passes the gateway minimum, but another administrator says it doesn't but gives no reason. What do you think?

Participant exceeded 402(g) by aggregating deferrals in 2 unrelated employer plans. Deferrals in each did not exceed the 402(g) limit. Must earnings be paid out? How would it be calculated?

We have administered a 10 participant DB since 1996. The plan is covered by PBGC.

The business was sold in 2001, so all employees terminated at that time. The owner retained the corp for another year before terminating the plan in 2002. After 2002 he had no more income so it made no sense to have the plan.

The owner became very uncooperative after he signed the termination amendment. He has been cooperative in keeping the plan compliant (GUST, EGTRRA good faith etc.) and all filings are current. Since 2002 we have not received adequate plan asset information. In addition, we conducted a search for former employees and only turned up one.

It is clear he does not want to pay benefits even though he has the vast majority of them.

We did not file the termination with IRS or PBGC because we need more information. The worst is that we somehow lost the termination amendment and he did not keep a copy.

I dont believe SCP or VCP would allow a retroactive amendment to terminate the plan.

We think the value of plan assets has increased since 2002 so I dont think there will be any funding issues, but we probably would have to go back and file schedule B's for 2003 and 2004.

Any thoughts on this?

Thanks much.

Here are some issues related to choices a plan sponsor might need to make when adding Roth to a 401(k) plan:

1 - If roll-ins from other plan's Roth Account are to be allowed, is it permitted to accept them if the participant inherited it from a deceased spouse? From a non-spouse?

2 - Same question as #1 except that spouse didn't die, just became an ex-spouse: can participant roll-in to a Roth Account the amount received pursuant to a QDRO?

3 - Participant terminates employment and receives a distribution from the Roth Account from a 401(k) plan, can his next employer accept it from him into its 401(k) plan's Roth Account? or only if it is directly transferred from the former employer's plan?

Sorry if this has already been covered elsewhere.

Back in 1997 I converted an IRA to a Roth IRA. I paid taxes on it at the time of the rollover. A few months ago, I needed to take the majority of money from my Roth IRA due to a house purchase. I did this under the assumption that I'd already paid tax, therefore wouldn't owe again. But when I did this I was advised to have tax withheld, which I did just to be on the safe side. Is this right? I shouldn't have to pay tax on it again, should I?

Like many other larger 401(k) plans, we have recently converted the company stock fund within our plan to an ESOP to make the dividend payments deductible. And as part of that process we have to give the participants the option of receiving their dividends in cash instead of being automatically reinvested in their accounts.

We have just completed the first quarterly process under these rules and 75 of the checks were for less than $1. My question is whether we can apply a deminimus limit on those cash distributions without jeopardizing the deductibility of the dividends.

When finalized, the proposed regulations will formalize the long standing position of the General Counsel. A non-profit organization which controls 80% of the board members of another non-profit will be deemed the "parent" of a "subsidiary" for purposes of Section 414.

Prior to that finalization date, I believe that the IRS does not have the legal basis to establish that a controlled group exists in such a situation. Is anyone aware of a successful enforcement action (or even an attempted enforcement action) to establish a controlled group between related non-profits ?

I've been reading about IRA's for awhile now and have decided that the Roth IRA is the way to go for me.

The one thing I can't seem to find any advice on is WHERE to buy one. Is there much difference between just going through my regular bank/credit union (simply for the convenience) vs somewhere else?

What do you look for when deciding where to setup the account?

Company A, a C-corporation, sponsors a DBPP. Company A has two employees, both of whom are HCEs. Employees of Sole Proprietorship (the "SP") also participate in DBPP. SP is controlled by one of the HCEs employed by Company A. Everything is fine so far.

Assume DBPP funding is $250,000. Can the entire amount be paid by Company A and be deducted by Company A? I'm guessing the answer is yes because Company A and SP are part of the same controlled group. It just looks bad, on tax returns, that Company A is taking deductions for employees who don't get a W-2 from Company A.

Your thoughts? Thanks in advance. Ed

A company had a 401(k) plan for several years back in the 90's. Business got bad, they terminated the plan in 2002 and paid out in 2003. There were only 5 employees, 3 of which were HCEs/Key's and the plan was top heavy.

Business is better now, and the employer wants to start a new 401(k). Same three HCEs/Key's but with about 8 NHCEs now. Would the distributions to those 3 keys still count toward top heavy in a new plan? It's possible that the new plan would not be top heavy starting fresh in 2006, if we do not have to count anything from the prior plan.

I never really thought that this scenario was any problem, but now I have had someone tell me they don't think the premiums are deductible.

We took over DB plan with 2 partners (owners) and about a dozen employees. Both of the owners have a $250,000 life insurance policy. I have had some confusion on this policy because some years they pay a premium and other years they do not. I have been informed that it is a Universal Life policy and the Trust only pays a premium if the policy requires a premium that year so that it does not lapse.

The Plan does not have any death benefits as an incidental benefit. These policies are basically there because the partners felt that if one of them died the business profitibility would be negatively affected and be burdened with the DB plan. So the death benefit is being used to offset future costs. The way that I understand it, if a partner died the plan would receive $250,000 in cash to help offset future pension costs.

So my quesiton is very similar to Dougsbpc which is still on the front page here. Except in his situation I think the plan is providing the $500,000 as an incidental benefit to the participant. In my scenario the trust is the only beneficiary of any death benefit payment. We have been considering the insurance policy like any other asset. In the years they make a premium payment the cash value is higher then when they do not make a premium payment. There is never very much value in the policy from year to year anyway, never more than a couple thousand dollars. It seems like they pay a premium of about $2,000 and then over the next couple years the policy uses up that $2,000 and the Trust then pays another $2,000.

Now since the insurance is not being used to fund an incidental benefit, I have had a colleague question deducting the premium at all. We haven't given any consideration for the fact that there is an insurance policy in the plan at all. So saying that a portion of the annual contribution is not deductible because every couple years a small portion of the contribution is used to pay an insurance premium isn't making sense to me. Any thoughts?

C corp pays bonus after PYE for calendar year plan. Document allows deferral of bonus. Sponsor is trying to treat deferral in March 2006 as 2005 deferral amount. Need a reg cite to convince his accountant he cannot do this. If bonus is paid and reported as W2 in 2006 associated deferral has to be 2006 and count against 2006 402(g).

I have a grandfathered gov. 401K plan that is developing correction procedures for correcting incorrect deferral amounts when the correction would cross tax years. For example, in November an employee changed their monthly deferral from $1100 to $1499 in an effort to max out their 2005 deferral limit and we implemented the change for $1149 until notified by the employee in February. Thus, they did not max out their 2005 deferral due to our error.

Our procedure has been to correct the error going forward and increase future payrolls by the shortage amount, as directed by the employee. However, this correction procedure would not make the employee, in the example, whole (becuase they were not able to max their 2005 deferrals and will not be able in 2006 to "make-up" 2005 deferrals - unless 414(v) applies).

Although the EPCRS correction procedures do not address administrative errors, we want to model our administrative correction procedure on those under EPCRS. However, given that the employee is a cash-basis taxpayer and the error is corrected in the following tax year, I think this would preculde us from correcting the tax reporting to show the employee maxed out their deferral amount. Under EPCRS 6.02 or other available guidance, is there any permissible way to make a full correction for this type of administrative error?

Any thoughts would be greatly appreciated.

We are now offering a new benefit to our employees (dental insurance)and since it is mid-year, can the employees increase or decrease their unreimbursed medical spending accounts because of it? Is a new benefit a qualifying event to change their elected amounts?

If a participant leaves company A and begins to work for company B (both of which are in the same controlled group), can their account balance be transferred from A's plan to B's plan? Or is there not a distributable event because the participant hasn't left the employ of the controlled group? Does it matter if the change was initated by the company or the participant?

Gut reaction: you would be allowed to make the transfer; it would certainly make things like loan processing easier.

Thoughts?

Basic facts are as follows.....

Participant (P) was married for about 15 years and divorced his first wife (W) in 1995. The divorce decree awarded W a one-half interest in P's defined benefit plan and ordered a QDRO be drafted. No QDRO was ever forthcoming.

In August, 2005, P made application for an ancillary disability benefit with the plan. The administrator noted that a divorce decree had been filed and contacted both P and W concerning the need for a QDRO. Pursuant to the procedures an administrative hold was placed on the portion of the benefit payments that appear to belong to W.

P is now remarried to W2.

Questions...

1. Can W submit an order that provides for a separate interest? P is in pay status, but only due to disability. The J&S notice is not submitted to a disabled pensioner until he converts to a normal retirement at age 62. Is she limited only to a stream of payment order? (This does not make much sense...if he recovers tomorrow, all benefits would stop...then W would be left in a lurch).

2. Should the plan ignore the fact that P is in pay status and request a separate interest order that is payable upon P's attainment of early retirement age? The intent of the benefit is to assist a disabled pensioner, not to provide a subsidized windfall to the non-disabled ex-spouse. W would still get her portion of the benefits accrued through the date of divorce.

3. Should the plan ask for some sort of hybrid order that gives W a right to a proportionate share of the disability benefits, and a separate interest in the normal accrued retirement benefits?

Am I completely off base...?? As indicated in the caption, this situation has me thoroughly confused.