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?

In April 2005 my wife and I each contributed $3000 to our Roth IRAs at Scottrade. We thought we had contributed for the 2005 tax year, so didn't think about it until February 2006. Now we see that it got applied to the 2004 tax year (most likely due to our filling out the form wrong), and it turns out we weren't eligible in to fully contribute in 2004, due to finally getting some back pay due us.

I called the IRS help line, and they said that since we haven't contributed to 2005, Scottrade could change the year of designation on it. The guy at the IRS said "This is completely legal, and we are totally fine with it." A guy at USAA (with whom I also have an account) said that they do that sort of correction all the time, and it just requires submitting a 5498 with the "corrected" box checked.

Scottrade, however, keeps saying that it's an excess contribution, which apparently requires filling out a 5329, and paying all sorts of penalties, though I keep getting different stories on even that part of it. It's especially frustrating because the guy at the local office isn't able to actually fix the problem, and nobody will let me talk to anyone except those at the local office.

The sense I am getting is that Scottrade does not have to make the change, but that they could if they were willing to.

If I end up having to do this the painful and expensive way, I'm very confused about what penalties I have to pay and what hoops I have to jump through.

I have an 80 y/o participant that retired 12/31/2005 from his employer that was sponsoring a 401(k) profit sharing plan. He was not an owner and therefore was not taking RMDs. He wants to roll his money into an IRA. In mid-Feb 2006 we processed a 12/31/2005 RMD for him, well in advance of the April 1, 2006 date for his first RMD. Do we need to process another RMD for him prior to the rollover?

I was handed a small MP plan that started in 1997. Document was properly established and the accountant has been doing annual 5% contibution requirement, correctly I hope (will be checking that, as well as distribution, vesting, etc.). But, 5500's were never filed. I want to file all of these now, using the small plan filer program - $1,500 for 2+ old filings. But, how to remedy the fact that they never had a fidelity bond to meet the small plan audit waiver from 2002 - 2005? Do they simply have to now have these audits done en masse with the filing? Any way around this since the filings and audits are now way late?

I'm drawing a blank but I'm thinking I read somewhere that compensation for allocation purposes cannot be limited by the plan document. For example, allocations will not be made on compensation over $50,000. Is this correct? If so, what is the cite. Thank you.

I have a client who has his first RMD coming up 4/1/06. The plan is scheduled to terminate in July 2006.

Under the DB plan, he has the option of starting a monthly annuity for the RMD or taking an annual annuity each 4/1.

If he decides that a monthly annuity is the best choice for him, and the plan terminates in July, he has only taken 4 monthly installments from the DB. At this point, if he rolls his remaining lump sum into an IRA, how is his rest of his RMD calculated?

Thanks!

Dennis

I have a client who has his first RMD coming up 4/1/06. The plan is scheduled to terminate in July 2006.

Under the DB plan, he has the option of starting a monthly annuity for the RMD or taking an annual annuity each 4/1.

If he decides that a monthly annuity is the best choice for him, and the plan terminates in July, he has only taken 4 monthly installments from the DB. At this point, if he rolls his remaining lump sum into an IRA, how is his rest of his RMD calculated?

Thanks!

Dennis

My question is two fold. First, is there a cut off for AGI of $100,000 for conversion of a traditional IRA to a Roth IRA? And, can I do an ammended return for say 2004 and add income from my trad. IRA in order to convert to Roth IRA?

Small 401k plan is terminating and its plan sponsor company is dissolving. One participant died recently and the participant's account was used to purchase annuity contracts from an insurance company for the participant's 2 children. The beneficiary designated by participant is a named custodian/trustee and the beneficiary designation specifies that the benefits be used by the custodian/trustee 50/50 for his two kids. The purchase of the annuities is consistent with the plan terms and the beneficiaries wishes, HOWEVER--the insurance company would only issue them to the PLAN and the insurance company does'nt want to transfer them to the custodian for the benefit of the children.

How do we handle the annuities if the plan is terminating and the sponsor dissolving?? Can or Why can't an insurance company allow transfer from the plan to the trustee/custodian?

Going crazy...short trip, I know...please help!

I have been researching RMD's for non-spouse's and almost everything I read is about IRA's. Do the same rules apply to 401(k) Plans?

There was a participant in our plan who was receiving his RMD. He passed away at the end of 2005. He was never married. He has several beneficiaries listed (nephews, neices, great nephews, neices). I know that they cannot rollover his account, however can they continue to receive his RMD?

If so, is it based on the oldest beneficiary (for the life expectancy factor)? Does the 5 year rule apply?

This also made me wonder about another question...how would it work if the beneficiary was a Trust?

Any help you can give me would be greatly appreciated.

HI,

We falied the TOP Heavy Test and we are required to pay the 3% non-elective contribution to the non-key employees.

Does the Company have to make the contribution? Are there other options?

Also, we failed the ADP/ACP test and the HCE were refunded the contribution. After the refunds, this would make the Top Heavy Test pass. Can the TOP heavy test be recalculated after the refunds?

How is TOP Heavy Test calculated before ACP refunds and after ACP refunds?

Sorry for so many questions. I am new to this and our TPA is not much of help.

Thanks in advance!

We failed ADP/ACP testing the the HCE's received their refunds. What is the next procesdure in terms of amending w-2's and amending DE6, 940, 941, and DE7?

Thanks in Advance!

Am I correct that an ERISA 403b is subject to ACP testing?