The gist: I'm unemployed and have been for several months. Savings quickly evaporated and I've been forced to liquidate large portions of my 401K to cover bills (including a big fat mortgage) ....and it's doing very serious damage to my retirement "nest egg." (oh yeah, being single doesn't help, ie no wife to help cover the bills). I am selling my house, but short of another job finally coming along, do I have any options to help "save" my 401K? eg I take it I can't do an equity loan given that I'm unemployed........

Anyone??

Looking over an existing plan right now and have discovered the following:

Plan uses whole life contracts on the 4 participants in the Plan.

Appears that whoever set the plan up was relying on the 50% rule under 74-307 to determine the face amount of insurance purchased, rather than a definite multiple of the projected benefit. Plan document is not specific as to amount of insurance to be purchased.

Fact pattern is the one HCE has a policy of around 130x projected benefit; one NHCE two years older has policy of around 15x projected benefit; two younger NHCEs have face values of around 25-30x projected benefit.

Appears from my reading that although 74-307 is "satisfied", that there are issues with Benefits, Rights, and Features due to the disparity in face purchased. Any comments?

Recently handled a takeover PSP which was on a prototype document. Plan was initially effective Jan. 1, 1989. Amended and restated on a pre-approved volume submitter document with a few language changes. Submitted the plan to the IRS for a determination letter. IRS agent recently requested all plan documents and amendments from 1-1-1989 to present. Was able to find a favorable determination letter that Plan received back in 1991. Prior prototype sponsor also forwarded to me the 2001 prototype doc. approved by the IRS and employer adopted the doc. before the end of the 2001 plan year.

I should not have a problem with persuading the agent to start the review from the most recent FDL, i.e., 1991, however, does anybody know when the proptotype sponsors had to amend their prototype documents for the 401(a)(17) and 401(a)(31) changes? I cannot imagine that the prototype sponsor (a law firm) did not make those amendments in a timely manner, however, if so, they failed to send me those pursuant to my information request. Thanks for any help that can be provided......

An employee elected max 5K for 2006 for dependent care FSA

he is having 1000/mo dedcuted from pay for 1dt 5 months of year

Is this ok or must it be "uniform" over 24 pay periods?

thanks

I have an active participant (age 59 1/2) who wants to take money out of a Safe Harbor 401K. The plan contains 3 different contributions: 1) Safe Harbor 3%, 2) Employee Deferrals, 3) A P/S discretionary from before the plan was a 401K. The only type of in-service withdrawal that the plan document discusses is the "Hardship". There is no mention of an in-service at age 59 1/2.

Am I correct that even though the participant is 59 1/2, she cannot remove her Deferral balance because it is not in the plan document? Also, the plan has a loan provision so would that not have to be used before any "Hardship Withdrawal" could possibly take place?

Any opinions would be greatly appreciated.

Scott

A participant took a loan out of the plan for $50,000 on 2-24-05 but decided he didn't need the loan and returned the check on 3-11-05. The ptp tried to take a loan out in 1-06 but was told he had to wait until

3-12-06 to take a loan out due to the ability to only take 1 loan out in a 12-month period. Even though he returned the check, does he still have to wait a year? Please advise asap. Thanks

I know that Relius calculates how many will be counted in the top 20% for the following year, but does the system actually tell you who gets to be excluded in the ADP test as a HCE? In other words by hand, I know who is included and who is not so is it up to me to code them as an NHCE so they won't show up as a HCE?

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