In a plan that uses the safe harbor hardship reasons, is it permissible for an employee to take a hardship for the purpose of buying land on which to build a home in the future?

Plan has both grandfathered and non-grandfathered amounts. Could I "terminate" the grandfathered portion pursuant to the transition rule and pay only that portion out by the end of 12/31/05 and pay only that portion out? If no, what about bifurcating the plan into 2 plans - grandfathered and non-grandfathered amounts and terminating the "grandfathered" plan. Does that work?

Can a participant of a 401(k) age take an in service distribution and roll it to an IRA and not have the mandatory 20% withholding?

Sponsor's business is poor so a number of employees were "laid off" effective Dec. 1, 2005, meaning that the company intends to call the workers back to work when (and if) business picks up. No compensation is paid while on layoff and the workers qualify for govt. unemployment benefits.

Three of those laid off on Dec. 1, 2005 had met the eligibility req (yr of service) and were on track to reach their entry date into the 401k plan on Dec. 15, 2005. The plan only considers comp received while a participant. The laid off workers will not be called back to work prior to the end of the 12/31/2005 plan year.

Questions:

1. Do these 3 workers enter the plan on their Dec. 15, 2005 entry date despite their layoff status?

2. If so, how are they treated with respect to the current year ADP testing in view of the fact that they will have zero deferrals and zero participant compensation for the 2005 plan year.

Thanks in advance.

Can a participant make a distribution election for deferrals subsequent to 2005 that revises a distribution made previously (for example2004 or 2005) ? Would making an election that changes a previous deferral election take away all grandfathered protections?

Hi everyone...I'm working on a census report and I want it to show the "reason not eligible" element for the ineligbles. I can't seem to find a database field that will work. Does anybody know the table/field that I can use to get this info to print? TIA for any suggestions.

I haven't run into this before and after researching I am abit confused. For a new 401k-PSP, one could adopt a plan today and make it effective 1-1-05. For a new safe harbor, the language I am seeing says "first plan year must be at least three months". I presuming the plan year begins on the effective date, so one could start a new 401k (s/h non-elect) today for 2005 with the effective date 1-1-05?

Company Z is owned 35% by Employee A, 15% by his nonemployee son, and 50% by Employee B, who is not otherwise related to Employee A. Company Z is terminating an underfunded DB Plan, and the Company would like to eliminate the underfunding by cutting back A's accrued benefit. The question is "can this be done, given his ownership percentage." The nonemployee son is an adult, and Employee A has the right to buy Employee B's stock pursuant to their shareholders agreement upon Employee B's death, disability or retirement.

A control group (parent/sub) currently operates as a QSLOB and has separate 401(k) plans and different matching formulae for the two plans (one for P and one for S). The group soon will reorganize and lose their QSLOB status. However, for various reasons, there is a need to continue the two different matching formulae. What discrimination testing and other issues should we expect. The two plans will be merged into one, but there will be one match for all employees except for those employees employed by the subsidiary, which will have a more lucrative match.

It appears the major issues are 401(a)(4) and 401(m)/ACP testing. In terms of the amount of the match, it appears you just test the total or aggregate match as one. In theory, it seems like as long as the subsidiary with the more lucrative match has a better participation rate by its NHCEs than the parent, this actually could help the parent's ACP testing, or it at least won't harm it. The sub also has a greater concentration of NHCEs than the parent.

It also appears that the other issue is the benefits, rights and features testing in 1.401(a)(4)-4. The more lucrative matching formula will have to satisfy 410(b) in order to pass the "currently available" requirement, and then, based on all the relevant facts and circumstances, it will have to be shown that the group of employees to whom the more lucrative benefit formula is given does not result in the HCEs being substantially favored. Again, since there is greater percentage of NHCEs in the sub, and those NHCEs in the sub historically have deferred more than the NHCEs of the parent, it seems like this is not going to be discriminatory.

Is there anything else that needs to be analyzed?

We're setting up a new PSP for a company that manages an affiliated hedge fund. There will be 5 participants in plan - 4 HCEs and 1 NHCE. Is there a problem with plan assets being invested in the fund they manage? If not, are there limits on the percentage of total assets that can be invested? Does trustee direction of assets vs. participant direction make any difference? Thanks in advance for any input!

9/30 corp y/e, 12/31 plan y/e. In preparing the 9/30/05 corp return, you use compensation for the fiscal year end. For the Plan, you use compensation for the plan year. So, would you deduct the 12/31/05 ER contribution on the 9/30/05 tax return? If yes, do you extend the tax return due date each year? Or, due you end up pre-funding the ER contribution?

I just saw a December 8, 2005 draft from IRS of a new Notice.

There will be no requirement to make 409A disclosures on W-2 and 1099 forms for 2005.

Are you familiar with the following scenario:

Three foreign partners ( non-resident aliens) wish to set up a defined benefit plan in a US-based LLC.

There is only one employee in the LLC, who actually manages the business. This person will be part of the db plan ( of course).

Questions:

1. Is it possible to set up a defined benefit plan for such a structure?

2. Would not this type of relationship between the LLC and its employee be considered as a de facto ownership?

Any comments, ideas, further questions will be appreciated.

Regards, Yelena

Is it possible for a new company to adopt a DB with a beginning of year valuation?

For example, suppose an S-corp is formed 1/1/2006. No compensation exists for the prior year, but suppose we wait until 12/31/06 and use 2006 compensation. I know an end of year could be done the first year and then switch to beg of year, but could you start with beg of year?

If it is possible to use first year salary for a new company and beg of year DB, could the plan year be different from the company year? For example, suppose an s-corp is formed 10/1/2005 with a 12/31/05 year end. Could the employer adopt a db with a plan year 10/1/05-9/30/06? My understanding is if a beg of year valuation is done, the deduction could be taken on the 12/31/05 return. In this case the only participant will be the 100% owner and he will absoultely have more than $210K in salary every year. the contribution would have to be funded by 9/15/2006.

Thanks much.

I'm brand new to the compliance side of plans, so please bear with me.

I am looking to get Relius to generate the SH Match numbers based on the 04 census information I have. It's all been imported into Relius and I have changed the Matching Provisions to reflect SH Match %'s. The Contribution Analysis report I generate for 2004 is still showing a 50% match. I would assume there has to be a way of getting the SH Match numbers for the entire plan, I just don't know how to do it.

Thanks!!

Can a 50% member in a LLC (there are no other employees) create and fund a SEP based on net earnings from self-employment (from LLC) without regard to other 50% member? Or must the SEP be created at the partnership level requiring both members to be included?

Plan Year 2004

calendar year

t/h 401k no match

besides the fact that it's already too late - client in big trouble with various agencies - just a general question really

need small qnec to pass

but also need th min 3%

allocation for nche = QNEC (i.e. 1% of pay) + 2% top heavy

can pass (a)4 with QNEC but can't pass without

can we fix it by giving a full 3% top heavy minimum plus qnec? then plan passes

I know this seems like a stupid question but I've been sitting here so long I can't think straight anymore

thanks for your help

A company has a welfare benefit plan with over 100 participant that they have filed a 5500 in the past. During an in house audit, found they did not include the reporting of their dental reimbursement benefit in the filing. This benefit does not have a written document but is mentioned in the employee handbook and is available to all participants. The information on the 5500 is for the welfare benefit plan that does have a plan document. The Question is should the 5500 just be amended to include to include this benefit and would there be a penalty involved or since this benefit is not mentioned in the welfare benefit plan document would this be a separate plan all together and a separate filing altogether need done. I have very little experience with welfare benefit so please forgive me if this is an elementary question.

If an employee cancels his deferral elections by the end of 2005 under the 409A transition relief, how much should be distributed to him? Is it strictly the amount he deferred, or is it adjusted for earnings? For example, if an employee elected to defer $10,000 during 2005 into a new account-based plan, and his account, because of earnings, is now at $11,000, if he elects to cancel his deferrals, does he receive a distribution of $10,000 or $11,000? What if his account has decreased to $9,000?

Background: We adopted a plan document during 2004 with a January 1, 2004 effective date. (The plan was a volume submitter with a 1000 hr and last day requirement). The plan sponsor decided to utilize Safe Harbor 3% beginning in 2005. To simplify things, the plan sponsor choose to adopt full and immediate vesting with the new document for 2004.

Issue: We had two employees that terminated in 2003 that were paid out in the beginning of 2004 that were paid out based on the old vesting schedule (both were not fully vested based on 2-6 yr) in affect prior to the adoption of this new document with F & I vesting. Do you think that the forfeitures for these former participants should be paid to the participants because they would be considered fully vested under the terms of the plan document? Or are we okay in keeping their payout the way it was?

Thoughts? Concerns? Need more info?