This is more of a grievance. I have plans in which the HCEs would be able to contribute more to a Traditional IRA than they can to the 401k plan. I think the rules need to change such that an HCE should at least be able to contribute the IRA maximum limit to their 401k without concern that a portion of it is going to be refunded. Thus, lets assume the IRA limit is 4k for 2005. I have an HCE who contributed 5k and the test results indicate a refund of 3k - all EE. I say, let the HCE keep at least 4k in the plan and refund only the 1k (5k - 4k). Does anyone see a problem with that?

I'm an international student at a US business school and plan on working in the states for a while after graduation. Am I eligible to open an IRA (either Roth or Traditional)? Depending on how long I work in the states and what my rate of return is on my investments, paying the 10% penalty may be worth it to enjoy tax-free compounding. Thoughts?

If an employer decides mid year that they want to offer an employer contribution to their Health FSA plan, how can they do this at this point. If employees were eligible during open enrollment (calander year basis), and elected, lets say $1500.00, can the employer add $500 to each participant at this point and make their new annual election $2000.00? What about the employees that were eligible during open enrollment and declined enrollment at that point, shouldn't they be able to receive the ER Contribution? Does this have to be prospective? Is this a qualifying event to enroll?

I am running a cross-tested 401(k) calculation for 2005. One HCE owner, 3 NHCEs. Top heavy plan, SH Matching with 500 hours/last day rule. If 2 of the NHCEs termed in early 2005 with less than 500 hours, although they deferred a small amount and will receive a match they should not be getting a profit sharing contribution from the employer. I am having difficulty with coverage testing. Any suggestions on how to pass testing?

What (if any) testing issues can a plan run into if it uses the 415 definition of compensation but excludes bonuses, overtime and commissions?

I am 25 and finally a little late deciding to start investing. I have done alot of reading and will be investing this year in a traditional IRA. My question is if I invest 4,000 for myself and 4,000 for my wife in a traditional IRA I will get an additional $2,000 back on my refund, 25% of 8,000.

So my question is can I mark that I am putting money into an IRA, and then wait for my refund to come in, then contribute to an IRA before April 15th. If so how does the IRS get confirmation that I actually contributed and does it matter if I file my taxes before putting money into an IRA as long as the money gets put in by April 15h?

Thanks in advance for any advice.

I seem to recollect the general vesting requirements in the event of a standard plan termination as follows:

(1) All participants required to be deemed vested if the sponsor receives or expects to receive a reversion.

(2) Vesting not required otherwise (except that the normal vesting rules would still apply, of course).

Question: Is this accurate? Or, must all participants be vested no matter the other facts of the case? (i.e., standard with reversion and standard without)

Corporation A purchases Corporation B, now a wholly owned subsidiary of A. Both A and B sponsor defined contribution profit sharing plans. Corp A disolves Corp B. Ideally, we would like to merge the plans. Are there any considerations that would make freezing plan B the better option? We are not aware of any plan B problems that would taint A, but there's always that possibility.

I spend alot of time looking at 5500's on Freeerisa.com. Can anyone give me any tips as to what to look for on these plans. I am new to marketing 401K and other qualified plans and would appreciate any insight to looking at the filed 5500's. For instance, someone told me to look at the code on the 5500 and make sure that they had a 2A and a 2F. They really didn't tell me why.

I see alot of plans that distributed all assets during a year, but didn't check the termination box. What's up with that.

On schedule I, what is the other income usually comprised of. Is it rollovers or what?

I thank you in advance for any help and insights.

Mike

A client with a Defined Benefit Plan wants to amend their plan to exclude an employee by name effective prospectively. This employee had entered the plan in 2001. The Plan started in 2000 and has always been top-heavy (and will continue to be top heavy). If the employee is excluded, we believe that the plan will still pass the 410 ratio percentage test for coverage, and they will pass 401(a)(26) for participation.

Can you think of any plan qualification problems that might occur doing an amendment like this?

Will this employee no longer be eligible to accrue any future top heavy minimum benefits?

Can his future compensation be excluded when considering his average pay for top heavy purposes?

Since the plan passes ratio percent, is it ok to exclude him by name, or does that not even matter?

Should the plan provide a 204(h) notice to this employee?

My client is currently having the plan participants pay all the Admin fees through an additional "wrap" or asset-based fee calculated by the insurance provider.

Is there any benefit to the plan sponsor if the vendor bills the recordkeeping fees directly to the company (and eliminates the "wrap" charge that participants are paying)? They are an S Corp.

Are these recordkeeping fees deductible?

I've got a controlled group (technically a group under common control, since at least one of the entities is a partnership) where the same four individuals each own 25% of each entity H, G, and S. H and G each have their own plans, which are mirrors of each other (deferrals only), while poor S has no plan at all.

Luckily, S is a staffing company that provides per diem employees to H and G, and both H's and G's documents specifically exclude per diem employees, so the vast majority of S's employees are not eligible by class, and since most work less than 1,000 hours, they would never meet the statutory guildelines and therefore don't impact the coverage testing. I know there are issues with long-term employees from S possibly being considered employees of H/G after a year, but that's a question for another thread (though it may be coming soon!).

From reading Tom Poje's responses in this thread:

http://benefitslink.com/boards/index.php?showtopic=29893&hl=

it sounds like I have to make the same aggregate/disaggregate election for both coverage (410(b)) and 401(k) testing, but am free to select either option. Have I got it right? Are there any circumstances that would force my hand one way or the other (besides, of course, that doing it one way fails and the other passes!)?

This is my first time dealing with something of this complexity, so if I'm overlooking anything else, please feel free to let me know.

ee from date of initial participation could have worked 42 years NRD = 1/1/30

they worked 5 years, quit 1 year then returned and worked another 12 years. (thus when they returned they could only work 36 more years to retirement)

[entered plan 1/1/88, quit Dec 92, returned Oct 93, calendar year plan]

what is the fractional accrual?

rev ruling 81-11 seems to say you would calculate as follows:

first accrual period + second accrual period

5 / 42 + (1 - 5/42)(12 / 36) = .4127

so this person comes out ahead of someone who never quit and worked 17 straight years?

e.g. 17 / 42 = .4048.

the second method under this rev ruling looks like you would have

17 / 41 = .4146

If a plan qualifies for transition relief from coverage under IRC 410(b)(6)©, can they test otherwise excludable employees for nondiscrimination purposes? In other words, if the plan does not formally run coverage testing on the otherwise excludable employees due to transition relief, can they disaggregate their adp/acp tests for those who meet the statutory minimum requirements and those who do not?

Employer owns two subsidiaries and would like to set up a safe-harbor 401(k) plan to cover them. Because the subs have very different workforces, Employer is considering setting up the employer contribution differently for each. Specifically, it would like to use the "mandatory 3%" safe harbor for one of the subs and the "100% of the first 3% plus 50% of the next 2%" safe harbor for the other.

Employer's question is, can it use both safe harbors in the same plan? If not, can it have two valid safe harbor plans within its controlled group, but use different safe harbors for different subs?

Thanks for any insight.

LJ

Any thoughts on the valuation of annuity contracts that have a higher death benefit than current account value and how that will affect RMD calculations? This seems just asinine to me. We now have to base current income recognition on possible future benefits?

I know this is a response to the Roth conversion schemes, but the Service seems (to me) to have gone beyond all common sense with this one. You could conceivably have a situation where the RMD is greater than the account value (e.g. $1000 account value with a $100,000 death benefit). If the actual funds available are less than the RMD, would you get penalized (in addition, to losing the potential death benefit if you had to surrender the contract!).

I started a Roth IRA about 8 years ago and only contributed to it for a little while, then stopped. As far as I know, I still have the IRA somewhere but I have no idea how to find it. I'd like to start contributing to it again but need to find a way to track it down. Does anyone have an idea of how to do this? I've moved cities and locations a few times since then so they have no way to mail me anything. I need to find it and give them my new address, start contributing again, etc.

Thanks!

I have been approached by a county-owned hospital to look at the investment platforms for their 457(b) and 401(a) matching plans. It has been brought to my attention that the contracts for the physicians employed by the hospital specifically preclude them from receiving contributions to the 401(a) plan. There is no such provision in the plan document that excludes them from receiving these matching 401(a) contributions. The hospital's attorney (who admits no knowledge of retirement plan matters) claims the contracts takes priority over the plan documents. My understanding is that the plan document overrides any other agreements.

Can anybody shed some light on which is correct, and possibly provide a citation that explains the answer? Thank you.

OK, I've been waiting for someone else to ask this question and no one has. Either the answer is obvious or no one is paying attention. The question is when is it necessary to amend an individually designed (non-safe harbor) 401(k) plan to comply with the final 401(k) regulations. Some of the changes in the final 401(k) regulations are EGTRRA changes, and thus, (at least I think) do not have to be made until the end of the applicable EGTRRA remedial amendment period. What about the other changes (i.e., safe-harbor hardship distribution, ability to no longer do bottom-up QNECs, definitiion of successor plan following plan termination, treatment of a participant with 401(k) deferrals as fully vested for 411 purposes, etc). Assuming that a plan did not elect to follow the regulations in 2005, is is necessary to adopt an interim amendment by the end of the current (non-EGTRRA) RAP????? by some other time?????

Also, for those of you with M/P plans. Are you providing your adopters with interim amendments while the IRS reviews your restated plan???

Thanks.

I have DB plan that I believe is a "Church Plan" for both US-based and overseas-based missionaries. I believe that all participants are US citizens. The mission pays their wages, but only withholds taxes for the US-based missionaries.

I can't tell yet whether the plan is an "electing" or "non-electing" church plan w/re participation/vesting/funding, etc. I believe that they are acting as if they are "electing" but I don't know whether or not they have "elected" :-)

Ok, so the question here is whether distributions under this plan are subject to the 20% mandatory withholding rules, the elective withholding rules (10% unless elected otherwise), or neither set of rules.

The mission also has a 403(b) plan where the vendor is applying the mandatory (20%) rules, fwiw.

In the current Pension Answer Book, there is a sentence in question 35:33 (dealing with TSAs for church employees) that says

"In the case of foreign missionaries, amounts contributed to a plan by the employer are treated as investment in the contract or basis since the amounts, if paid directly to the employee, would have been excludable from gross income."

I think the issue hinges on the distributions being considered "eligible rollover distributions", and the answer may be Yes for the US-based folks and No for the overseas-based folks. If yes, then the 20% rules apply, if No, then the elective w/h rules apply.

Anyone?