We give our employees American Express gift cards for achievement awards and for other purposes. It is my understanding that this is taxable income to the employee. For all plan purposes, we use W-2 as our plan's definition of compensation excluding safe harbor fringe benefits.

I assume that in the payroll period in which we tax the amount of the gift card that I would also take out elective deferrals from the gift card amount. For example for the pay period salary is $1,000 and the gift card is $50, I would take deferrals from $1,050.

If I don't want to deal with this, I am thinking about excluding cash awards from the plan's definition of compensation. I assume that I'll need to do a Compensation test under 414(s)(3) to do this.

Please let me know your thoughts.

Does anyone know of any associations/political action committees of small employers who contribute to multiemployer plans? I would be particularly interested in any such associations of employers who contribute to the Central States Southeast and Southwest Areas Pension Fund. I have a client -- small employer -- who is totally exasperated with its participation in this Fund and would like to explore ideas with similarly situated employers. Thanks for any help.

I have a governmental client that would like to offer an increased monthly retirement benefit (flat dollar amount) under its defined benefit plan to any retiree who elects (while retired and in pay status) to receive a lesser prescription drug benefit under its retiree health plan. Because the pension plan is a governmental plan, I do not see any pension nondiscrimination issues. However, this looks like a cafeteria plan election to me (choice between cash, albeit paid under a pension plan, and a nontaxable health benefit). Should the employer's cafeteria plan (in addition to its pension plan) be amended to provide this election? I do not believe this proposal violates Code section 125(d)(2)(A) (cafeteria plan cannot provide for deferred compensation), because there would be no election to defer compensation--retiree can simply elect to receive additional compensation if he/she is willing to accept a lesser prescription drug benefit (higher co-pays). Can anyone think of a reason why this will not work? Does the fact that the cash payment will be made under the pension plan (rather than directly by the employer) cause a problem?

Does anyone know if Box 13 on Form W-2 should be checked by an employer that contributes to a multiemployer plan on behalf of the employee. This is the box that informs the IRS that the participant is limited on the IRA contributions that can be made.

Our company will buy the assets of an entity which will close on Thursday. The asset purchase agreement (APA) says that we (Buyer) have to follow the applicable collective bargaining agreements (CBA) and allow the new union employees into our DB plan with vesting, service and benefit accrual as provided in the old employer's pension plan - but with an offset for the benefits provided under the prior employer's plan. The CBA specifically references the prior employers DB plan and the APA references the DB plan as well and says we must mirror it (although we are not assuming any liability for the prior employer's plan).

So we essentially have to calculate the benefits of these new union employees pursuant to the terms of the old employer's plan and then subtract out the benefits the employees would receive under the old employer's as of the date of closing - and our plan is responsible for the difference.

Can we simply amend our plan to reference the prior employer's DB plan (by date, etc.) as in effect on the date of close and then state that we will calculate the same way with an offset for benefits provided under the prior employers plan.

Or do we have to draft a separate schedule for these employees that attaches to our plan?

I ask because it seems that it would be Ok to reference the prior plan (easy to determine and no mistakes would be made in trying to convert the entire plan into a schedule just applicable to these employees). However, when we submit for a determination letter - we would have to provide a copy of the prior employer's plan - right?

Does anyone know if Box 13 should be checked by the employer on Form w-2 for employees that participate in a multiemployer plan? This is the box that is checked so that the IRS knows that IRA contributions are limited.

Does anyone know of any authority other than Tres. Reg 1-410(b)-1© that discusses the determination of whether retirement benefits were the subject of good faith bargaining for the sake of excluding employees under a CBA?

2005 Calendar year plan using current year testing methodology.

Company A & B are owned 100% by the same person and are all covered under one 401(k) plan.

On 9/30 Company A is sold (equity interest) 100% but continues to sponsor the current plan. Company B is spunoff into its own plan as of 10/1.

Question: Can we test Companies A & B as separate plans, due to the coverage change or do we have to included Company B's employees up through 9/30?

Calendar year plan. Company A & B are 100% owned by 1 person. On 9/30 Company A is sold (stock) off but continues sponsorship of the existing plan. Company B employees and their account balances are spunoff (still owned 100% by same person) to another plan.

Question: As there appear to be no separation from service for either Company A or Company B employees, how would adp/acp testing look like for 2005?

I had a client ask me this...

Voluntary Long Term Disability, Life Insurance & Accident plans that employees pay through pay roll deduction. Statement from insurance company identifying the contract and broker commissions paid.

Since this is voluntary and employee paid, what if any reporting obligations do they have?

Is there an understandable source out there that can lead me through the questions that I need to ask the client to determine if they should file? I have so little contact with health plans that I haven't a clue.

Thanks for any help that can be provided.

An employer plans to hire a sales person. The employer is planning to offer this person a substantial sum of money to be paid over 10 years AFTER the employee terminates service in exchange for the book of business he or she builds up over the years.

Is that a nonqualified deferred compensation arrangement -- or a non-compete agreement?

or would I need to consolidate the loan used for the first residence into the loan to purchase the new residence?

I have a governmental client that would like to offer an increased monthly retirement benefit (flat dollar amount) under its defined benefit plan to any retiree who elects (while retired and in pay status) to receive a lesser prescription drug benefit under its retiree health plan. Because the pension plan is a governmental plan, I do not see any pension nondiscrimination issues. However, this looks like a cafeteria plan election to me (choice between cash, albeit paid under a pension plan, and a nontaxable health benefit). Should the employer's cafeteria plan (in addition to its pension plan) be amended to provide this election? I do not believe this proposal violates Code section 125(d)(2)(A) (cafeteria plan cannot provide for deferred compensation), because there would be no election to defer compensation--retiree can simply elect to receive additional compensation if he/she is willing to accept a lesser prescription drug benefit (higher co-pays). Can anyone think of a reason why this will not work? Does the fact that the cash payment will be made under the pension plan (rather than directly by the employer) cause a problem?

An urgent request for help from the estate/trust/pension professionals out there:

Is the named beneficiary of a testamentary trust, established for a deceased participant's pension assets, permitted to step into the shoes of the participant and remain in the plan, or is the trust itself the beneficiary.

Very small employer wants to look into setting up a 401k for 2005, here in the last week of December!!! There's only about 5 employees (3 of which are HCEs) and the objective is for the owner to take a big bonus and defer some/most/all out of it. Lots of mechanical problems obviously, but lets assume that the plan can be adopted as soon as today, and that investments are chosen and ready to go. If only the HCE chooses to defer, then this won't work (failed ADP test). Could a massive QNEC to NHCEs only solve this problem? Alternatively, let's assume 1 or both of the NHCEs agree to have some of their bonuses deferred and there is room for the HCE(s) to contribute. Would this be acceptable? Would 401(k) comp. have to be limited to earnings paid on or after 12/19/2005? This is pushing the envelope but is their anything inherently wrong here?

Thanks

I am a little confused. I've read that 403(b) plans are subject to the automatic rollover of mandatory distribution rules. If the participant already owns the contract what would there be to rollover? Thanks for the help.

I asked a similar question as this before, but I want to be clear.

Situation:

A plan defines a year of service as 1,000 hours & a break in service as less then 501 hours. The plan has a 9 month eligibility, no hours requirement, and semi-annual entry. The plan does not require the participant to work a consecutive 9 months of service. A participant is hired on 2/15/05, terminates 5 days later on 2/20/05, and is rehired on 12/20/05. Does the employee enter the plan on 1/1/06 if he/she is still employed?

For the fiscal year 2004 I contributed $3000 to my roth IRA. When filing with my husband (we just got married), he informed me that I was no longer eligible to contribute to my Roth IRA and had to convert to a regular IRA. He filed our taxes as if I was contributing $3000 to the regular IRA. I was reading that the deadline to recharacterize was April 15, 2005 unless I had an extension, which would have made the date October 15, 2005. Of course, all these dates have passed, so a representative at my investment firm told me that I had to do a return of excess contributions and pull this money out of my Roth IRA, pay excise taxes of 6% and then file a form 5329. Is this the correct procedure, if yes, should I still see a tax specialist or just do this. I know there is a special calculation to figure out how much to pull out of the funds.

Thanks in advance for any adivce

Self-Insured Health Plan with Participant Contributions Through Cafeteria Plan -

We understand that Tech Release 92-1 and preamble to plan asset regulations won't exempt participant contributions from self-employed (sole proprietors) from trust requirement because they are not under a cafeteria plan.

What do people do? Wouldn't a trust for just these contributions ruin using 92-1 for the cafeteria plan contributions?

We know that if a Hurricane Katrina victim wants to take a Hardship withdrawal that they do not have to pay the 10% penalty. (IR-2005-96 under 7508A of the IRC) Pretty much all of our plans have language in place to accommodate that. The question is, If a participant terminates, do they still have to pay the 10% penalty or does it go back to the above regulation????