1. If a plan is designed so that forfeitures pay for plan expenses, can a plan use that forfeiture account to pay surrender charges to move the plan to another carrier? (I am thinking no, it just feels wrong)

2. If a plan is set up as safe harbor nonelective, in any given year, could the plan be amended to give the SH contribution to Non-Key employees only? The client is worried about potentially having a "bad year" financially, and is looking for relief in that situation.

As usual, thanks for your input.

We have taken over a frozen DB plan that only allows lump sum payments to individuals that have meet the early retirement requirements (55 and 10 yrs service). The client has asked if they can remove the lump sum option my answer was NO it is a protected benefit. However they have indicated that another party has told them that they can amend the plan to remove the lump sum option for anyone who has not meet the early retirement provisions as of the the date of the amendment.

Comments PLEASE

I have a client who has maintained a straight discretionary profit sharing plan for many years. He has maximized his contribution to the limits allowed.

He is a dentist (sole proprietor) and has had approximately 2 full time employees. The others are part time with extremely limited hours, and they have not participated in the profit sharing plan. In 2006, 3 new full time employees are coming into the practice.

What he would like to do is this.

Create a safe harbor 401(k) plan and make a 3%-4% NEC for himself and the other eligible employees.

Using $220,000 as the 2006 compensation (he is not age 50), he could defer $6,600(NEC) + $15,000(EC) for a total of $21,600 for himself.

His wife has a company that does real estate management. The dental practice is NOT located in any of the properties that she manages. She is the only employee of the real estate management company.

Could she have a 401(k) plan for herself and defer $15,000 as well. Or could she have a straight profit sharing plan and defer up to 25% of her income?

All of the income her company makes is from rental income on properties she and her husband (the dentist) own.

I am not sure if you can use rental proprety income as allowable compensation, and I am concerned about common ownership issues and how that would relate to the dental practices plan.

Any advice would be appreciated.

Thank you,

Michael

before people disappear I certainly wish all a good time. yeh, thats me all right.

with only one soul to cook for, looks like it will be cornish hen and stuffing.

of course, Target makes things easy by selling the complete thanksgiving dinner in 5 bottles of soda pop.

Turkey and gravy, wild herb stuffing, brussel sprout, cranberry, and pumpkin pie.

the review can be found at:

http://www.x-entertainment.com/articles/0943/

Big Company A is owned by Bill. Bill decides to sell Big Company A to Bigger Company B.

Since Bill doesn't want to sell widgets anymore, he forms LLC 1 on June 15. LLC 1 has no employees or assets until July 3rd when stock sale to Bigger Company B has closed. On July 2, LLC 1 has 5 employees, 3 highly paid and 2 administrative. All worked for Bill at Big Company A. LLC1 will be in a completely different and unrelated business than Big Company A or Bigger Company B. Bill owns 100% of LLC 1

Also, there is a small piece of Big Company A that Bigger Company B didn't want. On June 30 Bill forms LLC 2 and spins out the employees and assets of Big Company A that Bigger Company B didn't want. LLC 2 has 5 high paid people and 50 low paid people. Bill owns 100% of LLC 2

On July 3rd Bigger Company B purchases the stock of Big Company A (Note, stock sale).

So, Bill now owns LLC1 and LLC2. Up until July 3rd, Bill owned Big Company A. Also, note that on July 2nd, Bill ownes Big Company A, LLC1 and LLC2. LLC 1 had no assets or employees, but LLC2 and Big Company A did.

Question:

1) If Big Company A funded the 415 max in their DC plan before the sale, can LLC 1 start a new plan and fund the 415 max again?

2) If the highly paid individuals were HCEs in Big Company A, are they HCEs in LLC 1 and LLC 2 or are they treated as new employees?

The basic question is, are Big Company A, LLC1 and LLC2 part of a controlled group? I know LLC1 and LLC2 are, but do I need to consider the benefits provided by Big Company A in my analysis?

Any sites would be appreciated.

Hello All:

I am having a tough time determining one aspect of a Required Minimum Distribution.

Facts:

Participant in a 401(k) Plan had already begun his RMD payments. He takes part of his RMD for the current year and then passes away mid year without having taken all of his RMD amount for that calendar year.

Spouse is sole beneficiary so I am comfortable with her options in future years (2006 and beyond), but I am unclear on how the remaining RMD amount get distributed from the 401(k) Plan for 2005.

QUESTIONS:

Do they get issued in the deceased participant's name and SSN? In the name of his estate for 2005? or in the name and SSN of the spouse beneficiary?

Any insight will greatly appreciated.

Andmik

This is a very basic question, but I've managed to thoroughly confuse myself:

If an s-corp employer forms a leveraged ESOP, what portion of the employer contributions will be deductible? If some portion of the contributions are not deductible, are they still permissible if within the 415 limitations?

any help is appreciated!

Where can I locate a copy of the new 2006 Safe Harbor Notice? We sent out our notices earlier this month & now realize that there is a new notice so might have to re-send the notices. I would like to look at a notice to see what the differences are & if we have to make any major changes. Thanks!

If an employee completed an election to withhold 6% of pay into the 401(k) plan but the employer only withheld 3% of pay - is the employer obligated to make a QNEC of 3% to the employee plus allocate lost earnings on the 3%? I could not find this specific example in EPCRS - but I assume the intent of making the employee whole would govern. Is my thought correct.

An audited 401(k) plan terminated on 12-31-04. The new plan year starts 01-01-2005. The assets are paid out on 06-30-2005 so we are filing a final return. Would employees who were eligible for the 401(k) plan in 2004 but never contributed and never had a balance in the plan be considered participants as of 01-01-2005?

The 5500 instructions indicate:

"Active participants include any individuals who are currently in employment covered by a plan and who are earning or retaining credited service under the plan....."

Are those employees who were eligible prior to the termination of the plan still "covered by the plan" as of 01-01-2005? I'm trying to determine if the plan needs an audit in the final year - if these employees with no balance in the plan are still "covered by a plan" than the plan needs an audit - if they are no longer covered than the participant count drops down to 30 participants who were all paid on 06-30-2005 and the plan would not need an audit.

Is a 401(k) participant with no balance considered to have a "deemed distribution" as of the termination date?

Any thoughts would be appreciated.

1.414(s)-1c(3) provides a safe harbor alternative definition of compensation excluding certain fringe benefits and other special compensation items, including "welfare benefits." Is the term "welfare benefits" for such purposes defined anywhere? If not, is it generally interpreted to mean benefits provided under an employee welfare benefit plan?

More to the point, how should short term disability benefits be viewed in plans that exclude "welfare benefits" under the safe harbor alternative definition? I notice that several common reference charts comparing the various definitions of compensation note that short term disability payments will be excluded from compensation under this provision only if they constitute a "welfare benefit." However, I have found very little explaining when short term disability benefits constitute a "welfare benefit." I assume that short term disability benefits will be considered "welfare benefits" if they are provided under an insured short term disability plan or program such that they are considered to be provided under an ERISA employee welfare benefit plan. On the other hand, I assume short term disability benefits provided under a self-funded short term disability or sick pay program which is regarded as a payroll practice rather than ERISA welfare benefit plan might not be considered a "welfare benefit"? Does that sound correct?

Are 401(a)(9) amendments required by 12/31/2005? Thanks.

I have a CPA group which has 19 employees, and will have 19 employees when it renews January 1. The carrier will charge the 67-year-old employee enrolled in Medicare $286 instead of $576 if the group was over 20 employees. They will charge that amount until the next renewal. We know that the employee number will be over 20 before tax season is over and drop to 19 in May. Has anyone had any experience or know how Medicare would treat claims for this 67-year-old if the claims were incurred when there were more than 20 employees? Thank you.

Bill Lehnertz

Does anyone know where I can find detailed information on the states that have put in HSA's as an option to their employees?

I appreciate any help!

If you retain an hour rule or employment on the last day rule with a discretionary match in a safe-harbor 401(k) plan------do you have to test both the ADP & ACP percentages or just the ACP?

We have a prospective new client that feels that any distributions made to former employees who have moved to another state must have withholding taken out of their distributions for that state. Other than a new rule effective Jan. 1 in Nebraska for mandatory state withholding we don't want to have to comply with that suggestion and/or have to research into each state we may have a payee address for to determine whether or not we have to withhold income taxes for that state, set up a state tax id number, and comply with remittance instructions.

Does anyone have any suggestions or guidance on this issue? Thanks

Has anyone had an application accepted? I've heard lots of rumors about how hard is was/is to get them approved.

Just curious.

I was looking for feedback from others regarding the 2006 safe harbor notices. At the ASPPA conference, everyone was talking about the "new" notice requirements. We have been using a notice which I think is pretty comprehensive, but when I look over the "new" notice template, I see it contains much more information especially regarding "other" employer contributions to the plan, availability for withdrawal of those other contributions, vesting, etc. Is it really required to have all of that additional information in the SH notice? Our notices have always including information regarding eligibility and withdrawal restrictions as it pertains to the safe harbor contributions, but not on the other employer contributions that MAY be made. One of the IRS speakers at the conference said that notices by reference to the doc or SPD that didn't spell things out would probably not be acceptable. any input appreciated.

We deal with a few governmental money purchase plans whereby if an employee elects to voluntary contribute some additional money to the plan, it must be done on an after-tax basis.

Could a ROTH 401k be added to MPP?

Does anyone have a good participant statement vendor that they use and recommend?