Is it common for the financial group managing the 457 plan to get a commission from the front load of each mutual fund purchased by the particpants in the plan?

I max out my plan at $14,000 a year and the broker gets over $700 from me due to commissions.

Don't some financial companines wave the commissions and get paid by the company to manage the plan?

I would like to start out saying hi to everyone. This is my first time posting on this site and I wish that I had known this site a couple of years back but anyways, let me start where i stand now. I'm 22, self -employed and out of college with a student loan of 16k, car loan of 8k, and no credit card debt. I have little savings ($4,000) and would like to know is it best I pay off some of the debt before i can start an IRA? Since i'm self-employed; which would be better, SEP IRA or ROTH IRA? Thanks for all the advice..

Participant wants to apply for hardship distribution under PSP that uses the 401(k) safe harbors to establish heavy/financial need, i.e., medical expenses, tuition expenses, funeral, purchase of residence, prevent eviction (+) need that would apply to all participants in a similar situation. Participant says needs distribution to prevent having to file bankruptcy. First, assuming participant provides sufficient info. to back that up and assuming other participants similarly situated are later allowed to apply for hardship distribution on the same basis, then need may be OK. Second, the PSP allows for participant loans. Wouldn't the language in the Regs. allow for the participant to not have to first get a loan in the maximum amount available on the basis that doing so would put them in worse shape as to their need? Thanks.

Small 401(k) plan operates on a 7/1 - 6/30 plan year. if the plan is safe harbor (3%) for 04/05 plan year, can the owners (they are the only hce's) make 401k contributions of $13,000 in 2nd half of 2004, and then $14,000 in first half of 05? Then, skip the safe harbor for the 05/06 plan year, in which the owners make $0 401(k) contributions. For 06/07, back to safe harbor, with the owners again doing double 401k? Do you see any problems in doing this?

Thanks

A participant over age 70 1/2, in pay status at the time of his death and has multiple beneficiaries.

In order to calculate the minimum distribution based on each beneficiary's share of the participant's account, do you have to set up a separate asset account for each beneficiary or a separate account just within the plan's report on paper in order to calculate the minimum based on each beneficiary's age?

How do you calculate gain on excess annual additions? Is it only for the plan year for which the excess amount was contributed, or does gap gain also apply?

I am an employment law practitioner with a benefits question . . . . If a HCE retires while still highly compensated, does his or her highly compensated status follow him or her into retirement. In other words, if a retired former HCE receives discriminatory benefits, does that render the plan discriminatory? Are the excess benefits then taxable to the retiree-former HCE?

A client sponsors a qualified retirement plan. The plan has been sued by a former employee over a benefit issue (the former employee is a plan participant)--all administrative remedies have been exhausted. We are the plan's TPA. The client wants all of the defense costs to be paid from plan assets (the defense costs are mounting and will soon equal 10% of the plan's total assets).

My first question is whether a defense cost is the type of expense that can be paid from plan assets (the issue does not concern whether the plan is qualified--the issue concerns whether the participant is entitled to benefit A or benefit B)?

If defense costs may be paid from plan assets, my second question is whether there are any limitations on such payment--e.g., may the defense costs be paid from plan assets only so long as they are reasonable (whatever that might mean)? Thanks so much for your help.

I have heard of new comparability plans and even super comparability plans, but were there ever any "old comparability" plans and, if so, what were they like? Thanks.

Participant terminated service May 03, and still in Anaheim, CA area. We're pretty certain he's married, but wife is presumed to have gone back to Mexico. He came in about 6 months ago with his girlfriend pretending to be the wife, but was outed by one of the office staff who actually knew the wife.

No Divorce, No QDRO, etc. I am not comfortable paying him even 50% since we have no capacity to act as a family law judge. We're thinking about terminating the plan in the next several years, so folding into forfeitures won't really solve anything.

The distribution is $55,000 and 100% vested in a non-leveraged ESOP using a standard Corbel document.

What's a practical solution?

For 2006, a plan wishes to use the safe-harbor match formula, but with two exceptions:

1. 3 Key employees (all HCE's) get no match

2. All other HCE's get the safe-harbor match formula, but subject to vesting.

The plan is not top-heavy.

Does this exempt the plan from 401k/m testing?

A plan uses an expense load for funding a plan.

This expense load would not be included in the calculation of the present value of the accrued benefits.

However, does it / does it not, get included the calculation of current liability and PBGC premium liability.

It is an actuarial assumption, so my feeling is that it is included in current liability but PBGC premiums appear to be a different animal (just basically an unfunded accrued liability number - so I would No on it).

Other opinions are greatly appreciated (my thanks go out in advance)

May a partner deduct both the employee and employer contributions (if the exceptions are met) as an above the line deduction on Form 1040?

We have a plan that has "permanently laid off an employee". They will not say the person is terminated and I'm assuming the person did not quit. Can this be considered a separation of service to allow the participant to take a distribution from the plan?

the article seemed to imply that one could work for one's own business, because " . . .

My question is, can one set up a sole proprietorship consulting/investment management business this way?

i.e LLC is owned by my IRA and has two lines of business:

1) consulting on managing energy risk [oil, Nat gas futures & swaps, Physical electricity]

2) running a hedge fund, initially seeded at $3 million of my own funds, (funds NOT derived from my IRAs) with an eye towards establishing a track record to attract more hedge fund investors . . . [i.e. I would provide seed money in exactly the same fashion that a hedge fund incubator would]

While I know can't set my own salary, can I establish my salary according to a "rule", i.e. substantially all the billings/revenues go to me as an employee [and are thus taxable as my income], up to a cap of say, $500k, the rest are distributed to the LLC shareholders [which happens to be my IRA]?

While I would have thought that my providing services to the LLC [its my hours that the LLC is billing the client for] might have been a seeprate kind of prohibited transaction [seperate from the conflict of setting my own salary], the Forbes article would seem to indicate that as long as I'm not the CEO, and someone else is making the decisions, it is not a problem.

relevant quote from Forbes "IRA Adventures" [Oct/4/2004] below:

"Investing in your own (or a close relative's) venture can get tricky. While the law doesn't ban investments in a private company, it does prohibit certain self-dealing transactions between an IRA and a "disqualified person" (the IRAowner, his parents, his child or even a descendant's spouse). Penalties for self-dealing are onerous--for example, all the money in a traditional IRA becomes taxable as of the start of the year of the violation. In the case of a Roth, all the earnings become taxable.

The basic rule is this: An IRA can only be invested directly in a business if the owner of the IRAand his direct relatives own less than 50% of that business. But there's a de facto exception for new ventures. At the point you are about to start a business, you don't yet own any of it. So you can use IRA funds, in unlimited amounts, for the startup financing. This sounds like hairsplitting. But Ft. Worth, Tex. estate lawyer Noel Ice--who is no fan of this gimmick--says it works, based on the 1996 Swanson Tax Court case.

The self-dealing rules create additional complications if you're planning to work for your business, since you can't set your own pay. Patrick Rice, a real estate broker who runs www.iraresource.com, recently helped two couples use their IRA money to buy businesses--one a bed-and-breakfast, the other a convenience store. The couples each set up a limited liability company, owned 90% by the IRA, to acquire the property. An unrelated outsider bought the other 10% of the LLC and became its manager. That person then hired the couple to run the business and set their compensation--a key to making this kosher."

It is my understanding that you can freeze a 401(k) and start a Simple. If we freeze as of 12/31/05, can the SIMPLE be started 1/1/06? What about notice requirements?

What if the 401(k) is terminated effective 12/31/05, but assets aren't distributed until 2006. Can we have a SIMPLE for 2006 in that case?

Thanks.

Employer sponsors a safe harbor 401(k) plan, and is currently making the 3% SHNEC.

Is there any problem with:

1. Increasing the SHNEC to 10%, or

2. Making an additional 7% NEC?

If he makes the additional 7%, can there be allocation restrictions (1000/last day) on the additional, and would it need to be 100% vested? There is no match in the plan.

Maybe I'm not looking in the right place, but I can't seem to find anything about this. It seems like you only run into problems if you are making a safe harbor match and want to make an additional NEC. In this case, you would no longer be exempt from top heavy I think?

Thanks for the help.

I have a client with 3 plans. Plan 1 is a DB plan and covers most employees. Plan 2 is a PSP that covers many HCEs and other staff employees. No one benefits from both Plan 1 and Plan 2. Plan 3 is a 401(k) salary deferral only plan and covers all employees. The plans are top Heavy.

Employee A is a participant in Plan 1 (the DB Plan). He no longer completes 1,000 hours of service. Plan 1 would provide the minimum top Heavy benefit accrual, except however, Employee A doesn't accrue this benefit because he has less than 1,000 hours of service.

Employee A is a participant in Plan 3 (the 401(k) plan).

What Top Heavy minimum benefit does Employee A receive and from which plan. He doesn't satisfy the requirements for the DB minimum benefit, but does satisfy the requirements for the DC minimum contribution.

Any thoughts - please help.

Is there any problem with an employer making the safe harbor match on catch-up contributions?

I have a client in great need of a wrap document. I've received conflicting answers from Corbel in regards to their cafeteria document - one associate said it met the wrap requirements,another did not.

For those who are familiar with the Corbel documents - what is your opinion - do you use the cafeteria document as a wrap document?

Thanks in advance for your replies.