Hello,

About a year ago I was looking around on this site and came up with what I want to invest in for my Roth. I believe it was with the help of John G so thank you.

I opened a roth with fidelity FCNTX I believe it is called Contrafund, I put $3000 in it in February and it is at $3604 as of today. I think that is great progress. I have also a roth with franklin templeton which is divided up between 4 funds and the initial investment was $2000 and after 3 years that is worth $2756 which is great. I pay no fees for any of these.

My question is this, I will have $4000 after I get my tax check back this year again and it is perfect for me to invest in roth's because I get the total investment taken off my income for child support that I pay and this way I get to invest it and give it to kids when older. Works great. Anyway....

My question is this, should I put the 4k into the contrafund or do you have any other ideas? The money I put in will stay there for 20 more years so this is long haul. I am 38 and single.

Thank you in advance for your ideas!

The DRO states that "Alternate Payee may elect to receive from the Plan the amount in the separate account in Alternate Payee's name in any form avaialable to Participant under the Plan at any time after the separate account has been established for the Alternate Payee's share."

I read this to say that since the Participant is still employed, the alt payees options would be for whatever the plan options are for an in-service withdrawal, which in this case is none.

Do you agree? Why or Why not?

My client is very concerned regarding a terminated employee who has just recently left employment and she is aware of a pending divorce. The plan does not have J&S, therefore, no spousal consent required. The attorney's for the spouse have called inquiring about insurance benefits, but nothing regarding the plan. I told her until the actual QDRO is presented,(it in fact one will be presented) she cannot hold back payment of the benefits to the employee(he elected to roll to an IRA). She wants to know if QDRO's can be paid from IRA's. Can they be? This client is 100% by the book and does not want to do anything incorrectly that would at a later date come back to them. Thanks.

Linda Michals

Would some kind soul tell me if I am over-thinking, over-testing this:

A owns 51% of C and 49% of D

B owns 49% of C and 51% of D.

A and C participate in one multiple employer plan.... Plan 1

B and D participate in a separate multiple employer plan.

In Plan 1:

The compensations/contributions/accounts of A must be tracked separately from C.

A and C must test minimum participation separate from each other

Coverage and discrimination testing must be run for A, separately for C within the plan, and then separately for C and D.

Our pension plan has an early retirement provision at age 55, with benefit reduction of 50%. NRA is age 65. We had a former employee with a grievance and went to court in 1995. The attorney of the former employee produced an agreement where, among other things, requires the plan to pay the NRA benefit at age 55 (without reduction). This is just a brief over view of the situation and the question is "can a US Federal Court Order mandate a pension plan to make payment not available or different from that in the document?"

I was wondering if anyone has ever looked at the issue as to whether or not a Canadian citizen can serve as a trustee of a pension plan established and maintained in the United States? This is a pension plan covering husband and wife. I'm guessing that maybe a US financial institution might haver some rules on this subject, but I was unable to find any authority on this issue. Thanks in advance for your assistence. Ed

IBM has announced that it will freeze accruals to its DB plan beginning 2008. Last year IBM closed participation in the plan to new employees. IBM had added 6B in assets in the last 4 yrs to fully fund the plan and has an exposure of up to 1.4B arising from a judgment involving its cash balance plan. IBM's pension plan with 48B in assets is the third largest in the US after GM and GEs plans. The DB plan will be replaced with a 401k plan which will provided fixed contributions to participants in addition to matching contributions. IBMs stated reasons for freezing the plan is that the low rate of return on long term interest rates added 100M to the cost of the US plan in 2005 and increases in life expectency created unexpected future costs.

IBM's trasurer said "These plans were never designed to cover obligations that run as long as people are now living. Its important for companies to take actions to deal with this before these plans drag them into trouble. "

Here is something I thought was interesting. A plan that uses prior year testing fails to correct by the end of the following year. Normally you can't use QNECs to correct for a plan that uses prior year testing. The EPCRS says you can use QNECs to correct the failure to correct the ADP failure. Am I missing anything?

If a 401k plan that uses the 3% NEC safe harbor terminates during the first month or two of the plan year, is it OK to base the 3% contribution on compensation for that short period, or are there a minimum number of months of compensation that must be used?

In general, what form of benefit is offered to participants who are starting to receive MRD's? Does the Plan Administrator choose, or is the participant given a choice? Is spousal consent required no matter what the form of benefit? Previously a plan was automatically giving participants the joint & survivor form, if married, as MRD, but it has been decided to now give Single Life to new MRD's. Also, if a participant decides to take the MRD, must the participant make that election? Or rather is the election required to defer benefits and none necessary to receive?

After 22 years of doing ADP tests I stumbled on a new twist!

Another TPA firm is using Statutory Exclusions in the year in which a previously eligible employee terminates. That is, an employee has been in the plan for several years, but since they worked under 500 hours in the year in which they terminate they are treated as statutory excludibles.

The TPA refers to the statutory excludible regs.

Now I know you can do this BEFORE an employee is required to be in (21/1 etc), but AFTER satisfying the rules?

Willing to learn.

I'm having a contradiction with my manager regarding this issue, maybe you can help

Profit sharing plan, 1000 hours requirement to receive PS allocation. One participant became disabled during 2005 and had worked only 600hours. The plan adminsitrator really wants to give this guy a PS by waiving the 1000hours requirement just for the disabled employee. Isn't this discriminatory?? I say yes, my manager says no, the plan adminsitrator can do that if they want to.

Thanks.

I have been hearing of some "new" eligible FSA expenses such as cough syrup, bandaids, otc Clariten, etc.

Is this correct? Even if true, mustn't it be prescribed by a doctor? Is there a new IRS bulletin to this effect for 2006? Didn't see anything like this in Publication 502 for 2005 returns.

Thanks!

We have two employers, let's call them Employer 1 and Employer 2, sponsoring plans under the same multiple employer 401(k) plan.

The employees of Employer 1 are being transferred to employment with Employer 2. Employer 1 is merging its 401(k) plan with Employer 2's plan at the same time as the employment transfer. All of the employees -- except for a couple -- are working in the same place, doing the same thing, but their official employer is changing, and their plan accounts are merging with Employer 2's plan accounts.

The question is - what do we do with the accounts of the couple of employees that are staying with Employer 1? The Employer 1 plan doesn't exist any more! These employees can't be participants in the multiple employer plan anymore, because Employer 1 isn't related to Employer 2; these employees didn't sever from service though - their plan left them. They're still with the same employer. The plan didn't even terminate - it merged. Can they be paid out? The plan provisions don't really provide any guidance for this situation. In the meantime, their accounts have been merged into Employer 2's plan.

Thanks!!

We have a full-flex plan that allows for employer nonelective contributions as well as a FSA account (one full plan w/ IRC and ERISA benefits). Employer nonelective contributions may only be applied toward insured benefits under the plan (health, dental, ltd, etc.) and employee salary reduction amounts are used for the FSA. Right now we offer eligibility to employees after 30 days of employment (they receive the employer nonelective contribution). Also, if an employee elects not to participate, we pay them the amount of flex credits (employer nonelective dollars) as taxable compensation spread throughout each pay period.

Could we modify this so that if an employee elects not to participate, he/she is not provided (and taxed) on the nonelective flex dollars (i.e., if you choose not to participate then no extra amont is paid to the employee and therefore no taxable amount to the employee).

Also, for employees that do not use all of the flex credits (nonelective contributions), could we provide in the plan that the employee does not receive the non-used flex credits as taxable compensation (i.e., if the employee is given 500 flex credits/nonelective employer contributions - and only uses 300 of them - can we say that the employee has rejected the 200 unsued flex credits/nonelective contributions and that they are not paid out to the employee in cash and are therefore not taxable income to the employee).

Or is this wishful thinking?

I'm looking at 1.125-1 (Q/As 5, 6 and 9) and 1.125-2 (Q/As 2 and 4) that seem to say (in my novice interpretation) that once the employee is given the choice of participating or not participating that it may be a taxable event?

I have a client that was a C-corporation from July 1, 2003 through June 30, 2005 with a June 30 tax year end. They converted to an S-corporation effective July 1, 2005 so they have a short tax year ending December 31, 2005. They would like to establish a SEP plan to cover all of 2005 wages. Can the contribution be calculated on calendar year 2005 wages which encompasses two tax years? If so, can they deduct the entire contribution on the short-tax year 2005 S-corporation return?

I have a Plan that is part of a control group with 4 adopting employers. Each adopting employer signed a supplemental participation agreement to "join" the Plan.

Each of these adopting employers has now cuanged their legal name. I've amended the Plan to change the legal name of the Plan and the sponsoring "Employer", but I'm not sure of the best way to change the name of the adopting employers. Should I do new supplemental participation agreements in the new names or just some short amendment type document for each? I don't see this as a Plan amendment, per se. Right now I'm thinking of just doing an "amendment to supplemental participation agreement" for each of the 4 adopting employers.

I am little confused about how and when the 402(g) limit applies to NQDC plans linked to 401(k)s. I believe that the 402(g) limit will apply to NQDC contributions only if there is this mid-year type of election (for example, NQDC contributions kick in mid-year once the 401(k) plan fills up). I also believe that the 402(g) limit would not apply to the NQDC plan where the NQDC plan fills up first and is then reduced by the maximum allowable contribution to the 401(k) (as explained in example 12 of the proposed regulations). Does anyone agree with this or have any comments?

A small plan purchased an annuity for a participant.

How should this transaction be disclosed on the 5500? Distribution on item 2e of Schedule I in the amount of the annuity purchase?

Should a 1099-R be prepared for the participant?

Thank you.

Is there any reason why you could not use a non-whole number (ie. 1.5 years) as the eligibility requirement for the SEP?

The company is two years old and some of the non-key employees do not have 1.5 full yrs of service, and the employer would like to exclude them in this first year.

Thanks,