An Esop (formally a profit sharing plan) is being terminated. No contributions have been made to the plan for more than 15 years. Over the years, all the participants have been paid out their benefits in cash ... except for the sole/majority shareholder of the employer-sponsor. The plan's only remaining asset is about 22% of the outstanding shares.

The plan is now being terminated. The intent is for the owner/shareholder/participant/officer/employee to elect a direct transfer of these shares to an IRA. The IRA custodian has now raised the question of whether the transfer and/or holding of these shares in the owner's IRA constitutes a prohibited transaction and is requiring an opinion letter from me in order to accept the shares. Yikes and help!

BTW, the motivation for terminating the plan is to avoid the expense of performing an annual valuation. I'm told that the IRA custodian will accept an annual representation as to the value of the shares from the owner.

Any thoughts will be much appreciated.

A client currently has a SARSEP. They are adopting a new comparability profit sharing plan for 2005, with plans to change it to a safe harbor 401(k) plan for 2006.

1) For 2005, are the SARSEP deferrals included in the average benefits test when performing 401(a)(4) testing?

2) If they had adopted the profit sharing plan earlier in the year, could they have made it a 401(k) plan using prior year testing, and allowed the HCEs to make additional deferrals into the 401(k) plan (even though they were limited in the SARSEP plan)?

We have a 125 plan for employees to pay for their medical insurance premiums. Our enrollment form for the medical coverage gives us authorization to deduct their premiums from their pay. Must an employee authorize a separate withholding for the pretax payment of their premium payments and if so, must a new authorization be given each year?

I put 2,000 dollars in a roth ira with brownco years ago. browco is closing up shop and getting absorbed by etrade. I don't want to do business with etrade. I pissed away the 2,000 on risky internet stocks during the boom. It is now worth 3 bucks. My commission to sell the stock is more than it is worth. If I do sell the stock and close the account...what are my tax liabilities and/ or penalties since I am not 59 1/2?

Thanks

Non profit wants to establish a safe harbor matching k plan eff 7/1/2006 that also may include a discretionary nonelective contribution.

Questions: (1) Is a mid year safe harbor k permitted even though employees had non-ERISA 403(b) available to them before?

(2) Can the plan be effective 1/1, but SHMatch eff 7/1/06 to eliminate proration of 415 and 401(a)(17) limits for short plan year?

Thanks for any help.

How is the term “retired” defined for RMD purposes when deferring payments to a non-5% owner? We have both a DB and DC plan. We have people that retire for purposes of beginning payments from our DB plan, yet return to work immediately afterwards (next day) on a part time basis (subject to a monthly limit of 100 hours). Are these people considered retired for RMD purposes on the DC plan if they are still employed on a part-time or irregular basis after their "retirement" with the same employer? Thanks.

It's my understanding that 403(b) plans need to be updated for EGTRRA, but not necessarily by 12/31/05. According to a Corbel person, we don't have a specific date by which these amendments must be adopted. I went on to ask if there are EGTRRA amendments that would be specific to 403(b) plans and the answer was to just use the standard QP EGTRRA amendments.

However, I read that EGTRRA eliminated the maximum exclusion allowance, and also changed the definition of 415 compensation so that Employer contributions can be made for 5 years after an employee terminates.

Shouldn't those 2 items be included in the EGTRRA amendments adopted by a 403(b) plan? There may be other issues specific to 403(b)s as well.

I am curious as to when cross-testing became available or at least, when did it become widely used in the industry as a plan design format. I am looking at an existing profit sharing plan and trying to determine if the plan design was appropriate at it's inception since it is clearly inappropriate now. This may be due to changes in demographics of the sponsor's workforce but I am not certain. Any thoughts from the EB veterans out there?

My wife and I are both employed by a Washington State County, and are members of the PERS 2 retirement system. I have set up 457 deferred compensation plans for both of us to which we comtribute $4k and $6k anually.

I thought that we could set up Roth IRA's also, but in reading the IRS web site information, I am now confused. We are in our mid 50's, and are playing catch up on building our retirements. Do the 457's preclude us from contributing to Roth IRA's?

Can an amendment eliminating forced distributions from the plan be made effective 3/28/05, same as the automatic rollover amendments?

If not, then must the plan sponsor adopt the auto rollover amendment effective 3/28/05 and then adopt the no forced distribution amendment effective on signing of amendment.

Plan sponsor has never done any forced distributions even though document language says cash out distributions will be done as soon as is administratively feasible.

Thanks

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.