Plan X is an individually designed plan on Cycle C. Its RAP ends 1-31-09. The 401(k) regs are effective in 2006. Even though Plan X does not have to be submitted until 1-31-09, must it adopt a good faith amendment in 2006 to incorporate the final 401(k) regs?

What about adopters of a volume submitter plan? The specimen plan will include final 401(k) regs, but the adopting employer does not have to submit until at least 2009 or 2010. Must this plan adopt a good faith amendment in 2006 to incorporate the final 401(k) regs?

Unlike GUST, where a plan was required to comply operationally during the RAP, it seems for this round the Plan must also comply in writing.

Any advice?

Our TPA company (admin only, no product sales of any kind) is working with a financial advisor who wants to forgo commissions on a new 401(k) plan and instead be paid a yearly financial consulting fee. It is a decent size plan, about 150 expected participants, with the intention that the participants pay the fees out of their accounts. Let's say we would charge $25 annually, and the financial advisor charges $50 annually. At the end of each year, $75 would come out of everyones account to pay for both.

What the advisor has suggested is that the $75 come out at once and paid to our company (TPA firm). From there, we pay him the $50/per and 1099 him at the end of the year. Does anyone else do this and does it seem OK? We want to check as to why 2 separate transactions can't be done; I.E., he gets his check for $50/per directly from the accounts and we get our $25 directly from the accounts. That would seem to be the best way to handle it. But assuming there is a good, legit reason for that not being workable, is there anything wrong "lurking" about if we proceed as he suggested?

Thanks for all opinions

We have a small new comp plan (1 owner/ 3 partricipants). The demographics changed whereby the owner is the youngest. To get it to pass, I have to give the nonowners 21% and the owner gets about 10%.

Is it possible to forget the new comp allocation due to failure and just run the allocation using a "traditional" profit sharing allocation (contribution/wage)???

We're using a Corbel doc and it appears to be silent.

In a pooled investment account, if a participant was overpaid upon terminating, and all reasonable attempts to get the money repaid have failed, which, if any, of the following options are acceptable and or preferable for making the plan and the remaining participants whole?

1. Having the plan sponsor repay the amount plus lost earning? - If this is acceptable, can the sponsor deduct it, and what form does it take?

2. Having the trustees who committed the error repay the amount, plus lost earning, personally?

3. "Transfering" the amount, plus lost earnings from the accounts of the trustees to the innocent participants?

Which, if any (or please provide other), would be required if going through a formal correction program?

We have many participants in a plan where we cannot find the current address. We have sent their SSN thru the IRS and they forwarded to the last known address. We have exhausted all possibilities of reaching these people. We still have about 16 people who we did not hear from. We would like to kick those participants out of the plan, however, our administrator has stated that we cant kick them out (ie. send the money to the state Unclaimed Funds).

Is that true? If the IRS cant find them, and we cant send the money to Unclaimed funds, then we have to keep them on the plan forever?

Thank you for any help you can give!!!

I have the following questions concerning the option to beneficiaries to repay an outstanding plan loan and about the person who would be taxed if such option were not offered or were offered and the loan went into default:

If a participant dies with an outstanding loan, does the plan offer to allow the beneficiaries to repay it? Can the plan limit the class of beneficiaries eligble to repay the loan to the participant's spouse? If the loan becomes defaulted because the plan did not offer a repayment option, is the participant taxable in his/her final income tax return or is her/his estate taxable? Would the result change if the option to repay the loan was offered to one or more beneficiaries and the loan was not repaid?

We submitted a terminating plan for a favorable determination letter, and the IRS discovered that we did not apply the plan's vesting schedule appropriately for a short plan year that occured many years ago (resulting in underpayment of benefits for several employees). We have been asked to correct using the "contribution correction method" (Rev. Proc. 2003-44, Appendix B, Section 2.03(1)(a))

This particular section does not specifically say how to adjust for earnings. Does anyone have any suggestions on how to adjust for earnings? I am new at this.

Thanks for your help. Any input would be greatly appreciated.

I am working on a one-man sole proprietor DB plan with a calendar year plan year. He has already made the minimum contribution needed for 2004, but can make an additional deductible contribution for 2004 if he chooses to do so.

He has yet to give his tax info to his accountant, so his tax liability for 2004 has not yet been determined.

I understand that he is able to make additional contributions up to his deduction limit until his tax filing deadline of October 15. Our actuary has also stated that only contributions made by September 15 are reported on the 2004 Schedule B.

My question is: Do the assets on Schedule I include the additional contributions, which would then result in a discrepancy between Schedules B and I?

I tried searching but couldn't find anything.

Is it possible to have a 401(k) act like a DB plan? What type of plan provisions need to be in place to past the discrimination testing? just curious.....

Client is 66, still working (and plans to until age 70). She is not collecting any Social Security, having decided to wait for the higher payout at age 70. Between her SS benefit and her pension plan (which has a COLA), she expects to replace nearly her current annual income of about $60K. She will have only living expenses in retirement as her mortgage will be fully paid off.

She has been funding a regular IRA which now has a value of approx $60,000. She stopped funding that a few years ago, and started funding a Roth IRA instead. I am wondering whether it makes sense for her to convert the old IRA account to a Roth IRA, thereby avoiding RMDs starting at age 70-1/2, so that she can have the flexibility of accumulating her IRA funds in the event she lives for a very long time (she is concerned as longevity runs in her family). At my behest she spoke to the bank officer where she has her IRA account and he advised her not to convert based on the tax liability she would incur in converting to a Roth.

I also am wondering whether there are any differences to the account beneficiaries (her three children) if her account is held as a regular IRA vs. a Roth IRA.

I would be interested in getting any thoughts on either of these issues. Thanks.

If a cross tested profit sharing plan passes ratio % as a whole and each rate group passes ratio % test( using EBARs) does average benefits even come into play? Does the answer change if there is a 401(k) and/or match component?

Is long term care tax deductible (premiums) for the employer and the employee receiving the benefit or just one or the other?

Thanks

(just curious)

Alternate payee, wife, wants to omit social security number from the QDRO and disclose it via a separate document. Her concern is identity theft. Her statement is that the QDRO is a public document. (I'm not sure how the supporting disclosure of her SSN via the other document would not be public unless it's sealed????)

OK to do this and what would be the required procedure to make sure this requirement of the QDRO is met?

A large (and ever growing) controlled group has several Plans. Some have an Employer Match, some do not. All Plans pass coverage separately, except one which relies on the Average Benefits Test (there is also a DB Plan). All are tested separately for ADP/ACP.

One Plan wishes to be a safe harbor plan. Is there any problem with one plan in a controlled group becoming a safe harbor Plan? Is this addressed anywhere? I see the references in notice 98-52 to aggregation and disaggregation but it does not specifically address controlled group.

If an HCE transferred from the safe harbor plan to a plan in the group that does not have a match would the match have to be refunded to him? Would any problems of this nature be solved if HCEs were prohibited from receiving a match?

Thank you!

An employer with a 125 plan wants to increase decutibles, but only require employees to pay the old amount and therefore reimburse employees who exceed the old deductlbe amount up to the new amount. Is the payment from the employer to the employee for the difference in deductible taxable to the employee? I'm not much of a tax guy.

An employer with a 125 plan wants to increase decutibles, but only require employees to pay the old amount and therefore reimburse employees who exceed the old deductlbe amount up to the new amount. Is the payment from the employer to the employee for the difference in deductible taxable to the employee? I'm not much of a tax guy.

I am a "newbie" ... are there some sources I can go to which publish what health insurance trend has been for 2005? Our firm just got our 1/1 health insurance renewal. My carrier had trend of 12.5% and I'd just like to see how that compares to the industry average. I tried mercer.com and couldn't find anything, and on milliman.com they only have 2004 trend. Where can I look to see what insurance carriers are averaging for 2005? If anyone could give me some advice I'd sure appreciate it.

A start up will pay COBRA premiums for new employees until they have enough employees in California to quality for a group health plan since most of them are out of state currently. The maximum head count will be under 20 once the company is in place.

Since the premiums are paid by the new employer for the COBRA premiums for continuation coverage from a previous employer on behalf of their new employee, two questions:

1) Are these COBRA premiums deductible to the corporation as an expense if they provide this for all the new employees in lieu of a group health plan?

2) Are these premiums tax free to the employee or taxable income?

I know that most do treat them the same as group benefits and have had no tax issues but wondering if it is sanctioned by IRS or not. On one hand, they are the new companies employees and these are employee benefits. On the other hand, the benefits are not tied to the current employer but to the previous employer.

I would really appreciate your help on this because I looked through tax facts 2005 and other publications and could find no mention of this.

THANK YOU!

Can an employer, with two classes and waiting periods for benefit eligibility, offer a Cafeteria plan with two waiting periods?

Commercial Message deleted.

To post commercial messages on this site, please contact Dave Baker at davebaker@benefitslink.com