We have a prospect who sponsors a safe harbor 401(K) with an enhanced match.

The plan is on a fiscal year ending 10/31/05. Effective 11/1/05, the plan will be amended to a SHNE 3% because the plan is now top heavy; in addition, the client wants the flexibility of a profit sharing contribution, should he decide to make one.

The client was told by his insurance company representatives(who said they thoroughly checked with their Agent Support Team in their Home Office) that he could add a profit sharing component and have the vesting for the new profit sharing component start from the effecitve date of this amendment.

Then the fellow from the Home Office told the Rep that TPAs generally do not like to do this because it requires more work in that the contribution will have to be tracked separately, so TPAs tell their clients that this can not be done becaue they don't want to do the extra work.

I'm about to tell the prospect I have a problem with it because I do not beleive it is legal to do this, not because I do not want to.

Has anyone heard of this approach before?

Steve

Say a person has an income amount for a certaiin year that is under the limit at which you start owing income taxes. I think it is presently $7,000 per year for a single person. Assume you did not have any tax withheld, then you would not be required to file a tax return. (If I am mistaken about this, please advise.)

So assume that someone in that situation made under that amount, and put some of it in a Roth IRA because it was still earned money. Is he going to run into any problems with the IRS for not filing the tax return? Does the IRS require filing a tax return or any other kind of documentation to verify that he actually did make the amount of money he put into the Roth IRA account?

Thanks for any info.

I'm not sure if this is the right forum to be posting, but I figured I try anyway...I'm taking the 2nd SOA exam, exam FM in November. I'm really behind and I need some help in finding out where to get good study books/guides.

Have a C Corp on a fiscal year that will elect S Corp status and become calendar year filer. I'd like to match Plan Year to Corporate year (calendar).

Plan in place is a 3% SHNEC. Do I lose safe harbor status because of a short plan year? Don't think it will be an issue because of good participation, but you can never take anything for granted in this biz.

Participant wants to transfer a limited partnership interest to his personal account to satisfy the age 70 1/2 required minimum distribution.

I fear this is a PT, and that the asset will be valued without a true market value.

How do I advise this participant?

Participant "A" and "B" have the same last name. "A" wanted to raise his deferral percentage from 2% to 5% 7/1/04 to take full advantage of the $1 for $1 on first 5% match. Apparently he never noticed that his deduction changed on his paycheck. The change was inadvertantly applied to "B" whose deferral % was lowered from 6% to 5%. He also never mentioned the error to HR.

I haven't found any examples of this type of situation or suggested corrections. Has anyone run into this situation and how to fix it? It doesn't appear to be a qualification problem from what we see.

A local 125 administrator is allowing members who choose unreimbursed medical to not include a certain dollar amount. Rather, the select to participate in the URM FSA and submit claims as they are incurred. This eliminates the at risk componenet.

Client wants to set up a new 401(k) SH Plan. Do I have to wait to make it effective until 1/1/06 since its October 2005 already?? Doesn't it have to be atleast 3 mths to be considered a "short plan year". Also taking into consideration it being a SH Plan, there wouldn't be enough notice given to the employees for 2005 to be the effective plan year.....right??

Are there another limitation for the first year?

I have a client who has a pye of 9/30 and they just gave me their census. The have a new comp plan and all looks good EXCEPT all of the employees who are younger than their son have terminated.

First question is: is it too late to change the groupings so that I can provide the son with a zero.

Second question is dependant upon the first answer being yes, it's too late: Since the son hasn't started working for today...it's possible to actually terminate him. I'm sure the IRS frowns on that, but what precludes us from doing it?

I hate playing games with this stuff, but I suppose you have to get creative when a younger child is involved. better to have multiple groupings to begin with, but that wasn't the case and wasn't necessary for last 4 years.

Can anyone point me to a sample of a Governmental Excess Benefit Plan? I can't find one anywhere and don't know where to start if I'm forced to draft one from scratch. My usual source, RIA Checkpoint, doesn't have one. Any help would be appreciated. Thanks.

Can an employer amend his plan to say that the "minimum deferral percentage of pay is 5%"???

right now no limits

(dont ask the logic.........)

I recently attended a training class where the instructor pointed out that the recently released IRS Regs on IRA annuities state that each individual annuity contract must satisfy an MRD. This means that you can no longer take an MRD from your regular investment account to cover an IRA Annuity. I have not seen any articles or information that covers this point. I also cannot find the Reg Section referenced.

If anyone has info on this I would appreciate your sharing it.

Thanks!

Laura

Distributions from an HSA used exclusively to pay for or reimburse qualified medical expenses of the account owner or the account owner's spouse or dependents are excludable from gross income. Can a distribution from an HSA used to reimburse a third-party who directly paid the health care provider for qualified medical expenses qualify for this tax-favored treatment? In other words, if an account owner's former spouse pays for the dependent child's doctor visit, can the account owner take a tax-free distribution from his HSA in order to reimburse the former spouse for the expense?

I'm not an insurance fan in DB plans per se, but is there any cite that prevents us from deducting the full premium on say a whole life policy (split funding) if the policy is a paid up policy in say 5 years, but the assumed future working lifetime of the participant is say 20 years ? Would this be an unreasonable funding method if this accelerated full premium was deducted ? There's probably a Revenue Ruling or Rev. Proc. on this but not sure where. Both opinions and cites welcome.

Hi everyone,

I'm a financial planning master's student with a ESOP question.

I understand the tax advantages to the owner and the company of setting up an ESOP. What I'm wondering is: How does the owner benefit financially each year when the company makes its contribution to the ESOP?

A bit more detail: I'm working on a final project for an employee benefits class. Our hypothetical company wants to establish a qualified retirement plan and contribute $190,000 this year. The owner has a retirement savings need of $560,000 in 16 years, in addition to his other resources. I'm supposed to recommend a qualified retirement plan and explain how it will help the owner meet his retirement savings need.

So with a straight profit sharing plan, he would get $X (his portion of the $190,000) a year, and I would need to calculate whether that $X a year would grow into $560,000 in 16 years.

But with an ESOP, is he actually getting anything each year when the company contributes to the plan?

Thanks--I can post more details if necessary.

Leonard Barry

Madison, WI

I ran the ADP test for my plan, excluding the statutorily excludables. Plan fails the ADP test for 2004. Client decides they want to correct by allocating a QNEC. The QNEC is to be allocated to NHCEs who worked 1000+ hours and were active on the last day of the plan year. As part of the correction report, our system provides the allocation figure. I had the system allocate the QNEC and it provides it to all NHCEs who are eligible for the QNEC, regardless of their status as a non-excludable or excludable. My question is: Isn’t the QNEC supposed to be allocated to ONLY those participants who are non-excludables and in the failed ADP test? Should the excludables receive the QNEC allocation? The plan document does not specify this.

I probably haven't tried hard enough to get out of the 7.5% gateway on DB/DC permissively aggregated plans. It seems the "primarily DB in character" exception to the 7.5% gateway usually defeats what I'm trying to do (keep most NHCEs out of the DB plan) and I've tended to just think of "broadly available" perhaps overly simplisticly as simply two plans standing on their own for discrimination testing as normal (i.e., no special relationship between them). However, I noticed the blurb in the (a)(4) regs under the "broadly available" option that states it's applied "assuming that the Average Benefit Percentage test of 1.410(b)-5 were satisfied". Is this of much value from a practical standpoint ? I guess this eases the standard somewhat so it's not just the full normal coverage and discrimination applied to both plans separately as there is a built in ABP "pass". Anyone get any bank-for-the-buck using this approach ? Any example ? (just trying to see what situations it's helpful for).

A small DB plan with all family members except one NHCE - he quits with 700 hours worked. Did not accrue a benefit because 1000 hours required.

Do I fail 410b? I fear I do.

My plan already has language to allow a benefit accrual for this person if needed, but I don't want to recommend it to the client, 'cause the person was not vested.

Do I grant the accrual - then forfeit it?

I'm consulting for a small business that is consolidating two separate entities into one. I'm currently reviewing their policies. They have a "maternity leave policy" that states, female ee's get 4 weeks paid leave for birth, adoption, or placement of foster child. Males get 1 week paid leave upon same. If additional leave is required, the ee must request & discuss it in advance. Ee's may use paid leave if available, or leave without pay.

This policy makes me shudder for a few (hopefully obvious) reasons. I am trying to figure out a way to rework it so that the employer's liability isn't greatly increased, yet in a way that is gender-neutral and offers some recognition of the significance of any of these events in any employee's life. They are small and aren't subject to FMLA. They do not offer STD benefits other than what comes through Aflac (which nobody subscribes to anyway) or the couple of ee's we have in NY state. I would love to hear your suggestions of how I can rephrase this potential disaster waiting to happen! Post to board or email offline at meg.mccormick@gmail.com. Thanks!

A participant defers the full $10k allowed under 408(p) to a Simple 401(k) and then changes employers mid-year. The new employer hosts a traditional 401(k) plan. Is the participant's 402(g) limit reduced by the $10k deferred to the Simple 401(k) earlier in the year or can he defer an additional $14,000?