Plan has reached point where annual audit is required. Client is looking for CPA to handle. CPA is saying he has to go back to year 1 to follow balances up through present. Plan was set up in 1979. He says initial fee for doing so would 25K to 30K. Thereafter, CPA says it would be 7500 per year. Question is do audit requirements really require going to year 1 of the Plan? Thanks.

Can anyone offer me guidance on participants stock piling otc items etc... at the end of the plan year. I know it could come back on the participant in an audit, but just want to know if it could come back on me also. Is it my place to question that, or does the burden lie on the participant? Thanks

Sorry for such a dumb question.

Valuation is performed at the end of the year and the RPA liability is 150,000 and assets are 100,000. The assets include a prepaid contribution of 10,000 which receives an interest credit of 700. No credit balance.

The 412 FFL is 150,000 * .9 - (100,000 - 10,000 - 700) = 45,700.

The 404 FFL is 150,000 * .9 - (100,000 - 10,000) = 45,000.

Maximum contribution is the unfunded current liability of 150,000 - (100,000 - 10,000) = 60,000

Do these numbers appear to be correct?? Specifically, the question is regarding the inclusion of the interest on the prepaid contribution when calculating the limit for 412.

We have a client who is a US corporation, with a foreign subsidiary. Must the foreign subsidiary be covered by the SIMPLE-IRA of the US Corporation due to being part of a control group?

The subsidiary employees a couple of US Citizens who earn both US and Foreign source income. Must they cover none, US Only, or both sources of income?

Are any of the coverage choices optional or is it requried?

Thanks!

Andrea

An employee requested a mid-year election change on account of her marriage and picking up coverage under her new husband's health plan. She now wishes to rescind that election change and continue her coverage under our health plan. Is this okay? (Our plan includes all of the status change rules set out in the regulations). Also, we have an administrative rule (clearly communicated) that employees must advise HR of a status change within 30 days in order to make a change--can this employee only rescind her election and resume her old election if it is within those 30 days? Can you cite authority for your answer? Thanks.

Considering a plan that provides 3% 401(k) SH, and 2% profit sharing for total of 5% (which meets TH) for NHCEs.

Cash balance plan is to provide 3% (with a minimum dollar amount of Employer dollars to pass non discrimination) for NHCEs.

Much more provided for several owners.

7.5% gateway is met, so plans are cross-tested for non-discrimination.

In the plan design consideration, in order to pass ND tests it required one NHCE getting a larger cash balance credit.

1. Is there a problem with one or say a few NHCEs getting more than the rest of the NHCEs? That is, does some classification of employment need to be created to avoid the effect of name enumeration?

2. I need to check this point out further myself, but to what extent can the above design be implemented for 2005 calendar (plan) year? Do we have to wait until 2006 for the SH plan structure? What can be done for 2005?

Thanks.

The new final 401(k)/(m) regs require that gap period interest is paid on refunds of excess contributions and excess aggregate contributions (ADP and ACP failures). Is there any requirement that gap period interest must be paid on refunds of excess deferrals (402(g) limit), or is that still optional based on what the plan says?

Thanks!

Can anyone confirm whether we can use current 5500 forms (e.g., 2004) for past years delinquent filings (e.g., 2000) and just hand-correct the year (i.e., cross-out "2004" and write in "2000"). I've had someone tell me the IRS will accept this method, which would be great, but would appreciate it if anyone else has either had experience or at least heard that this approach will work.

2 separate questions here for the price of 1, but both are pretty straightforward. If an employer wants to terminate a target benefit plan and they are not planning on filing with the IRS for a determination letter, what is the timing on the notices to terminate (must distribute notice within 15, 30, 45 days)? Question #2 same as above, except it is a money purchase plan.

Thanks

I have a Maryland Bankers Association Bulletin that refers to Chapter 444, House Bill 147 of the 2005 Session of the Maryland General Assembly, which requires payouts of eligible rollover distributions from qualified retirement plans to withhold Maryland tax whenever federal tax is withheld....effective 7/1/05. I have found this Bill on the internet, and this is indeed what it seems to say.

However, I contacted John Hancock (formerly Manulife) where we have many Plans that are participant directed, and they claim that their compliance area says mandatory Maryland State withholding is not yet effective, and they will not be changing their distribution forms until it is effective.

Does anyone know whether this is effective 7/1/05?

Rather than amend the plan document to set a HCE Deferral Limit for catch-up contribution purposes, can it be done by a corporate resolution? Everything I read in the regs indicates that any limitation on deferrals by HCE's must be spelled out in the plan document.

What options are available to a M/P sponsor that failed to adopt 401(a)(9) Model Amendment by 12/31/03. Amendment has since been adopted. Go in under EPCRS as a "group" submission? What if there are fewer than 20 employers that adopted the M/P plan.

i dont see any reason why not but thought i would put this out there. approximately 10% of the participants did not receive top heavy mins for two plan years. dollar amounts are relatively small - 11,000 and 15,000 for each year respectively. i would like to self correct rather than use vcp. any thoughts.

Self correction (under Rev. Proc. 2003-44) is available only for Operational Failures. Operational failures are Qualification Failures arising solely from the failure to follow plan provisions. 403(b) plans are not subject to the requirement of a definite written program (although ERISA requires a written plan document for some 403(b) plans--this requirement is not applicable in this particular situation).

In the case of a qualified plan, it is generally easy to locate the "plan provisions" and also to determine whether or not a situation involves a "qualification failure". In the case of a 403(b) plan, or at least the one I have in mind, it seems much less clear. In my case, there is an SPD, no formal plan document, and the custodial agreement. The SPD says X, but the client has been doing Y. The custodial agreement is silent on the matter. The 403(b) plan can do X or Y without jeopardizing its "qualified status", i.e., without violating Section 403(b).

I am not sure what to do. Are the "plan provisions" referred to in the IRS self correction provisions contained in the SPD, the custodial agreement, the combined SPD/custodial agreement? Since the SPD is technically a summary of the plan, it makes logical sense that the SPD is not the plan. Also, since doing X or Y does not jeopardize the 403(b) plan's qualified status, is this truly a Qualification Failure?

Any thoughts would be helpful as I try to figure out what to do next. Thanks, in advance, for any help.

I'm attempting to complete the 2004 Schedule B for one of our clients, and I'm not sure what (if anything) I should show in the Accumulated Reconciliation Account (ARA).

The 2003 Schedule B reported the following:

line 9e = 100,000 (add'l interest charge on late quarterlies for the 2003 plan year)

line 9q(1) = 8,000,000 (ARA due to add'l funding charges)

line 9q(2) = 50,000 (ARA due to add'l interest charges)

line 9q(4) = $8,050,000 (total ARA)

The plan had an ERISA full funding credit of $4,000,000 for the 2004 plan year.

I think the balance in the ARA (line 9q(4) of 2003 Schedule B) gets eliminated because of the full fuding credit. Is that correct?

What do I do with line 9e from the 2003 Schedule B? Does this get reported on line 9q(2) of the 2004 Schedule B?

What should I report on lines 9q(1) and 9q(2) on the 2004 Schedule B?

PLEASE HELP!

How do you handle a terminated participant's forfeiture from the annuity? Usually there is a surrender charge, if the annuity is surrendered in the first "so-many" years, specified by the insurance company.

I have a 401(k) plan that provides for hardship distributions. They have a participant who wants a distribution which does not meet the safe harbor events test (i.e. it is not for payment of medical, educational expenses, payment of residence or to prevent foreclosure).

If they make the distribution and it is discovered that it does not meet the facts and circumstances test (for example, if the plan was audited) , what are the consequences?

A safe harbor plan is amended to include an early retirement window; wrt (a)(4) testing , is there anything that prohibits you from defining 2 component plans : (1)one that is safe harbor, includes participants not eligible for the window, and by design wouldn't require general testing and (2) another that includes only those eligible for the window and assuming the window is not safe harbor would require a general test ????

Also, the plan as amended for the window would have to pass coverage or 410(b) I assume ?? a component plan breakout wouldn't be available for coverage testing would it ??

I know this has been discussed before, but here goes.

Client thinks he's got an opportunity to buy some real estate on the cheap. Wants to buy it with plan money. Dad is Trustee and Son a participant. Wants to know if Plan can buy half and Son can buy half. Purchase would be from an unrelated third party.

Next comes the fun stuff. Dad has close to $2mm. If all goes well, he flips the property in a few years. Down the road, he's turned what could be a capital gain if bought outside the Plan, to ordinary income when RMDs begin. RMDs should put him in a pretty high bracket.

Son, buying outside the Plan, would be taxed at capital gains rate.

I've input Q's for males and females into a spreadsheet that calculates annuity purchase rates. My problem is that the males don't match up with the only printout of a table (6%) I have from an independent source.

Anyone willing to post a few monthly APRs from other sources? Something like:

Male, 5%, age 55

Female, 6.5%, age 60

In case you missed the header, I'm looking for 94 GAR sex distinct APRs.

Just a few will tell me if I'm on track or off base.

If I can verify my spreadsheet works, I'll make it available online.