Does anyone have any wisdom to support a definition of post-secondary education that might include "schools" other than colleges or universities? I can't find any legislative history or the like and am faced with a request for a hardship withdrawal for the cost of a truck driving school. The program is called a "class" and participants are called "students". Any help will be most appreciated! Thanks.

The employer maintains a nonstandardized, prototype 401(k) plan. A separate entity but member of its controlled group began participating in this plan on behalf of its employees at the beginning of this year, but the related company didn't execute a co-sponsor adoption page as is required under the terms of the plan. Can we self-correct by executing the adoption page now with a retroactive date (taking the position that this is a plan amendment to correct the inclusion of ineligible employees) or is our only recourse submitting under VCP? I would appreciate any thoughts.

Company currently sponsors a SH K Plan. From the beginning they have used the 3% QNEC SH election. They would like to amend their plan to include X-testing language. Upon review of the document, they have a 3 yr. vesting schl. for the non elective PS allocation. They have never allocated PS contributions. If they amend the plan to now have a 6 yr. graded vesting schedule, do the current EE's remain under the old schedule or can they apply the new 6 yr. schedule?

Thanks.

My question is can an Employer deduct funds from there employees paychecks on a pretaxed basis to pay for Employee only funded Insurance Premiums.

How would you run this through a section 125 plan?

what is the best way to handle this?

A partnership with only highly compensated employees partners (and no employees) allowed the partners to set up their own SEPs and contribute whatever they wanted within IRS limits. Some made contributions, some didn't.

This violates the SEP rule that requires that all employees (includes partners for this purpose) of an employer (the partnership) must receive the same level of contributions (as a percentage of pay).

Question: The normal way to correct this would be for the parnership to contribute amounts (and make up earnings) for each partner so that all received the same contribution as a percentage of pay. But this bothers me because the partners are all highly compensated and self-employed - it doesn't make sense because the make up contributions will be made in a later year, reducing the partners' income in the later year, and the deduction will go to the partners who got the additional contribution. It seems useless to correct this way, not to mention the fact that it will make the partners who didn't have SEPs before unhappy.

Is there an argument that it would be ok not to do any sort of correction, other than to lay out procedures to ensure that it will never happen again?

Or, what about the partners who got contributions simply taking distributions? Is there an argument that this will correct so they don't have to change their tax returns? Could you argue that the distribution is not subject to the early withdrawal penalty or the penalty on excess contributions to an IRA because the distribution was a correction?

Any suggestions?

Company A was purchased by Parent Company XYZ on 8/30/04. Company A sponsored a 401(k) plan with a December 31 plan year end. Parent Company XYZ also owns Company B which sponsors a 401(k) plan also. For 2004 ADP testing purposes, can the ADP test include just company A employees?

Plan sponsor allocates a MP contribution to a participant who was not employed on the last day of Plan Year. 3 months later they find that the participant was actually termed and should not have recvd. the contribution.

How to correct?

Several businesses make up a controlled group. We will be dividing them into QSLOBs. Not all of the businesses have 50 employees, so we plan to combine the smaller businesses with one of the larger ones. When we're done, we expect to have 2 or maybe 3 QSLOBs.

I want to make sure that such a combination is permissible.

We also have a client with ownership in 3 non-related businesses, 2 of which are a controlled group. Since one of the 2 businesses consists of the client only (no employees), I don't see how we can use the QSLOB rules in this case. Am I correct?

An employer will be permitting participants to invest in non-marketable employer securities. He will have to get a bond equal to the value of the securities if that investment totals more than 5% of the plan assets.

How frequently must the securities be valued? If there are no transactions in employer securities for an entire year is a new valuation required? Can someone provide a code section?

I was just wondering if anyone had a good crystal report for a participant's statement. Relius has some good certificates with pie charts that are ok, but since I am not a Crystal Report guru, I don't know how to make changes.

If anyone has a certificate they would like to share I would appreciate it.

You can email me or reply here. Thanks for any help!!

Carson Vaughan

Carson@dailyval.com

My boss asked me to find the Internal Revenue Code section that deals with individual/solo 401(k) eligibility....I have spent 4 hours and I still cannot find it (i.e. owners and spouse are eligible or owners and family members, etc.).

I really have to give him a citation for the eligibility....if anyone can help out, i would truly appreciate it.

thanks

If an employee eligible to defer to a (k) plan is on the payroll but does not have any compensation in the testing year, does he/she count as a 0 for determining the ADP/ACP averages ?

I think the answer is yes, but could not find any definative guidance. The arguement against including this person is - If the EE had no compensation, he or she had no real opportunity to defer so he or she should not count as a 0 for determining the average.

Any thoughts ?

I am just curious if anyone has come across this situation and how you handled it. Plan sponsor made late deferrals to the plan in the 2003 plan year (calendar year) but did not correct the late deposit until March, 2005. The 2003 form 5500 was completed by answering "yes" to question 4a on the schedule I but no amount was listed as the plan sponsor did not provide the information to the recordkeeper that was completing the 5500. A 2003 form 5330 was never completed.

The plan sponsor received a letter from the DOL indicating that the schedule I was not complete and to inlude an amount in 4a. That was done and the plan sponsor submitted the corrected schedule I to the DOL. My question is now that the plan sponsor has provided the amount of the late deferrals and the earnings on those deferrals were calculated and deposited into the plan, should a form 5330 for 2003 be completed even though it is considered late? Also, I would think a 2004 form 5330 should be completed and filed by July 31, 2005. My second question is: On the 2004 form 5330 should the amount of the lost earnings be listed in 6b since the lated deposits were not corrected timely?

Any thoughts on this situation would be greatly appreciated.

4 self-employed and independent attorneys who share an office have created a tax entity for their office expenses (ie. office supplies and the use of a secretary). Each pays 1/4 of those expenses and 1/4 of that secretary's W-2 wages.

Question: One of the attorneys wants to set up a SEP for himself. Does he need to include the secretary in the SEP? If so, since he is paying 1/4 of the secretary's salary, can he determine the secretary's contribution based the wages that he shares in the cost (1/4 of total pay)?

Hi, I 36yrs old and and my wife, we have never been big savers and I'm am just now trying to establish a saving Plan. I'm in my company 401K my wife is in her 401k, my contributions is 5% with a match of 50%up to 4%. My wife gets 0% match but good retirement and retires in 13yrs with full pay until 65(state job). All assets will be paid for in 12yrs. I make app. 70K and the wife 35K.

Now with that said, I would like to start a IRA preferably a Roth. can anyone give me any pointers?

David

Partnership has a top heavy profit sharing only plan in 2003, but started a 401(k)/match the end of 2004. The match is a safe harbor formula, but technically didn't start the safe harbor until 2005. The only contributions thus far for 2004 were the deferrals and match for all employees and partners. The partners assumed they did not have to contribute any top heavy minimums in 2004 due to starting the 401k/match. They have already filed their tax returns.

I assume the top heavy minimum deposited shortly would have to be deductible in the 2005 tax year and included in the 2005 415 test. Is this correct?

The plan provides top heavy minimums to key employees. Is 2004 earned income adjusted to calculate the top heavy minimums for the partners?

What is Comprehensive Income, how does it arise and how is it computed?

What type of stand-alone software are people using out there for participant loan processing (amortization schedules, notes, etc.)? Any recommendations would be appreciated.

DB/DC plans are to be aggregated for general testing.

DB's accrual rates are computed using the Accrued-To-Date method. DB grants pre-plan service credits for benefit accruals.

For computing the equivalent accual rates under the DC plan, can the current year accrual method be used or must one use the Accrued-To-Date method?

If the Accrued-To-Date method must be used:

1. What amount must be used in the numerator for computing the annual allocation - actual account balance (which reflects gains/losses, expenses) or aggregate allocations to date minus withdrawals, if any (i.e. ignoring gains/losses, expenses etc)?

2. What comp must be used - current year, average comp during benefiting years or average comp during the period used for the DB plan's average comp (e.g Hi 3).

Does anyone know whether earnings on the assets held in a secular trust can be treated as captial gains rather than ordinary income?