Employer wants to terminate their plan beginning with the 2005 plan year...calendar year!! They provide a 3% Safe Harbor, are they still required to make the safe harbor contribution in the year of plan termination? What are the rules with this?

A transfer from a qualified plan to an IRA resulted in a penalty for an annuity held in the qualified plan because it was cashed in prior to the transfer, but one day too soon. Now, the annuity company is willing to take back the original amount, waive the penalty and re-transfer the funds to the IRA.

Question: Do the above transactions require the issuance of 1099R's back and forth or could the original transfer be deemed a mistake? Are there any adverse tax consequences for the QP/IRA owner?

Client currently wishes to terminate SARSEP and establish a SH 401(k) for remainder of year. 5305A-SEP form in use, SARSEP will not meet the 50% participation requirement under IRC 408(k)(6)(ii). We would like to terminate sponsorship of the SARSEP [with notice and resolution] effective 7/15/05 and have the Safe Harbor 401(k) [using the match method] effective 8/1/05 in hopes of avoiding the concurrent plan problem of using the 5305A-SEP.

The 2005 SARSEP contributions I understand will be, due to failing the 50% rule, default to the regular IRA rules for deductibility, etc. My questions:

a) First, is my analysis above correct?

b) Is the sponsor still required to make the top heavy contribution due to partial year sponsorship of the SEP, even though all the 2005 contributions are now deemed IRA contributions rather than SARSEP contributions?

b1) Does the adoption of the Safe Harbor 401(k) eliminate the top heavy requirement for the year? [assume parallel participation]

c) If 'b' is "yes", do we base the 3% on total 2005 compensation or only through the SARSEP's date of termination?

d) If a top heavy contribution is required, can that contributatory requirement be made under the non-elective benefit structure of the (standardized) Safe Harbor plan?

e) If 'd' is "yes", can we subject the top heavy contribution to the graded vesting schedule under the SH plan? [my inkling on this is no, since this would not provide the same contractual benefit as a top heavy contribution under the SARSEP-thus 'd' would probably be "no" also]

f) If 'd' is "yes", The TH required amount I understand may not be reduced by the safe harbor match [iRS Notice 98-52]. What if we used the 3% nonelective safe harbor rather than the match?

g) Assuming 'd' is "no", would it be advised to make the Safe Harbor plan with a non calendar plan year? The concurrance issue with the SARSEP is what's rattling my brain here. Also, would the SH 401(k) plan be considered a 'successor plan' to the SARSEP? The only definition I currently know of a 'successor plan' is under Treas. Reg. 1.401(k)-1(d)(3), which, if applied, would not treat a SARSEP as a successor plan, but this is the flip of that. I believe the SARSEP is not considered a 'plan', but don't have a site.

thanks to any full or partial responders..

Does anyone know whether it's ok to post one notice to interested parties that covers two different plans by the same employer. Our 401k plan and profit sharing plan are separate plans, with the same eligible employee classifications. Everything in the notice is the same except the names of the plans and the plan number. As long as right plan name clearly correspond to the right plan number, I don't see a problem. Does any see a problem with this? Has anyone done this?

Thanks

Can a company terminate their PS plan (1 life) on June 30, 2005 and begin a SIMPLE on 7/1/05?

I'm just full of questions today.

Can a plan the allows a participant to enter the plan after 3 or 6 months also have an hours requirement or am I correct in thinking that an hour requirement is on a 1 year (1,000 hours) provision?

If a company with a leveraged ESOP is sold, I'm assuming the ESOP has to pay back the balance of the note using the proceeeds from the sale. If the ESOP pays back the company, and the company is sold, what happens to the cash? The company is currently owned 56% by one individual and 46% by the ESOP.

I'm driving myself crazy with this. For non group term insurance paid by the employer for the benefit of the employee and his/her beneficiaries, I know this is taxable to the employee. I believe the amount the employer paid for the premium is the amount to be included. The instructions to the w-2 don't tell you where to include it. What should I do. I realize that I don't get the benefit of the $50,000 exclusion.

I have a client that wants to allow his union employees to be eligible for the plan but does not want to give them a matching contribution as he does for everyone else now. Is this allowed and how do we go about doing this. Should we have 2 seperate plans one for reg employees and one for union members. How does this affect testing.

If an employer is paying compensation in lieu of the notice requirements (payments stop the earlier of 60 days after notice should have been provided or the employee find another job), are these payments to be treated as severance payments for retirement plan purposes? I feel that they are, but if someone could clarify or refute my logic, please do so. Thanks

I am interested to know how employers have structured award programs to avoid potential constructive receipt of income by employees. For example, a program in which employees accumulate points towards awards such as gift certificates or even items that otherwise might constitute a de minimis or working condition fringe. Thanks.

The 401(a)(17) Limit says that for year 2005, the most compensation that can be taken into account is $210,000. The Sec 415 limit is one-fifth or $42,000.

The Sec 402(g) limit is $14,000.

Can someone work for four employers

ER(1) for Jan to Mar

ER(2) for Apr to Jun

ER(3) for Jul to Sep

ER(4) for Oct to Dec

and

1) get $56,000 worth of elective deferrals for year 2005?

An employer wants to start a safe harbor 401k plan, but also wants to include union (collectively bargained) employees in the plan. For these union people, the employer wants to give them a fixed contribution, but they want it to be something less than the 3% non-elective for all non-union people. Is this allowed in a safe harbor plan and if so, does it affect the 401k test in anyway?

Thank you

It seems as though the DOL has changed the determination for "lost earnings" on late deposit of deferrals under VFC. Rather than the "greater of ..." method, the IRS deficiency rate under 6621 is to be used - as built into their VFC online calculator.

Is this an acceptable correction of lost earnings to the IRS? Late deposit of deferrals is also an operational error and if corrected under EPCRS and the principle is to essentially to put the plan (participants) in the position it should have been in had the error not occurred, it seems the adjustment for earnings just based on 6621 may not do that.

Is there a disconnect between what the DOL allows and what the IRS requires? How are others calculating earnings on these late deposits?

An employee submitted a medically necessary travel expense claim which includes a tip for the taxi driver. My research hasn't turned up anything that specifically addresses the tip portion of the expense as allowable or not allowable. Anyone know if there is something out there in writing, or have any guidance regarding this issue? Thanks in advance.

Darla

Help! I am new to this forum and need some advice quickly. My wife and I make a combined AGI of $140,000. I contribute to my 401K at work and also contribute to a Roth IRA. My wife, though, has profit-sharing at work and I want to get her setup with either a regular IRA or a Roth IRA---I need to know which way to go.

Can she contribute to a Roth IRA if I have maxed out my Roth IRA contribution?

If we need to get her on a tax deductible IRA, what is the max contribution she can make?

Thanks for your help!

If you file for an extension and later find out there are under 100 participants for the plan year, does that effect anything??? Meaning there was an extension filed but NO 5500??? Also, when do you NOT file a 5500 for a Flexible Plan?

I haven't seen any discussion of the proposed 415 regs on these boards. Am I alone in thinking that the IRS has taken negative and as far as I can see an unchallenged interpretation on compensation which has the effect of reducing the high-3 average (under prior regs) by now basing it only on years of participation (vs. prior service) and also applying the 401(a)(17) comp limit to it. Isn't it funny that the clarifying and simplifying regs always try to curtail the small business owner which is most likely to be impacted. I presume since these are proposed regs we do have the opportunity to comment on them to the IRS. I would hope ASPA or someone might also take up the cause. I think the loss of pre-participation compensation is especially hurtful since most small business owners don't have the income to both take high compensation and make large DB contributions so it could significantly reduce their contributions (no doubt that's what the IRS is hoping for) since they can't rely upon pre-participation comp to get them up to or near the 415 dollar limit.

An owner of a company wants to use his self directed IRA to purchase stock in the company he owns. The stock is not publicly traded. I'm worried about the prohibited transaction rules. Does this sound do-able?

Under State law, X and Y a male and female who have co-habitated for at least three years and who have held themselves out as husband and wife are considered married. Under Federal income tax law, they may not file a joint income tax return but must file as "single" or "unmarried head of household" because they are not "legally married". For puposes of Internal Revenue Code Section 401(a) is X considered to be Y's spouse?