I am wondering if the 30% limit under 1.401-10©(3)(i) still applies. It states that "If a self-employed individual is engaged in a trade or business in which capital is a material income producing factor, then, under section 911(b), his earned income is only that portion of the net profits from the trade or business which constitues a resonable allowance as compensation for personal services actually rendered. However, such individual's earned income cannot exceed 30 percent of the net profits of such trade or business. The net profits of the trade or business is not necessarily the same as the net earnings from self-employment derived from such trade or business."

For example, assume a business generates $1,000,000 in income. Does this mean than only $300,000 could reasonably be considered as constituting earned income.

What about situations where a business pays an owner a management fee that exceeds 30% of the entity's income?

Thanks in advance.

Ed

OK - Maybe it's a stupid question, but.

Anyone know how to structure a 401(a) plan distribution due to disability that will afford the employee to receive the monies on an income tax-free basis?

I thought the general rule is tax treatment of disability benefits atbrutable to employer contributions that were not includible in the gross income of the employee or contributions made by the employee on a pre-tax basis are always subject to income taxation, (perhaps excepting a few types of insurances).

Thanks.

The headline shows it all. This is a failure to follow the terms of the plan that has been ongoing for several years. Plan provides for in-kind distributions, but the plan has just been making lump sum distributions in cash.

Calendar year safe harbor plan. They currently exclude division A employee's from participating. They want to allow them to participate beginning Sept. 1. I can't see any reason why would this would jeopardize safe harbor, but I want to make sure I'm not missing anything.

Thanks in advance for any guidance.

I am working with a client who works for Stony Brook University and he contributes to a 403b plan with TIAA-CREF. He also has a 414h plan through SUNY and is periodically transferring assets from TIAA-CREF to the 414h. Has anyone ever heard of this? If so, what would the advantages be? I had no idea that this type of transfer was allowed. Thanks for any help with this.

Is there any basis on which to exempt from COBRA coverage a hospital's employee assistance plan in which 1) the counseling is provided by hospital staff to all employees and 2) under the terms of the Plan, coverage can continue for 5 visits even after termination? It has been suggested that "internal" programs may be viewed differently than programs using external providers.

What should we do if an employee’s paycheck (after tax withholding, garnishments and health plan premiums) isn’t big enough to make his or her deferral election? Should we make as much of deferral as we can? I thought there was a government opinion that said the election is invalid, so no deferrals should be taken out.

Hi there,

Can anyone please help me with this situation? This is the scenario: male employee A has a live-in girlfriend. They have a child together. The child is on employee A's health insurance and employee A also has a Dependent Care FSA for this new child. The girlfriend is not on the employee's health insurance. If the girlfriend loses/voluntarily leaves her job so that she can stay at home, would this be considered a qualifying event so that employee A can decrease his Dependent Care FSA?

I know that this would be a qualifying event if they were married, but how does the IRS view live-in girlfriend/boyfriends?

Any help would be greatly appreciated. Thank you!!!

The employer is in the process of changing to a new trustee for the company's 401(k) plan. Prior to this change, employees were investing all over the map. For the most part, they've been able to transfer things over without too much difficulty, but there's one investment that the new trustee says they won't take on.

There are significant penalties if the participant liquidates the investment now. I suppose we could set up a separate trust for that investment, but I'm wondering if the participant can be forced to sell.

I log into my company computer system from home using a remote desktop connection. I am able to log onto Relius Admin and Govt. Forms without any trouble but I have problems with Relius Documents. I was wondering if anyone else logs into Relius this way and would be willing to answer some questions.

The auditor of our health plan insists they need claims info. to complete the Form 5500. Accordingly, we asked them to sign a BAA, but they are only willing to sign a confidentiality agreement (which doesn't meet the requirements of a BAA). Has anyone run into this problem? I can't think of an exception to HIPAA for an auditor. Thank you in advance.

Can the state legislature take money that a university contributes for optional retirement plan participants to help fund those in the defined benefit plan? This is occurring because the defined benefit plan now has expected unfunded future liabilities. I thought that the fiduciary duty would be to all employees and this would be a violation of IRS code 401(a)(2), exclusive benefit rule and 401(a)(4), requirement that plan benefits not discriminate in favor of certain employees.

If so, would I take the case to the attorney general or could I start a class action suit as well?

One of the attorneys we (a TPA) do business with is telling his clients that they may take participant loans with an interest rate equal to the current "applicable federal interest rate" that is used by the IRS for imputing interest on an interest-free loan. This concerns me because that rate, for a five year loan, would be approximately 3.85% at present. That seems kinda low, doesn't it?

Is anyone having any doubts about implementing this grace period in light of some of the questions raised with respect to COBRA? We have put the brakes on implementing at this time after having read some of the concerns raised in the administration of COBRA (we handle it internally so are even more concerned about compliance).

If professors are given paid time off each year to go on monthly (or longer) sabbaticals, do they earn hours of service for allocation and vesting purposes? The school states that they are given sabbaticals to go research, meditate, etc. and feels that they should be given service while they're away. Any help would be greatly appreciated.

Am wrestling with how much to get involved with clients. Interpretation of CMS guidlines on CC Determination (Not Actuarial Attestment) seems to indicate this can be done by someone w/ claims/analysis background. Yet, carriers are charging up to several thousand to do this, which makes me wonder if I’m missing something

This 5500 season, our law firm has received auditors' request for information that include "non-standard requests" falling outside the scope of the ABA's Statement of Policy Regarding Lawyers' Responses to Auditors' Requests. In particular, we have received requests to "confirm all information brought to [the law firm's] attention indicating the occurence of a possible illegal act committed by the Company, the Plan, or any of their agents or employees." Our malpractice carrier has generally advised that we should not respond to such non-standard requests and tell the auditors that it would be inappropriate to respond under the terms of the treaty.

I am curious whether others have received similar requests and, if so, how are you responding.

I asked this on the terminted plan board, but it does not get much activity, thought i would try it here.

I have a company that terminated their k plan in January of 2005 when they got bought out by another company. The February deferrals started going to the new company's plan.

Do I test the terminated plan just for Jan. deferrals?

Something feels wrong about that...?

thanks all

A time-consuming task is the organizing and filing of monthly statements we receive for participants with brokerage accounts (Morgan Stanley, Merrill Lynch, etc.) Does anyone know of any brokerage firms which have a procedure whereby TPA's can automatically receive electronic copies of statements? If so, could you provide me with a contact person at the brokerage firm.

And if anyone has a suggestion for an efficient way to deal with brokerage statements, please let me know. Thanks.

Multiemployer PS Plan credited account of p for year in excess of 415© limits. RP 2003-44, App. A indicates that excess amount should be put in unallocated expense account to reduce ER contributions in future years and while suspense account remains, the ER is not permitted to make additional contributions to the plan.

Does this mean that the suspense account should be applied (allocated) to reduce contributions of all the ERs in the plan as to the entire universe of participants, just as to the participants on whose behalf this particular ER contributes on, or just as to the account of the participant whose account exceeded the 415© limit?