We have a calendar year 401(k) plan that is Safe Harbor. When the notice went out it stated a 3% SHNEC will be given to all eligible participants along with a Discretionary Match. Historically, this plan gave 66 2/3% on the first 6% deferred. Can the plan be amended now (retroactively to 1/1/05) to provide a fixed formula match of 300% on the first 6% deferred? Would this in any way be violating a Safe Harbor Notice content requirement? In addition to amending the document and distributing a SMM would we need to distribute an amended Safe Harbor Notice?

A single person profit sharing plan held a universaal life policy purchased under a 7 pay plan. Paid about 28K in premiums (deductible). Never paid another cent (I guess this was a vanishing premium policy (with a vanishing agent too)), Needless to say the policy self-sustained for several years. Plan member took out a 35K loan in 1997. Never paid any interest everything was covered. Loan principal and interest grew to 59K. Participant paid in a $2,000 in payments (not deducted) to keep everything in force. This year the plan will surrender the policy and the Profit Sharing plan will reveive about $1,000.

Question: Participant wants to eventually close the plan because a new one was established and covers the participant and employees. Participant wants to follow the rules (although the 50% Universal Policy limitation may have been violated in the late 80's) He wants to follow the law and report any distribution required. He is over 59.5 so no early withdrawl penalties exist.

The carrier is not issuing a 1099. Should he report a distribution of 35K or is tax due on the entire 59K. To take it one step further; I thought he should maybe pay off the loan with other sources. Then take a loan for 50K from the profitsharing plan secured by the primary residence and can pay th eloan back overtime. Also would this loan qualify for 30 yrear amortization??

Client has workforce that has worked from home for a year - they are now calling those employees back in house. Is this a "worksite" change and now can elect dependent care?

Thanks.

What does the closing of the GUST Program mean? I have some clients who have not submitted their plans for GUST determination letter--although their plans have been amended for GUST. Should I file a GUST determination letter application for them or just wait until the EGTRRA Program opens next year? Thanks.

A company has a cafeteria plan and provides a company contribution. The company wants to offer HSAs as a qualified benefit under the cafeteria plan. However, the company wants to set it up so that, if a participant picks the HSA benefit, the overall company contribution that the participant may receive will be reduced. Does anyone see any issues with this set up? Thanks.

We recently took over a plan that has a cash balance consisting of undeposited tax withholding on distributions for 2003 and 2004.

Has anyone ever encountered this situation and what is the correction method?

I have a takeover case with a BOY valuation date. Employees enter the plan immediately. Year of Service for benefit accruals is 1 hour credited svc during the plan year. For the 2003 valuation @ 1/1/2003 the following approach was used.

Eligible participants who terminated during 2003 but after 1/1/2003 were treated terminated and if they terminated non-vested, they were excluded from the funding calculations!

As a result, line 2b of Sch B has, say, 20 active participants but only, say, 15 participants were considered for the funding calcs!

Questions:

1. Is this a reasonable funding method?

2. Is one required to continue with this method even if it is not a reasonable method?

3. If the method is changed (to include the participants who terminate during the val year but after the val date), would it qualify for automatic approval under rev Proc 2000-40? I don't see anything on this.

Does your deductible contribution have to match your 415 limit?

For example, assume a 1 man plan. He deducts $30,000 for 2004. Can he still recieve an additional $10,000 for 2004? How will this effect 2005? Will he be able to do $40,000 for 2005 and deduct the 10k+40k as long as it is less than 25% of pay?

Hi,

I have a very small Roth IRA I started a few years ago. It consists of a couple of stocks and cash. It seems to be a good time to sell one of the stocks, do I have the ability to do that, or must I hold on to that stock until I am legally able to make a withdrawl? The account is through an online brokerage.

Q&A 12 COBRA on benefitslink (http://benefitslink.com/modperl/qa.cgi?db=qa_COBRA&id=12) states that an ex-wife of a former employee is not entitled to COBRA extension due to a divorce if the ex-wife was a qualifiying beneficiary but the former employee did not elect COBRA coverage. The reason stated was because a former employee is not a "covered employee" after the employee fails to elect COBRA coverage. Therefore, there can be no qualifying event under a technical reading of COBRA.

However, in reading the definition of "covered employee", (see ERISA 607(2)), a covered employee is "an individual who is (or was) provided coverage under a group health plan . . .". Accordingly, the former employee will always be a "covered employee" regardless of whether or not the former employee elects COBRA coverage, albeit the former employee would no longer be a "qualified beneficiary". So, the ex-wife should be entitled to 36 months of COBRA if she gets divorced during the wife's 18 months of COBRA coverage. Am I missing something?

Plan paying out benefits to retiree on an annual basis. They were paying him with a W-2, they switched to paying him the benefit via a 1099R. I do not deal in nonquals, how should a benefit payment be reported to the participant and the withholding be reported by the plan sponsor?

Thanks.

Plan Sponsor has a SIMPLE IRA. The SIMPLE IRA has been around several years. Plan Spnosor now wants a DB plan & a 401(k) plan. I know that Plan Sponsor cannot adopt another qualified plan during 2005 without violating the exclusive plan rule. Plan Sponsor wants to know the consequences of violating the exlcusive plan rule & having the SIMPLE IRA invalidated.

1. It is my understanding that 2005 contributions would have to be returned to employees prior to the due date of the employees' 2005 tax return. The early withdrawal penalty would not apply to that money

2. Employer gets no deductions for 2005 SIMPLE contributions.

3. Would there be any issues with years prior to 2005? I don't see that there would be, but we don't do alot with SIMPLEs anymore.

4. If Plan Sponsor intentionally had the SIMPLE IRA invalidated is there any reason to filing under EPCRS?

5. Are there any issues I am missing?

Thanks in advance for any guidance.

Has anyone tried to run ESOP administration on Omni?

I would be interested in any feedback about its flexibility, capabilities, or limitations. Any feedback about the types of plans that you are running on it would also be helpful. (leveraged vs. nonleveraged, 1042 vs. non1042, allocations that require general testing, dividend pass throughs, etc.)

Thanks!

Has anyone tried to run ESOP administration on Omni?

I would be interested in any feedback about its flexibility, capabilities, or limitations. Any feedback about the types of plans that you are running on it would also be helpful. (leveraged vs. nonleveraged, 1042 vs. non1042, allocations that require general testing, dividend pass throughs, etc.)

Thanks!

Is a Form 5500 required for employers with less than 100 participants where the recordkeeper acts as an agent for the employer with respect to the reimbursement of claims submitted by HRA participants? If so, what Schedules should be included?

My plan year is 7/1 to 6/30 ; the last valuation was 7/1/04; participants need to satisfy the window's eligibility criteria on 4/1/05, need to decide on 5/20/05 , and can retire early on 6/30/05.

Question : client is anxious to know if the window passes non-discrimination tests since participants will want to start receiving benefits shortly after 630/05 -- Q : Can I use 6/30/04 as the snapshot date with the accrued to date method -- and with eligible participants getting an adjusted enhanced amount as of that date ??? Or do I have to collect another census and use a snapshot of 6/30/05 in order for the test to be official ??

I am leaving my job to start medical school in the fall. I have a 401k balance of $2000 (my employer matched dollar for dollar). I also have a Roth IRA of $500.

I have to withdraw all these funds for qualified educational expenses this fall. What should I do? I want to get the greatest benefit possible. Should I roll over the 401k to my Roth IRA and then make the withdrawal? Or should I just withdraw from the 401k and from the Roth IRA separately? I hear you can withdraw from your Roth as long as it is a contribution you made and it will be tax free and penalty free. I also heard about the qualified educational expenses. But then I think when I roll over the moeny from the 401k it might get taxed. Please someone offer me some advise on what scenario you think will provide me the most benefit.

Thanks,

Ben

I am leaving my job to start medical school in the fall. I have a 401k balance of $2000 (my employer matched dollar for dollar). I also have a Roth IRA of $500.

I have to withdraw all these funds for qualified educational expenses this fall. What should I do? I want to get the greatest benefit possible. Should I roll over the 401k to my Roth IRA and then make the withdrawal? Or should I just withdraw from the 401k and from the Roth IRA separately? I hear you can withdraw from your Roth as long as it is a contribution you made and it will be tax free and penalty free. I also heard about the qualified educational expenses. But then I think when I roll over the moeny from the 401k it might get taxed. Please someone offer me some advise on what scenario you think will provide me the most benefit.

Thanks,

Ben

Are owers/highly compensated employees allowed to purchase (take distribution) their life insurance policy from the plan if the plan is underfunded?

We have a number of small checks (approx 75) that are all under $200, many under $25 and about 10 under $1.00.

It seems as though the cost of distributing these under $1.00 checks is higher than the check itself. Does IRS have any guidance on whether these small amounts can just be forfeited?

Who would be thrilled to receive a check for $0.53?