A Canadian citizen and resident will receive a lump sum distribution from a U.S. defined benefit plan maintained by a U.S. plan sponsor. Can the Canadian citizen transfer the funds to a U.S. IRA maintained by a U.S. custodian?

Our Canadian affiliate has determined that the employee cannot directly rollover the funds from a U.S. plan to a Canadian IRA. However, transfers from a U.S. IRA to a Canadian IRA are permitted. Therefore, the issue is whether a U.S. IRA can be established on behalf of the Canadian citizen and used as a conduit to transfer the funds to the Canadian IRA.

Does Change in Status Due to Spouse's Enrollment in Medicare Permit the Employee's HCRA Changes?

Or does it only permit changes to premiums for medical insurance, e.g., from family to single?

I never contributed to my company's 401K plan because they did not match contributions, however, after 1 year of service I was automaticly enrolled in the company's profit sharing plan. After 5 years of continous service then I become 100% vested. I reached my 5th year, last year. The profit sharing monies has been transferred to my 401K account (just recently) but I was told that I cannot take out a loan on this money.

My question is, why not, if I am 100% vested? Isn't this now my money to manage?

A defined benefit plan had a top-heavy ratio of 62% as of 8/31/03. The plan terminated during the 8/31/04 Plan Year and top-heavy minimums were provided. A 401(k) plan was established in 2004 with a calendar plan year. Two employees, who had not received any benefits under the DB, since they had not met eligibility, were allowed to participate early in the 401(k) by the client. The client wanted to keep them in the plan and amended the 401(k) plan to allow the early participation.

For the first year of the 401(k) the employer only intended to allow employee deferrals. Would these two employees be entitled to a top-heavy minimum in the 401(k) based on the DB ratio of 62% as of 8/31/03 or could the 8/31/03 DB values be combined with the 12/31/04 401(k) values for determining the top heavy status? The second option decreases the ratio to less than 60%

2 employers in a CG. Company A elects not to make a contribution. Would company B's maximum deductible contribution be 25% of coverred comp of both companies?

How about:

Document requires a profit to make a contribution and company A does not have one. Max Ded. contribution for Co. B (made a profit) 25% of coverred comp of both companies?

Do most NQDC plans provide full payout to the participant upon termination? Since participants are not eligible to roll funds over to an IRA or another NQ Plan I would suspect this is the case, however was wondering if some NQDC plans make participants stay in the Plan until their elected distribution date rolls around?

What constitutes the Board of Directors? Is its stated in the plan document? I have a client asking me who makes up their Board of Directors and I don't believe I would have the answers for that....any thoughts?

DB plan provide safe harbor formula of X per year of service is later amended to provide that employees hired after date G instead get a lower benefit, still a safe harbor. Each group has been tested under the ratio/percentage test and determined to pass, so since each passes 410(b) and is a safe harbor, the plan as a whole qualifies for safe harbor treatment.

Now the ratio/percentage test does not pass. Can the Average Benefits Test be used to restructure? IMHO the question comes down to whether someone is hired befor or after date G is a reasonable classification within the context of the NCT requirement of the ABT. Opinions?

Client wants to pay out a bonus to employees that will be based on the stock held in the ESOP. This is an S corp ESOP, 100% ESOP owned. The calculation would be basically a factor times the shares held in the ESOP, with a possible adj for new employees that have little stock. It would be a taxable cash bonus paid through payroll, and considered eligible compensation for year end ESOP allocations.

Any issues with this? My thoughts:

1) No separate class of stock issue as 100% ESOP owned.

2) Could this be considered a disguised S corp earnings distribution that would be subject the notice and consent requirements of 411(a)(11)?

3) Are there potential exclusive benefit issues here? This is like a dividend that instead of being paid to the plan is being paid to employees as current compensation. Would this be using plan assets for other than the exclusive benefit of providing retirement benefits to participants?

4) Should be no 409(p) issues as not a future payment, but a current payment.

Thanks for any input!

In this situation, the QB had a qualifying event due to a layoff on March 31, 2005. He elected Cobra coverage and paid the first two months' premiums (for April and May) with one check which he gave the employer on April 14. In May, the employee went back to work with the employer on a part time basis. According to the terms of a collective bargaining agreement, this employee's company paid healthcare coverage was reinstated retroactively back to April 1.

Since the employee was ultimately covered under the employer paid health plan for the entire period, is he entitled to a refund of the premium that he paid? If so, is he entitled to a refund for the entire period, just the month of May, or pro-rated to April 14?

Code section 403(b)(9) permits churches to set up "retirement income accounts" that sound like 403(b)(7) accounts without the 403(b)(7) restriction to mutual funds. I have church clients thinking and talking about 403(b) and this seems like an option to discuss. But has anybody seen a live one?

New Comparability Plan has 1000-hour & last-day requirements for a contribution allocation.

For 2004, plan fails the IRC 410(b) ratio percentage test due to the fact that only 9 out of 13 non-highly compensated employees are entitled to an allocation -- the other four NHCE's are terminated participants with more than 1000 hours.

Can this plan use the Average Benefits Test to pass coverage?

The first part of the ABT is the reasonable classification test.

Is "not employed on the last day of the plan year" a reasonable classification for this purpose?

I have found IRS Q&A's from two past ASPPA annual conferences that indicate that the answer is both yes and no -- unfortunately, the most recent answer (from 2001) was no.

Does anyone have any more-recent documentation on this question?

Does anyone use the ABT is situations such as this?

Thanks!

Prototype plan amendment was executed September 15, 2003 to increase plan's elective deferral % from 5% to 70%, effective September 1, 2002, as permitted by EGTRRA.

Someone reveiwing the plan has pointed to reg 1.401(k)-(1)(a)(3)(ii) as requiring the plan be amended before any increase in deferral percentage can be implemented. This reg. generally says the deferral provision cannot be effective until the later of the date the provision is adopted or the date it is effective.

I have always interpreted this reg. to require the plan be adopted prior to deferrals, not to require an amendment before deferral increases.

Seems to me this interpretation is a particularly big problem for prototype plans that retroactively amended for EGTRRA. Not to mention seems to be contrary to the remedial amendment relief for EGTRRA.

Does anyone else think you must amend before permitting increased deferrals, regardless of any other relief that may be out there ?

Can anyone provide clarification on the requirements to assure reimbursements from HRAs are designated to cover expenses of the actual participant, spouse, or eligible dependents? It's clear how providers can limit reimbursement by type (ie. Section 213 expenses) but not so clear on the expense source. For example, if a provider offers reimbursements via a debit card what responsibility do they bear to make sure the individual isn't using the card for someone other than eligible dependents? Does the participant bear the end responsibility? Would the plan itself be at risk if there were issues along this line? thanks!!!

Is this attachment required when filing a Schedule I if there are late deposits? When printing in Hyperprep(Relius) the form does not print if 4a is checked yes on the schedule I and there are no error messages if left blank. I can find no specific instructions in the 2004 5500 instruction.

Is it legal for an accrued benefit to decrease for a plan that uses an integrated benefit formula?

Example:

Accrued Benefit = (30% Avg Comp - 40% PIA) * (Accrual Service / Service at Normal Retirement)

In some instances, with an increase in the PIA, the accrued benefit in the above formula may be smaller than the prior year's accrued benefit. Do you have to maintain the prior accrued benefit as a floor, or can the accrued benefit actually decrease?

Our Benefits Dept is looking to set up an NQ deferred comp plan that 'mirrors' the investments in the 401k plan.

The biggest concerns raised by eligible employees is the bankruptcy risk (i.e. assets are not protected in that event is my understanding). Is there ANYTHING that can be put in place to offset the bankruptcy risk? Or is this just the basic feature of NQ plans?

I would like input regarding how employers administer the "tuition reimbursement" safe harbor hardship reason under 401(k). Specifically:

-- Do you limit withdrawals to 'college' courses?

-- If you do not restrict to college courses, do you require proof that the course requires a high school diploma? Or that the course results in some sort of "certification"?

-- Any other criteria requried? For example, is payment for cosmetology course or dog grooming approved?

Thanks

Elinor

I'm trying to calculate a participant's average monthly compensation in order to calculate his projected benefit with salary scale. I'm not sure how the 401(a)(17) limit comes into play for partial years.

For example (for 1/1/2005 valuation):

Salary Scale = 5%

Average Compensation for benefits is high 5 consecutive calendar years out of last 10

Normal Retirement Date = 11/1/2008

Compensation History:

2003 compensation = 170,000

2004 compensation = 185,000

2005 compensation = 194,250 <--(185,000 x 1.05^1)

2006 compensation = 203,963 <--(185,000 x 1.05^2)

2007 compensation = 205,000 <--(185,000 x 1.05^3) limited by 401(a)(17)

2008 compensation = 187,391 <--(185,000 x 1.05^4) / 12 * 10 <--Comp to 11/1/2008

Can I use the $187,391, or do I have to use $170,833 (10 months of the 401(a)(17) limit)?

My wife and I are self-employed and have Simple IRAs. Our 04 return was professionally prepared. The preparer followed my instructions to max-out contributions to our Simples. Due in part to an illness I was recovering from I didn't review the return as carefully as I should have. After filing by 4/15 I realized that because of a lot of itemized deductions the large part of the Simple contribution deductions were wasted. That is, we could have made considerably smaller contributions and still had no tax liability. The problem is we've made contributions that we didn't get a deduction for but that eventually will be taxed as they are distributed.

Can we now file an amended return showing smaller Simple contributions, and withdraw the excess contribution without penalty?

John W