I have a client that had a money purchase plan which was merged into an existing profit sharing plan. Now he wants to terminate the profit sharing plan and start a SEP. With the new portability rules, have the successor plan rules changed? Can the assets from the PSP be transferred automatically into the SEP or do we have to go through a distribution/rollover process and get participant and spousal consent for the transfer of assets into the SEP?

Is anyone aware of any guidance that would let a HDHP cover the expenses of a newborn incurred in the period immediately after childbirth until release of the child and mother if a) the newborn's expenses are billed out separately from the mother's and b) the plan has separate deductibles for each family member?

(If the child returns to the hospital, it has to satisfy its separate deductible before coverage.)

On its face, this seems to violate the restriction on coverage before the deductible is met. However, if the charges were instead imposed on the mother and the mother's deductible is met (likely in childbirth), then the expenses could be covered. This result seems based more on form than on what's actually happening. Any thoughts?

If we establish a Simple IRA this year, but determine prior to November 1 of this year that a 401(k) will be a better option, can we switch the plan to a 401(k) after only one year of having the simple open? The participants would maintain the Simple IRA's as IRA's for a min of 2 years. please advise

One of our clients has formed a company in the US Virgin Islands and wants to know if they could be added as a participating employer in their 401k plan.

Is this possible and does it raise any issues (for example because of particpant's

ss#). It is my understanding that the Virgin Islands tax laws operate as a mirror image of the IRS tax code. Virtually all of the same rules apply. That said, I don't know if elective deferrals are exempt from the local income tax, or what other issues might arise.

Client has prototype document that it failed to timely amend (complete and execute) for GUST and EGTRRA. Under Rev. Proc. 2003-44, would there have to be a contemporaneous determination letter filing even if this plan is a prototype document? Section 6.04 appears to provide that correction by plan amendment by adoption of a prototype would not require the determination letter filing, but I wanted to make sure.

Do any of the Canadian provinces require that you offer continuation of health coverage to terminated employees, employees going on long-term disability, etc. similar to the COBRA requirements in the U.S.? If so, do you know where I can learn more?

Father owns 2 shares of 51 in company; wife owns 3 shares of 51; children own the balance of shares; Father just turned 70 1/2 and is still receiving comp as an employee. Does the father have to take RMD from the 401k since he is less than a 5% owner, or does family attribution apply since his wife also owns 3 shares. He would like to not have to take a distribution at this time.

Where can I find an IRS code section or ruling that discusses what does and does not qualify as a plan expense that can be paid for out of plan assets, such as the forfeiture account? Do expenses related to participant education, specifically the hard-dollar fee charged by the education advisor, qualify?

Suppose you have an LLC, taxed as a partnership. Therefore, the pension contribution is calculated based upon the earned income. This would normally be the line 14a on the Schedule K-1, and then you take the 1/2 SE tax reduction, and perform the reduced earned income deduction.

A question came up on this, and since I don't do tax filings, I'd like to solicit opinions. Apparently, the CPA is saying that the contribution (let's say 40,000) on behalf of the partners should be on Line 13, and therefore the line 14a figure is already reduced by the 40,000. For example, if the earned income after the 1/2 SE tax reduction is 180,000, and the partner will receive a 40,000 contribution, the CPA is saying that the Line 14a should be 140,000, not 180,000.

This doesn't seem right to me. As I read the Schedule K-1 instructions for line 13, yes, it does seem that the 40,000 should be reported here, but this is so the partner can deduct the 40,000 on his 1040. It does NOT seem to me that it should reduce the Line 14a amount.

Any thoughts on this? Thanks!

I cannot seem to find a straight answer on this anywhere...does the 2004 compensation limit of $205,000 apply in determining the contribution for both employee elective deferral AND employer matching contributions, or just for the match?

I have a client for whom several participants had only 6% elective deferral for 2004 - going by the $205,000, the max contribution should have been only $12,300, however they went to the $13,000 limit. For the employer match, however, which is max of 3%, that was correctly capped at $6,150 (3% of $205,000).

Hi, two questions:

1. We have a 403(b) Plan. We have decided to change vendors. Our new vendor is putting in place a new plan document, which we will execute. Our HR department is getting calls from financial planners saying that their clients (a few of our employees) have the right to immediately roll over their account balance. The financial planners claim that by executing a new plan with a new vendor, we are basically terminating the old 403(b) plan. I am not aware of a permissible rollover unless a participant terminates. Does anyone know?

2. So when we adopt the new plan, participant account balances are still sitting with the old vendor. The old vendor told us they have a new product coming out. However, for employees to take advantage of it, they have to roll over their account balances. It is strange to me that a participant, with money with that vendor, would have to roll money over. Any thoughts?

Any clue on these questions is appreciated.

Hi, two questions:

1. We have a 403(b) Plan. We have decided to change vendors. Our new vendor is putting in place a new plan document, which we will execute. Our HR department is getting calls from financial planners saying that their clients (a few of our employees) have the right to immediately roll over their account balance. The financial planners claim that by executing a new plan with a new vendor, we are basically terminating the old 403(b) plan. I am not aware of a permissible rollover unless a participant terminates. Does anyone know?

2. So when we adopt the new plan, participant account balances are still sitting with the old vendor. The old vendor told us they have a new product coming out. However, for employees to take advantage of it, they have to roll over their account balances. It is strange to me that a participant, with money with that vendor, would have to roll money over. Any thoughts?

Any clue on these questions is appreciated.

We are planning on re-doing our Dependent Eligibility Status Forms for dependents on our benefit plans that are over age 19 - and FT students under 25

Does anyone have a sample form that you could share with me?

Also any comments about how often you send them out - monthly, twice a year?

Thanks

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.