Google led me here, where folks seem to be knowledgeable, so let me throw this out:

I write for TV and have just become a Subchapter S Corp. One of the major reasons for this is so I can put some tax-deferred retirement income aside. Now I need to decide between a SEP-IRA and a 401k. Now, I know the limit is $42,000, whichever way I go, but I'm confused over which way may might be most advantageous.

The SEP-IRA path is 25% of my salary, right? So I would need to pay myself $168,000. The 401k way is 25%of salary plus $14,000 of pass-through income. I will make enough to do it either way, I just don't know if there are tax savings from doing it one way or another.

A related question, I guess, is what is the optimal salary to draw? or what is the best balance between salary and pass-through income? I will gross about $425,000 with expenses (primarily agent commission and legal) about $70,000. I live in California, which I think imposes a 1.5% tax on S corp net income.

Grateful fo any advice, or to be directed to a clear discussion of above issues!

Greg

Just curious on how everyone handles this? Do you have each rate group name the participant in it specifically so that the owners child can be excluded and/or given a zero benefit?

Ex> Joe Schmo runs his own roofing firm. He has a new comparability plan that is working nicely and is maximizing his contributions. However, the heir to his roofing empire has just graduated from design school and needs to earn money to eat. Joe Schmo hires Joe Jr. to work for his company. Joes sole responsibility is to ensure that the company t-shirts are the best in all the land and that each employee wears it on a daily basis. Joe Jrs. Official title is Company Fashion Consultant. If you had them categorized as HCE and Non-HCE the plan would fail 401a4 miserably. So we must create a new category so that Joe Jr. can receive a zero contribution.

How do you categorize them now.

ie: Rate Group 1: Joe Schmo

Rate Group 2: Joe Jr.

Rate Group 3: All Others

or Rate Group 1: President

Rate Group 2: Company Fashion Consultant

Rate Group 3: All Others

Teachers are on contract for the school year with the summer off, but health care benefits are continued during summer months. They "make up" premium contribution at the start of the next school year. If they do not return in September, how do other schools handle getting payment for their contributions?

A plan has an effective date of 3/1/2004 and runs off calendar.

The owner makes one contribution on 12/31/2004 for $16,000 and no additional contributions before the plan year ends on 2/28/2005.

Am I correct in assuming that for non-discrimination purposes for the plan year ending 2/28/2005 the owner has deferrals of $13,000 and catchup contributions of $3,000?

Since we only get the census at the end of the plan year, and post a single transaction, our system wants to make the deferrals $14,000 with a $2,000 catchup (based on 2005 limits).

Thanks!

a calendar year psp(appx 18 particpants) wants to change the plan year to 4-1-04 - 3-31-05 in order to avoid making contributions to a couple of terminated employees. i advised that this can not be done retroactively. however, if they wanted to set it up for 4-1-05 thru 3-31-06, and the amendments were signed prior to april 1, 05. what liability would the plan have for the short plan year(1-1-05 thru 3-31-05) outside filing 5500 by 10/31/05?

Upon commencement of employment, employees elected not to participate in the employer's profit sharing plan. The plan has since been amended to include a 401(k) feature. Can these employees now elect to participate in the plan? The employees are only going to participate in the 401(k) feature of the plan and will be excluded from participating in the profit sharing feature.

I'm having a tough time figuring out the extent to which Reg. Section 1.401(k)-1(a)(iv) impacts these elections. Any comments?

Can someone please clarify for me the status of the IRS' new relative value disclosure regulations as they apply to money purchase pension plans (MPPP)?

Specifically, if a MPPP's lump sum is not less valuable than the annuities under the plan, are the regulations currently effective or delayed to 2/1/2006?

Thanks.

Is there potential age discrimination in a DB plan that reduces the NRB for years of service less than X?

For example, suppose the benefit is 50% of FAC multiplied by years of service divided by 25 years. Clearly an employee who is hired at age 55 will have a smaller NRB than an employee hired at age 35 (assuming same salary history etc.). However, if the employer does not force retirement at a specific age, the 55 year old participant could (but not likely) work another 25 years and earn a full benefit. Also, the 55 year old would accrue benefits at a rate at least as great as the 35 year old.

Suppose a plan passes 401(a)(4) but provides 50% of FAC to Group A participants and 50% of FAC reduced for years of service less than 25 for all other participants. Could a non-group A participant claim age discrimination?

Thanks much.

One of my clients over age 50 made a 401k deferral of $16,000 for 2004 in his employer's plan ($13,000 plus $3,000 catchup).

The client also has a SEP plan from unrelated self-employment income. The client thinks he can receive another $3,000 catchup contribution from his SEP for 2004.

I say no, but his accountant says yes. Am I wrong? Thanks.

plan year end is 4/30/2005 and the plan has last day and 1000 hour rule. Can we change the groupings or is it too late?

Currently plan groupings are "HCE" and "Non-HCE". We want them to read "President", "Vice Presidents", "Key Employees", and "all others". The only individuals who would be moving groups are HCE's.

Does moving HCE's to a lower contribution class constitute a reduction in benefits and thus disallow us to make this change? Ideally we'd like the "Vice Prsidents" to receive the same percentage as the "all others" and the "Key Employees" to receive a zero benefit.

We are going to be setting up defined contribution plans for a number of governmental entities and am looking for a good source of documents. All we have are the normal qualified plan document sources.

Any suggestions?

Can anyone provide a good source (preferrably online) for Health Reimbursement Account administration forms?

I have a plan that where all of the sudden I see a SEP money in one of the participant's accounts. Now this participant wants to take a hardship distribution from his SEP rollover. Can a qualified 401(k) Plan accept SEP money? I know it can accept IRA money. Is this pretty much the same thing?

Can someone tell me how this money would be taxed? I believe it is still not considered an eligible rollover, so the participant would not have to have federal income tax withheld. Does the 10% penalty still apply because he is under 59 1/2?

Any guidance on this would be appreciated.

Thank you.

Suzanne

While perusing the newly released LRMs for CODAs, on page 3 I discovered a note to reviewer that says: "A plan can permit Ele tive Deferrals fo more than 75 percent of compensation, but in general a plan cannot limit Elective Deferrals to a percentage less than 75 percent of compensation." What gives? Where did this come from?

I have a client who is about $5000 and several months in arrears regarding our invoices for TPA services. We have a signed contract with them that states we will cease services if any invoice goes unpaid for 60 days. When we notified them that we would be ceasing services until we received pmt., they informed us there were on the verge of filing bankruptcy. Also, they had not remitted several months worth of deferrals.

Now, without our prior knowledge, the broker has requested a check from the plan to pay our past due fees. I explained to broker that 1) the plan had to be amended to do this and 2) the amendment could be not retroactive and past due fees could not be paid from the plan. Do you all agree that the past due fees cannot be paid from the plan?

Broker has accused us of holding the plan and participants "hostage." My understanding is that upon filing bankruptcy, bankruptcy trustee will appoint a TPA to terminate the plan and payout participants.

Regarding our past due fees, I realize that we are just in line with the other creditors. But I want to warn the broker and the trustee that in trying to remedy the problem, they are creating others. Agreed?

I'm a little post happy today I guess. I'm having a hard time determining how to decifer and handle the new (2004) k-1 format on line 14 (self-employment earnings) where it has a sub-category A (net earnings from self-employment) and also B (Gross Farming) and C (Gross non-farm income). It's mostly "C" I'm wondering about. If a client has both A and C sub-categories of self-employment income shown on line 14 are both used for the earned income calculation (I realize there's a section 179 expense adj. potential as well). I don't like the term "Gross" income either on the C category as it make me wonder if there are some expenses that need to be subtracted from this figure. Any thoughts/help out there ? thanks.

Has anyone been receiving rejection letters from the IRS on Form 5500 extensions for the 6/30/04 PYE that were timely filed ? We have received a few and would have thought it was just our own issue but now a local CPA who files their own extensions (and does adminstration work on plans) also had a timely 6/30/04 extension rejected. In all cases the rejection letter claims the extension was not timely filed. Just wondering if anyone else has had this happen. Thx.

Here's a situation. A COBRA qualified beneficiary

notifies their COBRA administrator in writing that

they are terminating their COBRA coverage because they

have other coverage. They then learn that they do not

really have other coverage - in this case, it was the

mistake of the administrator of the new plan that

misinformed the COBRA participant. Can the COBRA

participant reinstate their COBRA coverage if they pay

the current month's premium before its due date? Is

there a cite for whatever the answer is?

Thanks.

Tom

I have seen articles on automatic rollovers and articles on seminars where there were indications the IRS was working on a revised model 402(f) notice to reflect the automatic rollover rules. As far as I know, this has still not come out. Has anyone heard anything further on when the IRS might release the updated safe harbor 402(f) notice? Thanks.

Can someone please clarify for me the status of the IRS' new relative value disclosure regulations as they apply to money purchase pension plans (MPPP)?

Specifically, if a MPPP's lump sum is not less valuable than the annuities under the plan, are the regulations currently effective or delayed to 2/1/2006?

Thanks.