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?

I am working with a retireing teacher who has accumulated a significant amount of unused sick days. The state of CT will make a payment to him for these days, and he is being told his options are to roll it either into his 403(b) or into a 457 plan, both of which have variable annuity investment options with lock ups we are looking to avoid. Does anyone know if there is also the option of rolling something like this out to an IRA? Thx

401(k) plan document defines compensation to include bonuses. Many participants earn bonuses on a weekly or monthly basis. The employer has never applied participants deferral percentages to their bonuses. The employer now realizes its error and wants to start applying the deferral percentages to bonuses. Enrollment is coming up and participants will sign new forms in which they will elect to defer and elect a deferral percentage. They will be told that this percentage applies to all compensation including bonuses. My concern is that if the plan is ever audited, the auditor may discover that the plan was not operated in accordance with the plan document in the past. Does anyone have any idea how to fix this?

Can anyone confirm whether or not rollovers and/or direct transfers are allowed from a 457 tax exempt to a 401k or any other qualified plan? Or if a transfer to another 457 is only permitted?

Thank you

Taking over a plan which specified that Actuarial Equivalence for all purposes would equal 94GAR mortality and the "applicable interest rate" (ie, 30-year UST). The interest rate is based on the 3 month preceding with a 1 month stability period. Both participants in the plan attained NRA @ 1/1/2005 and benefit accruals were previously frozen, so late retirement increases on actuarial equivalence are the only factor.

My problem: how would you determine the Late Retirement adjustment factors, from NRA to NRA+1, given that the document states that the interest rate changes monthly? Any ideas as to a reasonable interpretation (and no, 415 limits don't come into play at this point).

I'm a bit confused about whether/how the new Proposed 415 Regulations may affect supplemental payments made to military reservists called up to active duty.

Up to this point, I was under the impression that there was a bit of leeway for employers to either terminate the employment relationship or continue the relationship when the employee was called to active duty. Either way, the employer could pay supplemental pay to the soldier. If the employer relationship was terminated, no FICA/FUTA was due. On the other hand, if it was continued, FICA/FUTA was due, but salary could be reduced to make 401(k) contributions. The IRS never confirmed this interpretation, but I believe it is a fairly reasonable one.

Under the new Regulations, Section 1.415©-2(e)(1) says:

"(e) Timing rules.

(1) In general.

(i) Payment during the limitation year. Except as otherwise provided in this paragraph (e), in order to be taken into account for a limitation year, compensation within the meaning of section 415©(3) must be actually paid or made available to an employee (or, if earlier, includible in the gross income of the employee) within the limitation year. For this purpose, compensation is treated as paid on a date if it is actually paid on that date or it would have been paid on that date but for an election under section 401(k), 403(b), 408(k), 408(p)(2)(A)(i), 457(b), 132(f), or 125.

(ii) Payment prior to severance from employment. In order to be taken into account for a limitation year, compensation within the meaning of section 415©(3) must be paid or treated as paid to the employee (in accordance with the rules of paragraph (e)(1)(i) of this section) prior to severance from employment (within the meaning of section 401(k)(2)(B)(i)(I)) with the employer maintaining the plan. "

Section 1.415©-2(e)(4) says:

"(4) Certain military service. The rule of paragraph (e)(1)(ii) of this section does not apply to payments to an individual who does not currently perform services for the employer by reason of qualified military service (as that term is used in section 414(u)(1)) to the extent those payments do not exceed the amounts the individual would have received if the individual had continued to perform services for the employer rather than entering qualified military service."

I am wondering what the impact of 1.415©-2(e)(4) is. Only employees can benefit under a plan, so the employer cannot make contributions or salary reduction contributions for the employee normally if such a relationship doesn't exist (other than in the same plan year). Does this only pertain to employer contributions (and possibly salary reduction contributions for the supplemental pay) for the plan year the employee enters active duty? Alternatively, is the IRS trying to permit all contributions after the person is no longer an employee?

Any help would be appreciated.

Client is putting in DB plan primarily for owners but with enough employee classifications to pass testing (401(a)(26), 410(b), 401(a)(4)). Now at the last minute the client wants benefit other classes of employees initially designed to be excluded, by giving them a token $500 contribution per year. These other employee classes are already in a generous MP plan but client seems to want them to feel like they are also benefiting under the new proposed DB plan.

Is there any way to write this into a DB formula (general tested of course) or do I have to use a cash-balance arrangement to get this type of result. I really don't want to have 10 different token formulas to get each participant of different ages $500 or thereabouts. Any easy way to accomplish this without going to cash-balance ?

Has anyone successfully exported data and plan specifications from Relius and imported the data to establish new plans in Omni? I have 85 plans to move into Omni and I am looking for the easiest and most efficient way to do it.

Tom Poje, have you ever attempted to move plans between Sungard systems?

Supposedly, you can export the data stored in cards and run a JOBUNIC in Omni to import the data in cards.

I would love to hear from anyone that has any input.