If an employee eligible to defer to a (k) plan is on the payroll but does not have any compensation in the testing year, does he/she count as a 0 for determining the ADP/ACP averages ?

I think the answer is yes, but could not find any definative guidance. The arguement against including this person is - If the EE had no compensation, he or she had no real opportunity to defer so he or she should not count as a 0 for determining the average.

Any thoughts ?

I am just curious if anyone has come across this situation and how you handled it. Plan sponsor made late deferrals to the plan in the 2003 plan year (calendar year) but did not correct the late deposit until March, 2005. The 2003 form 5500 was completed by answering "yes" to question 4a on the schedule I but no amount was listed as the plan sponsor did not provide the information to the recordkeeper that was completing the 5500. A 2003 form 5330 was never completed.

The plan sponsor received a letter from the DOL indicating that the schedule I was not complete and to inlude an amount in 4a. That was done and the plan sponsor submitted the corrected schedule I to the DOL. My question is now that the plan sponsor has provided the amount of the late deferrals and the earnings on those deferrals were calculated and deposited into the plan, should a form 5330 for 2003 be completed even though it is considered late? Also, I would think a 2004 form 5330 should be completed and filed by July 31, 2005. My second question is: On the 2004 form 5330 should the amount of the lost earnings be listed in 6b since the lated deposits were not corrected timely?

Any thoughts on this situation would be greatly appreciated.

4 self-employed and independent attorneys who share an office have created a tax entity for their office expenses (ie. office supplies and the use of a secretary). Each pays 1/4 of those expenses and 1/4 of that secretary's W-2 wages.

Question: One of the attorneys wants to set up a SEP for himself. Does he need to include the secretary in the SEP? If so, since he is paying 1/4 of the secretary's salary, can he determine the secretary's contribution based the wages that he shares in the cost (1/4 of total pay)?

Hi, I 36yrs old and and my wife, we have never been big savers and I'm am just now trying to establish a saving Plan. I'm in my company 401K my wife is in her 401k, my contributions is 5% with a match of 50%up to 4%. My wife gets 0% match but good retirement and retires in 13yrs with full pay until 65(state job). All assets will be paid for in 12yrs. I make app. 70K and the wife 35K.

Now with that said, I would like to start a IRA preferably a Roth. can anyone give me any pointers?

David

Partnership has a top heavy profit sharing only plan in 2003, but started a 401(k)/match the end of 2004. The match is a safe harbor formula, but technically didn't start the safe harbor until 2005. The only contributions thus far for 2004 were the deferrals and match for all employees and partners. The partners assumed they did not have to contribute any top heavy minimums in 2004 due to starting the 401k/match. They have already filed their tax returns.

I assume the top heavy minimum deposited shortly would have to be deductible in the 2005 tax year and included in the 2005 415 test. Is this correct?

The plan provides top heavy minimums to key employees. Is 2004 earned income adjusted to calculate the top heavy minimums for the partners?

What is Comprehensive Income, how does it arise and how is it computed?

What type of stand-alone software are people using out there for participant loan processing (amortization schedules, notes, etc.)? Any recommendations would be appreciated.

DB/DC plans are to be aggregated for general testing.

DB's accrual rates are computed using the Accrued-To-Date method. DB grants pre-plan service credits for benefit accruals.

For computing the equivalent accual rates under the DC plan, can the current year accrual method be used or must one use the Accrued-To-Date method?

If the Accrued-To-Date method must be used:

1. What amount must be used in the numerator for computing the annual allocation - actual account balance (which reflects gains/losses, expenses) or aggregate allocations to date minus withdrawals, if any (i.e. ignoring gains/losses, expenses etc)?

2. What comp must be used - current year, average comp during benefiting years or average comp during the period used for the DB plan's average comp (e.g Hi 3).

Does anyone know whether earnings on the assets held in a secular trust can be treated as captial gains rather than ordinary income?

A participant took out a loan for a principal residence and was amortized over 30 years. Due to unforeseen circumstances the property was never used as the principal residence.

IRC 72(p)(2)(B)(ii) states -- Clause (i) shall not apply to any loan used to acquire any dwelling unit which within a reasonable time is to be used (determined at the time the loan is made) as the principal residence of the participant.

I interpret this as meaning since the intent at the time the loan was made was truly to purchase a principal residence, this loan is valid and no correction is needed. Anyone else have a different opinion?

Does anyone know where I can find a list of state tax withholding information for distributions broken down by state?

Right now I specifically need information for the state of California.

At my job one of my coworkers was telling me that if your index funds go down in your 401k plan don't worry about it, becuase you are young and you will bounce back and when it goes back up you'll make more money, because you bought the shares when the price was low. I'm in my mid 20's so he told me that you should hope that it does bad, becuase you'll buy a lot of shares of it, so when it goes up you'll do so much better.

Now I talked to another coworker and he says that's not exaclty correct. He says for instance if you have 100k say in an index fun and it goes down 10%, well now it's at 90k. If it goes back up 10% you are still hurting, because 10% of 90 will bring you to 99k. So he says that buying when it's doing bad isn't a good idea.

Who's right?

I received a call from a client regarding a welfare plan that has never filed a 5500. The effective date of the plan is approx 12-15 years ago. The plan has approx 300 participants, and it offers group life and STD. It is fully insured with the premiums being paid 100% by the employee with after tax dollars.

First, any recommendations as to what to do about the years not filed? Second, what are the filing requirements? A 5500 with what schedules? and an audit report?

Any help is much appreciated.

We have an employee that went on active duty in 1986 and returned to employment in 1990, both before USERRA was enacted. He has only now brought it to our attention that he wants credit for his time on leave. The individual that he gave his notice of leave to is now deceased. The documentation we have makes it appear as though he resigned from his job and then enlisted in the military a month later. When he finished his tour of duty, documentation indicates that he was re-hired a month after he returned.

What is the proper way to treat military leave situations prior to when USERRA was in force?

We have an employee that went on active duty in 1986 and returned to employment in 1990, both before USERRA was enacted. He has only now brought it to our attention that he wants credit for his time on leave. The individual that he gave his notice of leave to is now deceased. The documentation we have makes it appear as though he resigned from his job and then enlisted in the military a month later. When he finished his tour of duty, documentation indicates that he was re-hired a month after he returned.

What is the proper way to treat military leave situations prior to when USERRA was in force?

We have an employee that went on active duty in 1986 and returned to employment in 1990, both before USERRA was enacted. He has only now brought it to our attention that he wants credit for his time on leave. The individual that he gave his notice of leave to is now deceased. The documentation we have makes it appear as though he resigned from his job and then enlisted in the military a month later. When he finished his tour of duty, documentation indicates that he was re-hired a month after he returned.

What is the proper way to treat military leave situations prior to when USERRA was in force?

We are contemplating adding a SERP for one of our outstanding sales people - does anyone know if we need him to sign the election by June 30, 2005 for this type of arrangement (not set up as a bonus arrangement)?

I have a situation whereas the participant elected to have his distribution made to his new ee's plan. However, he did not do his homework and his new ee does not accept rollovers. This transpired in Feb,05. He said he would set up an IRA. It is now June and my plan sponsor has not heard back from him regarding this IRA. She wants to re-deposit the distribution back with the plan's investment(he was not 100% vested, his account was not forfeited, therefore still has an account balance) and wait until he contact her again with distribution instructions. Any problem in doing this? The distribution amount is $445! Thanks.

Has anyone run accross anything (or have any thoughts) addressing whether a 409A Separation from Service will occur if one moves from being a common law employee to an independent contractor/consultant.

I'm involved in a situation where key employee of a publicly traded company is stepping down but will remain as a consultant. The key employee will no longer have his current title (i.e., the employer will hire a replacement). He will not have the same duties as before. Will this be considered a separation from service so as to permit the executive to start receiving, in 6 months, his benefits under the nonqualified plan.

I have a 401k plan at work and I wanted to get into mutual funds and have a roth IRA. I just recently purchased a mutual funds book so I can start learning. I wanted to have a Roth IRA account that I wouldn't have to worry that much about it and then other mutual funds that are outside of the Roth IRA.

I was thinking about at least starting out with this Vanguard Target Retirement 2035 Fund (VTTHX). Is this a good idea or am I better off pickig another mutual fund?

I was thinking about going with this one for my Roth and then having another mutual fund (wellington). Any suggestions?