Hi Everyone,

I'm looking for a little assistance with the new 409A rules and the Grandfather Provision.

I understand that when you decipher when the compensation was deferred (either before or after January 1, 2005) you look at the vesting for the participant for those particular funds. The vested funds are tabbed as before 1/1/2005 and the unvested funds are tabbed as deferred after 1/1/2005. Now with the unvested portion does that maintain its vesting position as with the previous schedule?

Example: Plan's vesting schedule is 0-0-0-40-60-80-100. Participant is currently 80% vested. Thus the vested portion is earmarked as pre 1/1/2005. I know the unvested portion is post 1/1/2005. My question is that does the unvested portion remain at the point where one more vesting credit will vest the funds at 100% or does the vesting begin over again?

I'm 43 and just landed a new job making more than I ever have (little under $110k yr). I'm starting late, (never saved before) so I want to catch up as quickly as possible. 2 questions:

1. If I contribute the max ($14k) into my 401k, can I still open and contribute the max into either a traditional IRA or Roth IRA? Someone said I couldn't.

2. My compensation pkg is: $85k yrly, $15k yr end bonus and $3k "profit sharing" employer contrb to my 401k. They do not match my contributions. So what is the best way to maximize my investing? Put the max in 401k ($14k - i.e. most of my yr end bonus) plus max ($4k) in Roth IRA and whatever else I can into taxable funds? Or because long term capital gains tax is only 15% would it be better to contribute more into taxable funds rather than max in 401k?

Thanks!

I understand that elective deferrals are not made from severance pay that is paid to an employee after the date of termination. My question is related to the 3% nonelective SH contribution. The Plan defines compensation as W-2 wages. The severance pay is included in W-2. Does the severance pay that is paid after the employee terminates count when determining the 3% SH contribution?

Want to General Test a window that provides 3 years added to age and service for those eligible for the window and not receiving Minimum Distributions but only a flat $10,000 for a couple of non-highs who are eligible for the window and receiving Minimum Distributions.

Have a couple of questions :

(1) Are the accrual rates and corresponding rate groups to be tested created by looking at the entire plan's participants or just those eligible for the window ?

(2) If testing on a benefits basis would you simply convert the $10,000 amounts to an annuity at current age - both participants are older than the testing age of 65- and then for say the annual method would the change in accrued benefit simply be the converted benefit plus the otherwise accrued minus the beginning of year accrued ?

For those eligibles not getting the $10,000 and again using the annual method I'm assuming the accrual rates would be determined by taking the accrued benefit reflective of the 3/3 and subtracting the beginning of period accrued which naturally doesn't reflect any enhancement ?

Does anyone require active employees with ESRD (End-stage Renal Disease) to enroll in Medicare as a condition of continued participation in your active employee health plan? If so, would you be willing to share your plan language? Many thanks.

I have a KSOP that recently paid a stock dividend. I'm unable to find any language in the document which addresses what to do with the stock dividend on shares in suspense. The document does state that a cash dividend on suspense shares can be used to pay the loan or purchase additional stock. We have employees who are waiting to buy stock with their deferrals. Would it be reasonable to do this? Any suggestions?

Are there any COBRA administrators who have premium payments sent directly to a lockbox? How do you deal with payments that are made (postmarked) after the grace period has ended? Since the payment has already been deposited into the bank account, do you simply issue the participant a check?

Background:

1) plan participant divorced

2) a QDRO was drafted

3) plan participant died

4) the QDRO was then submitted to the plan administrator

5) the decedent-participant's estate claims the funds as does the alternate payee

The qualified DC plan has instituted an interpleader action. It intends to pay the account balance to a U.S. District Court, which will then decide who gets the money.

A few questions come up:

1) Normally a 1099-R would have to be issued, but does it in this situation, and if so to whom? (I see on the instructions to the 1099-R that if the payment would be exempt from tax no 1099-R need be issued.)

2) Is interpleader even permitted under these circumstances, and if so would the plan have to specifically provide for such an ability?

Thanks for any help.

When implementing a new cash balance plan for a professional organization (medical practice or really any organization) with 7 owners/HCE's... is it possible to exclude one or two owners if they do not wish to participate and contribute? Can this be done while drafting the plan? Does the number of owners or owner demographics play a role in the ability to do so or not? Does the company structure play a role? Most seem to be LLC's or partnerships. Thanks in advance for any help.

If an existing calendar year 401(k) plan wants to establish a safe harbor plan effective 1/1/05 using the safe harbor matching formula and timely provides the employee notices by 12/1/04 and operationally applies the safe harbor matching formula effective for the first payroll in 2005, when is the deadline for restating the plan document? Would it still be prior to the beginning of the 2005 plan year?

is a participant in a closely held esop entitled to receive a copy of the independent stock valueation reports used to annually establish esop stock value?

What happens to the 2% shareholders in a self-funded group health plan? I believe they are taxed as income on the fully insured equivilents and the claims paid out are not taxable as income. How does this impact non-discrimination testing if more claims are paid out to HCE's as opposed to non-HCE's? Are the HCE's then taxed as income on the claims?

Under a split dollar arrangement, if the cash value of the policy is paid to an employee (who at the time has terminated employment), is it reported on a 1099 or W-2? I'd appreciate any thoughs.

Is a 5500 filing required for a prepaid legal services plan (assuming the benefit is not incorporated in another ERISA-covered plan)?

We are trying to increase our organ transplant lifetime maximum amount, however, the increase will not apply to participants who have been advised to have or are in the process of having a transplant. Those individuals will remain at the lower lifetime maximum. (We do have particpants who fall into this catagory.) It seems to me that this would be a violation of HIPAA, however I cannot pinpoint a specific prohibitation in HIPAA to support this. Can anyone help me? Would this violate HIPAA's PCE or nondiscrimination provisions?

We have a client, presently a citizen of Venezuela. He has applied for

U.S./Puerto Rico citizenship, and is waiting and working on that process.

He resides in Puerto Rico (over 2 years), and is treated as a Puerto Rico

resident for tax purposes. He is the sole owner of an LLC (disregarded

entity, he files Sch C) that is a member of a Fl LLC, located in florida. He

does work for business in its Puerto Rico office. The LLC is profitable,

and he draws a salary from the LLC as well. Thus, I believe he is paying

Puerto Rico taxes on his salary, and U.S. taxes on his share of the LLC

profits.

I would like to transfer my Roth IRA ($10K) into an offshore retirement savings account in the UK (Isle of Man). Is this possible? If so, are there penalties?

PLR 200430013 takes the position that federal credit unions are instrumentalities of the US government, and that their deferred compensation programs are accordingly not regulated by IRC 457.

IRS takes the position in the PLR that it will not take a position on applicable law. (It is apparently troubled by the "loophole.")

So, what's going on, and what do you do if you represent a federal credit union ? The last item on the list of employee benefit projects for IRS "priority guidance" is "guidance under Code Sec. 457(b) and Code Sec. 501©(1) on plans established by federal credit unions."

Unless legislation is enacted, it seems pretty clear (to me, at least) that 457 does not apply to federal credit unions and that 409A (issued after the PLR) probably does, although I suspect that Congress probably did not intend 409A to apply to federal instrumentalities, so even that is iffy.

Is it possible that federal credit unions simply need to operate deferred compensation plans according to pre-409A and pre-457 law?

George Chimento

I know this is a dead horse but can someone give me guidance on when elective deferrals need to be deposited after they have been witheld. I'm confused considering the 15th of the following month guidance and more recent things saying if you are audited it's a 7 day time period to be considered administratively feasable.

If a "safe harbor" profit sharing plan provides that a lump sum is the normal form of benefit, but also provides that a joint and survivor annuity is an optional form of benefit, are the spousal consent rules in effect? Or is spousal consent only required when the normal form of distribution is an annuity?

Thanks!