we use IRS Form 5305-SEP - Simplified Employee Pension - Individual Retirement Accounts Contribution Agreement - as our Foundation's formal SEP plan document. In that document, we currently specify that discretionary contributions will be made to employees' IRAs for all employees who are at least 21 years old and have worked for the Foundation at least 0.5 years (or 6 months) of the immediately preceding 5 years. Our SEP plan document specifies that our SEP plan excludes: (a) employees covered under a collective bargaining agreement, (b) certain nonresident aliens, and © employees whose total compensation during the year is less than $450 (subject to annual cost-of-living adjustments).

The Foundation currently contributes 12.5% of each employee's gross salary or wages earned during the calendar year to the SEP-IRA account specified by the employee.

The first question is whether or not SEP Plan benefits provided under the Form 5305-SEP plan document would apply to all employees on the Foundation's payroll, full-time or part-time regardless of how few average hours are worked during a work-week (as long as all criteria in the first paragraph above are met for a particular employee).

Would there be any way to exclude certain part-time employees (e.g., working less than 20 hours/week) and exclude all full-time or part-time college interns from receiving the SEP benefits under the Form 5305-SEP? Or would we have to discontinue the existing Form 5305-SEP document and then create a new SEP plan document? If so, what kind of hassles or employer risks, if any, would using an alternative SEP plan document entail?

Also, when should SEP benefits begin for a new employee (i.e., the begin date defined as the first payroll run to which SEP benefits would be applied): on the specific date an employee reaches his/her 6-month anniversary (within the 5-year span) or on January 1 of the calendar year that includes the employee's 6-month anniversary (within the 5-year span)?

Does anyone know of a calculator, spreadsheet or similar tool for calculating excess parachute payments? Any help/suggestions would be greatly appreciated!

I have read prior posts on this subject but remain unclear as to the conclusion. We have a sole proprietor client with a few long term employees who sponsors a 401k plan. All employee deferrals are timely deposited into the plan. The sole proprietor makes his deferral election by the end of the calendar year.

However, his self employement income can not be accurately calculated until after year end - usually in March or April.

Questions:

1. When does the deferral for the sole proprietor have to be deposited into the plan?

Options:

a. by 12/31 - seems impossible.

b. by 1/15, assuming it was not administratively feasible sooner - seems impossible

c. as soon as administrative feasible after determining his self employment income

d. 3/15 (heard something about a 2 1/2 month rule)

e. 4/15 (1040 due date)

f. 10/15 (extended date of 1040 and 5500)

2. Does the answer change for single person 401k plans?

3. Can you site any regs or rulings which address this point?

Thank you.

Several years ago, an employer used the wrong 415 limit to calculate contributions for two HCEs; it therefore undercontributed to their accounts. It would like to use QNECs to self-correct under EPCRS (under § 6.02(4)(b), such corrective contributions relate back to the yeart they should have been made and therefore aren't annual additions in the year they'reactually contributed).

EPCRS requires the employer to amend the plan to permit such QNECs--but all the guidance I'm finding on such amendments relates to correcting nondiscrimination errors and therefore doesn't apply to these HCE-only contributions. Is there necessary language for such an amendment, or can it just provide that the employer can, at its discretion, correct operational failures with QNECs?

Recently I heard that there was a case where a participant's widow was able to sue the trustees of a plan for losses her husband sustained in his directed brokerage account within his 401(k) Plan. I believe she prevailed. is anyone aware of this case?

Are there any provisions allowing a person called up for military duty to submit claims for a plan year beyond a plan's "run off" period? If so, would you need to extend the "run off" period for participants not out on military leave?

Have a 4/1 - 3/31 plan year. Plan has deferrals and prorata profit sharing. We are running the profit sharing allocation in Quantech and it valued annually not daily.

We are maximizing the top HCE so we need to make a contribution of 19.5% of compensation to do that. However this raises some issues for another HCE.

HCE deferred $16,000 out of bonus at 12/31/04. He has also deferred $2,545.46 between 1/1/05 - 3/31/05. His comp is at the 205,000 limit.

I thought when we went to allocate the 19.5% profit sharing, that the allocation would show $3,000 as catch-up, $15,545.46 as deferrals and then based on the 415 limit of $42,000 for plan year ending in 2005, allocate profit sharing of $26,454.54.

Not the case, it gave him $3,000 as catchup for exceeding 402(g) in 2004 calendar year ending within the plan year and then gave him $4,000 in catchup for reaching the 415 limit for plan year ending 2005. So, it gave him profit sharing of $30,454.54.

My problem with this is that now he has used his $4,000 catchup for 2005, so he can only defer $14,000 in 2005.

Is there a way to say no we don't want to use the $4,000 catchup for the 415 limit ? or since the document has prorata allocation and we are doing 19.5% HCE, do we have to get him as close as possible using the catchup for 415?

Still thinking of catchup as an election of a participant to defer more, it is harder when it is due to plan or statutory limits being hit and you seem to give up the ability to elect to use or not.

Does anyone know where we might find the following tables:

1994 Group Annuity Reserving Table projected to 2002

1984 Unisex Pension Mortality set back 3 years for spouse

I apologize in advance for mutilating the terminology.

Do you need interest assumptions to use these tables?

Thank you

I always read articles about the use of endorsement split dollar as an informal funding vehicle for a NQDC plan, and I've read the Miller case, but does anyone see this being done in practice? I saw a survey once that showed (I think) 2% (maybe less) of NQDC plans using split dollar.

Just curious about how common it is in real life.

Thanks.

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Cross-tested 401(k) SH plan. Three groups, 2 of which define the person by owner and year born. The 3rd group is all others. Plan is TH

After running eligibility we have 4 eligible EE's. 2 owners and 2 NHCE's. The one owner max's out by contributing 401(k) and the rest PS. The other owner has $0 401(k) and wants to get $0 PS. Now we are left with the 2 NHCE's and here is the question. One NHCE has termed with <500 hrs. Give that EE the 3% SH only? I get confused with coverage, given this person is not included.

Thanks.

According to Rev. Rul. 2004-45 (May 11, 2004), eligible individuals (who must be covered by a high-deductible health plan) may continue to contribute to an HSA while also covered by one or more of the following types of employer-provided plans that reimburse employee medical expenses:

-limited purpose FSAs and HRAs that restrict reimbursements to certain permitted benefits such as vision, dental or preventive care benefits;

-suspended HRAs where the employee has elected to forgo health reimbursements for the coverage period;

-post-deductible FSAs or HRAs that only provide reimbursements after the minimum annual deductible has been satisfied; or

-retirement HRAs that only provide reimbursements after an employee retires.

1) Based on the above, is it possible to use both a General Use Post-Deductible FSA and a Limited Purpose FSA in the same organization? IRS has stated that a mix of these plans can be used. The Post-Deductible FSA threshold would be the statutory minimums. Until the minimum is met, the Limited Purpose FSA would be able to reimburse all expenses not covered by the HDHP (ie not going toward the HDHP deductible).

2) If I understood all this correctly, the threshold of this Post-Deductible plan is met by reaching the statutory minimum with FSA eligible expenses?

3) In the Limited Purpose FSA, can prescription drugs be scheduled eligible in the plan docs while maintaining eligibility of the HSA holder to contribute to their HSA?

I know that catch-ups are disregarded when establishing the $41,000 (for 2004) annual additon limit (i.e a 50+ person who made $100,000 and deferred $13,000 and an additional $3,000 catch-up in 2004, can get a $28,000 profit sharing contribution for 2004) but I am pretty sure I heard that you cannot disregard the catch-up when testing the 100% of salary limit. I cant find the cite, does anyone know it?

a 50+ person has salary of $41,000 in 2004. he defers 13,000 and an additional $3,000 catch-up. Can he get a profit sharing contribution of $28,000. It all depends on whether the catch-up is ignored for the 100% limit test. does anyone know the cite either way?

ps. its a cross-tested plan where there are other employees and this guy could get the full $44,000 without the plan failing the 25% deduction limit.

pss. I tried using the search to find a previous similar question.

I have a client wanting me to determine if a cross tested plan would help him. So far I have not had to administer any such plans. I've been studying my PPD manuals and have a simplistic understanding of the concepts.

I'd like to plug some values into a spreadsheet and see what comes out. But I get the feeling that it is not so simple.

Can anyone point me to discussions on this site or other references I can read online that will get me closer to my clients request.

I have two partner owners making $150,000 and not the oldest. About 8 staff who make $70,000. Currently they are a Safe Harbor plan.

Any suggestions for raising my learning?

Thanks

Assuming a calendar year plan,

An employee is a participant in the 2003 plan year and terminates prior to the end of the plan year, without an account balance.

The employee is subsequently rehired after the 2004 plan year begins, and as per the document provisions becomes a participant as of the date of hire.

Since the participant was not actually employed on the first day of the 2004 plan year, are they included in the beginning count for purposes of the 5500?

Thanks!

A client had a calendar year profit sharing plan that was amended to a Safe Harbor Matching 401k plan with the 401k provisions effective 7/1/04. The client is a partnership and therefore has partnership income. Is it possible/legal to provide matching contributions on compensation earned from 7/1/04 thru 12/31/04 rather than the entire year?? And if so, is there a way to do that with the partners' income since they do not receive a salary?? Thanks.

I have a client who had a corporation, went to sole proprietor on the advice of a guy who claimed to be an accountant, then re-incorporated on the advice of a real accountant. Plan documents were done to reflect all of this.

For 2004, I have participants with 2 W-2s, one with sole p EIN and one with corp EIN. Add them together? All but 1 are relatives. (Owner will have little-to-no sole p income but W2 from the corp.)

I see that the DOL claims procedures address mandatory arbitration with respect to group health plans. Does anyone know whether mandatory arbitration provisions are enforceable in pension plans? I know that there are some cases addressing their enforceability in brokerage agreements associated with ERISA plans, but I'm looking for guidance on whether a plan can force a participant to go through mandatory arbitration as part of the claims process. Thanks.

Has anyone out there heard of an "ERISA account" that is funded by an investment trustee for the benefit of a client. We have a company 401(K) and an outside consultant that we hired advised us to press our trustee to fund this kind of account for us to use to pay fees for a plan audit. The Trustee says no because this would be a prohibited transaction without any ERISA exemption. Our consultant says it's done all the time, but we haven't found any information on this being done.

Does anyone have any information on this kind of thing? Should we press for this?

Our LLC clients issue W-2s to the owners who, in turn, participate in the company 401(k) plan. A new LLC client asked if the businessowners opt to be taxed as a partnership, can the owners still participate in the 401(k). Never had this situation before - can't the partners receive W-2s? If not, could the owners simply create an S Corp, as an additional employer, receive W-2 earnings and then participate? Thanks to those who make time to clear this up for me.

We have a signed distribution form from a former participant that is over 90 days old. Our understadning is that the tax notice only must beprovided within 90 days of payment. Can we get around this problem by simply providing another tax notice or does the partipant need to re-execute distribution paperwork?