In the SEP answer book that is published by ASPEN publishers it mentions that all of an employer's plans including Section 401(a) plans and annuity contracts described in Code Section 403(a) must be included when determing whether the employer's SEP plan is top heavy? I think that 403(b) plans are not 401(a) plans but are 403(b) plans considered annuity contracts described in Code Section 403(a)?

1. Can you terminate a Simple IRA at any time?

2. Can you open a SEP IRA the same year the Simple IRA is terminated?

3. If a SEP IRA is effective 1/1/05, do all employees who have worked the past 3 years become immediately eligible? Or do they have to wait 3 years from the time the SEP was established?

One of our daily valuation plans provides for immediate distribution. The plan also deposits its matching contribution in September following year end. So, participants who terminated in 2004 will receive their matching contribution in September 2005.

If a participant had an account balance >$5k and the match deposited for 2004 will be less than $1,000, can the trustee cash out that balance, or do you always look to the original vested balance?

Also, how long do you honor distribution papework submitted by the participant? If a participant originally elected a rollover in 2004, is that election valid in September 2005 once the matching contribution is deposited, or must we get another form completed?

Our other concern with some of the distributions that occurred in early 2004 is that the terminated participant has possibly closed that IRA account.

Couple of questions. If a QB waives COBRA coverage, and then revokes the waiver, the employer can reinstate coverage on the day coverage is revoked. Is the employer required to administer in this manner, or can we retro-reinstate?

If we did reinstate on day waiver is revoked, this does not extend the end of their COBRA term, right?

Thx.

This may be a dumb question - but when you say that 403(b) deductions are deducted pre-tax - does this include withholding, social security and medicare? Or just withholding?

Hey - I have been out of the retirement admin scene in along time - recently my boss asked if there was a way to provide an array of benefitsd to employees.

right now they have a DB plan(yes, still) 401(k) no match and a fsa.

I am thinking that a cafe, with a 401(k)/Match combines the best alternative.

Sorry - was not always the best alternative in the past - has that changed?

if we ditch the db (seems likely) can we do a crosstested ps separate and apart from the cafeteria plan?

I am very up to speed on the tech side - but haven't had to do this type of plan proposition in a while.

any help would be greatly appreciated!!

Plan has no age/service reqt. There are 2 part timers who were in the plan in 2003 but decided I guess not to pick up any hours during 2004 and therefore did not work and have no salary. One of them did officially terminate employment during the year but the other did not so she could resume working at some point in time. Question is how should these 2 be classified? Technically they are active ee's with no salary. But if they are listed that way they are included in testing which can't be right since they would have 0% deferral rate. Or should they be listed as ineligible since they have no compensation to receive benefits on anyway? Technically if they did not work any hours then they had a break in service and should be listed as inactive anyways I think? Plan uses 1 year break rules.

Does anyone know of the significance of Schedule D matching up with Schedules A and I. Specifically, what values shoud be reported on the D? The data that we get from the Insurance Company about the PSA's is normally on a cash basis. However, the ending balance on Schedule I is normally on an accrual basis. The same goes for Schedule A. Does the D have to match the A? Because the Schedule A data is often reported on an accrual basis. I have never received any notices from the DOL about the different balances reported on the schedules not matching up. Has anyone else run into this problem?

Dental ins. carrier is not issuing Schedule A for 2004. Says new legislation is holding it up. Anyone aware of this?

Following is the situation I'm looking at regarding newly acquired companies:

Owners of Company 1 (Owner A - 80.03%, Owner B - 19.97%) buy 4 new companies. In the end, each owner owns the same percentage in all 5 companies. Company 1 maintains a PS plan with a 09/30 plan year end.

Company 2 was purchased 12/2001; had an existing PS plan

Company 3 was purchased 06/2003; new PS plan adopted 10/04

Company 4 was purchased 03/2004; new PS plan adopted 11/04

Company 5 was purchased 06/2004; had an existing PS plan

Due to the transition period allowed for acquisitions is the following correct regarding the Company 1 coverage test?

09/30/04 PYE - include Company 2

09/30/05 PYE - include Companies 2 and 3

09/30/06 PYE - include Companies 2, 3, 4 and 5

I am somewhat confused if there is no coverage testing at all for the transition period or if coverage testing is still needed for the existing controlled group and only excluding the newly acquired company is allowed.

Any help would be appreciated. Thanks!

Can you issue an in kind distribution from a non qualified plan? if so, what is the taxation?

I work in the HR department of a company with about 5,000 employees. We have about 10 people that are in the reserves and take intermittent days throughout the year as unpaid military leave. The days taken are normally a Friday or Monday, and at the most, a week at a time, all for training. Are we to consider this time as military service under USERRA and credit wages that would have otherwise been earned (on the days off) to our pension plan accordingly?

There have been various informal indications in the past from seminars and articles that the IRS was working on a revised model 402(f) distribtuion notice to reflect the new automatic rollover rules. Has anyone heard anything recently at a seminar or otherwise on when the IRS might release the updated safe harbor 402(f) distribution notice? Thanks for any info you might have.

I left my employer in 2004. I elected for a total distribution of my 401k and rollover into individual IRA. The actual total distribution occured in 2005. Received notice of excess contribution. I have requested the excess be removed from my current account and returned to me. I am showing the excess as additional income for 2004.

Former holder is to issue 1099R for 2005 reflecting excess contribution and earnings, which would be taxable to me in 2004?? Earnings would be subject to 6% penalty?.

Question: Other than reporting excess as "other income" on 2004 return, are any penalties or taxes due on excess contribution. 10% penalty ??

TIA

Has anyone created a report that looks more like the internal actuarial data report from Pentabs they wouldn't mind sharing? I would really like to be able to print data for more than one person on a page. Thanks in advance, Sue

Family Coverage Won't Disqualify Spouse From HSA, IRS Rules

A married individual who is eligible to contribute to a health savings account (HSA) does not lose eligibility when his or her spouse has low-deductible family health coverage, provided the spouse's plan does not cover the individual, the IRS ruled on April 13.

According to Rev. Rul. 2005-25, the special rule in the Internal Revenue Code treating both spouses as having only family coverage when either one has family coverage does not apply when the other spouse's low-deductible coverage excludes his or her spouse. It also does not affect the eligible spouse's eligibility to make HSA contributions up to his or her annual contribution limit.

The maximum amount that an eligible individual may contribute to an HSA is based on whether the individual has self-only or family high-deductible health plan (HDHP) coverage, the IRS said. For 2005, the contribution limit is the lesser of the annual deductible under the HDHP (minimum of $1,000 for self-only coverage and $2,000 for family coverage) or $2,650 for self-only coverage and $5,250 for family coverage.

A married individual who is eligible to contribute to a health savings account (HSA) does not lose eligibility when his or her spouse has low-deductible family health coverage, provided the spouse's plan does not cover the individual, the IRS ruled on April 13.

According to Rev. Rul. 2005-25, the special rule in the Internal Revenue Code treating both spouses as having only family coverage when either one has family coverage does not apply when the other spouse's low-deductible coverage excludes his or her spouse. It also does not affect the eligible spouse's eligibility to make HSA contributions up to his or her annual contribution limit.

The maximum amount that an eligible individual may contribute to an HSA is based on whether the individual has self-only or family high-deductible health plan (HDHP) coverage, the IRS said. For 2005, the contribution limit is the lesser of the annual deductible under the HDHP (minimum of $1,000 for self-only coverage and $2,000 for family coverage) or $2,650 for self-only coverage and $5,250 for family coverage.

Rev. Rul. 2005-25 is available online at

Hi,

I'm doing my wife's taxes for 2004 (we live in New York City) and she worked part-time through the year earning roughly $38,000. She contributed the max to her ROTH IRA which she opened on January 1, 2004.

Turbo Tax is telling us over and over that we have "overcontributed" to the ROTH and must take out the entire $3,000. I cannot for the life of me figure out why.

I am self-employed and itemize deductions. Therefore, my wife must itemize her deductions also even though we file separately. Her only income was this part-time income and we ahve a full W2 and everything.

Any thoughts?

Plan documents call for comp only while a participant. Two entered the plan at start of 4th quarter. They are included with others in an allocation group. Plan passes test based on Ratio Percentage Test using a 6% allocation and I have only including their 4th quarter comp.

Because Plan is Top Heavy, they are entitled to the top heavy minimum. 3% of full year comp is more than the 6% of the eligible 4th quarter comp.

Do I simply give them the larger of the two amounts without further testing? Or do I run the cross-test using a 3% allocation and their full year comp?

If I have to do the latter, the cross-test fails at 3%. I have to raise the allocation back to the 6% rate to again pass the cross test--an amount that is twice the THM.

Your comments are as always greatly appreciated.

Is there any problem with the sale of qualified employer securities from a plan to the employer in exchange for a 5 year promissory note rather than a single payment in full? The note would bear interest at the applicable federal rate.

I understand that due to the recent changes with the VCP that the participant notification requirement was elimintated. However I have a client that would like to send a participant notification anyway. I have searched various website's and tried a "google" search and I can not find a sample. Does anyone have one or could you suggest a website that may have one or be helpful.

Thanks!!!