I have a client that is a controlled group all working off the same custom plan document. They are a car dealership.

Do you test each group separately for 401(k) and 401(m), 415, top heavy, 410, etc? Or do you combine all into one?

I have in the past, but I'm thinking that for top heavy & 415, that maybe I should just combine them.

Thanks.

Employee receives a salary from Company A and a substantially higher salary from Company B. Company B has adopted A's plan. The employee only defers through B. No deferrals on wages earned from A. At the end of py it was determined based on combining wages from both companies, her match was underfunded. Question: Are you required to combine the compensation for both companies? I believe so, i just need some reassurance. Companies are a controlled group and utilize one plan doc.

A participant is going to have a baby. She is making upfront payments to the obstetrician as part of a payment plan agreement. Although no actual service is being preformed, would the payments that have already been made, qualify to be reimbursed through the FSA. (payments made are not for reqular office visits) My thinking is that this would not qualify to be reimbursed, because she is actually paying for a "provided service" that hasn't taken place yet. I hate to see someone "SOL" so I thought I'd get a second opinion, just to make sure I'm on the right track.

If a plan is terminated in 2000, but the assets are not completely distributed until 2003 - what obligation (if any) does a plan sponsor have to update the SPD for legislative/regulatory changes?

Anyone else running into problems with this report? We just upgraded to 10.0 and having major problems trying to get a cross tested plan to pass gateway. Not because we're not giving the right people the correct amount of contributions, but because Relius is continually saying it is failing. There are 7 NHCE's in the plan and everyone one of them is getting at least 5%, which in this case is required under the gateway reqt's. Talked to Corbel and they said that it is most likely due to a terminated part. in previous year getting a contribution which is not the case. Just wanted to see if anyone else had run into this before I go back to Corbel.

An IRA owner died in 1995 before his required beginning date. No distributions were taken from the IRA until 2004, when the IRA was totally distributed to the beneficiary. Under the proposed minimum distributions existing at that time, the IRA beneficiary had to either (1) start lifetime distributions in the year following the year of the owner's death or (2) fully distribute the IRA in the fifth year following the year of death (which in this case was 2000). Since lifetime distributions were not started, the default at that time was the five year rule. So, the IRA should have been completely distributed in 2000.

My question is, since the IRA should have been fully distributed in 2000, but nothing was distributed until 2004, how is the 50% penalty calculated and reported on Form 5329? From reading the IRS instructions for 5329, IRS Publication 590 and Treasury Regulations Section 54.4974, it is not totally clear whether (1) a 2004 form 5329 should be filed with the 50% penalty calculated on the lump sum distribution made during that year or (2) a 2000 form 5329 should be filed and the 50% penalty calculated on the 12/31/00 balance. If the answer is #2, then does that mean that forms 5329 should be filed for every year from 2000 to 2004 (when the lump sum distribution was made)? The above referenced instructions lead you in the direction of the latter response, but that would amount to a 200% penalty on the total balance in the IRA, which seems a bit absurd.

I am aware that the IRS provides for a refund of the 50% penalty, but the Publication 590 says you must pay the penalty first, so I have to deal with these questions.

Any guidance, especially actual experience, is appreciated.

If an employer hires an individual working as a temporary, can that employer waive or "credit service" toward the waiting period that employees must satisfy in order to enroll in the Section 125 portion of the Plan?? Rather than requiring that employee to re-satisfy the waiting period? My first answer is no, as the term "employee" is a defined term in the plan document (which references 414) and the service that was credited was not as an "employee" of the company.

HELP?!!

Company X maintains a 401(k) plan and a defined benefit plan. Company X acquires the stock of Company Y, a subsidiary of Company Z and Company Y employees are expected to become Company X employees as of the closing. The transaction is expected to close by 7/1. For purposes of the following tax law qualification requirements, does compensation of a former Company Y employee with Company X begin at $0 or does compensation with Company Y carry over into Company X:

(1) For purposes of determining highly compensated employee status for the year of the closing, are Company Y employees hired by Company X considered non highly compensated or does Company X have to look at their preceding year's compensation with Company Y?

(2) For purposes of determining highly compensated employee status for the following plan year, does Company X have to combine compensation with Company X and Company Y?

(3) For purposes of the elective deferral limit of $14,000 under Code Section 401(a)(30), are deferrals with Company Y combined with deferrals with Company X?

(4) For purposes of the compensation limit under Code Section 401(a)(17), does Company X have to combine compensation with Company X and Company Y?

(5) For purposes of determining whether an employee has exceeded the Social Security taxable wage base under a plan's integrated benefit formula, should Company X combine compensation with Company Y?

Thanks for your responses.

I have a single client who contributed $3,000 to his ROTH in 2004 and now we have found that his MAGI is in the phase out range. He has decided that he wants to withdraw the excess contribution (with earnings). Question - will the earnings on the excess contribution (required to be taxed in 2004) cause the MAGI to increase and create a circular calculation with respect to the maximum allowable contribution? I can find no guidance on the earnings on excess contributions with respect to the MAGI, so I presume the amount is includable in MAGI. ANY HELP IS MUCH APPRECIATED. THANKS.

A participant terminated in Ocotober 2004 and received a distribution in 2004. It was just discovered that her last deferral had not been remitted to the plan. When this was communicated to the plan sponsor, he issued a check to her rollover IRA instead of depositing it into the trust.

Can this be construed as a 2004 contribution and a 2005 distribution?

A client wants to amend their Eligibility Service Requirement from 3 months to 12 months while still keeping quarterly Plan Entry Dates. The next Plan Entry Date is April 1, 2005. Am I correct in assuming the Amendment must be effective and Resolutions executed no later than March 31, 2005? Thanx.

Would coverage of family planning services (oral contraceptives, IUD, Norplant) fall under the preventive care safe harbor for HDHPs? Notice 2004-50 Q&A 27 states that "drugs or medications are preventive care when taken by a person who has developed risk factors for a disease that has not yet manifested itself or not yet become clinically apparent (i.e., asymptomatic), or to prevent the reoccurrence of a disease from which a person has recovered." Also, Notice 2004-23 allows obstetric and gynocologic screenings as preventive care, but makes no mention of preventing pregnancy. My thought is that these drugs and devices would not fall under the preventive care safe harbor and must be subject to the plan deductible. Any thoughts?

Is the cash out of 2 weeks leave for a terminated employee the same as crediting them an additional two weeks service for vesting purposes.

If an employee receives cash for unused vacation is this "COMPENSATION" for purposes of 415©(3)? The regulations 1.415-2(d)(2) - states for "services ACTUALLY RENDERED" does this assume that if you worked to accrue the vacation that your employment was in fact the "service" that was rendered?

Part time employee hits NRA but does not accrue because hours are below 1000 needed and average comp does not increase. Plan proides that late retirement calculation is greater of formula benefit or actuarial equivalent of prior year's accrued benefit.

The participant's accrued benefit increases on account of the actuarial increase for late retirement. Is this benefitting under 410(b)? Reg 1.410(b)-(3) does not seem to have anything that says no, but logically one might think the answer should be no. Opinions?

Plan has first of plan year and 7th month entry dates. Participant completed 1 yos after 7/1 but was allowed to make deferrals for the remaining part of the year. The document says to distribute the deferrals, plus earnings, back to the participant. Question is how is this treated for tax purposes? Should they receive a 1099 for this amount? When do they include this in income? It's not a rollover eligible distribution, so should it just be done in the same manner as an excess deferral?

This is my first post on these boards! Thank you for the wealth of information.

Here's a thought I wanted to run by my fellow benefit professionals:

I have clients who want an HDHP and HSA for their companies, but they renew mid-year and don't like the limited HSA contributions for the partial calendar year.

For instance, an employer renews 7/1/05 and wants to fully fund the employee deductible in an HSA and doesn't like the risk presented to the employees because he can only fund 50% of the deductible or 50% of the maximum HSA contribution limit.

Can we implement an FSA where the employer will fully fund the amount of the deductible (NOT implementing a company sponsored HSA for the employees) through the end of 2005? Then, the employer will end the FSA 12/31/05 and open HSA's 1/1/06 to be fully funded for 2006?

Basically, I want to start an FSA with a short plan year and then end it to start the HSA. The goal is to have the employer start the HSA concept by lowering premiums and funding employee's deductibles for 2005 and then funding the HSA's for 2006 and onward.

Do any of you forsee any problems in doing this?

Thanks,

Josh in Alaska

How should we go about correcting a situation where there was a double-transmission of an employee deferral file when the error is not found until months later? The money was never actually deferred by a participant, but was posted to the participants account? If we do not use a "negative contribution", would it be acceptable to use an excess contribution transaction? Would it be okay that a trust statement shows more deferral contributions than those that were actually deferred by participants as long as there was a part of the trust statement that showed "corrective contributions" under the appropriate heading?

Participant exceeds 2004 415 limit for DC plans by $2,000. They are catch-up eligible and have the entire excess recharacterized as a catchup contribution. Their compensation is $205,000 and deferrals, prior to catchup, is $13,000.

Employer does not match on catch-up contributions and their formula is 75% up to first 6%.

Question: The match allocated to this participant was $9,225. Since the employer does not match catch-up contributions, is the attributable match on the recharacterized catchup contributions "forfeited" pursuant to correction under 401(a)(4)? If so, are they included/excluded from acp testing?

Is there a deadline for submitting a Volume Submitter plan using form 5307?

The plan in question was adopted in 2004 with a 1/1/04 effective date. This is a volume submitter defined benefit plan that is being aggregated with a DC plan for 401(a)(4) testing. The filing will include Sch. Q with Demo 6. Thanks