Plan Year 2004

Participant 401k = $13,000

He's over 50

Add'l PS = $31,000

Total limit = $44,000

Can that work based on taking $3,000 out of the $13,000 and classifying it as catch up...therefore $10,000 401k, $3,000 catch up, $31,000 PS???

After the merger of two non-profits, there is now both a 403(b) plan and a 401(k) plan. Both have matching employer contributions subject to ACP testing.

Each plan satisfies coverage under 410(b).

Is there permissive aggregation for purposes of ACP testing?

Participant makes $13,000 in catch up contributions, he is over 50 for 2004. Can't he still receive $44,000 total, because any $3,000 of his 401k can be reclassified as catch-up?

401k = $13,000

PS = $41,000

Reclassify $3,000 as catch up, therefore 401k test only on $10,000???

For a total of $44,000

Any truth to this?

The spouse of an incarcerated participant, with power of attorney, wants to direct a lump-sum distribution. Can the 401k plan allow this? If allowed, what's the tax implication?

This is a new one on me. Any ideas much appreciated.

Newco buys Oldco's facilities and will employ a large percentage of Oldco's employees. Newco will set up a 401(k) plan, but because of time pressure it would rather not draft an actual document until after the closing date (the time pressure is significant and unavoidable). Instead, Newco proposes to establish a trust and to simply "carry over" employee salary deferral elections--made under Oldco's 401(k) plan--to Newco's "planless" 401(k). Newco would then draft a plan document before the end of the plan year; but, for significant period, employee money would be contributed to the trust without a plan document.

This makes me a little nervous. § 401(k) and the regs all presume a plan document; but is one required before a qualified cash-or-deferred election can take place? I know people rely sometimes on a "general rule" that you're OK if you get a plan document in place before the end of the first plan year--is there any support for that? If so, does it apply to cash or deferred elections?

I have an existing calendar year 401(k) plan. The Company was

thinking about maybe electing Safe Harbor (3%) for 2005, so they

distributed the "wait-and-see" notice in Nov 2004. Let's suppose

that in Nov 2005 they decide to elect the Safe Harbor and they distribute the

supplemental notice notifying the participants that the plan will be

Safe Harbor for 2005. My question is....When does the plan need to be amended? Does it need to be amended by Nov 30, 2005 or Dec 31, 2005?

plan wants to, effective 1/1/05, eliminate a class of employees (union) from the plan due to the union now collective bargaining. They have not in the past which is why they were in the plan in the first place. The elimination will reduce the number of participants by more than 20%. Does this qualify for a partial termination in which the former union employee's will be 100% vested? Thanks.

I have two employers that each have a 401k with my firm. The owners of each company are husband and wife (wife owns one, husband owns the other), thus a controlled group. This relationship was not known originally and each company's plan was setup on a standardized plan document that does not (and would not be able to) exclude the other company within the control group from participation.

We are going to move each company to a non-standardized document that excludes the other employer from participating going forward.

What would be the proper correction for the time the company's were on the standardized documents? Mostly concerned about the documents not excluding the other employer from participating in plan.

I know the proper correction method for a single, non-control group plan that excludes an eligible employee. I just feel those correction methods don't make a lot of sense for a controlled group of plans. For a single non-control group plan, an improperly excluded employee was denied the opportunity to participate. For a controlled group of plans, though an employee was technically improperly excluded from participating in one plan, he/she was able to participate in another plan.

A partnership failed the adp/acp test for 2004. I am in the process of having the deferrals refunded back to the one partner. Does the 10% excise tax apply to them if the money is refunded back prior to April 15(their tax filing deadline) or do they have to have the refund done by March 15 as in the case of a corp?

Normally, this calculation is performed using actuarial equivalent assumptions (at least that is the way that I was taught) to detemine the ILP normal cost. This is then multiplied by some number less than 2/3 to arrive at the maximum premium. So, for example, the projected benefit (without salary scale) would be multiplied by the AE APR and level funding from attained age would produce the initial ILP normal cost.

A client is now attempting to introduce a similar concept into a 412i plan (I know this is one everyone loves <GGG>). My initial reaction was to produce the same calculations from the first paragraph using the definition in the document for AE. They would prefer to use the settlement rates of the annuity and the funding assumptions in it because it produces MUCH larger ILP normal cost and therefore more insurance.

The argument is that RR 74-307 looks at 2/3 of the uninsured cost. Therefore, if an annuity was bought (using the settlement rates and accumulations in the annuity) - it would represent the uninsured cost.

Any feelings?? (The RR never really referenced how to do the calculations for a DB plan from my experience. The method outlined above was derived based on the principles set forth in the RR)

Thanks for any and all comments.

How long does an IRA have to be in effect? Here is why I ask....

- Cleint sponsors a 401(K) plan and maxes out

- Client makes an IRA contribution

- Client now wants to roll the IRA into the K plan

What is to prevent the client from doing this every year ... is there a rule that does just that?

Whatb is

Does anyone have any thoughts on how to "fix" the following problem? A governmental agency adopted a 401(k) plan for the first time in 1996 and has been maintaining it ever since.

We have a Schedule C person with an age-weighted allocation formula. I'm OK with regular and integrated formulas, but am wondering how to set up the circular calculation for this type of allocation. If Tom Poje sees this post, perhaps he can help. I downloaded his self-employed/partnership calculation spreadsheet and found that my own spreadsheet was exactly like his as to the outcome - not the format. Any help/suggestions will be greatly appreciated.

In a community property state, husband and wife own 50% each of S Corp with a SIMPLE plan. Both are officers, and receive wages with SIMPLE participation. Wife also has unrelated Sch C income and wants to make maximum SEP contribution. Is this OK, or by attribution rules does she own > 50% of Sub S so benefits must be equal in both Sub S and Sch C?

often we see plans whose match is not exactly to the penny. this may affect a few participants who may receive $40 too much or short by $20. i believe there is a threshhold where the plan administrator has to make adjustments on the amounts. i want to say $20, but am not sure. for instance if the employer overcontributed by $15 on the match, it would not result in $15 being moved from that participants account to the forfeiture account. if an employer inadvertantly underfunded a participants match by $25, they would just make it up either by issuing a check or transfering from forfeiture account. or am i completely wrong.

I am looking for information regarding the distribution of SPDs and SMMs. Specifically, I would like to know if such material can be distributed electronically. My company's population can be divided into salaried employees, who currently have access to an online benefits library (all salaried employees have a computer terminal at their desk), and hourly employees who are mailed their material because not all hourly employees have a terminal at their work area. Indeed, we post material for salaried employees to review or print and do not distribute. Can we post hourly material electronically as well and avoid the mailing, or must we continue to distribute the material individually?

A controlled group sponsors 2 401(k) plans, each for a separate location. One has a 2 YOS requirement for match, the other has a 1 YOS for match. Both use prior year testing. For 410(b) purposes, the plans are being tested together. Can you test them together for the ACP test? If so, do you only test those who have 1 YOS at location A and 2 YOS at location B?

In one of the Treasury teleconferences post 2005-1 I remember hearing that, after 12/31/05, the exercise of discretion to terminate a plan and distribute the assets would be deemed a material modification and thus violate 409A, even if the plan document allows for it. I've referred to my notes and my impression then was that the only allowable termination/distribution for a grandfathered plan would be under an "automatic" plan feature (i.e. financial trigger).

Since that time, another (well respected) advisor has disagreed with my understanding. Would you weigh in?

Thanks,

Joe

married couple ages 30 and 28. he makes about 80k annually contributes appx 7000 to his 401(k) which includes match. he puts in 4% and they match up to 4%.

she made 13,400 as a self employed medical transcriptionist in 2004. usually she makes 19 to 20K. they have about 154k in cds and 36k in savings and feel they pay too much in income taxes.

would directing her income into a SEP be a good idea? roth IRA?