Ok- ESOP participant is taking a lump sum distribution and decides to take advantage of the special tax treatment of the ESOP shares.

So the taxable amount = cash + stock basis.

I knoe that if this were a shares only distribution there would be no withholding becasue there is no cash. Here there is cash but not enough to withhold the federal tax , much less the required state withholding.

Should I send as much as there is to the Federal Govt and "stiff" the state or shoudl I do some sort of pro-ration of the taxation so both the feds and the state get something?

If i'm totally off base on this, please educate me.

Go to Google and type in "What time is it in (City)" It always pulls up the website: www.timeanddate.com This is great if do not want to wake up someone that is five hours behind you. Such as calling from Dallas to Hawaii. Your participants will thank you for this

I'm interested in opening an IRA, but I can't seem to find out the minimum requirement for opening one. I'm on a limited budget, so it's needed information. Any help would be appreciated. Thanks

If an IRA beneficiary designation provides that two children share the IRA 50 percent each, and one child predeceases the IRA holder, what happens? Let's say the beneficiary designation and the IRA agreement doesn't address the issue. Does the surviving child get 100 percent of the IRA or does the deceased child's share go to the child's estate?

I'm a bit confused about our TPA's response to a COBRA payment question we recently encountered.

Situation:

Employee Terminated 12/15, received COBRA notice and submitted election on 12/23 sending payment that covered 12/16 until 12/31. The TPA's COBRA election form reminded employee that payments were due on the first of month with 30 day grace period. Employee has not made any payments since the one received by TPA on 12/28.

On 12/28 our TPA sent Employee a letter stating the employee had received the payment and that the next payment was due on or before 2/19/2005. ????

When I questioned the TPA about this, they insisted that the employee had, at a minimum of the end of their 60 days of election to pay for their election.

I reminded them that he had, in fact, made the election and paid for the election he made back in December.

According to the DOL website:

"The initial premium payment must be made within 45 days after the date of the COBRA election by the qualified beneficiary. Payment generally must cover the period of coverage from the date of COBRA election retroactive to the date of the loss of coverage due to the qualifying event. Premiums for successive periods of coverage are due on the date stated in the plan with a minimum 30-day grace period for payments. Payment is considered to be made on the date it is sent to the plan."

If that is the case, wouldn't the "successive period" have been the January 1 premium with the grace period for 1/30? TPA claims that their COBRA program is set to comply with all regulations and they follow it's lead.....They are insistant that the employee, despite their payment for the period retroactive to their election back in December, still has until 2/19 to pay more so his insurance is still active. We will soon be out of time to retoractively cancel the policy back to the last payment.

Am I misreading the DOL explanation?

Help!

I'm a little fuzzy on this as I rarely see it in practice, thanks in advance for any help.

Law Firm PLC is owned by 5 = partners (assume taxed as a partnership and not simply an expense sharing entity). The 5 partners are attorney's. Each attorney has his own separately incorporated law firm, and each partner attorney generally derives his compensation from his own corporation. The attorney owners all operate under the name of the PLC for day-to-day business purposes.

The attorney's would like the PLC to sponsor a newly to-be-adopted 401k plan. None of the owner-attorneys want to participate, they simply want this benefit so their employees have access to a 401k plan. All of the non-owner attorney's (several) and admin staff are employed by the PLC.

I think I have an affiliated service group? If I use a prototype and the individual attorney corporations simply don't adopt the plan, does that mean that the five owner attorney's are then simply just ignored for plan purposes? Or do I have to put them on the ADP test w/ whatever their net earnings from self employment (taking into account SE tax adjustment) is from the PLC (assuming that's a positive number).

I realize if they don't participate their ADP is zero which could help things (if the owners have to show up on the test). Also if the individual attorney corporations want to exclude themselves from participation by not adopting, can that be done in a prototype environment? I'm trying to determine how to handle the set up mechanically-speaking.

Company is considering the follow safe harbor design:

- Employee can contribute on either pre-tax or after-tax basis

- 100% match on first 3% / 50% match on next 2%; employee receives match on first 5% of contributions regardless of whether they are pre-tax or after-tax or a combination of the two

Assuming all other safe harbor requirements are met, my understanding is there would be no ADP testing under this plan. My question relates to ACP testing. Which of the following (if any) is true:

- there is no ACP testing required, or

- ACP testing is required on all employee after-tax contributions, or

- ACP testing is required only on unmatched employee after-tax contributions.

I have an ERISA 403(b) plan that provides for voluntary, basic and matching contributions. Although the plan does not have any exclused classes, some priests opt out of the plan and do not make or receive any contributions. Instead, their denomination or order provides for them. Has anyone else encountered anything like this? When performing 410(b) testing, 401(a)(4) testing and 401(m) testing, what do I do with these people? Some of the people who opt out are HCEs.

There is an employer that requires employees to participate in mediation for employment-related issues. If the employer wants to pay part of the cost of the employee to retain counsel, is that permissible under a "prepaid legal services plan"? My hunch is no because it is not a "personal" matter, it is a business matter so to speak.

In any event, it is my understanding that it will be taxable to the employee unless it qualifies as a working condition fringe benefit.

Any insight will be greatly appreciated!

Thanks

Can a SEP exclude the owner from participation? A client wants to do something for his employees, but doesn't want to put anything in for himself.

Thanks.

Distribution 101 question: Assuming no state withholding is required, can a plan send a check representing 80% of a lump sum amount without offering a direct rollover option if the full benefit value is between $201 and $4,999 and the plan does not require the consent of the participant or spouse for such distribution, or MUST the plan offer t make a direct rollover and provide for a reasonable time for the participant to choose whether or not he/she prefers a direct rollover?.

Now that final regs. have been published with respect to required minimum distributions from db plans, may a plan still adopt the model amendment in Rev. Proc. 2002-29 without modification, or will revisions need to be made to the model amendment? (I am aware that db plans are not required to be amended until the end of the EGTRRA remedial amendment period, but sponsor wants to amend because plan may be terminated w/in next year.)

I administer two separate plans that are sponsored by two employers with common ownership. Currently, the plans are tested separately. Some employees are switching employers. My question is:

If switch is made mid year, do I test the employee in each plan? Example:

John Doe worked for ABC Co. Jan-Jun, 2005. Earned wages 35,000; 2,000 401k

Then in July 1, he switches employment to 123 Co. to the end of the year(12/31). Total wages earned here: $35,000; 4,000 401k

It seems logical to me I should enter in the plan's census the wages/401k according to the above example and test accordingly. Any problems with service rules? I feel an amendment is appropriate at this point that allows for predeccessor service in both plans. Any other issues? Thanks.

Linda Michals

I know this will sound stupid, but how does a Safe Harbor Match allow you to automatically pass the ADP test?

If you have a plan that is designed as a safe harbor with the basic safe harbor match formula and no other contributions going in, then what happens if you get only 2 key employees to contribute and no other NHCE's participate. Is there somewhere in the Regs that allow you to get by without an ADP test?

Thanks.

During the review of my client’s 2004 401(k) plan, I found that an employee was allowed to make 401(k) deferrals into the plan, even though he was not be eligible. (He will not be eligible until 2005.) I have read through the document and it states that the contributions need to be refunded to the employee with any attributable interest. So far, so good. However, it does not state how the participant is to be taxed? Is this like a 402(g) failure (contributions taxed in prior year, earnings in current year)? How is this taxed? How many 1099R forms? With what codes?

Any help would be greatly appreciated.

there would be no significant changes to their current plan outside changing the type of entity on the adoption agreement would there? changes meaning there are no real differences between a standard S Corp and regular corporation in a plain psp.

Hello,

I was always under the impression that a 401k/PS could not be started in the same plan year once a SIMPLE IRA contribution was made during that year.

I have been reading other posts, and it seems there may be a way around this, although it might be a mess.

It may be worth looking into because of 2 employees wanting to max out the 415 limit. The company has 5 people and only 2 SIMPLE contributions have been made for '05.

What is the process for this, and if a 401(k) can be started, can SIMPLE balances be rolled into the plan this year? (Everyone has had SIMPLE > 2 yrs.)

Thanks.

I'm looking for something that proves hardships from post-88 earnings are not permitted from custodial account plans. Can someone help?

One participant pension plan has $260,000 in assets from a 401(k) rollover and about $30,000 in plan assets.

The individual wants to use $160,000 in cash from the rollover account to purchase a piece of land as an investment.

And he also wants to take a loan of $80,000 from the rollover account.

1. It seems from my research that the purchase of land, assuming it is only for an investment and that the individual receives no cinsideration from the transaction (and there is no self-dealing), is an acceptable transaction.

2. It seems that he could take a loan of up to $50,000 or 50% of present value accrued benefit (as allowed by the plan), where the accrued benefit is equal to the sum of the 401(k) account balance and the accrued benefit in the DBPP.

Are there any other views on this?

Is anyone out there familiar with a scenario purported by United Financial Group wherein the rank and file employees of a small business become members of a Chicago union, thereby being classified as collectively bargained employees excludable under the terms of a retirement plan? Some information is available here.

Of course the basis for this approach is to provide small benefits to the rank and file through the union and large benefits to the owner through the corporation. Of course UFG avers that this approach is legitimate, conservative and has passed IRS scrutiny under audit.

I would appreaciate the insightful opinions of the members of these boards.