I am having trouble with the 'new' match.

the example for calculating gap period income (1.401(k)-2(b)(2)(viii) example 4

(ok page 120 if you printed them and your page numbers come out the same as mine)

anyway the example says 8,000 multiplied by 3,800 divided by 110,000 is 266.65

I tried my calculator at work, home and the computer as well and I keep getting 276.36. What numbers am I suppose to arrive at? or maybe I am punching the numbers in wrong, how do you arrive at 266.65?

If it is wrong, who do we contact?

By the way, I also think they left out a section in the preamble - the last section on ACP safe harbor. It was in the proposed regs. And the clarification that was in the proposed regs made it to the final regs - you can not have an allocation condition on the discretionary match. I was working on a possible article on safe harbors when I discovered that apparent omission. For whatever reason, the article wont be used, so heck if anyone wants here it is.

I recently left my employer where I held a 401k plan. I was just wondering if when I roll over the $5,000 of 401k funds into a Roth IRA I will have to pay any penalties? Also, after the rollover, is that money considered my personal contribution, so that if I withdrew it at some point I would not be taxed? Thanks for your help.

Peter Gunn

New to this board - I meet all criteria for Roth withdrawals. Q.?- Can you withdraw funds and at a later date put some or all of these funds back into the Roth? I may need to use some of the funds for an urgent yet temporary purpose. Did not find info in IRS publications.

Prior to 2005, we adopted a new plan with 409A language. The Plan provides it will hold 2005 deferrals, and allows us to transfer to it the non-vested amounts from "old Plans." That gives us a grandfathered plan under pre-409A rules and a new plan under 409A rules.

I'm pretty comforthable that the transfer of non-vested amounts from the old plan to the new plan are not a material modification which would cause grandfather status to be lost. It seems like the most practical way to comply with this difficult grandfathering provision, which looks to vesting rather than year of deferral.

Any thoughts ?

If a 50% or more company owner is in a 401(k) Plan and also makes non-deductible IRA contributions, are the non-deductible IRA contributions included in his IRC 415 annual limit? That is, do they count towards his maximum $42,000 limit for 2005? This question was posed to me by a client who said he read this but I can't find anything on it.

I opened a roth ira in 2000 and contributed a total of $4000 since it opened. I withdrew the money in 04 and recieved $3932.00. I asked earlier if I was going to be taxed on it and the answer I received was no. The thing is I received a 1099R in the mail with gross distributions being $3932.00. Does this mean I am getting taxed because I did my taxed and now it is coming up that I owe $215.00. Why am I getting taxed? Can anyone please help me with an answer?

Ok, I'm glad I found this forum.

I'm 33 yrs old. I open a Roth (I don't have my paperwork on-hand right now) around 1999-2000 (I guess) I have close to 10K on the account right now.

I asked on my bank about taking some of that money out and they literally scared me about the 10% penalties + taxes to be paid, etc, etc. Same ppl. that asked me to wait to finish my auto lease to refinance my residual.. Ohh well..

Anyway, I already read that "down the road" after x amount of years I can take what I deposited.

My questions are:

How many years I have to wait to take some money out without penalties?

Can I rollover that Roth IRA to let's say Fidelity or Vanguard?

TIA,

GenPao

We periodically audit the dependency status of individuals enrolled as dependents by an employee. We request proof of dependency on two separate occassions. If we receive no response validating the individual's status of a dependent, we drop the individual from coverage. Is this a COBRA event? I say no because it isn't a "qualifying event" as defined in the regs, but it is just as simple as dropping them? Has anybody had experience with this or know where I can find more info (any cases?) Thanks

Has anyone come across a defined contribution plan that invests into their own defined pension plan. The point being to receive the same rate of return as the pension does. I'm assuming there would need a seperate account for the DC funds.

A sponsor of a single employer DB plan ("Plan A") for its union employees is contemplating freezing accruals under Plan A and joining a multiemployer pension plan. The multiemployer pension plan will provide some benefits based on past service with the employer. It has been proposed that Plan A be amended to provide that the accrued benefit of participants under Plan A be offset by the amount of the past service benefits to be provided under the multiemployer plan.

My tentative conclusion is that this would be impermissible under Code Section 411(d)(6), because the result of the offset amendment would be a decrease in the already accrued benefits of participants under Plan A. Others have suggested that 411(d)(6) is not a problem here and have pointed to floor-offset arrangements as an analagous situation. Clearly, in a floor-offset plan the DB plan benefit decreases as the DC plan account balance increases. However, this is a function of the benefit formula of the DB plan. I don't think you could add an offset to an existing plan if the result is that the already accrued benefit is decreased (although you could certainly add an offset against future accruals).

Any thoughts or comments would be appreciated?

I'm trying to come up with a list of general grandfathering rules for 401(a) plans. As an example, post-88 earnings on elective deferrals are not available for hardship withdrawal. So, any plan that has been around since 88 (or earlier) would have to watch out for this. Any other specific examples or a source for a more comprehensive list?

Well, here's a good one. I hope someone out there has a suggestion as to what I should do.

Terminated participant from a Profit Sharing Plan (no 401(k) contributions) gets paid out in 2004,Trustee (same as employer) issues the check from the business checkng account instead of withdrawing the funds from the plan. So now, the plan still has her money in it, but she was indeed paid out.

What do we do now? Should the employer issue the 1099-R instead of the plan, and the plan call her money forfeitures (that would look pretty wierd on the valuation reports), or should the plan reimburse the employer, and issue the 1099-R anyway (even though it is clear on the 5500 that there was no pay-out or expense due to a benefit payment).

Any suggestions out there? Any help would be appreciated.

Thank you!

When there's a change in the end of the limitation year, the Sec. 415 limit is prorated for the resulting short year. This rule is very clearly described in Reg. Sec. 1.415-2(b)(4).

But, I've never seen a similar rule for a short year resulting from plan termination.

Example: A plan terminates on 03/31/05. Both the plan year and the limitation year are the calendar year. For this short, final year, does the plan get the full, 12-month Sec. 415 limit? Does it make any difference whether there's a successor plan?

Any words of wisdom will be most appreciated.

An employer with a SIMPLE IRA wants to terminate that plan and adopt a 401(k) plan for 2005. However, he has already made a contribution of employee deferrals to the SIMPLE plan for 2005. Does this preclude him from adopting a

401(k) in 2005? If he did adopt a 401(k) in 2005, would that only affect the SIMPLE plan, or would it also affect the 401(k) in some way?

Receiving payments in violation of 409A will result in taxation at ordinary income tax rate, 20% penalty tax and imputed interest at the fed rate for underpyament of income tax. As I understand it, the 20% penalty is added to the amount of income tax and the imputed interest is compounded as of the date the payment was initially deferred. E.g. if employee is paid 100k in violation of 409A when the underpayment interest rate is 6% and the payment was initially deferred 20 years ago, the tax on 100k will be due at the marginal tax plus a 20k penalty and 19,242 in interest @6% compounded for 20 years (6000 x6% for 20 yrs) . I would like confirmation that the interest would be compounded from the date of the deferral at the underpayment rate in effect in the year the payment is made as opposed to the IRS underpayment rate for each year since deferral occurred.

Has anyone out here upgraded to 9.1 and/or 10.0 ?

Any major snags while upgrading?

Any feedback positive or negative would be helpful?

I heard 9.1 was a small upgrade, but I'm a little worried about 10.0.

If an employer provides several different benefits, i.e. a self-funded dental benefit, insured group health and disability benefits, can they all be considered one health and welfare benefit plan and a consolidated 5500 filed for the "plan"?

It would be helpful to have resource material cited if possible.

The consolidation issue does not seem to be addressed in the 5500 instructions.

I have a frozen supplemental retirement benefit plan from the 80s that has never been terminated. The plan once received the excess benefits from a pension plan, then excess deferrals from a "savings" plan. No new money, other than earnings, has gone into this plan since the mid-90s.

The plan ties form and timing of distribution to the election the participant makes under the employer's qualified plan. I know that this is not allowed under Code section 409A. I understand that there is a transition rule allowing this type of tied distribution to be made or commenced during 2005. However, there are balances in the plan that will not be distributed until after 2005.

The plan is clearly grandfathered as there have been no "deferrals" in over a decade. I do not want to subject the plan to Code section 409A and would like to avoid amending it and accidentally subjecting it to these rules (although it appears that compliance amendments are not material modifications). My question is whether I have to amend the plan to comply with Code section 409A?

I know that I will have future distributions that do not meet the rules; and, the guidance appears to say that for future years, distributions must meet the rules. However, the plan would be distributing grandfathered money, which is not subject to the new rules.

I realize that I may be going around in circles BUT it seems like I should be able to simply leave the plan as is because the balances are all grandfathered. If I can not, why not?

Thanks!

I am probably going to get roasted for asking, but I have read a few too many contradictory opinions on this one. What type of restricted stock intended to be subject to Code section 409A?

I had thought all restricted stock was covered from what I read and heard during the JCEB (?) conference, but I just read a summary from Corbel that said it is not and re-read Q-4 in the Notice. I will admit that this rule of what restricted stock is covered and what is not seems a little arbitrary. Both situations in the Notice sound like a deferral in compensation. Could someone enlighten me as to what I am missing?

Thanks!

This act requires employers to provide 24 months of COBRA coverage to service members instead of 18 months.

If an employer continues active benefits for the first 6 months of Military LOA, and then offers 18 months of COBRA, does this satisfy the 24 month requirement? Or does COBRA have to be offered for 24 months after the LOA has ended?