We recently purchased another company and are in the process of merging their 401(k) Plan into ours. We have incurred expenses with our attorney for legal advice related to the merger as well as the preparation of the merger agreement and amendment and the Sarbanes Oxley notice.

Our plan document does allow us to use forfeitures to pay plan expenses but I'm wondering if these specific expenses would qualify to be paid by the plan.

Any feedback would be appreciated.

Plan document refers to the definition of compensation for plan purposes as that which is used for adp/acp testing. This definition is a non-safe harbor 414(s) definition. Absent specific plan language, could the plan administrator use

415©(3) compensation instead of the non-safe harbor 414(s) comp for adp/acp testing purposes or would the plan document need to be amended?

FYI - plan uses current methodology & passes 414(s) comp testing. Adp/Acp Fail with non-safe harbor definition but passes with 415©(3).

Hope this is a softball!

Have a new client with a Solo 401(k) Plan. He deferred $16,000 before year end 2004. He's over 50.

His net schedule came in at (round numbers) 15,000 and 1/2 SE tax is 1,000, so Plan Comp is $14,000.

Am I correct in assuming that $2,000 (or $3,000 for that matter) can be classified as "catch-up" and therefor no excess contribution?

Is the $16,000 deductible, or only the $14,000?

Thanks all.

My employer refuses to give me information on the plan I am vested in. What kind of information should I ask and how does the law protect my interest? The company I work for is very small (five employees) and doing well financially.

Upon contacting the company who handle the administration of the pension plan, I was brushed off.

What documentation am I entitled to have each year about my personal benefits and the plan situation? If so, Is there a publication or guide I can consult.

Thank you,

Employer has a SEP requiring 3 years in last 5, wants to contribute max allowed.

Employer is considering a 401k with one year eligibility as a safe-harbor plan.

Key is only person getting SEP for current year because other employees don't have 3 calendar years employed.

Three questions:

1. If 401k is a safe-harbor match, do we avoid aggregating plans for 401a4 discrimination testing, 401k or 401m testing?

2. If 401k is a 3% SHNEC, do we avoid aggregating plans?

3. What is effect of top-heavy?

I have a DB plan with a safe-harbor formula ; the client is proposing an early retirement window that grants 3 years of additional benefit service and adds 3 years to a qualifying participant's age.

To me this design pushes the plan outside of safe-harbor status and neccessitates the general test.

Does anyone have any additional thoughts/insights ??

I've searched without locating a definitive answer. For a self-funded health plan covered by ERISA, can you increase the retiree dollar contribution and have the employee dollar contribution remain the same? We currently use the same monthly funding amounts for actives and retirees--can a Plan use different amounts for these two groups?

Hello all,

I'm new to this forum and see similar questions but not exactly my question so here goes:

We have a safe harbor 401(k) plan with a 3% NEC. Our plan uses the "415 safe harbor compensation" excluding reimbursements, expense allowances, fringe benefits, moving expenses, and deferred comp welfare benefits.

Should severance pay be included in the compensation (just for the 3% - I've seen numerous discussions about the deferral portion)? If the severance pay carries over a plan year, would the participant only receive the 3% for the year they were an eligible employee?

Any help would be much appreciated!!

Did something recently happen that I missed about DB conversions to CB plans?

The 401(k) plan does not match catch-up contributions, yet there is a 25% match on all other deferrals. A over-50 HCE contributed $13,000 in 2004. The ADP test failed and the excess contribution is $1,000. The $1,000 was recharacterized as catch-up, therefore no refund. Is it ok that the $1,000 was matched, since it was not considered a catch-up at the time it was contributed and matched? I think it's ok, but was wondering what others thought.

An individual is employed and all of his income is derived from a "guild" where he receives 1099 income. He participates in a DB plan with the guild. He would like to set up a db plan:

(1) Can he set up a db plan for himself (corporation)?

(2) If so, is the 415 limit offset by the benefit he receives from the guild plan

Is it legal to require different employee contributions for different health plan options?

Ex. Employer has 2 different plans which are available to all employees. If the employee choses the basic plan, then the employee's actual contribution is 10% of the premium cost to the employer. If the employee chooses the HDHP, then the employee is responsible for 20% of the cost to the employer.

Is there a problem with this?

A client had me re-run a contribuiton calculation for them yesterday, and as a result, they fail the ADP test by 0.01%. This causes two HCEs to each get a refund of $3 (plus earnings, of course). Does anyone know if there is a deminimus amount for a refund, like under $10 or something? I told the client I would look into that , otherwise these two guys will get a refund check and can go to Wendys for lunch one day.

I did post this in the 401(k) forum as well. Any help is appreciated.

A client had me re-run a contribuiton calculation for them yesterday, and as a result, they fail the ADP test by 0.01%. This causes two HCEs to each get a refund of $3 (plus earnings, of course). Does anyone know if there is a deminimus amount for a refund, like under $10 or something? I told the client I would look into that , otherwise these two guys will get a refund check and can go to Wendys for lunch one day.

Thoughts?

Newly disabled client establishing a plan... wants to borrow to renovate his principal residence or eliminate 2nd mort. Can term be longer than 5 years? Not a purchase.

A participant passed away in 2002. He had been receiving RMD payments of about $1,100, but apparently not cashing all of them. The spousal beneficiary just found one that was issued in 2000! (Not sure yet, but there could be more). How should this be handled? Can we reissue the check to the beneficiary or should it be reissued to the participant who obviously can not cash it? Any guidance would be appreciated.

My husband has a Roth account which we got through our bank through Frankling Templeton. It is 4 funds, Growth (Franklin capitol growth fund), Value (Mutual shares fund), Global (Templeton growth fund) and Blend (Franklin growth fund). These are all Class B it says. The total value is 2,534 which 1.000 was invested in 2003 and 1000 in 2004.

We are getting charged a yearly fee of 15 per fund which with such a small amount invested not sure if we should keep it there.

We got a letter from Franklin stating that no longer do they accept money straight from us for class B funds and that we would have to go a financial advisor.

We called the advisor which we saw one time in 2003 and he told us that we have to buy different funds and we should do it ourselves or he would have to charge us.

We are wanting to put 3000 in a Roth soon.

What should we do? We have thought about E Trade with getting emailed our asset summary.

By the way he is 38 and we are looking at long term, we are not going to touch this money until retirement if ever, it may be given to the kids. We are looking at putting 3000 in each year, maybe the 4000 but 3 this year so far.

Thank you so much ahead of time!

Linda and Chris

We recently had yet another one of our clients audited by the IRS. Seems to be a lot of audit activity in the Southeast area lately. Fortunately, the plan was a nice, clean Safe Harbor Match 401(k) plan with no potential issues that we were aware of. It was a very small plan with less than 15 participants with very good participation.

The auditor insisted on handling the audit at the workplace so our involvement was somewhat limited. After nit-picking some irrelevant issues related to the 1120, he took issue with 2 things. (1) He noted $245 in the forfeiture account at year-end. He stated that such accounts are not permitted by the IRS and should never be established or maintained. The forfeiture was generated by old PSP monies subject to a vesting schedule. Although the document clearly stated that forfeitures would be used to reduce matching contributions, the forfeiture was in fact "swept" in the first month following the plan year end when the safe harbor match was funded, the auditor was not satisfied and considers the issue "open". I don't know how any plan in the country that has a vesting schedule could possibly operate without a temporary holding account for forfeitures.

(2) And this is even more ridiculous......the plan was top heavy, solely safe harbor, and there was one participant who did not defer and therefore did not benefit. Auditor continues to claim that this participant should receive a top heavy minimum even after being referred to the EGTRRA amendment. Even if the auditor wasn't quite "up to speed" with EGTRRA, you would think he would have required top heavy minimums for all since prior to EGTRRA, matching contributions could not be used to satisfy top heavy. And, the icing on the cake, and what makes this whole thing really pathetic is that his BOSS from the regional office was present for the audit!

All in all, my client and his assistant lost 3.5 days of valuable business time and were left with a very bad taste in their mouth. They don't know who to believe, me or the auditor. His general feeling was that it didn't appear that the IRS wanted him to have a plan at all. I am left with having to address these 2 issues again, and doing so somehow without insulting the auditor for his obvious inexperience and incompetence.

Just thought I might share this experience with others.

A client received a nonelective contribution to her 403(b) account for this year. However, she is no longer working for the employer- she received no compensation from the employer for this year, and the contribution is based on past year’s services. Does this contribution affect her $42,000 limit for this year sicne it is based on past year's service ? She wants to do Solo 401(k) for this year .

Thanks in advance

Jane

My organization provides technical support for medical software databases. I feel PHI is of passed around in emails freely for trouble shooting client systems. Does anyone have a suggestion for remediation other than using S/MIME or PGP?

Here is a quote from the support supervisor, "I think the main point of HIPAA is to use 'some means' of protecting PHI so even a password protected zip file will suffice. However it may be easier to just not allow any PHI in emails."

Any ideas on changing this train of thought?