During the GUST restatment process we included a "default" $5,000 cash out level

for our prototype plans. The corbel ammendment package allows the document sponsor to 1.) keep the $5,000 threshold andprocess automatic IRA rollovers, reduce or eliminate the provision. Only one may be chosen at the prototpye sponsor level. Our initial impression was to keep the $5000 threshold as our sponsor level amendment but we are begining to think that this will require us to be proactive with our clients on this issue and do more "unpaid" work. What are others thinking in relation to adminstrative complexity?

Plan starts in 2004 and first valuation date is 12/31/2004. A contribution was made to the plan during 2004. Normally, you would subtract the "advance" contribution plus interest at the val rate from the year-end market value. But in the first year of a new plan, should you do this or simply set the AVA to $0? If you subtract the contribution, what do you do if you get a negative number?

Ex.

1/1/04 contribution = $10,000

12/31/04 market value = $10,500

Valuation interest rate = 6%

What is the 12/31/04 Actuarial Value of Assets?

What if the 12/31/04 Market Value is $11,000?

Participant’s balance is $20,000

Participant receive loan of $10,000 on the last 30 days.

Balance in account is now $20,000, with loan balance of $10,000 included in the $20,000 balance.

Participant now wants an in-service withdrawal of $10,000, leaving only $10,000 loan in account.

Is this permissible?

Thanks very much

Can someone tell me what plan provisions are required in a dc plan as far as new comparability plans go? For example, is it necessary to include an explanation of the gateway test etc....? This does not seem necessary to me. I believe that we can essentially state that allocations will be made to the various classes of participants and that 401(a)(4) will be satisifed through cross testing. Someone please help.

We received a QDRO that specifies that the alternate payee may elect to commence her benefits under the plan as of the earliest retirement age at which the plan participant would be eligible to commence benefits.

The QDRO section of the plan document states that "earliest retirement age" shall have the meaning under 414(p).

The participant is 45 years old and still employed. Our interpretation of 414(p) is that the earliest retirement age in this case is upon the participant attaining age 50, unles he terminates employment before then.

Anyone have any guidance on the timing of this distribution?

Health benefits will be provided by the parent under its self-insured plan. Can we offer different benefits to the employees of the subsidiary than the employees of the parent?

Has there ever been any guidance (formal or informal) from the IRS on what it means to be employed on the "last day" of the plan year?

EXAMPLES:

Employee terminates employment on 12/30/2004. Plan sponsor is closed on 12/31 since New Years Day falls on a Saturday. Is employee considered to be employed on the last day of the PYE 12/31/2004?

Employee's last day of work is on Friday, July 29th. Plan sponsor is closed on Saturdays & Sundays. Is employee considered to be employed on the last day of the PYE 7/31/2005?

Employee's last day of work is on Wednesday, 2/23/2005 and is paid two weeks of vacation pay on his last day of work. Is employee considered to be employed on the last day of the PYE 2/28/2005?

Should the plan document address this issue?

If the plan document does not define the term "employed on the last day of the plan year", what guidance is there?

What are you doing in situations like this?

Thanks for all feedback, opinions, conjectures, etc...

Is income required in order to make a contribution to a ROTH IRA?

A new employer started business on July 15, 2003 and began a 401(k) plan effective for 2003. No deferrals were made the first year. For 2004 calendar year plan, there is one HCE (the 100% owner). He deferred $13,000 out of a $60,000 salary, no employer contributions.

Here's the fun part.

The disaggregation rules say that all of the HCEs can be tested with the non-excludable NHCEs (current year testing on this plan) If we take this rule at face value, in theory, the single HCE ends up in a test by himself and gets an automatic pass even though he is also an excludable employee (remember nobody has a hire date prior to 7/15/03).

If this works, new employers who start a 401(k) right away would get a free pass for the first year, maybe even the second year of the plan. I can't believe this works.

When I started to peer review this plan and saw what the administrator had done, I thought "no way", but then after thinking about it, I am not sure that it doesn't work. I sure don't want to pass on it without some feed back from the experts though.

Thanks!

Is it possible to transfer management of your Roth IRA to a Holding Company or LLC?

IOW, what restrictions are placed on where the funds can go?

Are there any allowable secure or confidential ways of keeping the IRA?

Many thanks in advance for your advice.

When a C corp converts to an S corp, what amendments to the ESOP must be made? I can think of the following:

1. Eliminate ability of participants to demand distribution of stock

2. Eliminate ability to use dividends on allocated shares to make loan payments

3. 409(p) nonallocation rules

Anything else?

An employer has a self-insured health plan, and funds payment to the insurance carrier on a checks cashed basis.

The carrier is now telling the employer that any uncashed checks (even though the employer did not fund these) are now the employer's responsibility to report to the state due to the unclaimed property laws.

Is this required by the employer?

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.