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.

Existing employee first becomes eligible to defer amounts under company's NQDC plan in February. 409A(a)(4)(B)(ii) allows new participants to defer amounts related to services performed subsequent to the election provided election is made within 30 days of participant first becoming eligible. Thus, newly eligible participant is presumably only able to defer that portion of his 2005 bonus attributable to services following eligibility. The bonus qualifies as a performance-based bonus so participants generally have until June 30, 2005 to make bonus deferral elections. First, I assume the June 30th performance-based deadline would trump the 30 day first year eligibility deadline? Second, assuming he has until June 30th, is there any argument that he can defer ALL of his 2005 bonus since everyone got until June 30th to make deferral elections or is he limited to deferring just that portion of the bonus prorated to account for services after becoming eligible for the deferred comp plan?

Is there specific guidance written on how to calculate the "gap period" earnings on a corrective distribution?

I'm wondering if anyone might have been at the present at the IRS meeting for comments on the proposed changes in the 403(b) regs and what they heard.

Can anyone tell me if there is an easy suggestions for calculating gains on the amount of excess deferral that is returned to a participant.

With regard to a pension investments in a non-guaranteed group annuity contract that is a pooled separate account, my understanding is that the amounts invested are ERISA plan assets. Why is it then that pension plans generally do not require insurance companies to acknowledge their fiduciary status in such contracts, which thereby would make the insurance companies investment managers under ERISA so as to limit fiduciary liability? Does this have to do with the fact that the insurance industry is heavily regulated?

Can any of you wonderful folks point to some research or survey results on this topic. Looking for views -pros and cons - of stable value vs. balanced vs s&p500.

Many thanks!

The compensation ratio test is required when total compensation is not used. A client has questioned whether this test is to be performed on an annual basis (for example looking at 2004 compensation) OR be performed on the testing compensation (for example the 3 year average compensation).

My reading is that it is only an annual basis number. Anyone disagree??

An additional question on imputing permitted disparity. A DB and DC plan are being combined for testing purposes. Permitted disparity may only be imputed once. I can not find any rules outlining which plan must be primary (if any) or whether the maximum under either plan can be used, etc. Any comments???

I would think that using the maximum permitted disparity under either plan would be OK.

If a participant is not suspended "timely" after receipt of a harship distribution (plan uses safe harbor standards), are the deferrals and match, which are allocated during the suspension period, included in the adp/acp tests? Client is correcting this by refunding the deferrals and forfeiting the match, but this will not take place until after the plan year end being tested.