CEO of a company had part of a loan defaulted (don't ask me why they didn't default the whole thing...) while the plan was at a prior recordkeeper. He has since taken another loan but the administrator did not take into account the defaulted amount in the calculation of the maximum allowable amount. This resulted in a loan being issued for about $10,000 more than it should have been. This also violated the plan loan provisions which no not permit loans to be issued to participants who have defaulted on loans.

The plan does not allow in service withdrawals for participants under age 59.5 unless a hardship so I can't go back and treat the excess as a legit distribution and issue a 1099.

Any suggestions on how this should be corrected?

Thanks!

Good Morning All!

If a client has a Cash Balance Plan and a Profit Sharing Plan where the Cash balance provides 2% for almost everyone except for a couple older participants, is it possible to kick up their allocations in the Profit Sharing Plan and thus satisfy top heavy for everyone? Possibly turn the Profit Sharing into a Class Plan?

Any help would be most appreciated! Thanks!

A three physician doctor's group has it's own current retirement plan (safe harbor 401k and profit sharing). They save the maximum $42k from this plan.

They, and 11 other doctors, are opening a surgery center with each doctor as a 7% owner. We are going to establish a retirement plan for the employees of this new surgery center.

If the doctors figure out how to turn their passive income from the center into active, can they use this as a 2nd source of profit sharing that will let them save up to $84k (for both plans?). Does a 7% (per individual, not by practices) ownership and use of the facility constitute "affiliation" and deny them participation in this plan? Is there a workaround that they can consider to be a part of this 2nd plan?

I'd like to get some opinions on the pros and cons of reducing the involuntary cash out to $1,000. I've pulled the analysis that was posted by mintz.com and am anxious to get some other opinions. I have several clients that would like me to provide a listing of pros and cons.

Thanks!

We cover retirees under plan A, which is the same for active employees, until age 65. At age 65 retirees receive a fixed amount towards coverage in Plan B. Under the deferred event rule, we know that COBRA will apply to Plan A when the employee loses coverage but only for the time remaining in the 18-month COBRA coverage period (i.e., the COBRA period is measured at the original event, termination).

My question is does COBRA apply to plan B? I assume not since the qualified beneficiares could have elected COBRA under plan A and still have gotten the subsidy under plan B.

Thanks!

Does anyone know of any group that is starting or considering a public awareness or employer awareness campaign (or any other sort of campaign) to ensure that this proposal to eliminate the FICA excludibility of cafeteria plan salary reductions does not become law.

It would spell the death of cafeteria plans and have a major impact on employer provided health coverage. It would also have a major impact on the business of TPAs,

Here is the Proposal See page 71:

http://www.house.gov/jct/s-2-05.pdf

Situation:

Husband retired and rolled his 401K to an IRA. The IRA contains around $450K. Now husband is getting divorced and is transferring half of money to wife as part of settlement. Wife needs to know what portion of the transferred IRA is taxable since the original 401K had a non-taxable and taxable portion. Husband is 68 and wife is 63. Husband says he does not have records of the 401K distribution/rollover.

Question:

How does one determine the taxable portion of a 401K rolled over to an IRA?

We have a plan that had the wrong definition of compensation written in the GUST restatement. The prior document excluded bonuses and the employer did not intend to change. The plan was amended in 2004 when the error was discovered. I know the IRS does not recognize scrivener's errors. However, if we go back and correct the allocations for the years in question it will result in a reduction of benefits for the NHCEs. Has anyone had any experience with this and the IRS?

The spouse of a 100% owner of a corp works for the corp and was taking a substantial salary for few years and has established the desirable Hi 3 average for maximum projected benefits.

If the spouse stops taking a salary (while still working), can service credits be given to the spouse for plan benefit purposes?

Quick question regarding key employees. I ran across somewhere stating that there is no longer a look back on Key employees on the Top Heavy Test. Is this correct?

Example - Key employee in 2003 (Highly Paid Officer), was terminated in June of 2004. Never made the $130,000 required under the Highly Paid Office category. Is he still concidered a Key employee for the 2004 plan year end?

Thanks,

SHAF

In a 401k plan what is the timing of elective deferals for the partners?

We have a health plan that simply defines dependent as a child until age 19 (23 if full-time student) and the parent provides over 50% of his or her support. The WFTRA, however, broke the definition of dependent into two categories. My question is whether it is necessary to amend our definition to include the age, support and residency requirement for a "qualifying child?" We only cover children who get more than 50% of their support from their parents, so the way I see it we will always satisfy at least the "qualifying relative" definition. Any thoughts?

We have a DB plan with a provision that if a person comes back to work within 5 years they can repay a prior lump sum payout in order to get service restored.

My questions are as follows:

If the person needs to repay $74,000~

Can they pay any of the amount needed with money in their checking or savings account? I am under the impression that they cant since the plan is tax qualified.

If they can pay from personal funds, is there a limit to the amount they can repay from them - Code Section 415 limit of $42,000 per year????

Would this impact how much they can contribute to other plans, like a 401(k) during the same calendar year?

It is my belief that all money they use to buy back service must come from another tax qualified source, i.e. conduit IRA, etc....

Any help you can provide on clearing this up for me would be greatly appreciated!!!!

Thanks

Is there alternative contribution formulas for a SEP - i.e. integrated with SS or is the only acceptable formula pro-rata?

Employer recently changed custodians for its SEP. In the process, several individuals chose to have their accounts at a different institution. Employer asked them to provide the account information and employer made SEP contribution to those accounts. (Contribution made approximately July 2004; calendar year plan.)

Employer has now learned that some of those accounts were an employee's existing traditional IRA, and not an IRA devoted solely to the SEP. Is this a problem for the employer? For the employee? What actions, if any, should/can employer take with respect to the contributions already made?

(Employer was switching to monthly contributions in 2005, but they are being held up for the accounts in question.)

A one-participant DBPP has a total of say $125,000 in plan assets, where say $75,000 is due to a rollover from another plan. Therefore, the DB assets for funding is close to $50,000.

Is this plan required to file a 5500-EZ in this case? Based on the form instructions I did not ascertain any definitive indication.

Thanks.

Effective 01/01/04,an employer adopted a regional prototype PSP with a 401(k) provision.

Employer accidently checked a box to state that HCEs aren't eligible to participate. This is wrong wrong wrong and certainly wasn't the employer's intention. The HCEs enrolled in the plan last year and made elective deferrals contributions throughout 2004.

How can this problem be fixed? Can the employer make a retroactive change to the adoption agreement? Does the employer need to use a correction program and pay a user fee?

Thank you in advance. I slipped on some ice yesterday and broke my arm and wrist. Today, I'm trying to get some work done and am reaching out for whatever help I can find.

The prior TPA used K-1 income and reduced it by a Schedule E for unreimbursed partnership expenses. Is this correct? Where can I find instructions on what to reduce K-1 income by?

I have a DB plan that requires contributions from eligible ees. Automatic deductions from compensation. I've never seen anything like this. What could be the purpose? The plan has been restated with all the bells and whistles, so it's been looked at during the past few years.

Is this permissible.

The IRS has issued PLR 200453015 which permits a participant who is a 5% owner to rollover his account balance to a Q plan of a separate employer where he is an employee but not a 5% owner and defer commencement of MRD until he retires. The only requirement is that the owner must take his MRD for the year of the rollover from the transferring plan. This ruling should be applicable to similar situations such as a rollover from an IRA to a qual plan or 403b annuity after 70 1/2 or rollover from a Q plan to a 403(b) annuity.