We have a client who is worried that their cross tested pension plan is in danger of being disqualified after a consultant to the firm gave them a copy of Carol Gold's October 22, 2004 memorandum.

The plan received an IRS determination letter based on the cross tested formula. We believe that Ms. Gold was not referring to cross tested plans in general, but was addressing other types of employer abuses.

Unfortunately, due to the usual year end hoopla, I haven't noticed if there had been any follow-up by the Treasury Dept. to put the minds of employers at rest. Has anything further been said about this issue?

Are Optional AD&D & Life excluded from federal tax wages?

Company establishes non qualifed deferred compensation plan for independent contractors which company refers to as a "retirement plan". Company "markets" the plan to contractors by touting its tax benefits and mistakenly represents that post-retirement distributions from the plan are reportable on 1099R and therefore exempt from SEPA taxation. Contractor participates in plan for several years and retires with expectations of using plan assets to fund retirement. Subsequent to contractor's retirement but before beginning distributions, the company's accountants/auditors review plan's features and determine that distributions should be reported on 1099 misc, and therefore are subject to SEPA taxation upon distribution. Contractor is harmed to the extent that contractor paid maximum SEPA taxes in the years in which income was deferred - and is therefore being subjected to payment of additional SEPA taxes which would have been avoided had the contractor opted not to participate in the plan. Company admits mistake but denies contractor's claim for compensation.

Question: Does contractor have a case against company for misrepresenting the ultimate tax benefits of the "retirement plan"? Perhaps on grounds of "injurious reliance"?

What is the timing of contributions for 457 plans? Can employer contributions be made after the end of the plan year similar to qualified plans?

Participant took out a 5 year loan back in March of last year. The employer forgot to set up withholding. Since it's the employer's fault, the employer is instructing us to not deem the loan. They are just going to start up loan repayments now.

The question I have is if we follow the client's instructions, is this just a taxation issue for the participant, or is there a plan disqualification issue as well?

Thanks

I need help quick! I have a meeting with a potential client who is considering starting a 401(k) plan strictly for the "professionals". There are two companies (a controlled group) where they currently have a SEP that covers their union (non-professionals) as well as the non-union (professionals). They also have an old Keogh. I know there has been much debate over whether they can contribute to the SEP and the 401(k) during the same year.

My question is, unless there is a distributable event, they cannot roll the assets for the "professionals" from the SEP to the 401(k) plan, correct?

Also, let's say that the SEP is not a model SEP, is there a conflict due to the fact that the professionals (non-union) are getting it from both sides and the union ee's are not?

My suggestion would be to terminate the Keogh, and roll those assets to the 401(k), but how do we handle the SEP situation?

I realize this is probably not an option, but let's say they could terminate the SEP, I would assume those assets could be rolled into the 401(k) providing we set the plan up to accept IRAs, correct?

Thank you so much for all your help!

I have a takeover plan (PBGC Covered) with assets less than adequate to pay benefits at termination. Everyone has been paid out except 3 key employees. The company sold all of its assets at the end of 2004 and deposited all of the money from the sale into the pension plan. The company still exists, but really only until the pension plan is terminated. The 3 key employees (also trustees of the plan) agreed to take whatever was left in the plan after everyone else was paid out.

Is it possible for the keys to waive in this situation, or is there another solution that would have the same effect?

Background: My position was eliminated and I was fired 2 years ago from a company with an ESOP. It is my understanding that a terminated employee cannot receive any payment from his or her ESOP account until 5 years after that employee's date of termination. Prior to my termination date the company purchased certificates of deposit for departing employees. These CDs were for the full amount of the departing employee's acrued ESOP account. For example: If a terminated employee had an acrued total of $25,000.00 in his or her ESOP account the company would purchase a certificate of deposit in that person's name for $25,000.00 shortly after the employee's departure. After the required 5 year waiting period the terminated employee could cash in the CD and have control of the full $25,000.00 plus any earned interest. The company discontinued this practice shortly before I was fired. At present the fate and amount of the total in my ESOP account depends entirely on the performance of the company. If the company does well, my ESOP account is safe. If it fails, my ESOP account becomes a fond memory. Since my departure the company has fired 3 very high level people (a president, a vice president and the highest level manager) who are supposedly subject to the same ESOP laws and rules as all employees. The amount of money acrued in their ESOP accounts and owed to these 3 former employees is undoubtedly very substantial.

Here are my questions: 1.) Is there a law that would prevent the company from purchasing CDs for the 3 high level ex-employees, thus securing the full amounts in their ESOP accounts, while denying the same privilege and opportunity to me and other lower level terminated employees? 2.) Is there a law that would enable me to determine whether or not this has occurred?

I am somewhat familiar with insurance policies within a retirement plan. I don't like insurance in retirement plans but it is something I am forced to deal with.

PS58 costs for the year are reported on a 1099. A question came up today regarding a participant who is receiving Minimum Required Distributions each year and also has a policy in the plan. The question is...Does the PS 58 Cost satisfy all or a portion of the MRD requirement for the year?

I want to say "no" but I don't have any backup for that conclusion and I am not sure where to start looking.

Any help from all you insurance and tax guru's would be much appreciated.

We started a tuition reimbursement plan in 2004 funded from our general assets. Are we required to file Form 5500? If so, are any Schedules required?

Does anyone know what the record is for the most views on an individual post?

I have to think that the 1,006 views on the "Best retirement pension plan" post in the Retirement Plans in General Forum would have to be in the running.

I have to admit that I have found the bickering to be quite addictive. The posters may not mean to be entertaining, but they are! It is like rubbernecking at an accident, you don't mean to look, but you just can't help it.

The new COBRA law requires updates to SPD's - is this applicable to employee groups of more than 50 or 100?

Ground floor

I have a medical practice that is owned equally by 11 doctors. These same 11 doctors own another side business operated in conjunction with the medical practice.

The medical practice has a PS 401k plan and already maxes out the doctors' PS/401k contribution each year. The doctors are now asking if they get get a $42,000 contribution in 2005 from each of their companies.

My opinion is that they cannot do this since both businesses have the same owners. Am I correct? If not, please let me know.

A 20 participant DB is sponsored by a professional corporation. The company and plan have a December year end.

Suppose the pension contribution is $100,000 for 2003, the corporation goes on extension and the full $100,000 is funded by September 15, 2004. However, the accountant files the tax return prior to the final $10,000 deposit and only deducts $90,000 for 2003.

Question: can the $10,000 plus the 2004 contribution be deducted on the 2004 return? Or, could $10,000 of the 2004 contribution be pushed to 2005? Assume there is no 404(a) limit problem.

I seem to think they cannot because the last $10,000 deposit was contributed timely for the 2003 return and the only way to remedy the problem is for the accountant to file an amended return for 2003.

Anyone disagree?

Thanks much.

Is it ever possible to change a payment election after benefits commence?

In this case a participant was terminated and elected a form of payment on Dec. 17, 2004. The first payment was made Jan. 3rd or 4th of 2005. The amount of the payment was not what was expected, so they contacted the sponsor. The sponsor said that the payment was correct based on the form elected. They also indicated that the plan did not allow for a change of payment after benefits commence.

This participant is mentally disabled (they are receiving the benefit as a termination payout, not a disability benefit). The only reason I mention this is that I'm wondering if there might be something like the ADA that would override ERISA and/or the Plan Document, assuming that the participant did not understand the election form.

Also, an attorney helped this participant at the time of termination. Apparently, the participant was terminated a couple of months prior to qualifying for a significantly larger benefit. The plan sponsor agreed to change the termination date to allow for the larger benefit. At the time the attorney helped with the benefit amount, it was clarified in writing that the form of payment should not be the form that was eventually elected. The participant probably chose the form that had the largest amount (accelerated distribution for 4 years, and offset by SS after four years).

Thanks

A client just added a HDHP with individuals HSAs. However, the HSA provider has not yet set up the individual accounts. If the accounts are not set up by 1/31, does this mean that the HSA can't reimburse expenses from January, since the account won't be set up until February?

A top heavy 401(k) plan has a permitted disparity allocation formula and a safe harbor match. The plan's entry date for salary deferral and for the safe harbor match is the first day of the month following employment. The employer's discretionary allocation requires the completion of age 21 and 1 Year of Service.

All employees, who have entered the plan, will receive at least the 3% minimum, either directly through an employer contribution, through the safe harbor match, or a combination of the two sources. The employer is also making a discretionary contribution to maximize the owner.

Of the employees, who met the age 21/1 Year requirement, 87% of the NHCE benefit under the permitted disparity formula. If the employees, who do not meet the age 21/1 Year are included in the ratio, coverage fails the percentage test, since they receive the top heavy only. Can this second group (otherwise excludable) be disaggregated for testing purposes? All of the HCE have met the age 21/1 year requirement.

I see that IRC §§457(b)(4) holds that:

"... the term 'eligible deferred compensation plan' means a plan established and maintained by an eligible employer...which provides that compensation will be deferred for any calendar month only if an agreement providing for such deferral has been entered into before the beginning of such month."

It seems reasonable to expect that somebody makes an election to defer before they have an opportunity to receive the deferred compensation in hand, but why must the election be made before the beginning of any particular month? Does this mean that any changes must also be made prior to the beginning of the month in which the change takes effect? Is this just "old" law that has not been updated for current technology and recordkeeping practices?

Thanks,

Ruth

What are the standards the IRS is to use in approving a change of funding method? In the case at hand, a DB plan is changing to funding method that would be automatically approved under 2000-40 but for a prior change was made in 2000.

I have just restated a profit-sharing plan which received a favroable determination letter for GUST to add 401(k) provisions. Both are volume submitter documents. My question: should I submit the 401(k) plan for a favorable determination letter now or should I wait til it must be updated and submitted in the new proposed staggered remedial amendment period?