I may have completely missed this, but did a new rule come out on what contribution must be made for a Plan participant who is not given the chance to defer when he/she becomes eligible to participate in the Plan? (I know the old rule was that the employer had to contribute the average percent for the NHCEs - however, someone just mentioned a 30% rule?) Thanks.

Hi,

I am a former employee of a company that has an ESOP plan which was formed during my last year of employment. I resigned 5 years ago and was 100% vested immediately. So this year I am finally due my 1st payout. I just received my annual certificate that shows what my shares are worth, and this year there is a line item theat reads:

"Shares of Forfeitures" with an NEGATIVE amount that represents about 35% of my account!

In the past this amount was a buck or two, now its over $4,000.00. Can someone explain to a total novice what this is and why I'm getting shafted?

Thanks!

How do you handle the forfeiture of merged money purchase monies in a 401(k)? Do these monies still retain the taint of money purchase once they have been forfeited by a participant? I have been keeping up with them in a separate account and reallocating them; however, this year the employer wants to use the monies to reduce the matching contribution that they are making. Can this happen or do I have to track them separately due to the restrictions on the money purchase monies? (I do not have JSA on the profit sharing monies.)

Hmmm?

I talked to a bank investment broker today . He wanting to sell me a annuity from

a company called ING. He said I had the option to pick mutual funds but I

would get 7% if my funds went bad. He explained the plan to me and it

looked good but it seemed complex. It was at least a 1O year investment.

How do I find out about this company called ING or any annuity company.

How do I know if that company is not another Emron or whatver. How do I

begin go do my research on a company like ING? What happens to a annuity

if a company goes broke?

Thank you,

Is it your understanding that the special transition rule under Q&A 4(d)(iv) of 2005-1, for payments pursuant to the exercise of an SAR "granted pursuant to a program in effect on or before Oct. 3, 2004", is intended to protect SARs granted now if the program was in effect last Oct. 3?

Plan has formula: 6.66% times Years Of Service up to 15. Benefit is accrued using fractional rule with maximum denominator of 20. NRA is 65&5, or if earlier, “55 and completion of 16 Years of Service”. Year of Service requires 1000 hours. Document describes denominator of Accrued Benefit fraction as “Years of Service the participant would accumulate if employment continued until NRA”

A full-time employee, born 1/1/51, is hired 1/1/90 and is still employed on 1/1/05. The numerator of his Accrued Benefit fraction is 15 as of 1/1/05, but what is the denominator of his Accrued Benefit fraction as of 1/1/05?

Here's the situation:

1. Roth IRA funded by conversions from traditional IRA

2. Five years have NOT passed since the conversions

3. I am over age 59.5 and was when I made the conversions

4. There were no non-deductable contributions involved

If I withdraw some of the amounts, less than the amounts converted, do I have to pay a 10% penalty?

IRS Pub 590 is very confusing. When they mention the 59.5 exception, it is not clear if it applies for this case. Please help.

Dick

A corporation with a 401k plan makes EFTPS payments for their payroll on a semiweekly payroll schedule. They have a 401k plan with a separate EIN for the Trust and make the 20% tax withholdings under that EIN. The question I have is do the payments for the plan trust have to comply with the deposit schedule of the corporation, or can they make the tax deposits on a monthly schedule (assuming they qualify for monthly)? Thanks for your responses.

Amounts deferred prior to 2005 are "grandfathered" and are not subject to 409A, unless "the plan under which the deferral is made is materially modified after October 3, 2004." §409A(d)(2)(B). Notice 2005-1, Q/A-18(a) states that "a modification of a plan is a material modification if a benefit or right existing as of October 3, 2004 is enhanced or a new benefit or right is added."

Is it possible that the IRS would view the formation of a Rabbi Trust to fund grandfathered deferrals as a material modification? (Assume the Rabbi Trust would not violate the new rules in 409A re: springing Rabbi Trusts and foreign trusts.)

Instinctively this does not appear to be a material modification for several reasons. The addition of a Rabbi Trust change does not affect the plan itself, but rather the plan's funding mechanism. Also, a Rabbi trust does not protect the participants' assets from creditors, although it does prevent the company from disposing of the assets, except to pay benefits.

The Conference report contains the following in the summary of present law on p. 293: "Arrangements have developed in an effort to provide employees with security for nonqualified deferred compensation, while still allowing deferral of income inclusion." Could this provision of security after 10/3/04 (by adding a Rabbi Trust) be viewed as the enhancement of a right (e.g. the right to receive the benefits)?

I can't help but think that if Rabbi Trusts could not be added to old deferrals without losing their grandfathered status, that the IRS would have said so in the guidance issued to date or informally in the seminars and teleconferences that their representatives have attended. However, I would be interested in hearing others' views on why it is still ok to add a Rabbi trust to pay grandfathered benefits.

Thanks in advance.

I've decided to pursue a professional designation, and am trying to decide which is the more useful: QKA (Qualified 401k Administrator, by ASPPA) or RPA (Retirement Plans Associate, by same people who do CEBS). I'm currently involved with DC employee/participant education (nearly all 401k), and would like to move into relationship management. Any thoughts on which of the above, or any other designation, would be most valuable in both preparing me for a relationship management role and in giving me credibility in a job search?

A CLIENT OF OURS HAS THE FOLLOWING MATCH FORMULA BASED ON YEARS OF SERVICE

1 Year of service: they match 33.33% of a participants annual deferral amount up to 6% of annual compensation.

5 Years of service: they match 66.67% up to 6% of annual compensation.

10 Years of service: they match 100% up to 6% of compensation.

They now have an Adopting Employer Effective 1/1/05.

They want the employees from the Adopting Employer Company to receive 100% match immediately (basically as if they worked with the company for 10 years) but any new employees hired after, or any current employees of our clients are still subject to the wait. Is this discriminatory

A client is asking a question regarding the following formula:

20% of compensation plus .65% per year (maximum of 35) of compensation in excess of covered compensation

The issue is with an employee who has 40 years of service at retirement. The plan calls for fractional accrual based on service.

They are being questioned on whether they can accrue the benefit over more than the 35 years.

I am not aware of anything that prohibits the above formula from being accrued on a fractional basis. Am I missing something??

A company is downsizing and would like to go from a 401K plan to a simple-IRA plan. They stopped contributing to the K plan in 2004 and submitted paperwork to terminate the plan in December of 2004. Can they immediately start a simple-IRA plan in 2005 and not violate the exclusive plan rule?

Independent contractor (insurance agent) participated in a non-qualified deferred compensation plan. In each year during which income was deferred, contractor's non-deferred income exceeded the maximum FICA wage base and contractor paid maximum FICA taxes during these years. Now, contractor has retired but has not yet received plan distributions. Company notifies employee that distributions will be reportable on 1099 misc. Question: Will contractor be required to pay FICA taxes on distributions? Or, is income exempt givent hat contractor paid the maximum FICA taxes in the years in which the income was deferred? Thank you.

Well... I am not much of a football fan.. wasn't much of a baseball fan either. I am a fan that waits till the end to see if there is a local sports team that has the fortune to have made it to the final games with hopes to be the one holding the trophy when the last game is over. Living in Boston has been good for sports fans this year.... especially for footbal fans the last couple of years.

I did watch the Steelers/Patriots game on Sunday. Have to admit, the Patriots are a fun team to watch. I think coach Bill has a knack for mixing it up. The players appear to be having fun as well... The Sox set a record coming back agains the Yanks... I think if the Pats win the Super Bowl then they will be one of 2 teams to ever win 3 Superbowls in 4 consecutive years. I think the only thing new englander's can ask now is for it to stop snowing!

We have a case that uses a 3% non-elective safe harbor provision.

Company is in hard times, and laid off most of the employees in 2004.

Is there a way to eliminate the safe harbor provision for 2005, or to have the HCE's waive the safe harbor contribution since there are no R&F employees?

Can the owners waive the safe harbor allocation on their behalf for 2004, and only fund the safe harbor for the R&F?

Thanks.

I have heard that money market accounts are great for retirement. How do they compare to the 401k in terms of yields and the ability to diversify?

John Diaz

Online tutor, homework help, term papers

In our NQDC plan, top-hat employees must make a deferral election before the plan year and they are locked in for the plan year. Deferrals to our NQDC plan begin when the participant hits the 402(g) limit in the 401k plan. Participants are allowed to change their 401k election at any time and it will be effective on their next paycheck.

Under the new deferred comp law (Code section 409A), NQDC plan participants are not allowed to increase or decrease the amount of their deferrals during the plan year. If a participant changes his or her 401k deferral election during the year, it affects when he or she will hit the 402(g) limit, which in turn affects when NQDC deferrals begin. If they begin sooner, the participant effectively increased his or her deferral amount into the NQDC plan. If they begin later, the participant effectively decreased his or her deferral amount.

Under the transition rules for 409A, deferral amounts for 2005 have to be locked in by March 15.

Does anyone have this problem and what are you doing about it? If you don’t have this problem, what do you suggest we do? I suppose we could lock-in 401k election for NQDC participants or require NQDC participants to elect an amount for the year, rather than a percentage per pay.

To be grandfathered there must not be a substantial risk of forfeiture under Section 83 concepts. The Section 83 regs seem to state that there is a presumption that a non-compete does not create a substantial risk of forfeiture, but that presumption can be rebutted based on certain facts or circumstances (Compared to a substantial risk of forfeiture under 409A in general which can never be created by a non-compete)

Has anyone given any thought on whether the IRS would ever try and rebut the regulatory presumption and argue that a non-compete does create a substantial risk under Section 83 for purposes of saying that amounts deferred under a NQ plan are not grandfathered? I would think that they would be hesitant to make such an argument since it could come back to haunt them in "normal" Seciton 83 disputes.

Plan allows two classes of employees to make one-time elections to defer specified percentages into the Plan. These amounts are made on a salary-reduction basis. Does the Plan have to offer this to all participants? Is this election a BRF and must pass coverage to be nondiscriminatory?