Is changing the IRC 402(h) exclusion limit of 25% (that is still based on "includable" compensation) all that is needed to allow contributions of 25% (or greater) to SARSEP plans? If I wanted to ask my Congressman to make this fix, exactly what should I propose to bring this type of plan to parity with a 401(k)?

A married participant becomes disabled and submits a retirement

application in June. (His benefits would have been payable

July 1). Fund office sends the benefit election notice to

the participant. (Disability benefit is auxiliary, but paid in

the form of a QJSA). He dies 3 days after the notice is

sent.

Trustees would like to give the spouse the 50% QJSA now

rather than wait for her to reach his early retirement age.

Given the fact that the participant submitted all necessary paperwork

besides the election form, it seems the spouse should be entitled

to the 50% QJSA.

Agree? Any other issues to consider?

I am trying to get up to speed about the participant's use of a debit card. A prospective employer's communication material indicates that when using a debit card, the partipant can "spend" up to the amount that he has contributed to the FSA at that point in time.

Granted, I have not followed FSA's for a few years, but previously the employer had to be "at risk" by reimbursing the participant up to the amount he elected to contribute for the plan year.

Has something changed via Regs. that treats the "at risk" concept differently for debit cards?

I've heard practitioners advise participants to elect lump-sum distribution at time of deferral since you can always change to installments at a later date. However, there seeems to me to be a major problem. An example.....

A DC plan defines a payment only in the event of separation from service, death or hardship. If a plan participant elects lump sum distribution at separation from service, and 1 year before separation from service elects a switch to installments, it appears that the first installment would begin 5 years after the separation from service. The only exceptions to the 5 year delay are distributions in the event of death, disability and hardship. Do you agree?

If true, this seems punative, as the election is not acceleration (in fact, lengthening the payment period). It takes away an opportunity for effective income/tax planning on the part of a participant.

Do you know of communication with Treasury that addresses this issue?

Hi

I have a question regarding IRA contributions. Hopefully some one can help me.

I contributeto my Roth IRA monthly by dollar cost averaging. In 2004 I contributed $1500. I have since came into a bit of cash and would like to top up my 2004 contribution to the $3,000 maximum.

Can I still do this in the 2005 calander year and if so what would be the drop dead date to do this.

I also plan on maxing out my 2005 Roth limit.

Your help would be appreciated!

Plan has an effective date of 10/1/1996 and runs off-calendar (10/1 - 9/30 plan year).

The plan received an initial letter of determination in 1998. The plan was timely restated for GUST, however it was not submitted until after the RAP period ended for the volume submitter we use. The RAP ended 12/31/2003 and the plan was submitted on 1/30/2004 (just made it, I know). We submitted with the User Fee.

The IRS has just now responded indicating that it appears the plan may be eligible for a refund of the User Fee as provided in Notice 2002-1.

I was pretty sure that if you were past the RAP than you had to pay.

Notice 2003-49 indicates that the plan is only eligible for elimination of the User Fee for EGTRRA if it was first in existence after 1/1/1997, which this was not as noted above.

I would love for our client to get back their User Fee but am not sure if it is really applicable. Would really appreciate anyone's thoughts.

Thanks!

According to 409A, deferral elections are based on services performed over a period of at least 12 months. My question is this:

Hypothetical Situation: An employee begins in August 2005. Employee receives a bonus on December 31st 2005 and the bonus is considered earned and vested on December 31, 2005. How would an election be handled?

Must employee make an election by June 2006 for that bonus and any bonus received on December 31, 2006? Or, as a new employee, could employee make an election for the 2005 bonus compensation within the 30 day initial election window.

Any and all guidance is appreciated!!

Let's say a plan has no NHCE's for 1/1/2003 to 12/31/2003. They are deemed to satisfy the ADP test.

They hire a NHCE in 2004, and must now complete an ADP test for 1/1/2004 to 12/31/2004. If they use the Prior Year Testing method, what 2003 NHCE average would they use?

My question if anyone can help is:

1)Do I need to file a 5330 for the employer over the late deposit issue? It seems everything I have read says untimely deposits are prohibited transactions and a 15% excise tax should be paid on the full amount of late deposits.

2)Can this be self corrected by depositing lost earnings for all affected participants? If so would that wave the excise tax from being paid?

A sponsor of a DB plan wants to amend the plan so that participants who terminate employment for reasons other than death, disability, or retirement, will have to wait until either early or normal retirement age in order to be paid out. Right now, the document allows for immediate distribution upon any termination of employment. Would amending the plan to delay the distribution availibility be a protected benefit violation?

Thanks

If a local government employee's service-connected disability pension benefit is deemed to be non-taxable (ie. considered in the nature of workers' compensation), is it non-taxable for life?

The answer to this question in the Governmental Plans Answer Book (Q 11:43) basically says that it is only non-taxable until retirement eligibility. But in parentheses afterward it says that the tax treatment of disability payments subsequently changed and that this statement is not useful in describing current tax treatment of disability. I can't find anything about the current tax treatment of disability pensions in the 2005 Cumulative Supplement.

This issue involves vesting and eligibility of individuals who 1) worked for companies that subsequently merged and 2) participated in DB plans of the companies that merged and the DB plan of the merged companies (which consists of the merged DB plans of the prior companies as various titles in the DB plan of the merged companies). Please excuse the complexity.

Example:

An employee was hired by Company A in 7/91 and left that company in 8/00. He had a deferred vested benefit in Company A's DB plan. Company A was acquired by Company B in 2001. The employee went to work for Company C in 6/02 and became a participant in Company C's DB plan. Company C and Company B merged in 8/02 to form company D. The employee continues to actively participate in Company C's DB plan (which was merged 12/31/03 into the merged DB plan then consisting of the DB plans of Companies A and B).

Company C's DB plan was not amended to recognize service in Company A or Company B for eligibility or vesting at time of merger of Company B and C. As noted above Company C's DB plan merged with the other DB plans at the end of 2003.

As of 1/05, the prior companies are all part of the same controlled group, all the employees work for the same company, and all the heritage DB plans are now merged into one DB plan (with various Titles--the titles consisting of the heritage plans).

The employee had less than a 5 year break in service from termination from Company A to hire by Company C, less than a 5 year break from the date he left employment with Company A and the date Company B and C (he being an employee of C at the time) merged, and less than 5 years from the date he left the employment of Company A to the date he works for a company that contains the merged DB plan of Company A.

He thus has a deferred vested benefit in Company A's DB plan (now a title of the merged plan) but is not yet vested in the Company C's DB plan (another title in the merged plan).

Question--in this fact circumstance example, can the Titles of the merged plan disregard prior service in a different heritage company for eligibility and vesting in a merged plan? If so, what are the relevant dates? If not, from what date or dates must the prior service be recognized.

Thanks for any help/guidance/thoughts on this labyrinthine issue.

Under Regulation 1.415-2(d)(2)(i), compensation is technically that which is received for "personal services actually rendered in the course of employment with the employer maintaining the plan to the extent includible in gross income..."

If severance is paid in a separate check, either all at once or spread out, how would it be included for plan allocation/testing purposes? IMHO, technically these payments are not for services rendered during employment, and are not part of a disability or health related compensation program.

Comments?

I work for a government contractor who until recently paid for all employee life insurance benefits. We have just been told that there is mandatory participation in the life insurance plan.

Can an employer force an employee to participate and have premiums taken out of their pay?

We have a takeover plan that has life insurance. The plan document says that the administrator may purchase life insurance in a non-disciminatory manner. The death benefit payable from the plan is based on the amount of life insurance in effect. The 2003 contribution to the trust included a side fund amount and a mortality amount. The plan administrator did not purchase life insurance.

Since the plan administrator did not purchase life insurance, is the mortality amount deductible?

Can the Colorado PERA Board disburse survivor benefits to an ex-spouse pursuant to the PERA state statute without any consideration of the Colorado probate statute that revokes the designation of an ex-spouse as a beneficiary upon divorce?

Is it legal to incent employees who have other health plan coverage to waive group coverage by giving them some after tax dollar amount? This would be non-cafeteria plans. They might have a Section 125 POP plan only. Thanks

In the process of resigning from a nonresponsive client. For the last few plan years, the client was required to obtain an accountant's opinion because of the number of participants. However, they failed to do so. The DOL has sent correspondence to them relative to the missing accountant's opinion for at least one of the years, to which the client has not responded.

During the time that all this was going on, the company was sold to another company in an asset sale. The original corporation still exists but has no doubt been stripped of any value, by way of bonuses/compensation to the owner.

My question is, to what extent, if any, is the owner personally responsible for the penalties? The Plan Administrator is defined to be the employer, and the Plan Trustee is the owner. The penalty situation was known by the owner prior to the sale.

Thanks for any help!

A.W.

If a participant takes a hardship withdrawal towards the purchase of his principal residence and the purchase doesn't go through can he re-deposit the funds back into the retirement plan (document is silent)? And if yes, must it be returned within a certain time frame?

Thanks!

Client has "satisfied" top-heavy contribution for past 3 years via 3% nonelective safe harbor contrib. However, it has been using a definition of compensation that excludes OT and bonuses (not a 415 definition). What is the appropriate correction?

Plan also has a discretionary profit sharing contribution after 2 YOS--can we look to that to make up the "deficiency"? (then we would only have folks with less than 2 YOS with an improper calculation)