We discovered a participant in a 401(k) profit sharing plan did not take Required Minimum Distributions. These RMDs should have started in 1997. The participant was born in 1930 and is still actively working at his son's business. The father does not own any part of the business, but the family attribution ownership rules we discovered apply. I'm going to advise the client to take the 2004 RMD prior to 12/31/04. I'm going to further advise they take all past due RMDs by 12/31/04. Question #1: Can I reduce each RMD calculation amount by the amount they should have previously taken? For example, can I reduce the 1998 calculation balance by the amount they should have taken in 1997, even thought it won't be taken until now? Question #2: Which IRS address / office would the client use to contact the IRS to explain the situation and to request a waiver to the 50%penalty? Question #3: Which table should be used for which year? His 77 year old wife is his beneficiary.

We discovered a participant in a 401(k) profit sharing plan did not take Required Minimum Distributions. These RMDs should have started in 1997. The participant was born in 1930 and is still actively working at his son's business. The father does not own any part of the business, but the family attribution ownership rules we discovered apply. I'm going to advise the client to take the 2004 RMD prior to 12/31/04. I'm going to further advise they take all past due RMDs by 12/31/04. Question #1: Can I reduce each RMD calculation amount by the amount they should have previously taken? For example, can I reduce the 1998 calculation balance by the amount they should have taken in 1997, even thought it won't be taken until now? Question #2: Which IRS address / office would the client use to contact the IRS to explain the situation and to request a waiver to the 50%penalty? Question #3: Which table should be used for which year? His 77 year old wife is his beneficiary.

Client has an ongoing calander year Profit sharing plan. Monthly contributions have been deposited to the Profit Sharing account for 2004. Any way to set up a Defined Benefit plan in prior to 12/31/04, "transfer" the monies previously deposited to the profit sharing account and treat them as Defined Benfit contributions?

You have to hand it to those folks at the IRS - they sure know how to take minor things and blow them up into huge problems.

We've had 3 cases in the last couple of weeks where the plan administrator has made distributions, done mandatory withholding, then tried to submit the withholding and had problems. First of all it won't go through electronically since they are using the TIN for the plan. (This is nothing new). Then they file with the 8109 coupon using the TIN. All 3 trustees have then been told that the number is not valid since has not been "active" in the last 3 years.

On one case, the IRS automatically changed the number to the EIN for the business.

On another, the accountant decided to change to the EIN and file under that.

On the third case, the Administrator is looking to us for guidance, do they apply for a new TIN? She told the IRS reviewer that the number is active, they have had it for a long time and it has appeared on the 5500 forms, (Schedule P) - he replied that he didn't know anything about 5500 forms, he doesn't do pension plans.

Has anyone else encountered this? If so, what did you do? This is the first time this has come up for us - appears to be something new. It isn't uncommon for a small plan to go 3 years without a distribution, which apparently makes the TIN "inactive" by the standards of the knuckleheads at the IRS. We can have them apply on-line for a new TIN, but I'm uncertain what other problems this may create. And at the very least, it can cause administrative and recordkeeping nightmares. Sheesh! Any suggestion for somone at the IRS to whom I should forward these concerns, stated a bit more diplomatically... Thanks!

A participant terminated employment and stopped making payments on a loan in the second quarter of 2004. The document considers the loan in default the following quarter. In addition the plan is valued daily and the funding company accrues interest on the loan daily.

When the 1099R is issued should the value of the defaulted loan be the principal outstanding as of the last day of the third quarter? Assume no communication was sent to the funding company until December 1, 2004 to issue a 1099R. Do you instruct them to reduce the value of the loan to the principal outstanding as of September 30, 2004?

Any thoughts would be appreciated?

Plan X is a 401(k) plan that provides a matching contribution. Assume the following two situations:

Employee A works for the sponsor of X, makes elective deferrals and has those deferrals matched under the matching formula. A terminates on 12/15. X's recordkeeper doesn't learn of this until 1/15. Assuming there was a two-week period delay in paychecks, A is paid on 12/31 and has elective deferrals deducted and matches taken. What can X's sponsor do to correct the over-contribution?

Employee B works for X's sponsor. makes elective deferrals and has those deferrals matched under the matching formula. B is a salesperson earning commissions. Assume B makes a big sale to a customer and the customer cancels the sale 30 days later. In the meantime, B has earned the commission and had elective deferrals taken and matching contributions made. Assume alternatively that B continues to work for X's sponsor or that B terminates employment before the customer cancels the sale and takes a lump sum distribution from X. What can X's sponsor do to correct the over contribution?

Can you use the age 65 APR for an ee who is over age 65? His APR is lower and that then increases his ebar. I know i can override the age in census to get the APR for age 65.

Probably a silly question, but the terms are used interchangeably around the office. Is there a difference?

A one-participant/owner plan is purchasing an apartment complex. The plan intends to use plan assets 1) for a down payment, 2) to pay mortgage, 3) to receive rent payments, and 4) ultimately to collect and recognize the capital gain (proceeds) from the sale (or loss for that matter).

Questions.

1. In the scenario above, does anyone believe it is a PT?

2. Could the receipt of the rent payments and payment of the mortgage payments be done outside of the plan (say by the owner) and still not be a PT? And the investment would just be treated as an asset with a recognized gain/loss at time of sale?

3. I'm not even sure that the plan can recieve the rental payments and make mortgage payments. I finf it hard to believe it can make mortgage payments and not sure if the receipt of rental payments wouldn't be deemed plan contributions?

4. Does the real estate need to be appraised annually for the 5500 or can it be just valued at cost basis until it is sold?

Curious to hear comments.

Thanks.

does this pass muster:

1st - pass out 3% SH non-elec

2nd - integrate @ TWB (5.7%>TWB)

3rd - allocate excess to bring HCEs to max 415 limit

I can use the 3% SH as part of my employer contribution, the draw back is that there is no vesting on the 3%... 100% vested

almost forgot... what if a SH Match.... do I need to give out minimum 3% to all as en ER contribution and then perform my integration, and if anything left allocate the excess? What if there isn't anything left... what if there isnt enough? reduce the amount of the integration? or do I reduce the 3% to 1/2 of the integration (to 2.85%)?

I have a 9/1 plan year. For the 2003 calendar year, I have an HCE that had a $2,000 excess deferral that never got paid (now an operational defect). That HCE had an ADP excess contribution for the 9/1/03 - 8/31/04 plan year of $3,000. The $3,000 was paid on 10/1/04 (before 2-1/2 deadline).

Can I offset the ADP excess to satisfy the excess deferral that never got paid?

I assume this can be done in accordance with 1.401(k)-1(f)(5)(i)(B). I see the tax reporting as: $2,000 excess deferral taxable in current tax year (2004) and $1,000 ADP excess taxable in the prior tax year (2003).

Thanks.

I have heard that Wisconsin is taxing HSA contributions (both employee deferral and employer contributions). Has anyone else heard this? Are any other states taking the same position?

I have in my possession an old copy of the Code, and I would like to know whether it still possible for a late retiree to segregate his normal retirement lump sum and separately invest it, as IRC 414(k) once provided. Unfortunately, my client is a one-life group, and I am trying to minimize his tax liability on asset reversion.

Any ideas would be appreciated.

For a plan with both core investments (mutual funds) and individually directed accounts. that is moving from balance forward to daily valuation, should the participants with IDAs also be blocked from making any investment changes, requesting distributions, loans, etc. as the participants in the core investments are prohibited from doing so until the 12/31 balance forward valuation is complete? Does this hinge on the ratio of HCEs in the IDA group?

The comp threshold for officers that are key employees increases from $130,000 to $135,000 in 2005. The 2005 top-heavy test will be done 12/31/2004 based on ending balances and census data for 2004. Do I use the new $135,000 officer comp limit since it is technically the 2005 test? What about start-ups in 2004? Do I use the old limit for the 2004 test and the new limit for 2005, similar to how we did things for 2001 start-ups due to EGTRRA changes effective in 2002?

We have a prospect that is currently employed by the United Way (non-profit). a small group of employees (4) are spinning out to a new non-profit (they have a 403b plan).

The UW employees are in a DB plan and it is being terminated.

I have several questions:

Can a non-profit have a 403b and a 401K?

How about a 403b and a simple?

What options are available for a group of 4 wishing to save for retirement, cash flow is not big, but they do want to save.

HELP!!!

We have a client who is spinning out a new non-profit and their existing employer (United Way) has a DB plan, can those assets be rolled into a qualified plan?

Also this new group will only be 4 participants, what is their best option for a new retirement vehicle?

Thanks

Why

Is it required to withhold state taxes from a minimum required distribution?

This may seem like a dumb question and maybe it is.

How do you make sure that you are not discriminatory in favor of highly compensated employees? Use similar testing as for a 401(k) plan?

If you find that you are discriminatory, how do you fix the problem in this type of plan?

Any help you can provide would be much appreciated.

Thanks

Does anyone have any new information regarding legislation which would permit the rollover and/or merger of 403(b) plans into 457 plans?