a new plan with 3 doctors will be showing no earned income and a substantial loss according to their cpa. up until it was determined that there would be no income, the 3 doctors were deferring into the plan and receiving a match. the match can be transferred into a suspense/holding account to be used later, i believe, but can the deferrals "unwind" back to the pllc before plan year end 12/31 or will that amount be required to be refunded as income? either way im pretty sure the tax consequence will be roughly the same. i am just trying to minimize paperwork at this point.

Anyone have statistics on number of people who take advantage of the partial withdrawal option at retirement??

We are contemplating changing our distribution options from LS only to LS and Partial distribution. However, the Pres, wants to know if there would be any additional cost associated with allowing the partial distributions after attaining "x" age in lieu of LS distribution. (how many people would stay in the plan so they could get $$ out sooner, thereby incurring additional admin fee while the money is in the account) as apposed to them taking it out comptletely and eliminating the mantainance feel.

I have a situation where the emloyer has no non-highly compensated employees, but rather 10 highly Compensated Employees that includes the one sole (100%) owner. He wants to put in a cafeteria plan for dependent care expenses only, in which he the only Key Employee will NOT benefit in, only the other Highly Compensated Employees. Given there is NO non-highly compensated employees do I get a free pass on IRC 129(d)(2) HCE discrimination testing ? or is this a problem since I'd fail the 55% dependent care (IRC 129(d)(8)) test ? Thanks for any thoughts/opinions.

401k Plan with 50% of first 5% deferred, capped at 2.50% - written in the document

Can the Plan be amended by 12/01/04 for 2005 for 3% Safe Harbor and Employer Match?

I currently have a profit sharing plan for my partnership (plan sequence #1) and would like to add an individual 401k. It is a prototype plan from from a brokerage firm. The 401k and the profit sharing plan will have to be terminated after this year due to a change in business entity.

I've been told that the 401k paperwork should submitted as a restatement of the profit sharing plan and the plan sequence number should be #2.

Does this make sense? Why would the sequence number change if the 401k is a restatment?

Or should the adoption agreement indicate that this is an initial adoption for the 401k and have a new plan sequence number?

Thank you for your help.

A terminated participant in a governmental money purchase plan signed a waiver (for another TPA) in 2000 "irrevocably" deferring her benefit until her early retirement date. The money just changed vendors -- she got a statement, remembered her account, not the waiver and wants her money. Can she change her mind?

We checked the document and there is nothing about irrevocable waivers of benefits. Is this an IRC rule with which I'm unfamiliar?

Any comments would be appreciated.

Plan participant in a k plan wants to take inservice withdrawal of entire account balance and roll it to IRA. He is 72 years old.

Plan has in service withdrawal provisions.

Do the 70 1/2 MRD distributions kick in for this distribution?

Hoping someone can shed some light on this. Code section 125(d)(1)(B)

states within the definition of a cafeteria plan that the plan benefits

are limited to cash and qualified benefits. Section 125(f) states that

LTC insurance is not a qualified benefit. Flexible spending arrangements

are a variation of cafeteria plans. Section 106©(1) states that an

employee has gross income if an employer provides LTC coverage through an

FSA.

So, a cafeteria plan in the form of an FSA may not offer LTC coverage and

remain qualifed, but, if it does, the employee has income. What's going

on here? Obviously, I'm missing something.

Thanks and I hope everyone has a safe and happy Thanksgiving with their

family and friends.

Ken Davis

Univ. of South Alabama

Health insurance premiums for coverage other than that provided by the

employer may not be reimbursed by a health FSA. Does this rule apply to

COBRA premiums that a new employee pays for coverage under the old

employer's health plan while waiting out the pre-existing condition period

of the new employer's health plan?

Thanks,

Ken Davis

Univ. of South Alabama

We are trying to resolve an issue and would appreciate any input:

11/01/03-10/31/04 Plan year

11/01/03-10/31/04 deferrals for HCE = 18000

01/01/03-12/31/03 HCE had 1500.00 in catch up

01/01/04-10/31/04 HCE already deposited 16000.00 (3000 catch up for 2004)

For the 10/31/04 ADP test do we include 16500 (18000-1500) of deferrals in the ADP test or do we include 13500 (18000-1500-3000)?

If we are to only include the 16500 and the test still fails, I assume this HCE would not be able to have any of the excess reclassified and would need a return since the 2004 catch up limit has already been met.

Please help, we are split 50/50 on this issue!!

I have run across a differenty type of situation and would like your input. I have a client that has a prototype document that says they will make a 3% SHNEC for the 2004 plan year. However, the client decided back in November, 2003 that he would issue a safe harbor notice stating that the safe harbor match would be made.

Can the plan be amended this late in the year to change from SHNEC to SHMAC or has the plan lost its safe harbor status for 2004? Will both the match and non-elective contributions have to be made?

We have an employee that will be leaving our company on 12/31/04. As part of his severance package, he will be paid for the first 6 months of 2005. Since the individual will be paid for half of next year, can he contribute to the 403(b)? Is he eligible for the match?

Our match does not require employment on the last day of the plan year. However, it seems that he would not satisfy the service requirement of 1000 hours (even though he is being paid like a current employee) to qualify for the match.

Any thoughts?

Thanks.

What's the difference between the new sidecar IRA provisions and the old QVECs?

I only work on safe harbor DB plans but would like to get the calculation of the NAR and MVAR of 1.401(a)(4)-3(d) straight.

I found a posting from March of 2001 regarding the calculation of the NAR and MVAR if the normal form of the benefit were 10C&C.

In determining the NAR, the example indicates that the 10C&C accrued benefit payable at NRA is first converted to a life annuity using the plan actuarial equivalence factors and this would then be expressed as a dollar amount or a percentage of average annual compensation. Is this conversion from 10C&C to a life annuity correct and if so, why? It looks like section 1.401(a)(4)-3(d)(1)(i) indicates that the NAR involves the “increase in the employee’s accrued benefit (within the meaning of 411(a)(7)(A)(i)…” Section 411(a)(7)(A)(i) says that the accrued benefit is “expressed in the form of an annual benefit commencing at normal retirement age.” Does 411(a)(7)(A)(i) not consider a 10C&C benefit to be an “annual benefit”? If normal form were a 50% QJSA, would one convert this to a life annuity first in order to calculate the NAR?

In the posting from 2001 basically, the accrued benefit payable at normal retirement as a 10C&C benefit is converted to a QJSA benefit payable at the participant’s current age using plan equivalence and then this benefit is normalized. This looks right to me, kind of (see below). The posting indicates::

1. Using plan equivalence, calculate the lump sum equivalent of the 10C&C accrued benefit payable as of the participant’s current age.

2. Using plan equivalence, convert this lump sum to a 50% J&S benefit payable at the participant’s current age.

3. Using standard interest and mortality, calculate the lump sum equivalent of this 50% J&S accrued benefit payable as of the participant’s current age.

4. Standardize this lump sum by accumulating it to testing age using standard interest and then dividing by the APR determined using standard interest and mortality.

I still contend that if the QJSA under the plan is not subsidized and is determined from the normal form using plan equivalence that it is not more valuable than the normal form of the benefit and the MVAR would be the same as the NAR but the regulations don’t seem to agree with me, and they win. Does anyone else have an opinion on this?

I know that it is relatively common, particularly in the severance context, for employers to agree to subsidize the COBRA premiums for departing employees (i.e., they don't pass the premium costs through). My question is whether an employer, by not passing through COBRA premiums, is effectively creating a self-funded medical reimbursement plan under Section 105(h)--in addition to the "real" medical plan that actually offers the benefits. If it did and you were considering subsidized COBRA for a departing executive-level employee, you could run into discrimination problems.

As a practical matter, I doubt that very many (if any) employers ever consider this as a possibility. The argument seems like an unnecessarily strict application of Section 105(h) in any event, particularly when the medical plan at issue is fully insured and not otherwise subject to Section 105(h). Still, I can't point to anything definite to refute it.

Any thoughts?

UPDATE: Actually, never mind, at least insofar as insured plans are involved. I forced some clarification of the argument. Still, for self-funded health plans, I'd bet dollars to donuts that employers don't focus on the potential for discrimination when they subsidize COBRA for a bigwig who's on his/her way out the door.

I'm trying to determine whether my client can distribute 100% of his IRA, and rollover 100% of his IRA, but designate the rollover such that only the pretax portion of his IRA is transferred to a qual plan that accepts only pre-tax money and the after tax $ gets rolled over to another IRA.

The goal is to avoid prorating the rollover so that he has to take a taxable distribution for a portion of the rollover to the qualified plan, solely because it does not accept after tax money.

Can he pick and choose which part of the account gets rolled over to the plan and to another IRA?

We have a controlled group that will no longer be a controlled group effective Feb. 2005 (half of one corporation is being sold). Per Derrin Watson’s book, we can test both companies separately, but can we terminate one of the companies from the plan?

What are TPAs doing to comply with Reg E? We're new to the FSA Stored Value Rx Card market and wonder who (TPA, Card Vendor or Employer) is taking care of the Reg E discolsoures, documentation requirements, limitations on participant liability for unaurhtorized transfers, correction procedures and reservation of certain rights on pre-authorized EFTs. If it is the TPA, what are TPAs doing to comply? Any other comments on this topic are welcome as well, Thank you!

By what date does a not-for-profit organization have to make employer contributions to a SEP or SIMPLE?

Company A has a SEP for the 2 owners and EEs. Company B wants to put in a Solo (no EEs obviously). As long as A and B are a controlled group the Solo will not fly... correct? I mean if "A" didnt have a SEP it would have to be part of "B"s plan. What if the Solo was a deferral only plan... no ER contribution.

Bottom line... can anything work?