Even though bottom-up QNEC's are on their last legs given the July 17, 2003 proposed 401(k) regulations, I've always felt that bottom-up QNEC's are still permissible until those regulations become final and effective.

However, how does the IRS' new guidance on discriminatory practices (October 22, 2004 memo from Carol Gold) effect bottom-up QNEC's used to cure failing ADP or ACP tests? Do people think that bottom-up QNEC's are still permissible?

The adoption agreements for our prototype plan have a section entitled "Service for Predecessor Employers." A plan sponsor can then list any such predecessors. But the plan document nowhere defines just what a "predecessor employer" is.

Our clients are all employers in the same industry and they are in competition for business. It often happens that an employer will hire away certain preferred employees from a rival. The employer wants to usher the new employees into its plan and bypass the eligibility and vesting requirements that apply to other hires, so they utilize this section of the adoption agreement to name the other employer as a predecessor employer.

But is this OK? We don't have guidelines as to what is and is not permissible in this situation. The Code is a bit vague.

Reg. 1.411(a)-5(b)(3)(iv)(A) Predecessor employers states: "Service with a predecessor employer who maintained the plan of the current employer is treated as service with the current employer (see section 414(a)(1) and the regulations thereunder), and certain service with a predecessor employer who did not maintain the plan of the current employer is treated as service with the current employer (see section 414(a)(2) and the regulations thereunder."

Sec. 414(a)(2) Service for Predecessor Employer states: "in any case in which the employer maintains a plan which is not the plan maintained by the predecessor employer, service for such predecessor shall, to the extent provided in regulations prescribed by the Secretary, be treated as service for the employer."

I don't see that the Secretary ever deemed the issue sufficiently important to prescribe regulations. (On the other hand, my copy of the Code is pretty old.) Is this issue addressed elsewhere?

a participant has 2 403(b) arrangements from 2 different employers. he is over 70 1/2 and still employed by an employer sponsoring on of the 403(b) arrangements. does he have to take an rmd from the other 403(b)?

Client filed 12/30/03 5500 8/10/04 (due 7/31/04). Yhe late filing was due to emergency hospitalization, so I think we can establish reasonable cause.

If the IRS accepts his excuse, will the DOL? If not, does the fact that he's been notified by the IRS preclude him from filing under DFVC?

A tangential question. Given that the DOL is now the primary "intake" agenency for 5500 filings, what is the IRS interest, at least for plans that are not subject to minimum funding standards?

I've read the IRS publication 590 where it relates to compensation that is eligible for an IRA contribution.

I have one steady line of work: home-based telemarketing that I receive a 1099 for every year. I make about $6,000 (net) annually. I'm an independent contractor.

Some years I try my luck at network marketing, which usually involves some advertising expense, but it is totally separate from the home-based telemarketing I do. Some years I may have a profit and some years I have a loss with the network marketing. This is all reported on a separate Schedule C.

So here is my question: If I have a loss from network marketing, let's say it's $4,000, do I subtract that from the $6,000 I always make from telemarketing to get a net eligible taxable compensation of $2,000? Would $2,000 be the maximum I could contribute to an IRA?

In publication 590 it says if you have W-2 wages and you have a loss from Schedule C, do not subtract that loss when calculating taxable compensation.

So if I was doing telemarketing as an employee, not independent contractor, I would definitely have $6,000 of eligible taxable compensation. It seems like all that is important is that there is some material involvement in an income-producing activity.

An answer from a CPA or IRA specialist would be appreciated.

Thank you,

Mary-Jane

Employer has been allowing pre-tax payment of premiums to supplementary voluntary policies (life, health, etc) since Dec. 2003. Employer wants to stop the practice (due to ERISA implications). Employer has had a flex plan in place but it does not list the voluntary policies as an optional benefit.

QUESTION: Is BEST course to amend the plan retroactively to provide that there was a "12-month window" during which this was allowed, and to inform employees of the change?

Other thoughts?

Just curious what version people are running these days? We haven't updated in a while and wanted to know if there were any problems on any of the newer versions. We will probably update to the most latest by year-end

I am starting to do the 2004 cross testing projections and am getting confused by the "early entrants" into the 401(k) portion of the plan.

Top Heavy Plan

401(k) - 3 mos service

ER (SH-NEC & PS) - 12 months

Employee is in the 401(k) portion only, but gets TH min, not SH.

Cross Testing:

Ratio %: only the folks in the ER portion (ignore the TH min ee)

Average Benefit Test:

- NDC - only the folks in the ER portion (ignore the TH min ee)

- AB%T - include the TH min guy (def and TH min)

Is that right? Thanks -

My uncle was fired from a government job of 20 years. He was told that in order to receive his 401k, he had to have his 2 previous wives to complete a document acknowledging he owes no child support nor alimony. Unfortunately, neither wives are in a hurry to sign the paperwork.

How long would the government wait to send his 401k? It would benefit the ex-wives if he owed them money, so I would not think the government would continue to wait.

An employer had an existing 401(K) plan when it became unionized. Under the collective bargaining agreement, the employer is contributing to the multi-employer pension and annuity trusts. The existing employees want to be able to continue to contribute to their 401k accounts but the employer will no longer be making any contributions. Is this permissible? Anything to watch out for?

The partnership has adopted a SEP. The parnership has 5 partners and no other employees. May a partner elect out of the SEP coverage?

Washington Post Article

Can a participant run her retired spouse's premiums through her FSA account? The husband is retired and they pay out of pocket for supplemental medical insurace. Can she use her FSA to cover this? I am thinking no because it is an insurance premium, but then again it is not being paid pre-tax. Any info would be great!

Tried to log-in to the Planet ERISA site, but their password screen wouldn't let me enter my full password. When I tried to use the "Contact Us" function, I also could not get through. Does anyone know if this site is still active?

Employer sponsors a 401(k) plan. He wants to amend the current plan to to a safe harbor 401(k) plan effective January 1, 2005. By what date would the amendment need to be executed and notice given to participants?

It is my understanding that if cross testing doesn't work a safe harbor allocation may be used. I have that situation, however, when i use a safe harbor allocation, the plan fails the 410(b) 70% coverage test (it fails that regardless of the allocation) and also fails the rate group (midpoint) test. I guess my question is if i'm using a safe harbor allocation does the plan have to pass the 401(b) 70% coverage test?? Thanks.

Can a SIMPLE 401(k) be "merged" into a new SEP IRA or must the SIMPLE be terminated and the funds rolled over?

Have a designation that reads:

My children or their issue per stirpes, otherwise

ABC trust.

There is one child, and he disclaims. My initial reading was that we skip the first line entirely and it goes to the trust, but I'm being told that a disclaimer is treated the same as a death, so it goes to the issue per stirpes. The more I think about it the more I think that's right. It's going to an attorney but I thought I'd throw it out here.

The benes are the same under the trust so it's not such a big deal.

Employer terminated its 401(k) Plan in July, 2003 in anticipation of its acquisition by another company, which utimately did not pan out. Final assets were not distributed from the terminated 401(k) Plan until July, 2004. Employer now wants to re-establish a 401(k) Plan, since the proposed acquisition was a bust. It is my understanding that, under the successor plan rules, this could not be done any earlier than August, 2005 - i.e., 12 months after the final distribution was made from the prior terminated 401(k) plan.

Would there be any problem with the employer establishing a SIMPLE IRA program just for 2005 - using a reduced 1% match - and then establishing a new 401(k) Plan effective January, 2006? The SIMPLE IRA would only have a one year run.

The employer's intent is to have a "salary deferral only" 401(k) Plan and was specificaly not contemplating making any employer contributions (matching or profit sharing). Though there is a required employer contribution under the SIMPLE IRA, I'm thinking that such contribution may be significantly (if not entirely) offset by the lack of administrative costs to establish and operate the SIMPLE IRA program.

Before broaching this approach with the employer, wanted to see if anyone else had any comments and/or suggestions.

Thanks!

Hi,

I am in partnership with one other partner and we each take a monthly draw throughout the year, pay estimated taxes and issue K-1's for income tax.

If we implement a 401k plan, we have no formal *salary*. Can we take the deduction without having a formal salary and where would the deduction be shown on the partnership return and K-1's.

Thank you for your help.