I am working with a 100% participant directed plan (SDBs) and an active participant wishes to use assets from his plan account to purchase a condo. Does anyone know if there is any reason this woukd not be allowed? Thanks!

Is there anything improper, illegal, or discriminatory about giving away a prize to an employee who enrolls in our 401(k) plan by a particular date? I would send enrollment kits to all eligible non-highly compensated employees who are not currently enrolled in the plan. Those who complete and return an enrollment form to me by a specified date would be enrolled in the plan and entered in a drawing to win a prize like a digital camera. I found one at Circuit City for $99.99. The value of the prize would be somewhere in that ballpark.

Which employee benefit plans are subject to ERISA if the employer only has 25 employees? LTD? STD? Medical, dental, vision? Life insurance? 401k? Health Care FSAs?

A US Doctor working in Australia would like to establish a DB Plan. Doctor has his own US "S" corporation established that receives his Australian income and pays him as an employee. Question is, can he use his gross income as shown on his 1040 before the foreign tax credit? He pays Australian income tax on his earnings and then gets a foreign tax credit on his 1040. Couldn't the DB Plan be based on his 415 compensation?

We had a client come to us and request to set up a one person 401(k) Plan. He has a sep. full time job, but set up an LLC in order to do day trading.

He would like to know if he can set up a one person 401(k) under this business and roll $50,000 into the plan - and then take a loan from the Plan (which he intends to pay back over the 5 year time frame).

I wouldn't think any of this would be a problem, except that he does not receive any salary through the business and other then the loan payments, he would be unable to make contributions. Any thoughts?

Thanks!

I am reviewing draft footnote from non-profit sponsor (don't know who prepared the draft, probably auditor), with the following item immediately following the funded status:

Benefit cost included in the combined statements of operations and changes in net assets

Never seen this before. Can anyone help my poor brain understand what this means?

Can a plan that has used the presumptive method, say, elect at any time to adopt a new withdrawal liability allocation method such as the rolling 5 method, for example? This assumes the plan is not a construction industry plan.

I am preparing Form 1099-R for a retired participant in a DB plan. He retired before age 50 and has been receiving monthly annuity payments since that time. He reached age 59 1/2 in June of 2004.

For 1099 purposes, should he be coded as 1 (early distribution, no exception) even though he meets the "substantially equal" rule? The 1099 instructions don't seem to have a code for substantially equal payments for someone who separated from service before age 55.

Alternatively, may he be coded as 7 (normal distribution) since he turned age 59 1/2 during 2004?

I feel this is a problem but since I see it so often I wonder if I am wrong.

Many small plans have no checking account or money market account available for writing checks. The brokerage makes participant distribution checks payable to the trustee but tells the trustee to deposit in the corporate checking account and then to draw corporate checks to the participants.

I don't like the idea of plan assets being deposited into the employer's checking account. Am I wrong on this, and if so why?

We normally pay in arears and take benefits deductions based on the pay cycle (i.e., if the deduction beginning date falls within the pay cycle then the benefit is deducted). At times this may mean that an employee whose benefits begin on the first of the month doesn't see the deduction in the first paycheck they receive in the month if the first does not fall within the pay cycle. Our most recent pay cycle ended on December 31 with the pay date being January 7. Should the paycheck received on January 7 reflect benefits elections and new deduction rates that went into effect on January 1 even though January 1 was not included in the pay cycle being paid out on January 7?

We normally pay in arears and take benefits deductions based on the pay cycle (i.e., if the deduction beginning date falls within the pay cycle then the benefit is deducted). At times this may mean that an employee whose benefits begin on the first of the month doesn't see the deduction in the first paycheck they receive in the month if the first does not fall within the pay cycle. Our most recent pay cycle ended on December 31 with the pay date being January 7. Should the paycheck received on January 7 reflect benefits elections and new deduction rates that went into effect on January 1 even though January 1 was not included in the pay cycle being paid out on January 7?

a profit sharing plan has been in existance for many years, nursing home, makes a small contribution each year($10K). ER inquiries about changing plan to only include supervisors/owners. In course of our conversation, he says, I do not want to include union employees. The plan has always excluded union ee's! He just never revealed them as such on the census.

Any ideas as to corrections, if any?

Thanks.

Linda Michals

Assume I am calculating the varible rate portion of the PBGC Premium for the plan year and premium payment year beginning 1/1/04. The client made a contribution of $100,000 on December 15, 2003 for the 2003 plan year (reported on the 2003 Schedule B).

I am using the alternative calculation method, therefore, I use the actuarial value of assets and current liability as of January 1, 2003 (reported on the 2003 Schedule B).

Can I include the discounted value of the $100,000 contribution on line 3©? The $100,000 is not included in the value of assets as of January 1, 2003, but it was deposited prior to the PBGC filing date and is for the year preceding the premium payment year.

I am doing an amended 2002 & 2003 form 5500 for a new client. I remember doing some of these a few months ago for someone else, and can swear that they get mailed to a different address than the EBSA in Kansas. Anyone know? At my old employer, we had one of those 5500 tips books. They don't have it here, and the gov't has not answered my inquiry yet (surprise).

thanks!

This Schedule D stuff makes me cross-eyed.

Probable takeover case where a Schedule H is required, and one question led to another, ad infinitum - you know the routine.

Plan investments are all through the "John Doe" Trust company, which allows participants to direct their accounts by purchasing only mutual funds. They are limited to (x) funds - I believe around 50 of them.

I find the form 5500 instrructions and DOL regs referenced to be somewhat less than a model of clarity on Schedule D and DFE issues. The Trust company does NOT file a 5500 as a DFE, and they say that a Schedule D is not required as this is not a PSA, or a CCT, etc.

This is the conclusion I also rather belatedly arrived at, although I originally expected the opposite. But since this is the first time I've wrestled with this particular question, I'd appreciate any comments from others who may have gone through this same exercise. Do you agree or disagree that a Schedule D is not required? And assuming not, then the value of the funds should be listed on 1©(13) on the Schedule H?

Thanks in advance!

For ease of access, I wanted to post the following link to a couple of minor IRS clarifications to Q&A 19 and 20 in Notice 2005-1. This clarification was released on January 5.

http://www.ustreas.gov/press/releases/js2180.htm

We restated all of our plans for GUST and EGTRRA and the adoption agreement we used had a choice to distribute as a lump sum or rollover into an IRA. My understanding is with the latest regulations, a lump sum is no longer an option. There are no de minimus amounts, everything is supposed to be rolled into an IRA.

1. Are we required to prepare an amendment for the adoption agreement to take out this choice?

2. Has anyone actually rolled a balance of less than $100 into an IRA? If so, can you give us a name of who accepts them?

Is anyone aware of any formal language that must be contained in the notice to participant/alternate payee that a DRO has been received? I realize the Plan Administrator will need to provide both with the plan's QDRO procedures. But, I'm not sure if the actual notice needs to say anything except that one was received and a copy of the procedures is enclosed.

I initially thought an employer could freeze their "old" Non-qualified Deferred Comp Plan, thereby preserving the participants' ability to make elections under the "old" Plan as to time and form of payment, then start a new Non-qualifed Deferred Comp Plan effective 1/1/2005 for post-2004 deferrals. And, that only deferrals under the new Plan would be subject to new Section 409A.

But, as I read Q-18 of Notice 2005-1, it says that a "new arrangement" after 10/3/2004 is presumed to be a material modification of the pre-2005 Plan.

I think this means that if the Employer wants to continue a non-qualified deferred comp plan for employees after 12/31/2004, the pre-2005 deferrals have to be brought under the new rules, i.e., the pre-2005 deferrals won't be grandfathered.

Is this correct?

I've always "understood" that 415 limitats applied to distributions out of a DB plan whether or not some/all of the benefits is coming out of a 414k account within the DB plan. In other words, if a participant segregates his benefit in a 414k account and self-directs the investments which do so well that the ultimate distribution would exceed 415 limits, can he receive the full 414k account if as of the time he segregated the assets into the 414k account the 415 limit was not violated back then. I think 415 limit still applies to the current 414k account. Any thoughts or disagreement on this ?