There are a number of places where the 403(b) rules say to follow those for 401(k)s. Therefore, I have scanned the final 401(k) regs to see if any of the provisions may apply to 403(b)s. The only instance I can find is the expanded definition of hardships to include funeral expenses and expenses to repair damaged homes.

Did you see anything else?

I have a situation where the ESOP only owns a portion of the S-Corp. As time goes on and distributions to the shareholders (including the ESOP) are made, I won't be able to maintain the "primarily invested in employer securities test." Would I be able to make a cash distribution to all participants of their share of the earnings? Maybe through an In-service withdrawal? Would it be subject to 72(t)?

My friend had net earned income from self-employment only for the years 1992 through 1995. He established a single participant Keogh MPPP in 1992 and made contributions for the years 1992 through 1995, deducting the amounts contributed.

He had no earned income, and no further contributions were made, for years after 1995. All contributions were invested in mutual funds. He moved cross country in 1998. By the end of 1999, the assets had grown in value to over $100,000. Because he had not made contributions for over four years, his records were in disarray from the move, and because he had never previously filed Form 5500-EZ, he did not realize the Form had to be filed beginning in 1999.

He is now nearly 69 years of age and recently began examining his retirement accounts in preparation for taking Minimum Required Distributions and also for estate planning. It was not until the past few weeks that he learned he had to file Forms 5500-EZ for the years 1999 on. He is preparing late returns for filing and will request that penalties be waived based on reasonable cause. (As a Form 5500-EZ filer, he is not eligible to participate in the DFVC Program which substantially reduces penalties.)

Only question so far is: 1. Does this qualify for a TSL (tear stained letter)?

In preparing the Forms 5500-EZ discussed above, examination of his records revealed that his Keogh contributions exceeded the allowable amounts for the years 1992 through 1994 by a total of $2,410. The 10% excise tax applies only for the year 1995 because, for all prior years, the cumulative excess contributions are not more than 6% of his compensation for the year. For 1995, the cumulative excess contributions are $740 more than 6% of his compensation, so he will be paying $74 to the United States Treasury, and filing Forms 5330 for the years 1992 through 1995, as well as Forms 1040X for the years 1992 through 1994.

He will be withdrawing all the excess contributions and earnings thereon this year and will reflect those amounts in income on his Form 1040 tax return for 2005.

Additional questions are:

2. For what years are the earnings on the excess contributions reported? Every year beginning in 1992 on a 1040X? Only on his Form 1040 tax return for 2005? Something in between?

3. He never made GUST amendments. What does he need to do about that?

4. As soon as everything discussed above is resolved, he intends to rollover all the Keogh assets to an IRA, thereby terminating the Keogh. He'll file a final Form 5500. Are there any other Forms that must be filed? Forms 5310 and/or 8717?

This bulletin board is such a fabulous resource. Thank you for any help you can provide.

We have a client that allows the employee's portion of their health care premium to be withheld pre-tax via a 125 plan. An employee wants to drop his health care coverage, thus discontinuing his pre-tax premium. Can the employee drop the coverage prior to the end of the 125 plan year end without jeopardizing the favorable tax status of the plan?

I appologize if this has been asked before. Regarding the Automatic Rollover Regulations, an arrangement has to be worked out by each QP with an IRA vendor who is willing to accept th Automatic Rollover.

Anyone have a list of vendors doing this? What are other people out there doing?

Thanks.

We have a client whose 2001 Pension Plan Return is under examination.

Two plans, MP and PS.

Two accounts for each plan.

Two doctors, one term vest doctor and one common law employee.

For 2001, max comp was $170,000, max contribution $35000.

The two doctors made $14,000 contributions to the MP, $21,000 to the PS, each.

The auditor wants to declare a funding deficiency for the MP because he says the plan is $3,000 deficient for each doctor.

Quite simply, the doctors contributed the $3,000 in error to the PS plan.

I can understand making the transfer to the MP plan, but not the $3,000 "deficiency" and payment of any excise tax.

Anyone have any similar experience with an audit like this?

Thanks,

Steve

I've been unable to find guidance on the deferral of bonuses paid in multi-year arrangements. I seem to remember the topic being addressed in one of the conference calls, but can't find it in any of the printed material. Has there been guidance issued, or can we anticipate in in the mid-year regs?

Thanks, Joe

I know there have been some changes to deferred comp plans this year, but I thought it went into effect next year...

My spouse works for a foriegn company here in the US. There is a deferred comp plan for management in addition to the 401k they sponsor. My spouse has deferred his bonus to the deferred comp plan for 3 years, and is 100% vested in the first 2 years of contributions.

In December a mysterious entry showed up on his pay stub indicating that about 1/3 of what he is vested in (in the deferred comp plan) is taxable income!!!!

Does this sound right???

What about withholding? It is enough to possibly cause us to be under withheld.

Where can I get some easy to read info on this?

Thanks!

Are Stock Options (CALLs and PUTs) buying and selling permitted in a Roth account? If not, why not? Thanks, GeneJ

What restrictions can we place on limiting predecesssor service credit to existing employees in an acquired company.... If we hire an employee who previously worked for and then (in 2003) terminiated employment with the recently acquired company, is the newly hired employee eligible for prior service credit?

Hey everyone I have some basic questions regarding the 412i and 419 af 6 plans.

412i

1. Make up of 412i plans can be: 100% whole life or 50% annuity and 50% whole life insurance? Can they be like 30%/70% or another combination?

2. what is the maximum yearly (monthly) benefit for a DB plan and for a 412i

3. what constitutes eligible employees 20ys old and worked for how long?

4. Must 100% of eligible employees be covered? Someone told me that you can get away with 40% covered i.e. if there was a husband and wife and three employees then just the husband and wife can be covered and nothing for employees(100% benefit for owners)

5. the structure of the annuity in the 412i Assumptions, i=3%, term is 5years and contribution is 150k per year to annuity

Say 150k flows into the annuity portion of the 412i in year one and assume a crediting of 3% Then at the end of year one the value of the annuity would be 154.5k minus surrender charges if they apply. At the end of five years then the annuity value would be 750k plus all the interest earned? If one wants to pentionize will that be a life or 20 year certain? If one wants to sell it for cash value then roll it into an ira how does that work? Is it converted to cash for its same value? Is it a 1035? What are the tax implications when reciving the dissbersments, its treated like income?

4 the whole life portion of the 412i

How does one figure the death benefit? Each cash value is different depending on the insurance company right? Loans can not be taken from the cash value, without taxation? If the owner dies during the term of the 412i plan does it pay to the estate or beneficiaries? Is the DB taxable as ordinary income because its qualified? At the end of the term (assuming 5 years) does one keep the whole life policy in force? If the owner keeps the policy in force does he keep paying the premiums and does that count as a taxable distribution (taking control of policy) If owner does not want to continue the whole life then how is it liquidated and what is the tax implications? Is that value rolled over with the annuity’s value into an IRA?Is one taxed on the gain (money put in minus gains?)

The 419s

Has anyone ever used Disability in a 419?

How do the debit cards work with the cash value of the 419

How do you get accesses to the cash value, with qualified expenses? Does this include drugs, hospital bills, LTC needs… what about health insurance? Someone told me that if a doctor recommends you to build a pool for health reasons then you can start taking loans from the Cash value. Are these loans tax free so long as the policy does not collapse?

Is it truly unlimited contribution limited by reasonable compensation and the underwriting of the insurance company?

Can you put long term care in these things?

Anyone have the phone number of people who build these?

Is it true you can build near complete discrimination between classes?

What are considered classes and what are not?

Thank you guys sooo much!

Feel free to call if you like

Saul

972.733.9987

saul@albominvestments.com

MPP Plan for professional medical corporation was last amended for TEFRA, DEFRA, & REA in 1985.

Accountant for corporation has discovered failure of owner to take required minimum distributions over a 5-year period.

Presuming that both the amendment failure and the RMD error can be corrected through VCP, are two separate VCP filings necessary or can both problems be corrected in a single VCP filing?

Hypothetical $50,000 of net earnings from SE for owner, and $25,000 comp for employee. Those two people comprise the entire eligible population. Plan doc grants NEC to HCE's.

Employee is easy 3% X $25,000 = $750

Owner?

.03 / 1.03 X $50,000 = $1,456.30

Is that right (e.g. we don't just multiply 3% X net earnings from SE - right?)?

Thanks for any help.

I've seen several references to proposed Treasury Regs. 1.125-2 Q7(b)(7) in several recent posts. It's not clear to me whether these regs are binding or not. If they are not currently, are they expected to be in the future? How should they be viewed in general? If they are not binding, are there consequences to not following them?

Can the service recepient accelerate vesting in connection with a plan termination and distribute the vested amounts prior to 12/31/05. Several of the commentaries suggest that this is possible, and I think I agree, but wanted to run my analysis through the message board to see if others agree.

Q/A 18© allows a plan to be amended on/before 12/31/05 to terminate the plan and distribute the deferred compensation. The section does not discuss vesting, but presumably, the ability to accelerate vesting to the date of the plan's termination, 12/31/05 is derived from Q/A 15(a) which allows a service recepient to accelerate vesting. Is this correct?

Thanks.

Seeking some input from TPA owners while I put my resume together.

I have worked at the same company for 6 years now. Before here, I worked at a pension firm in another state for 5 years. Little did I know that the TPA firm I worked for did everything wrong. I was fresh out of school and had no idea how wrong we were doing everything. (didnt know till I got here...where we do everything right).

The city I am applying to is in the same city as the old TPA I worked for. I think that the old TPA probably has a pretty bad reputation. Can I leave it off my resume?

would you look at my resume and wonder...where was she before her current job? I don't want it to look suspicious.

thanks for any input!

A plan participant dies....for discussion sake he had already satisfied all of the necessary requirements to elect 10-year averaging treatment.

The beneficiary is a family trust, not the spouse (which I think was mistake number 1).

10-year averaging does not turn out to be a worthwhile election for the trust. However, my question is whether the ability to use 10-year averaging election flows down to the spouse since she is the beneficiary of the family trust?

My preliminary reseach sugggests that answer is no and that 10-year averaging only passes down from a trust to a beneficiary in instances of a grantor trust.

If anyone else has some insight, I thank you in advance.

Mark.

I believe the SEC has stated that corporate pension plans can benchmark from Moody's Aa bond yields in setting discount rates under FAS 87. The Moody’s Aa rate was 6.01% as of 12/31/2003. I think the rate was 5.84% as of 11/30/2004. Does anyone know when or where the 12/31/2004 Aa rate will be published? I do have sites for the Aaa and Ba rates, but not the Aa.

Thanks.

Prior plan document (non-standard prototype) preserved the old matching vesting schedule of 5 year cliff for pre-2002 money. This provision was never added in the new document restatement (volume submitter).

I'd like to do an amendment retroactive to 1/1/02 and submit to the IRS since such change will remove reliance on the volume submitter opinion letter.

Any thoughts?

Participant took out a 15 yr. loan for a primary residance from a former company retirement plan. When he left that company, he paid off his loan balance by taking out a short term loan (at 18% interest). His plan was to then take out another loan from his current employer plan to pay off the short term loan and resume his "mortgage" payments.

Any suggestions? Any thoughts on whether the tracing rules would help?