We are a TPA. The investment provider does the daily val. However, the investment provider has not been able to track loans. That is, their system was unable to split principal and interest and update loan balances as loan repayments were deposited. So, it has been up to us to reflect loan activity and balances on the year-end participant statements that we prepare.

Our loans fees charged to the participants were an initiation fee of $100 plus $30 per year prepaid maintenance fee based on the term of the loan. For example, a 5 year loan cost $250 deducted from the participant's account and no subsequent fees.

The investment provider is now able to track loans. Their fee includes an initiation fee plus a $3 per month maintenance fee charged monthly against the participant's account.

So, we have a problem. We'd like to transfer these loans onto their loan system, but we don't feel it's fair to have charged participants our maintenance fee and then turn around and charge an additional $3 per month fee.

One thought we've bounced around is simply reimbursing the participants our prepaid fee (or portion thereof based on remaining payments). However, our concern is the IRS might view the reimbursement as a contribution to the plan subject to 404 and 401a4.

Any thoughts or suggestions?

A new PS/k plan was adopted 9/1/04 effective 1/1/04 for 2 Drs. and 3 NHCE's. The 401(k) provision is effective 1/1/05. The plan is on a VS doc. As of last Friday the Drs. decided that they may want to remove the salary deferral feature from the plan (at least temporarily).

Any problems with that and, if not, what's the best way to handle it?

Realize if Bypass is properly setup and Custodian approves, an IRA can be funded by disclaimer to the Bypass. Several operational questions:

1. If the estate is such that the deceased individual really didn't have any IRA, but most of the estate is comprised of the surivivor's IRA, can the survivor transfer some of their IRA into Bypass to be able to fully fund? If that's allowable, would the RMD be based on the survivors life expectancy, or that of oldest beneficiary?

Does community property state versus separate property state laws have any impact?

2. Finally, if it is possible to do number 1 above, any problem with the survivor paying the taxes if she qualifies to convert some of her IRA into Roth, and then transferring the Roth to the Bypass to complete funding? Again, will the RMD be on her life expectancy or the beneficiaries? Does community property state versus separate property state laws have any impact?

Know this a lot to cover/answer, but I'm involved in a complicated settlement where the CPA is uncomfortable with the IRA and Bypass funding. This client has an estate of 4.5 million, and 3.4 million is the survivors IRA, and the house and other intangiables are 400K of the remaining 1.1 million.

I have a regular trading account with Scottrade and am thinking openning a Roth IRA account with them. Anyone who has a Roth IRA account with Scottrade can share his/her experience?

The new deferred compensation provisions under the Jobs Creation Act (Sec. 409A) except bonus or other deferred compensation that is paid out within 2 1/2 months into the year following the year the compensation was earned.

Does that mean that a perfomance bonus earned in 2005 that is completely paid out to the participant by March 15, 2006 is not subject to the requirement that the deferral election be in place on or before June 30, 2005??

I'm very confused on when catch-up are applied to an ADP failure. Can someone confirm logic below that Catch-up is applied as the last step before refunds:

Owner A age 45 $80,000 defers 5% or $4,000

Owner B age 51 $150,000 defers 5% or $7,500

Plan only support 3% HCE deferral, so $4,600 in refunds is required and split $550 to Employee A and $4,050 to employee B. Since B is catch-up eligible in 2004, he gets a $1,050 refund. Is this correct?

Does anyone know where I can find language that can be sent stating that they need to take a Minimum Required Distribution etc. Thanks

Seeking advice about vesting amendment from 100% immediate to 3 yr cliff.

Say this is done 12/1/2004 - calendar yr = plan year .... all computation periods = plan year where applicable. Yr of service = 1000hrs not elapsed time method. Would this suggest the following?

* All p/p's with 3 or more yrs of service through 2004 plan year end can elect to stay on the 100% vested immediate schedule for all contributions (applicable to the source the amended schedule applies) made through plan years up to and including 2004?

* Do new contributions for 2005 and future years of same source have to be recordkept under old schedule for only those that met the three yrs of service rule - OR could new schedule apply to new contributions irrespective of the grandfathered schedule for certain 3 yrs of service people applicable to those benefits accrued through adoption of vesting amendment?

Thoughts are appreciated.

Here are the facts. Husband and wife are married at the time of the husbands death. This is his second marriage. His will states that the new spouse should receive an amount equal to the elective share in NJ of his estate. The only real asset the husband had is an IRA. However, the IRA lists his children as the beneficiaries. The children were listed as the beneficiaries prior to his new marriage and the new spouse has no idea about the children being named.

Can augmenting the husbands estate make the spouse eligible for 1/3 of the IRA or do the prior benefit designation forms rule on this.

Any help would be great. Thanks in advance.

A pension plan rolled over too much money to an IRA and now wants the money back.

I believe the money has to be returned immediately since it was an ineligible rollover. I also believe that if it remains in the plan it is an excess contribution and must be removed.

Would appreciate learning your thoughts on this.

I have a terminated plan with a PYE of 9/30/04. All participants were paid out in November-December 2004. Does this create a short plan year for the 5500 form? Or does the plan need an amendment? How should the form be dated?

thank you

Dana

Individual-k plans are not subject to non-discrimination testing because the plans cover only the business owners. Could it be argued that if the plan could also cover the children of the business owner and still not be subject to the non-discrimination testing?

Thanks in advance for your help.

Jane

Under the new Top Heavy rules, if an active participant has an in-service/hardship distribution in a plan year prior to the determination year, but within the past four years, is that amount included or excluded for top heavy testing purposes?

Let me clarify - I'm asking because our software is including these amounts in our top heavy tests . . . and I was under the impression that any distributions prior to the determination year are not considered . . . are these amounts being included because these people are still active?

Our plan currently states that coverage ends the end of the month in which a dependent child over the age of 19, but under the age of 23, ceases to be a full time student. We are thinking of amending the plan to provide coverage until the end of the year in which the child ceases to be a full time student and are wondering what other employers/plans do.

Is a 5500 filing required for prepaid legal services if this benefit is not included in a plan covered by ERISA ?

Thanks.

I have a profit sharing plan with a 6/30 plan year end. A participant who terminated 4/2003 will need to be reported on the SSA.

The question is what balance do we report? The vested balance at the time the participant was terminated or the vested balance at the end of the plan year?

A plan was effective in 2000. Through 2002, only HCE's are participants.

In 2003, a participant entered the plan whose compensation in 2002 was below $90,000.

The plan tests on a prior year basis except for the "first Plan Year in which the Plan allows Elective Deferrals."

Since there were no NHCE's in 2002, does the plan automatically pass the test in 2003? Or is testing done on a current year basis as if it is the first plan year with deferrals?

Hi,

Plan fails ADP and entire amount of deferrals will be returned to the KEY HCE. The KEY is over age 50. Plan is top heavy.

Can the KEY HCE retain 3,000 of the excess contributions as her 2004 catch-up or would this trigger a top heavy minimum contribution for the staff?

Help is greatly appreciated.

I have two separate clients who have now become an affiliated service group. The first employer [Company A] has 2 owners, age 57 and 34 and one rank and file employee, age 25.

The second employer [Company B] has 2 owners, age 27 and twelve employees ranging in age from 26 to 30. The rank and file salary range is fairly high, with the lowest being $48,000 and the highest being $90,000. The owners earn $120,000 each.

Company A had a profit sharing plan which allocated 5% to employees under age 30, 10% to employees under age 40, and 30% to employees age 50 and older. It passed all of the coverage and benefits tests.

For 2003, the owners of Company B were the only eligible employees and they contributed $40,000 each to a Profit Sharing Plan.

In 2004, there are seven eligible employees in Company B in addition to the owners.

If I were designing this plan without regard to Company A, I would have recommended a 401(k) Plan in January of 2004 with a safe harbor matching contribution and possibly a supplemental employer contribution (allocated with permitted disparity) to maximize the owners. However, I wasn't brought into the discussion until a week ago, so it's too late to consider a 401(k) for 2004.

Because both of my owners in Company A are exactly the same age as the rank and file employees I won't get a plan to pass the 401(a)(4) tests. Even one percentage point higher in the contribution to owners will blow out the test.

Does anyone have thoughts about the best approach for 2004? I've already suggested getting a 401(k) plan in for 2005. With the relationship between the employers, we have to get something in place for the employees this year to preserve Company A's contribution scheme. I just want to be sure that whatever I recommend is the best possible option for both employers.

How would you design it?

Thanks so much!

Also posted the following in the General Retirement Plans section.....

Am I right in thinking that an amendment to a safe harbor 401(k) plan during the plan year is OK (i.e., won't adversely affect the 401(k) safe harbor) assuming what's amended is not 401(k) safe harbor related? For example, if e/er wanted to add or take away loans, it could amend during the plan year to do so and just issue a summary of material modifications to the participants. Since nothing affected the 401(k) safe harbor, the fact that the safe harbor 401(k) notice given out prior to plan year did/didn't mention loans is not a problem..... ??