Under the AJCA, "Specified Employees" of publicly traded companies cannot receive distributions for 6 months after seperation from service. "Specified Employees" are Key Employees under 416. In determining "officers" under 416, should a plan disregard or foreign employees (e.g. nonresident aliens receiving no US source income)?

Help is appreciated.

Had an unusual conversation with IRS auditor looking at one of our DB clients. The client's pension plan excludes "Cashiers". Most work under 1,000 hours, and 410(b) coverage has never been an issue.

The auditor made it clear that in her mind the client is being discriminatory against low-paid employees under new 410(b) guidance and she is going to require them to retroactively put all eligible Cashiers into the Plan. (flies in the face of recent memo where IRS thought plans were giving too much to low paid employees). She said she might have overlooked the exclusion had we excluded the Owners.

I told her that we disagree that this is discriminatory. It is a reasonable classification, and all coverage and discrimination issues are satisfied.

Anyone else have a problem like this? In December 2003, the client filed the Plan with the IRS for a DL, and we are expecting a response soon.

If mandatory pension contributions were picked-up in error, how are they to be treated? Must they be refunded as soon as administratively possible? Or can they only be distributed after separation from service?

For example, a participant is required to have only 5 percent of his salary picked up. However, 8 percent was being picked up instead. An excess of 3 percent was being picked up.

Would this be corrected the same way as contributions that exceed 415© in the case of defined contribution plans?

Sole proprietor client terminated a Defined Benefit Plan in '03. Actuary calculated a required contribution of $25K. It was non-deductible because of no earned income. Deposit was made in 2004.

Participant (client) rolled over the balance of the DB to an IRA in '04.

I think I've looked this up, but 2 things:

1) Non deductible contribution OK in last year of the plan (no excise tax)

2) Rollover of said non-deductible contribution a) OK and b) creates no "basis" in the IRA.

I'm away from my files, so I can't rifle through it for my cites.

I'd like to sleep some time this week....

A Company has a DB Plan and a cross-tested PS Plan, which are aggregated for the general test. The cross-tested PS Plan has the 1000-hr. and last day provisions. The Plans are top-heavy. Th participants who terminated and worked 1,000 hours during the year will accrue a DB Plan benefit during the year.

1. Will these participants be entitled to a 2% top-heavy DB minimum (not 3% since they are not benefiting in the PS Plan)?

2. Should they be entitled to the minimum DB/DC aggregate allocation gateway?

3. If the Company did not have the DB Plan, do you agree that these participants need not receive any top-heavy PS allocation?

Safe harbor 401(k) provides for eligibility rules age 21 and 1 year of service. Also provides for dual entry dates of Jan 1 and July 1 with entry date for a participant being the entry date coinciding with or next following the date the eligibility requirements were met. Employer hired new doc Oct. 2003. Employer wants to amend Plan to allow for new doc to enter plan as of July 1, 2004. In essence, eligibility requirement would have to be reduced to 6 mos. in order for new doc. to enter plan as of July 1, 2004 and thus be able to defer in 2004. Also, compensation taken into account would be for entire plan year and not just compensation from entry date. What issues are there with amending the service requirement retroactively, e.g., effective as of first day of 2004 plan year (Jan. 1)? Although potential discrimination issue in favor of highly compensated e/ee exists, wouldn't non-highly's also benefit by virtue of now being eligible for the 3% nonelective safe harbor contribution? Thanks for any input...

Company started in July of 2004. Plan year end is 12/31. I would like to avoid prorating comp for ADP. I heard somewhere that I could make my plan year begin 1/1 even though the organization did not begin until July. Is this correct?

Thank you

I'm sure this is a fairly easy question, but I don't work with SIMPLE plans and I want to be sure I give an accurate answer...

Client is terminating his SIMPLE Plan as of 12/31/2004 and starting a 401(k) as of 01/01/2005. There will be "receivable" contributions from December payroll that actually go into the SIMPLE Plan in January. Is this an issue with the SIMPLE exclusive plan rule? It doesn't seem as though it would/should be in practice, but then I got thinking .................any help is appreciated.

I have a 403(b)annuity account with ING. I am having financial difficulty, and am falling behind in my bills and payments. I am a single mother, and it is very hard at times to get caught up to date. I have tried twice to cancel my account and each time I was told I would have to take a loan out. Which I did. I did not want to do this, and now I am falling behind in payments and still have not been able to cancel my account. I would like to pay off the loans out of my annuity account and be sent the remaining balance. I know I will be penalized by the IRS. I do not think this is fair business. As of this date, they will not give me MY money. How can I get them to release my money? There hasn't been any money added to the account since June 2004.

Client is a small closely held ESOP with all comapny stock held in plan. We are down to jsut a couple of active participants with the terminated ees being paid out in installments over 5 years. The problem is that the cash is dwindling and with just a couple fo ees left even maximum contributions will not satisfy repurchase obligation...any sugestions?

We discovered a participant in a 401(k) profit sharing plan did not take Required Minimum Distributions. These RMDs should have started in 1997. The participant was born in 1930 and is still actively working at his son's business. The father does not own any part of the business, but the family attribution ownership rules we discovered apply. I'm going to advise the client to take the 2004 RMD prior to 12/31/04. I'm going to further advise they take all past due RMDs by 12/31/04. Question #1: Can I reduce each RMD calculation amount by the amount they should have previously taken? For example, can I reduce the 1998 calculation balance by the amount they should have taken in 1997, even thought it won't be taken until now? Question #2: Which IRS address / office would the client use to contact the IRS to explain the situation and to request a waiver to the 50%penalty? Question #3: Which table should be used for which year? His 77 year old wife is his beneficiary.

We discovered a participant in a 401(k) profit sharing plan did not take Required Minimum Distributions. These RMDs should have started in 1997. The participant was born in 1930 and is still actively working at his son's business. The father does not own any part of the business, but the family attribution ownership rules we discovered apply. I'm going to advise the client to take the 2004 RMD prior to 12/31/04. I'm going to further advise they take all past due RMDs by 12/31/04. Question #1: Can I reduce each RMD calculation amount by the amount they should have previously taken? For example, can I reduce the 1998 calculation balance by the amount they should have taken in 1997, even thought it won't be taken until now? Question #2: Which IRS address / office would the client use to contact the IRS to explain the situation and to request a waiver to the 50%penalty? Question #3: Which table should be used for which year? His 77 year old wife is his beneficiary.

Client has an ongoing calander year Profit sharing plan. Monthly contributions have been deposited to the Profit Sharing account for 2004. Any way to set up a Defined Benefit plan in prior to 12/31/04, "transfer" the monies previously deposited to the profit sharing account and treat them as Defined Benfit contributions?

You have to hand it to those folks at the IRS - they sure know how to take minor things and blow them up into huge problems.

We've had 3 cases in the last couple of weeks where the plan administrator has made distributions, done mandatory withholding, then tried to submit the withholding and had problems. First of all it won't go through electronically since they are using the TIN for the plan. (This is nothing new). Then they file with the 8109 coupon using the TIN. All 3 trustees have then been told that the number is not valid since has not been "active" in the last 3 years.

On one case, the IRS automatically changed the number to the EIN for the business.

On another, the accountant decided to change to the EIN and file under that.

On the third case, the Administrator is looking to us for guidance, do they apply for a new TIN? She told the IRS reviewer that the number is active, they have had it for a long time and it has appeared on the 5500 forms, (Schedule P) - he replied that he didn't know anything about 5500 forms, he doesn't do pension plans.

Has anyone else encountered this? If so, what did you do? This is the first time this has come up for us - appears to be something new. It isn't uncommon for a small plan to go 3 years without a distribution, which apparently makes the TIN "inactive" by the standards of the knuckleheads at the IRS. We can have them apply on-line for a new TIN, but I'm uncertain what other problems this may create. And at the very least, it can cause administrative and recordkeeping nightmares. Sheesh! Any suggestion for somone at the IRS to whom I should forward these concerns, stated a bit more diplomatically... Thanks!

A participant terminated employment and stopped making payments on a loan in the second quarter of 2004. The document considers the loan in default the following quarter. In addition the plan is valued daily and the funding company accrues interest on the loan daily.

When the 1099R is issued should the value of the defaulted loan be the principal outstanding as of the last day of the third quarter? Assume no communication was sent to the funding company until December 1, 2004 to issue a 1099R. Do you instruct them to reduce the value of the loan to the principal outstanding as of September 30, 2004?

Any thoughts would be appreciated?

Plan X is a 401(k) plan that provides a matching contribution. Assume the following two situations:

Employee A works for the sponsor of X, makes elective deferrals and has those deferrals matched under the matching formula. A terminates on 12/15. X's recordkeeper doesn't learn of this until 1/15. Assuming there was a two-week period delay in paychecks, A is paid on 12/31 and has elective deferrals deducted and matches taken. What can X's sponsor do to correct the over-contribution?

Employee B works for X's sponsor. makes elective deferrals and has those deferrals matched under the matching formula. B is a salesperson earning commissions. Assume B makes a big sale to a customer and the customer cancels the sale 30 days later. In the meantime, B has earned the commission and had elective deferrals taken and matching contributions made. Assume alternatively that B continues to work for X's sponsor or that B terminates employment before the customer cancels the sale and takes a lump sum distribution from X. What can X's sponsor do to correct the over contribution?

Can you use the age 65 APR for an ee who is over age 65? His APR is lower and that then increases his ebar. I know i can override the age in census to get the APR for age 65.

Probably a silly question, but the terms are used interchangeably around the office. Is there a difference?

A one-participant/owner plan is purchasing an apartment complex. The plan intends to use plan assets 1) for a down payment, 2) to pay mortgage, 3) to receive rent payments, and 4) ultimately to collect and recognize the capital gain (proceeds) from the sale (or loss for that matter).

Questions.

1. In the scenario above, does anyone believe it is a PT?

2. Could the receipt of the rent payments and payment of the mortgage payments be done outside of the plan (say by the owner) and still not be a PT? And the investment would just be treated as an asset with a recognized gain/loss at time of sale?

3. I'm not even sure that the plan can recieve the rental payments and make mortgage payments. I finf it hard to believe it can make mortgage payments and not sure if the receipt of rental payments wouldn't be deemed plan contributions?

4. Does the real estate need to be appraised annually for the 5500 or can it be just valued at cost basis until it is sold?

Curious to hear comments.

Thanks.

does this pass muster:

1st - pass out 3% SH non-elec

2nd - integrate @ TWB (5.7%>TWB)

3rd - allocate excess to bring HCEs to max 415 limit

I can use the 3% SH as part of my employer contribution, the draw back is that there is no vesting on the 3%... 100% vested

almost forgot... what if a SH Match.... do I need to give out minimum 3% to all as en ER contribution and then perform my integration, and if anything left allocate the excess? What if there isn't anything left... what if there isnt enough? reduce the amount of the integration? or do I reduce the 3% to 1/2 of the integration (to 2.85%)?