I have a client who has a 401k plan and has elected Simple 401k status for the past several years. When they saw that the statutory limit increases every year, they asked if could they put a plan limit on the participant's elective deferrals during simple 401k years, i.e. they want to keep the deferral limit at $8,000.

Is this allowed?

Top Heavy rules provide that, for purposes of determining whether a plan is top-heavy, you must exclude the account of any non-key employee if that employee was a key employee in any prior plan year.

What if an employee is a key employee (a partner), then is TERMINATED AND RE-HIRED as an of-counsel non-key employee. Can we consider the re-hired employee a non-key employee and consider their account for purposes of top-heavy testing?

The ability to do this would turn our 68% top heavy plan into an under-60% non-top heavy plan!

In filing the Form 5307 and attachments to request a determination, a Form 2848 was filed with the tax matters specified as Form 5307 and related forms. This provided us with power of attorney. Now, can the power of attorney sign off on the certification for exemption from user fees on the Form 8717?

Todays NY times has a front page article on the reduction of the retirement benefit of a 61 year old retiree from 151k to 22k when the employer filed for bankruptcy. I know that the max insured benefit is about 45k for a 65 year old but how does the reduction operate for ees less than 65?

I just recently looked at Code Sec. 7702B re long term care. Appears that it is to be treated as an accident and health plan. Do the same discrimination requirements apply? Employer wanted to provide e/ee's with choice between long term care insurance and cash knowing that only one of the highly compensated e/ee's would choose the long term care insurance. My thought was that would fail the discrimination req's for cafeteria plans. Employer then gave me a brochure from insurance agent which stated that an employer could provide long term care insurance under 7702B under a discriminatory basis. I am trying to find the Code justification for this. In the past, what I had found was that if an insurance company was willing to write it, then it wasn't discriminatory. Anybody able to shed some light on the discrimination rules which may or may not apply to long term care insurance? Thanks.

Does anyone here know of some good precious metals index funds and mutual funds? (funds in precious metals companies)? That is, funds with low expense ratios, preferrable low or no load.

Someone has posted obscene and racist messages under the name of "PPL are weird". Would you please delete the offensive messages and block this individual from posting again? Also, can you track the IP address so that the same person can't register again under a different name?

What is the correction method for a safe harbor plan (safe harbor match) that failed to distribute a safe harbor notice for a prior plan year (discovered within the self-correction time period however) but the employer still made the safe harbor matching contribution for that year? Thanks.

I have heard several people opine that an employer who contributes to HSAs of its employees must make equivalent contributions for employees who are medicare enrolled (in an FSA, HRA or cash).

This statement is based either on the ADEA or Medicare Secondary Payer rules.

Has anyone else heard this comment?

If you have a plan that matches 403(b) contributions in your 401(k) plan, are you including the 403(b) matching contributions in your 401(k) plan audit? If you have a combined plan like this, are you including the 403(b) employees as participants in the 401(k) on your 5500?

Company A sponsors Plan A. Company A owns 70% each of Company B & Company C (which sponsor Plan B & C, respectively). Remaining 30% owned by executives of Company A.

Is there any basis to perform 410(b) testing on a consolidated basis? I believe the threshhold is 80% for consolidated testing.

Are the rules any different for ADP/ACP Testing? Refunds are required for Plan B & C when run individually, but not if all three plans run together (due to high NHCE participation in Plan A).

I'm not sure Plans can (or must) be combined, but wanted to make sure I wasn't missing something (or any ideas where to look next).

My husband and I own a small company (6 employees). We would like to offer our employees a retirement plan. I am a bit confused by the IRS wording regarding the Simple Plan:

"You are generally required to match each employee's salary reduction contributions on a dollar-for-dollar basis up to 3% of the employee's comensation."

Would we as a company be required to contribute to employees' under this plan?

Client is a professor, age 71, and still employed at a school with a 403(b) plan (Plan A). She has several other 403(b) accounts with balances from schools where she was previously employed (Plans B&C). In order to avoid additional required minimum distribuitons, she is considering rolling over the balances from B&C into A. An investment advisor told her that she can open a new custodial account to receive the B&C balances and as long as the account is styled as a 403(b) of the school where she is currently employed, there is no RMD from the account. The investment choices would be different from those currently offered in plan A. Is this correct?

Does anyone have an opinion on whether a db plan would violate the 133-1/3 rule under the following circumstances?

The db plan is a cross tested plan that provides benefits based on employee classifications....Class A, Class B and Class C. Assume that Class A provides a benefit that is more than 133-1/3 percent of the benefit under Class B and the Class B benefit is more than 133-1/3 of the Class C benefit.

With no other facts, it appears as though this would clearly violate the 133-1/3 rule. However, there is no natural progression between classes, meaning a participant does not necessarily start out as a member of Class C and then move up to B and then A. For example, an individual may start out in Class A. Likewise, an individual may start in Class B and never move to Class A.

The purpose of the classifications is not to evade the vesting rules by backloading. However, it may appear as though backloading is taking place since individuals may move between classes.

Any theories or opinions would be greatly appreciated. Thanks!

I am reallocating 2003 forfeitures to the remaining participants of a plan. However, because I am doing this now, instead of at the end of 2003, I have two participants that terminated in 2004 and took a distribution. They were eligble for the allocation in 2003, but the Plan Sponser would rather not give it to them. With that siad, my question is do I have to reactivate their accounts, deposit the forfeitures and re-surrender? Or can I take their portion and reallocate to the remaining participants. thanks

A colleague just realized that a mistake was made when an individual was enrolled in the 403(b) plan. The employee was enrolled in the "over age 50" catch up rather than the basic plan. For some reason, Information Systems had taken the cap limit off. So this employee has had money go into this for the last couple of years without regard to any annual limit.

I have 2 problems to cure: The employee has not received a match because his deferral was going into the wrong area. With the cap limit turned off, his deferral has been over the annual limit.

How do we handle this?

A colleague just realized that a mistake was made when an individual was enrolled in the 403(b) plan. The employee was enrolled in the "over age 50" catch up rather than the basic plan. For some reason, Information Systems had taken the cap limit off. So this employee has had money go into this for the last couple of years without regard to any annual limit.

I have 2 problems to cure: The employee has not received a match because his deferral was going into the wrong area. With the cap limit turned off, his deferral has been over the annual limit.

How do we handle this?

A plan uses the safe harbor matching contributions to pass ADP. The plan also includes a cross tested profit sharing provisions. The only eligibility for the 401(k) is the attainment of age 21. The PS requires age 21 and one year of service.

The Plan Sponsor would like to only offer the safe harbor match to the participants who have met statutory entry requirements.

I know that the Safe Harbor rules have some added complexity when it comes to disaggregating the statutory excludable employees; such as the ADP test must be run if an HCE is in the excludable group.

One question I had was, if the 401(k) portion of the plan is being tested by disaggregating the statutory excludable employees, that does not necessarily mean that the PS must be tested using disaggregation as well?

The Plan is not currently top heavy, but if the plan were top heavy and the otherwise excludables received the top heavy contribution would they then become part of the profit sharing plan? If the PS was then tested using disaggregation, they would not need to receive the gateway?

Any other complications to watch out for?

Thanks.

I wanted to see if anybody else is aware of the the account mentioned below. If yes, where would I be able to get some more information. Thanks.

'Large retirement accounts present a tough tax planning problem because they may be subject to both estate tax at death and income taxes for distributions. A relatively new development to be considered for an IRA with a balance of at least $500,000 is a restricted management account (RMA). The purpose of an RMA is to provide management of the funds for long-term return. An incidental benefit of the arrangement is to receive a valuation reduction of 30 - 40% for estate tax reporting.'

I have not heard of such a develpment so I'm a bit skeptical but the regs have changed so often recently, its hard to rule anything out. Any assistance is appreciated.

Thanks.