On behalf of a Catholic Hospital, I have obtained a PLR from the IRS that its pension plan is a "church plan." The IRS ruled that the pension plan is considered a "church plan" since the date of ERISA's enactment. Based on this ruling, the PBGC has made a refund of premiums made over the last 6 years. However, the DOL is conceptually having difficulty in issuing a similar ruling that the pension plan is exempt from ERISA because we asked that the DOL rule that the pension plan is a "church plan" retroactively to the date of ERISA's enactment. I have explained that both the Code and ERISA contain provisions which clearly state that if an employer corrects any defects in the "church plan" before audit, the plan can be determined to be a "church plan" back to the enactment of ERISA. The DOL does not like the concept of an employer establishing an intentionally defective church plan (covered by ERISA) and then corrects the defect and gets a ruling that it is exempt from ERISA. I have provided the DOL with other opinions it has rendered where the defective "church plan" structure was corrected and the DOL ruled that it was a "church plan." What I noticed in the rulings was that the DOL does not state that the plan is a "church plan" retroactively but just that it is a "church plan." I have told the DOL that we will inform participants that the plan is a "church plan" and will modify the SPD accordingly. Can anyone shed any light on why the DOL is having difficulty ruling retroactively? The pension plan at issue clearly meets the requirements for being a "church plan." Thanks.

I am looking towards setting up a ROTH IRA through Vanguard today. I like Vanguard because of their low fee index funds. This IRA I am setting up is going to be a bit more conservative, based solely on Index funds (haven't decided on ratios yet, but prob 80% SAP500 Index and 20% Total Bond Index).

I am an E-Trade customer, but I think I would rather set up a ROTH with the actual company I plan on investing through, rather than through E-Trade or another broker.

I think the advantage of an E-Trade is that you could probably play with your IRA money more aggressively by trading stocks with it easier. I think through Vanguard that are significant fees for trading stocks, rather than using their Mutual Funds.

Has anyone had any good experiences through discount brokers like E-Trade or others that they would recommend for setting up ROTH's?

Thanks - BT

Should health care providers include a HIPPA privacy statement in their summary plan descriptions? Is it required by law? If so, what is the cite. Thank you

I want to contribute a great deal to 401K since I am 26 and have never started one as of now. Are there any limitations on how much I can contribute per year?

Also, my employer matches up to 6%. Does that count against my limit of how much I personally put in?

For example, lets say I want to put in 10,000 a year (which is my hypothetical maximum amount). Would I need to deduct the 6% from this to not exceed the maximum?

Thanks,

Brian

My questions:

- Does MAGI account for 401K money before its taken out? Or is MAGI straight pay without 401K taken into account?

- Are there better investment strategies for people who will make > 160K married filing jointly?

Help is appreciated! Thanks.

Brian

Need some guidance on participant loan reporting for Schedule H.

Does the aggregate participant loan amount have to be reported on Line 4i? To me, the instructions are unclear. I've heard some people say you must report them, others say you don't. Any help would be appreciated.

This is not my area of expertise, so forgive my ignorance.

This is a partnership with a 401k PS plan with 3% safe harbor contribution and the profit sharing contribution is typically 15% (although its discretionary).

Plan has 2 definitions of compensation: Partners: earned income (no exclusions); Employees: cash compensation (excludes OT and bonuses).

I am told that because the Employee definitions contains pay exclusions, we have to test the definition of compensation under the very convoluted 1.414(s)-(g). (Even as a safe harbor plan, we still have to do this I believe, if I am wrong, let me know and I will thank you profusely.)

I guess I'm hoping there is a cheat sheet or something out there because my head is spinning.

I think this practice is okay--but barely ok. I would like to know if you agree or disagree.

Client pays all employees monthly, on the last day of the month. (Eg, Employee is paid for work done in January on January 31) Client allows employees to enroll in the 125 plan up to 5 working days before the last day of the month, effective retroactively to the first day of the month. Enrollment is not automatic--they have to affirmatively submit their forms or they get cash.

I think this is ok for mid-year initial enrollment under RevRul 2002-27, does anyone disagree? What about for annual enrollment (Eg Employee can submit enrollment forms on January 20, 2005 to be effective Jan. 1 2005)? What about for midpyear election changes? Do you know of any other guidance besides Rev Rul 2002-27?

THANKS!

Here is the address for Rev Rul 2002-27

http://benefitslink.com/IRS/revrul2002-27.html

The pertinent language I think is on p. 2: "For a new hire an election ... is efective if made when the employee is hired or within a reasonable time before compensation for the first pay period is currently available. For a current employee, an election is effective if made prior to the start of each calendar year ..."

A plan has an automatic enrollment feature. When dealing with rehired participant (who become eligible on rehire date), when do they automatically enroll and at what percent - the plan's default election, or do they resume at the election in place when they terminated employment?

I have an odd situation I have never run into before with a fund group.

Company "A" has money at two fund groups, "Fund Group A" and "Fund Group B". Employee has money in both places. She was paid out of one fund group "A" one year ago (but chooses to leave her money in the other fund group).

A year later, employer decides to move all plan money from "Fund Group B" to "Fund Group A". Of course, employee (who was previously paid out of "Fund Group A" has money at "Fund Group B". Money transfers over for her along with the rest of the plan funds.

Here is the odd part: Fund group A will not take her money unless the trustee sends them something saying she is active and rehired!

We told them that she is not rehired but wants to keep her funds in the plan. But, they insist that they have a "policy" that once someone is paid out, any money which comes in after that will be paid out according to the prior payout.

They are insisting that they are cutting a check to the employee. DOes this sound nuts to you???

Thanks.

The recent act amended the master definition of "dependent" under Code section 152 effective as of the 2005 taxable year. Among other changes, the new definition imposes an age cap on dependent children (to be a dependent, the child must be 18 or under, or 23 or under if a student).

In connection with this change, I read Codes sections 125 -- the cafeteria plan rules -- and 105 -- tax exempt health plan payments -- to say that as of next year, you cannot run premiums for a full-time student over the age of 23 pre-tax through a cafeteria plan.

I hope I'm just missing something.

If premiums can't be taken pre-tax, then either many plans should be changed for open enrollment, or we'll have to inform employees that they'll be hit with post-tax premiums next year if they cover an older college/post-grad student.

Any thoughts?

I am the only employee of an S corp and also generate income from a schedule C. In 1989 I established a profit sharing plan (#1) and money purchase plan (#2). Through 2001 contributions from the C and S were being made into one profit sharing plan and one money purchase plan as shown above.

In 2002 the money purchase plan was terminated with balances rolled over into an IRA. Effective 1/1/02 an indivdual 401k plan was established and fully funded by contributions from the S corp.

Now the question:

When the 401k was established I checked the new plan box on the adoption agreement and used a new plan number (#3) for the 5500 EZ. It looks like I should have listed this as a plan restatement and not used a new plan number.

Am I ok with what was done?

Is there anything I should do at this point if a correction is needed?

Can IRS disqualify the 401k and or the profit sharing plan because of this?

Thank you for your help. This has been costing me some serious sleep deprivation.

Can a plan sponsor terminate their DB plan this year and open a SEP plan?

A client personally owns 100% of two different types of entities (one medical related and one in unrelated consulting) which is clearly a brother-sister Controlled Group. IRC 414(b) states that the controlled group rules apply to IRC 415, but make no mention of IRC 404 (deductions). I take this to mean that with only one 415 limit that only one entity could sponsor a DB plan with one 415(b) limit. However, could the other entity sponsor a DC plan simultaneous with the other entity sponsoring a DB plan and fund them both to the invididual plan maximums (i.e, over 25% of pay when combined) without violating the combined DB-DC deduction limits under 404(a)(7) ? I guess the question comes down to whether Controlled Group rules treat both entities as "one" employer for deduction purposes. Any thoughts/opinions are appreciated.

I know that EGTRRA allows a plan to distribute a participant's account without his or her consent, and without the spouse's consent, when the amount in the account is less than $5,000. And when calculating the account balance, EGTRRA allows rollovers to be disregarded.

My question is this: I have a plan that requires a participant to get his/her spouse's consent when obtaining a loan. Additionally, the document indicates that if the amount of the loan is $5,000 or less spousal consent is not required.

However, the document does not indicate that in a loan situation the $5,000 threshold can be calculated without regard to rollovers. I am concerned about applying this disregarding of rollovers in the loan situation. The heading on the IRS EGTRRA model amendment only refers to disregarding rollovers when applying the cashout rules. I cannot find any guidance or anything in the preambles to EGTRRA that would indicate in a loan situation rollovers can be disregarded in calculating the $5,000 amount. Any thoughts on this?

I have a prospective client that is a law firm with the following scenario:

1 Plan for Associate Attorneys only-Plan only has Elective Deferrals

1 Plan for everyone else-Plan has Deferrals, Match, Profit Sharing and QNEC because they always fail the ADP Test.

They want to amend the non-Associate Plan for cross testing. My questions are:

1. Since I would have to aggregate the Plans for coverage and 401(a)(4), would I also have to aggregate for top heavy testing?

2. Would I still be able to test the 401(k) Plans separately?

One other question: There are two Associates who became Partners and then opted out of the Plan. When I determine the Top Paid Group are they excluded from all consideration or are they still considered HCE's. I know I would not include them in the ADP Test but should I include them for the HCE count?

Thanks

Can a plan sponsor exclude employees in an affiliated company (in a different state) from the plan and/or specific benefits in the plan?

I see from 403(b)(1)(D) that the non-discrimination requirements of 403(b)(12) do not apply to church plans. Does this mean that I can require employees to participate in a contributory DB plan before they are permitted to make salary deferrals to the TDA?

This question is an oddball, so be gentle! Suppose you have a corrective distribution from a 401(k) plan - calendar year 2003 plan. Let's say excess contributions under an ADP failure. These are not eligible rollover distributions. Let's further suppose that the distribution is made in January of 2004 - within 2-1/2 months after the correction period, so it isn't taxable in 2004.

My interpretation is that 10% withholding does not apply.

First, do you agree? And assuming you do, the question was - MUST the Plan Administrator allow the participant the option to elect withholding at 10% or even more than 10% if the participant wants to? My interpretation would be no.

Moving on to a somewhat related question - suppose you have a non-periodic IRA distribution, to which 10% withholding applies unless the participant elects out of it. Is an IRA custodian REQUIRED to allow the participant to elect additional withholding? I don't find anything in the regs to require this, although I may have missed it, and I know that many custodians do allow this - of course if required, then they probably all do! The W4-P has a line to elect additional withholding, but I'm not sure if additional withholding option is required for all IRA distributions.

Appreciate all opinions. I just hate these fiddling little questions.

Does anyone have any experience in obtaining a refund of FICA taxes in light of the CSX decision? Thanks in advance for your response!