I am looking at the 1.401(a)(4)-12 definition of Plan Year Compensation under Section 5 "Special rule for new employees".

Calendar Year Plan

Effective Date = 1/1/04

Comp = Plan Year

Testing Comp = 3 Yr Ave based on Service (rather than Participation)

Testing Date 12/31/04

An participant was hired 7/1/02, 1000 hrs each yr, so there is actually 2.5 years of comp history.

Question: To determine ave comp for testing, can I add the entire comp history and divide by 3 (as long as the method is applied uniformly)?

In calculating the reduction in the 100% of compensation limit for a DB plan under IRC 415, what are the requirements for a year of service. The plan requires 1000 hours of service for a year of vesting service but only 500 for a year of accrual service. The owners daughter worked 700 hours.

How long after termination of a defined contribution plan are you entitled benefits. I know someone who never received notice of termination due to moving to another city. Apparently this happened a few years ago, and she wants to track down her funds.

can someone explain how loans in DB plans operate? my main question is how do you account for it if there is no account balance?

We have a client that has been purchasing life insurance in it's DB plan. The client has been purchasing up to a face amount of 100 times the projected accrued benefit.

The client has decided that the principal has enough life insurance and wants to stop purchasing. What are the clients options? Obvisously the plan must be amended to eliminate the use of life insurance, but what can be done with the life insurance in the plan now? Any suggestions?

Plan is a PSP with annual valuation date (12/31). Distribution section re terminated participants states that upon particpant's election account balance will be payable upon the Anniversary Date that coincides with/ or is on/after the date of participant's termination of employment. SPD says the benefit will be distributed as described "as soon as administratively feasible". Given that the annual valuation takes some time to get together it is not unusual for a number of months to go by after year end before a participant's account balance can be determined. Regardless, participants want their $$$$ now and some even demand interest to be paid from 12/31. Plan typically denies such a request. Are there any recent rulings, cases, etc.... which address specifically the payment of interest issue? My gut is that the "administratively feasible" threshhold is determinable on a plan by plan basis and is probably like trying to define "reasonable"..... Thanks for any help.

Does anyone see a problem with a Plan Sponsor who amended his plan last year to remove loans (to allow one participant to take a hardship distribution) amending the plan this year to allow loans (because he wants one)?

The October Special Edition employee plan news talks about extension for tax filing and contributing to SEPs and SIMPLEs. http://www.irs.gov/pub/irs-tege/se_1004.pdf. But I can’t find anything that states whether the deadlines for establishing the plans were also extended. Are you aware of any such provisions?

the Consumer Price Index numbers for the last quarter are:

189.4 189.5 189.9 (Sept was released today)

so according to my notes next year's comp limit should be 210,000, 415 allocation is 42,000, db limit 170,000, key ee 135,000 and hce at 95,000.

of course, I could have something built into my spreadsheet which is wrong and things will stay as is.

I imagine they will announce the numbers at the ASPA conference next week.

If a plan has terminated, all participants have been paid out, and a very small balance (<$10) remains in the forfeiture account, can this be returned to the plan sponsor/employer instead of reallocating to participants?

It is my understanding that if a DC plan has QJSA as a distribution option, then the participant's spouse must consent to the distribution. The only exceptions to this that I've been told is if the participant's vested account balance is less than $5000, or if the spouse cannot be located. What if we had a situation where the spouse was incarcerated, and the participant states that they cannot obtain consent for the distribution? The participant knows where the spouse is located - would consent still be required? Thanks for your help!

I think I am going blind. Would someone please point out to me where the following calculation is OK??

A participant has an accrued benefit of X which is coincidentally equal to their high 3 average compensation (which is not remotely close to the dollar limit).

Can't the plan pay the lump sum value of this benefit as long as it does not exceed the lump sum of the dollar limit (using the applicable rate and mortality)??

In other words, the lump sum limit is NOT computed on the smaller of the 100% of compensation limit and the dollar limit. It is strictly computed on the dollar limit.

Thanks in advance.

Tax Cuts Explained

from David R. Kamerschen, Ph.D. Professor of Economics 536 Brooks Hall University of Georgia

Let's put tax cuts in terms that everyone can understand. Suppose that every day, ten men go out for dinner. The bill for all ten comes to $100. If they paid their bill the way we pay our taxes, it would go something like this:

€ The first four men (the poorest) would pay nothing.

€ The fifth would pay $1.

€ The sixth would pay $3.

€ The seventh $7.

€ The eighth $12.

€ The ninth $18.

€ The tenth man (the richest) would pay $59.

So, that's what they decided to do.

The ten men ate dinner in the restaurant every day and seemed quite happy with the arrangement, until one day, the owner threw them a curve.

"Since you are all such good customers," he said, "I'm going to reduce the cost of your daily meal by $20."

Now, the dinner for the ten only cost $80. The group still wanted to pay their bill the way we pay our taxes.

So, the first four men were unaffected. They would still eat for free. But what about the other six, the paying customers? How could they divvy up the $20 windfall so that everyone would get his 'fair share'?

The six men realized that $20 divided by six is $3.33. But if they subtracted that from everybody's share, then the fifth man and the sixth man would each end up being 'PAID' to eat their meal. So, the restaurant owner suggested that it would be fair to reduce each man's bill by roughly the same amount, and he proceeded to work out the amounts each should pay.

And so:

€ The fifth man, like the first four, now paid nothing (100% savings).

€ The sixth now paid $2 instead of $3 (33% savings).

€ The seventh now paid $5 instead of $7 (29% savings).

€ The eighth now paid $9 instead of $12 (25% savings).

€ The ninth now paid $14 instead of $18 (22% savings)

€ The tenth now paid $50 instead of $59 (15% savings).

Each of the six was better off than before. And the first four continued to eat for free. But once outside the restaurant, the men began to compare their savings.

"I only got a dollar out of the $20," declared the sixth man. He pointed to the tenth man "but he got $9!"

"Yeah, that's right," exclaimed the fifth man. "I only saved a dollar too. It's unfair that he got nine times more than me!"

"That's true!!" shouted the seventh man. "Why should he get $9 back when I got only $2? The wealthy get all the breaks!"

"Wait a minute," yelled the first four men in unison. "We didn't get anything at all. The system exploits the poor!"

The nine men surrounded the tenth and beat him up.

The next night the tenth man didn't show up for dinner, so the nine sat down and ate without him. But when it came time to pay the bill, they discovered something important. They didn't have enough money between all of them for even half of the bill!

And that, boys and girls, journalists and college professors, is how our tax system works. The people who pay the highest taxes get the most benefit from a tax reduction. Tax them too much, attack them for being wealthy, and they just may not show up at the table anymore. There are other places offshore with nice restaurants and good business opportunities.

DEFEAT SOCIALISM – VOTE ACCORDINGLY

We're finalizing our COBRA election notices and processes.

The initial election notice that we send outlines the due dates for premiums for the first 3 months. If the participant elects COBRA, they are then provided with a coupon book that shows the amounts due, and each due date.

I'm looking for advice as to if this satisfies the notification requirement for premium due dates?

Thanks

pasted together is the following "history" of the world from certifiably genuine student bloopers collected by teachers throughout the United States, from eighth grade through college level. Read carefully, and you will learn a lot.

The inhabitants of ancient Egypt were called mummies. They lived in the Sarah Dessert and traveled by Camelot. The climate of the Sarah is such that the inhabitants have to live elsewhere, so certain areas of the dessert are cultivated by irrigation. The Egyptians built the Pyramids in the shape of a huge triangular cube. The Pramids are a range of mountains between France and Spain.

The Bible is full of interesting caricatures. In the first book of the Bible, Guinesses, Adam and Eve were created from an apple tree. One of their children, Cain, once asked, "Am I my brother's son?". God asked Abraham to sacrifice Isaac on Mount Montezuma. Jacob, son of Isaac, stole his brother's birth mark. Jacob was a patriarch who brought up his twelve sons to be patriarchs, but they did not take to it. One of Jacob's sons, Joseph, gave refuse to the Israelites.

Pharaoh forced the Hebrew slaves to make bread without straw. Moses led them to the Red Sea, where they made unleavened bread, which is bread made without any ingredients. Afterwards, Moses went up on Mount Cyanide to get the ten commandments. David was a Hebrew king skilled at playing the liar. He fought with the Philatelists, a race of people who had lived in Biblical times. Solomon, one of David's sons, had 500 wives and 500 porcupines.

Without the Greeks we wouldn't have history. The Greeks invented three kinds of columns - Corinthian, Doric, and Ironic. They also had myths. A myth is a female moth. One myth says that the mother of Achilles dipped him in the river Stynx until he became intollerable. Achilles appers in "The Iliad", by Homer. Homer also wrote "The Oddity", in which Penelope was the last hardship that Ulysses endured on his journey. Actually, Homer was not written by Homer but by another man of that name.

Socrates was a famous Greek teacher who sent around giving people advice. They killed him. Socrates died from an overdose of wedlock.

In the Olympic Games, Greeks ran races, jumped, hurled the biscuits, and threw the java. The reward to the victor was a coral wreath. The government of Athens was democratic because the people took the law into their hands. There were no wars in Greece, as the mountains were so high that they couldn't climb over to see what their neighbors were doing. When they fought with the Persians, the Greeks were outnumbered because the Persians had more men.

There were no wars in Greece, as the mountains were so high that they couldn't climb over to see what their neighbors were doing. When they fought the Parisians, the Greeks were outnumbered because the Persians had more men.

Eventually, the Ramons conquered the Geeks. History calls people Romans because they never stayed in one place for very long. At Roman banquets, the guests wore garlics in their hair. Julius Caesar extinguished himself on the battlefields of Gaul. The Ides of March murdered him because they thought he was going to be made king. Nero was a cruel tyranny who would torture his poor subjects by playing the fiddle to them.

Then came the Middle Ages. King Alfred conquered the Dames, King Arthur lived in the Age of Shivery, King Harold mustarded his troops before the Battle of Hastings, Joan of Arc was connonized by Bernard Shaw, and victims of the Black Death grew boobs on their necks. Finally, Magna Carta provided that no free man should be hanged twice for the same offense.

In midevil times most of the people were alliterate. The greatest writer of the time was Chaucer, who wrote many poems and verses and also wrote literature. Another tale tells of William Tell, who shot an arrow through an apple while standing on his son's head.

The Renaissance was an age in which more individuals felt the value of their human being. Martin Luther was nailed to the church door at Wittenberg for selling papal indulgences. He died a horrible death, being excommunicated by a bull. It was the painter Donatello's interest in the female nude that made him the father of the Renaissance. It was an age of great inventions and discoveries. Gutenberg invented the Bible. Sir Walter Raleigh is a historical figure because he invented cigarettes. Another important invention was the circulation of blood. Sir Francis Drake circumcised the world with a 100-foot clipper.

The government of England was a limited mockery. Henry VIII found walking difficult because he had an abbess on his knee. Queen Elizabeth was the "Virgin Queen". As a queen she was a success. When Elizabeth exposed herself before her troops, they all shouted, "hurrah". Then her navy went out and defeated the Spanish Armadillo.

The greatest writer of the Renaissance was William Shakespear. Shakespear never made much money and is famous only because of his plays. He lived at Windsor with his merry wives, writing tragedies, comedies, and errors. In one of Shakespear's famous plays, Hamlet rations out his situation by relieving himself in a long soliloquy. In another, Lady Macbeth tries to convince Macbeth to kill the king by attacking his manhood. Romeo and Juliet are an example of a heroic couplet. Writing at the same time as Shakespear was Miguel Cervantes. He wrote "Donkey Hote". The next great author was John Milton. Milton wrote "Paradise Lost". Then his wife died and he wrote "Paradise Regained".

During the Renaissance America began. Christopher Columbus was a great navigator who discovered America while cursing about the Atlantic. His ships were the Nina, the Pinta, and the Sante Fe. Later, the Pilgrims crossed the ocean, and this was known as Pilgrims Progress. When they landed at Plymouth Rock, they were greeted by the Indians, who came down the hill rolling their war hoops before them. The Indian squabs carried porpoises on their back. Many Indian heros were killed, along with their cabooses, which proved very fatal to them. The winter of 1620 was a hard one for the settlers. Many people died and many babies were born. Captain John Smith was responsible for all this.

One of the causes of the Revolutionary Wars was the English put tacks in their tea. Also, the colonists would send their parcels through the post without stamps. During the War, the Red Coats and Paul Revere was throwing balls over stone walls. The dogs were barking and the peacocks crowing. Finally, the colonists won the War and no longer had to pay taxis.

Delagates from the original thirteen states formed the Contented Congress. Thomas Jefferson, a Virgin, and Benjamin Franklin, were two singers of the Declaration of Independence. Franklin had gone to Boston carrying all his clothes in his pocket and a loaf of bread under each arm. He invented electricity by rubbing cats backwards and declared, "A horse divided against itself cannot stand." Franklin died in 1790 and is still dead.

George Washington married Martha Curtis and in due time became the Father of our Country. Them the Constitution of the United States was adopted to secure domestic hostility. Under the Constitution the people enjoyed the right to keep bare arms.

Abraham Lincoln became America's greatest Precedent. Lincoln's mother died in infancy, and he was born in a log cabin which he built with his own hands. When Lincoln was President, he wore only a tall silk hat. He said, "In onion there is strength." Abraham Lincoln wrote the Gettysburg Address while traveling from Washington to Gettysburg on the back of an envelope. He also freed the slaves by signing the Emasculation Proclamation, and the Fourteenth Amendment gave the ex-Negroes citizenship. But the Clue Clux Clan would torcher and lynch the ex-Negroes and other innocent victims. It claimed it represented law and odor. On the night of April 14, 1865, Lincoln went to the theater and got shot in his seat by one of the actors in a moving picture show. The believed assinator was John Wilkes Booth, a supposingly insane actor. This ruined Booth's career.

Meanwhile in Europe, the enlightenment was a reasonable time. Voltare invented electricity and also wrote a book calle "Candy". Gravity was invented by Isaac Walton. It is chiefly noticeable in the Autumn, when the apples are falling off the trees.

Bach was the most famous composer in the world, and so was Handel. Handel was half German, half Italian, and half English. He was very large. Bach died from 1750 to the present. Beethoven wrote music even though he was deaf. He was so deaf he wrote loud music. He took walks in the forest even when everyone was calling for him. Beethoven expired in 1827 and later died for this.

France was in a serious state. The French Revolution was accomplished before it happened. The Marseillaise was the theme song of the French Revolution, and it catapulted into Napolean. During the Napoleonic Wars, the crowned heads of Europe were trembling in their shoes. Then the Spanish gorillas came down from the hills and nipped at Napolean's flanks. Napolean became ill with bladder problems and was very tense and unrestrained. He wanted an heir to inherit his power, but since Josephine was a baroness, she couldn't bear children.

The sun never set on the British Empire because the British Empire is in the East and sun sets in the West. Queen Victoria was the longest queen. She sat on a thorn for sixty-three years. Her reclining years and finally the end of her life were exemplatory of a great personality. Her death was the final event which ended her reign.

The nineteenth century was a time of many great inventions and thoughts. The invention of the steamboat caused a network of rivers to spring up. Cyrus McCormick invented the McCormick raper, which did the work of a hundred men. Samuel Morse invented a code of telepathy. Louis Pasteur discovered a cure for rabbis. Charles Darwin was a naturalist who wrote the "Organ of the Species". Madman Curie discovered radium. And Karl Marx became one of the Marx brothers.

The First World War, caused by the assignation of the Arch-Duck by a surf, ushered in a new error in the anals of human history.

Are participant loans taken into account in calculating the value of a participant's benefit for purposes of the involunary cash out rules?

Anyone have any examples of the IRS finding that one person allocation groups resulted in a deemed CODA?

I hope this isn't too stupid of a question... back in April, we did the plan amendment and plan sponsor certification for HIPAA, sent it off to the TPA, thought it was all signed, we were good. They then sent us a whole new plan document with the added sections and a new execution page. I just ignored it, since we'd already signed everything. They now sent a letter saying how we never did the HIPAA stuff and they need it asap or we won't get our reports. So I am faxing copies of the amendment and certification.

If we have a signed amendment is it necessary to recreate the entire plan doc and re-execute it? It seems redundant to me. Is that normal?

1) Does anyone know if the DOL/IRS will be issuing a model amendment to comply with the new IRA automatic rollover regulations?

2) Does anyone know what financial institutions are willing to serve as IRA custodians for these small accounts?

Thanks.

Hi, just wondering if the 415© limit, which I understand to be the total of EE plus ER contributions in a year, includes post-tax EE contributions or just pre-tax EE plus the ER match.

Our plan currently restricts HCE's to 6% and our match calc is based on 6%. Next year we are adding a post-tax option once the $14k is reached. Do any of your plan designs allow for match to continue past the $14k in ee pre-tax all the way up to the first 6% of pay, or do you stop at 14k? Thanks.