I'm assuming that there is a requirement that plans be tested for nondiscrimination on an annual basis, but is there a requirement that a plan make a filing to that effect (i.e. in Form 5500 or something else)?

I'm working on a combined ADP test for a controlled group and have a quick question...Since one of the plans is a safe harbor plan, can I exclude this plan from the combined ADP test? I initially ran the test including this group, but the test failed and some of the participants in the safe harbor plan are getting refunds, which doesn't seem to make sense.

Thanks!

I have money coming to me soon and I am 53 years old. I don't have much in savings for my retirement. I know it is really late, but I would like to have something to look forward to. I have a 401K at my work and it is only a couple thousand in that. My work only gives 25% but better than nothing. I don't want to chance this money I will be getting soon into anything too risky. I am a low income individual.

What does anyone recommend I do? I have been checking out magazines and Suze Orman shows and I even thought of CD's. Any help sure couldn't hurt.

DOL Opinion Ltr 76-111 (and probably other cases or rulings since then) indicates that ERISA does not apply to a plan under which the sole owner of a trade or business is the only participant, since such a plan does not cover any "employees," citing Labor Reg. 2510.3-3©(1).

2510.3-3©(2) states that a partner is not an employee with respect to a partnership, for purposes of the definition of "employee benefit plan" under ERISA.

Facts: A startup company is an LLC taxed as a partnership and is owned primarily by a venture capital firm, but several executives own between 1% and 5% of the LLC.

Question: If one or more of the executives who own LLC interests enter into an agreement that provides for deferral of a portion of their compensation, would such an arrangement not be deemed to be an ERISA plan because it does not cover an "employee"? (Based on the regulation noted above.)

ERISA is an issue because the executives make up most of the workforce. Covering them all would pose a problem under the "select group" requirement for top hat plans. However, if anyone has seen a case or ruling that allows most of the employee population to be covered by a top hat plan (such as where everyone is management or highly compensated), I would love to see it. The highest percentage of covered employees that I have seen sanctioned is about 15% (the Demery case, I believe). Barring such a case, they need to implement a plan that would not be considered an ERISA plan, and I am hoping that a plan covering only LLC members (i.e. partners) would be such a plan.

Thanks in advance for any thoughts.

Client has a contract that will soon begin paying her $20,000 per month. She was a W-2 employee for 10 months of the 2004 calendar year. Her new endeavor is an LLC in which the contract will be paying her. The LLC will have a year end of 12/31.

She would like to put in a profit sharing plan and deposit $41,000 between 11/1 and 12/31 taking the deduction on her 2004 return. Her plan year would be 11/1/04 through 10/31/05. Her salary during the plan year will be $240,000.

On one hand I look at this and say how can an LLC (taxed as self employed) put in a contribution that is higher than she will even make in her LLC during the 2004 calendar year?

On the other hand it seems like it is ok to fund her profit sharing contribution during the plan's fiscal year and take the deduction on her applicable tax return. The loss generated would offset some of her taxes owed while she was a W-2 employee.

Obviously if this were an LLC that only made $40,000 in income during a calendar year with a calendar plan there is no way she could deduct a $41,000 plan contribution. Also if we had a short plan year the first year she also would not be able to deduct $41,000.

I feel like I know this or should know this but somehow have confused myself and I can't straighten myself out. Maybe I just need to sleep a lot this weekend and think about it Monday.

Can someone straighten me out?

A distribution payment was made to a terminated participant. A clerical error was discovered AFTER the annual report/valuation was sent to the Employer, and AFTER Employer paid participant what was thought to be the vested benefit. After clerical error was discovered, new report was provided to Employer. Revision of Report resulted in a lesser vested distribution to Participant. Trustee (Employer) was directed to contact participant and alert participant of overpayment. Participant refuses to refund overpayment to Trust. Payment was in form of lump sum distribution. I know that there have been Court cases where overpaid participant was forced to return the overpayment to the Trust (in some cases along with Court costs). Participant has engaged attorney who refuses to believe that such suits exist. Help!!! Can anyone give me some citations? I contacted answers @tagdata.com and they cited me a Texas case. Attorney spoofs this.

Do 457(f) plans really need to be amended for AJCA? The conference committee report states that deferred compensation will be taxable if (1) not subject to a substantial risk of forfeiture or (2) the plan doesn't contain the new rules. If a 457(f) plan provides for a substantial risk of forfeiture, then the provisions of AJCA should not be necessary. Am I missing something?

I'm looking for a phone number to reach someone at IRS who handles EPCRS matters and could discuss the viability of a proposed correction. After endless holds, transfers, and painstaking description of our issues on the EP taxpayer assistance line, I got a call back today giving me a phone number to call that turned out to be disconnected. Before I start beating my head against the wall again, is anyone willing to share contact information that actually works? Many thanks.

I have been searching in vain for some proposed SPD language to describe a client's automatic enrollment feature for a 401(k) plan. This is a classic "negative election" set up by which a new employee will be automatically deferring a certain percentage of pay into the plan unless they opt out, or opt to raise or lower the percent of elective deferral. Would any of you good, kind people be willing to share, either on the message board or by e-mail, a sample SPD paragraph that you might be using to describe an automatic deferral feature. I would be humbly in your debt.... Thank you in advance.

As an extension to the discussion on vesting in 403(b) plans with employer contributions, does anyone have any experience in how forfeitures are handled. If they reduce the employer contribution, is the nonvested portion of the account returned to the employer to offset the next contribution? Does he have to find a vendor who sets up a forfeiture account?

Any information on the practical application would be appreciated.

Does anyone know of a website or article that has the equation (or steps) for computing the maximum PSP contribution for a "sole proprietor owner", when the sole proprietorship has employee participants (in addition to the owner)? The plan is top heavy, integrated at 100% TWB, and the owner's income from the business is below $200,000.

I've computed contributions for for integrated corporate plans before, so I'm a little familiar with integration. I've also computed contributions for self-employed employer plans without integration (ie: if employees get 10% ....then owner can only get 1/1.10 = 9.909%).

But combining the rules of "integration" and "self-employed owner" together sounds difficult.

Thanks.

Can I have a high deductible insurance plan/HSA for a dependent child?

We currenly have a family catastrophic plan/HSA but want to drop the parents due to the fact hey are covered by the VA for their medical needs. Thus they would only need coverage for their dependent children.

Is this within the scope of the rules?

Company has a DC plan, all participate for 2003.

Can the DC plan be amended to exclude Key EEs and a DB Plan set up to cover the Keys and a group sufficient to pass coverage/participation/non-disc. without the DC plan still needing the TH min contribution (which would be nondeductible because the DB ded > 25% of pay.)

I have looked and find: "1.416 T-6 Q. What is a required aggregation group?

A. For purposes of determining whether the plans of an employer are top-heavy for a particular plan year, the required aggregation group includes each plan of the employer in which a key employee participates in the plan year containing the determination date, or any of the four preceding plan years. In addition, each other plan of the employer which, during this period, enables any plan in which a key employee participates to meet the requirements of section 401(a)(4) or 410 is part of the required aggregation group."

Its the "4 preceding plan years" that makes me unsure. Would the Keys have to sit out for 5 years and then the DB plan could be set up and not be required to be aggregated?

Or is the 4 year look back a reference to the old Top Heavy look back period and is obsolete post 2002 plan year?

Thanks

I have a participant who has seasonal affective disorder. She was taking meds but wants to try another route due to side effects. She asked if a light box that is specific to that condition would be reimbursable. Also if the replacement bulbs would be too. She said she would have no problem getting a Dr's note for this.

Due to change in status on December 15 and lower cost we decided to move health insurance and medical reimbursement account to husband's employer as of Jan 1. Notified wife's employer on 12/29 to terminate these accounts as of Jan 1. Her employer required proof of her insurance coverage, and continued deductions until this was forwarded to them in late January. They then refunded the January insurance deductions but not the reimbursement account deductions, saying that the IRS did not allow this. So we tried to get reimbursement for January expenses but they did not allow them. Can they do this, or do they at least have to either 1) refund her January reimbursement account deductions, or 2) reimburse our January expenses?

I need the SEP/SIMPLE Answer Book!!!! I'll be ordering next week. In the meantime, maybe someone can help me with a few SEP questions, ranging from easiest to hardest:

S-Corp started in June, 2002 with 2 equal (50/50) owners. No other ee's in 2002, just them, but they take no comp. In 2003, both take a salary. They also hire 2 p/t people. In 2004, they are again taking salary and expect to make a lot of money. They 2 p/t people leave in 2004, and are replaced in July, 2004 with 4 new p/t people. Owners objective is to start a SEP in 2004 that will include them (owners only) and not the others.

1. Would the eligibility have to be set at "having performed services in 2 of the previous 5 years" to get the 2 owners in (3 out of 5 would keep them out for 2004, correct)? Would the minumum wages have to be $0 since they were not paid in 2002? Also, if 2 out of 5 is correct, would that mean the 4 new p/t people will not enter until 1/1/2006?

2. Assume all of the p/t people work less than 1000 hours. Can the employer terminate the SEP after 2005, start a PS or 401k in 2006 with a 1 Year of Service/1000 hour eligibility requirement, and have everyone excluded other than the 2 owners?

3. I believe 415 applies to SEP's so if they contribute $3,000 each to the IRA, they can receive up to a $38,000 employer allocation each in the SEP? Is this correct?

4. Employer also uses around 20 leased employees from a hospital. These employees are covered under the hospitals DB plan. I think the ER reimburses the hospital for all wages and benefits including the DB plan. Do these leased employees have to be covered in the SEP?

5. Finally, can the company borrow from the 2 owners to fund the SEP?

This is quite a laundry list so thanks for any comments. I'd rather stick to 401ks.

New deferred comp rules under American Jobs Creation Act do not apply to eligible 457(b) plans. Presumably this means an organization-wide deferred comp plan of a governmental or private tax-exempt employer, and NOT a top-hat 457(b) plan for the executive of a private non-profit; i.e., the new deferred comp rules DO apply to a top-hat 457(b) plan??

Due to the final COBRA regulations released May 26, 2004, is it necessary to amend all Cafeteria Plans, including Premium Only Plans?

I haven't seen anything that requires a plan to notify participants who are catch-up eligible. I'm trying to find some language that specifically indicates that a plan does NOT have to inform participants of this eligibility. I'm having trouble finding that in the code. Can anyone point me to something?

New deferred comp rules under American Jobs Creation Act do not apply to eligible 457(b) plans. Presumably this means an organization-wide deferred comp plan of a governmental or private tax-exempt employer, and NOT a top-hat 457(b) plan for the executive of a private non-profit; i.e., the new deferred comp rules DO apply to a top-hat 457(b) plan??