I've been filing 5500 forms for years for a sole propritor's Keogh. The sole proprietorship no longer exists. In fact, the former sole proprietor closed his business years ago and disbursed funds to all participants except two of them. Those two have balances of only $600 & $400. They have moved and cannot be found, but still I have to prepare the annual 5500 because the plan still has assets.

The former sole proprietor is my client. He has resided in a nursing home for the past three years. Before moving to the nursing home he married a young sweet thing 40 years younger tham him. She is in charge of all his business affairs. She hates to have to pay me each year to prepare the 5500. I hate dealing with her. Now she expects me to hire a private detective to find the two former participants so she can pay them their measly benefits. I'll do anything to get her off my back but I'm not footing the bill for a Dick Tracey. She is rude and mean (I'm scared to death of her). I guess I could tell her to find someone else to prepare the 5500 but she thinks that I have to solve this problem for her. I guess she thinks it's my fault that these two people left town without a trace.

Are there any IRS rules that simply let us to stop filing the 5500 each year and just sit back and wait untill we hear form the two former participants by chance?

I have a client who makes the 3% annual QNEC to satisfy the safe harbor feature of his 401k plan.

The client also is considering (and the document permits) paying a match that doesn't exceed 4% of pay and doesn't match deferrals in excess of 6% of pay.

Notice 98-52 states that the annual notice must be written such that it is sufficiently clear to a participant the circumstances under which contributions other than the 3% QNEC (for this particular employer) will be made.

This client is using a prototype document that provided a sample safe harbor annual notice. The sample notice simply states "your employer may be permitted to make additional contributions to the plan - refer to your SPD." Of course it also directly addresses the 3% QNEC.

In my opinion, it is not "clear" in the sample notice that the employer intends to make the match. The employer won't decide until year end whether or not he actually makes the match, and the document is drafted such that the matching contribution is not required.

This client has three people eligible to participate. Himself, his wife, and one NHCE employee. "Himself" is the sole owner. He would like to avoid giving the NHCE a match. The NHCE has indicated she doesn't want to defer. She has been provided w/ the SPD. I don't think she really understands though the benefit of the match, should she change her mind and choose to defer.

Is the language in the sample notice sufficient - e.g. would it pass muster on audit or would the gov't say that the notice was insufficient and thus did not meet the requirements to be a safe harbor plan? Obviously I'd like to follow the wishes of the client, but I also want to make sure he's sufficiently protected upon audit.

Curious as to any opinions. Thank you!

When an employer is running the 55% average benefits percentage test, does the employer consider all non-excludible employees or only those employees participating in the DCAP? For example, assume that an employer has 100 employees, of which 10 are HCEs and 90 are NHCEs. However, only one HCE and one NHCE are participating in the DCAP. The HCE contributes $5,000, while the NHCE contributes $2,750 (55% of $5,000). Does the DCAP satisfy the 55% test? It would if the employer only considers participating employees. It wouldn't if the employer must consider all non-excludible employees. Thanks in advance. Ed

Just noticed the numbers don't match the title of the post. I had already typed this before I saw page 2 of the census, which had 4 more employees. But the question is the same.

We had a question come up from another TPA who does not handle cross tested plans. He has a client who has 12 employees, (including the owner) and wants to have 12 groups.

We've never administered a plan on this basis. I know at one time there was some discomfort that the IRS might consider this a "deemed CODA" and there were also dark hints, rumors, and mumblings about it being a lack of a definitely determinable benefit. Sal Tripodi makes reference to a 2001 ABA conference where the IRS did NOT raise the CODA question, but I don't have a transcript of the question and IRS response.

While such a design doesn't necessarily thrill me, I also cannot find any guidance that specifically prohibits it. If after consulting with his tax/legal counsel, the client still wants to pursue, they can full for a full determination letter and we'll see what the IRS does.

My question is - have any of you ever had a client receive a determination letter on a similar basis? Or had one turned down? I'd rather benefit from someone else's misery than experience it on my own...

Situation and any help with the answer will be greatly appreciated:

Participant had an ADP refund for 3/31/03 plan year end of $3000. She was eligible for catch-ups, so we reclassified $2000 of the ADP failure as catch-ups.

Now we are completing the 3/31/04 testing. Her amounts are as follows:

1/1/03 - 12/31/03 deferrals = $14000

4/1/03 - 3/31/04 deferrals = $14752.55

With her deferrals for the calendar year being over the $12000 limit, can we reclassify the additional $2000 (14000 deferrals - 12000 limit) as catch-ups?

Or, since she already used the 2003 catch-ups by the 3/31/03 ADP test failure, should she be getting a 402g violation of $2000?

Thanks.

Can anyone think of any reason(s) why a partnership or an S-Corp would wish to use a excutive bonus plan? Thanks

Facts: 401(k) plan with enhanced match if participant elects to receive match in company stock. Employer stock match considered ESOP portion of plan. Diversification rules apply to company stock (55 and 5 years of participation).

Question: Is 404© protection available on the employer securities investment option assuming employer has satisified the laundry list of 404© requirements, or is it impossible given the application of the diversification restrictions.

Employee X worked for a division of Company A since 1995. In April 2003, Company B acquired the ASSETS of the division.

From April 2003 to December 2003, Company B "leased" the employees of the division from Company A. Company B reimbursed Company A for cost of employees that stayed at the division during transition (and worked on a substantially full-time basis for Company B).

In December 2003, Company B hired Employee X.

*********************

Company B Plan Document indicates that predecessor service of an Adopting Employer is reconized for vesting and eligibility. However, I don't think this would apply, since there is no "employer." The Plan Doc seems to address Stock Acquisitions, but not asset acquisitions.

Plan Sponsor took a conservative approach, and credited service from Employee X's 1995 hire date with Company A. Is this allowed if there is no amendment addressing this particular situation? The Plan Doc seems to address Stock Acquisitions, but not asset acquisitions. May the Company retroactively amend the plan to credit prior service for employees from this asset purchase? Would the anse change

A) Upon Employee X's hire by Company B, what service is required to be recognized? (i.e. at a minimum, is leased service from April 2003 required)?

B) Was Company allowed to credit service back to 1995 without an amendment addressing this particular purchase?

C) Could Company B now retroactively amend plan to credit service for employees from asset purchase?

D) Would the answer change is the Employee was a potential HCE?

I apologize if this is too basic, but there's so much on Catch-ups, but I haven't seen a clear answer on the following:

Are Catch-Ups an election or simply the result of "normal" contributions exceeding a limit? In a practical example, a 50+ employee elected 15% deferrals on a $100k salary in 2003. Plan stopped withholding at $12,000 claiming participant did not "elect" catch-up contributions.

The answer is usually "what does Plan Doc say?" Unforunately, it is silent to the issue other than saying that Catch-up contributions are allowed (very poor document).

Absent any further language, is this participant owed $2,000 for the Plan's failure to follow his 15% election.

Along the same line, if the plan does not elaborate, are matching contributions required on the Catch-Up amounts? I know they may be excluded, but is the default that Catch-up amounts are to be matched?

Thanks

I was wondering if anyone could provide some insight into how salary deferrals from a bonus that is paid within 2 1/2 months after the plan year ends are handled.

I had some confusion about how this rule would be administered.

Assuming the plan year and the ER taxable year are both the calendar year:

If the ER pays a bonus on February 1, 2004 for services applicable to the 2003 plan year, can deferrals from this bonus be considered for the 2003 plan year?

If yes, I'm assuming they would be tested in the 2003 ADP test?

Would the additional deferrals be reflected in the 2003 W-2s?

Are these deferrals deductible to the employer for the 2003 taxable year?

When would the ER had to have declared the bonuses? For example, if the ER declared the bonus on February 1, 2004 this would have been after the W-2s had been issued.

Sorry for my confusion, and thanks for any help.

In a self-funded plan, with a new amendment added to increase the waiting period to 12 months, can the plan offer optional limited benefit plan, paid for by the employer, for the 12 monhts waiting period at the end of which the employee would opt into the regular plan?

I have a takeover plan where one participant has a plan loan. There is no written loan policy for the plan. The loan papers she signed does not say anything about the loan being due upon termination of employment.

The owner is terminating the plan as of 9/30/04 and will be closing his business as of 11/30/04.

We were wanting to make distributions to the participants in October. Can I go ahead and distribute this participant's remaining account balance in October and give her until 11/30/04 (date of her termination) to pay back the loan? If she doesn't pay it back, then would the loan balance become a taxable distribution with no withholding?

Thanks for any help on this.

Does anyone know where we can get the text of obscure PLR's???

Small professional corporation has an SEP for one older professional and 3 or 4 young staff members. The owner has contributed $40,000 to the SEP in January for 2004, but now would like to switch to a DB plan and contribute considerably more money.

Can the $40,000 plus earnings be returned as an overage for 2004? If yes, how are the returned earnings calculated (just compute actual earnings?)?

Is it the case that SEPs are not like a Simple that you could not fund the Simple and a DB Plan in the same year, but you could fund a SEP and DB plan in the same year?

Could the $40,000 in the SEP be left alone for 2004 and then fund the rest of what could be contributed to a DB plan for 2004 into the DB plan?

Does anybody know of a web site that might have what I would call a "reverse" loan calculator whereby you input the loan amount, interest rate and payment frequency and the calculator determines the number of payments and the last (usually slightly different) payment amount?

This is for those participants who want to specify a specific dollar amount per pay period that they want to pay on a participant loan.

Thanks - any and all info, comments and/or suggestions welcome!

The employer maintains a 401(k) P-S plan with a match formula of 10% upto 5% of deferrals. They contribute the match on a payroll basis. Some of the participants have contributed 5+% to the plan, but their match is less than the maximum amount of .50% of pay. Normally the document states whether or not the match is based on annual compensation or payroll compensation. The problem is that the document does not state if the match is based on annual compensation or payroll compensation. Is there a default that should be used or does the client have discretion regarding the match and possible true-up? (We are the new recordkeeper and in the past, they have not made any true-up contributions.)

Any help would be appreciated.

if the account had fees and expenses in excess of cap gains and dividends, would you still issue 1099's? if so what would be the amount?

Scenario - ER maintains two plans, one safe harbor and one non-safe harbor for different groups of EE's. The non-safe harbor plan has a 150% match on first 3% of comp. and safe harbor match is 100% on first 3% of comp. If an HCE transfers from the non-safe harbor plan to the safe harbor plan, the aggregate match he or she receives for a year will be greater than the safe harbor match provided in the safe harbor plan. (150% match for part of the year and 100% match for the rest of the year.

According to notice 98-52, this violates the safe harbor requirement that on HCE can not received a greater rate of match an NHCE. See Notice 98-52 (Section IX.B.2)

Has anyone come across this problem and how have you dealt with it ? Has Notice 98-52 been superceded ?

Just seems odd to me that transferring an HCE from one employee group to another for legitimate business reasons could potentially disqualify the safe harbor plan.

The Financial Cost Of Adult ADHD In The Billions

Attention deficit hyperactivity disorder (ADHD) is taking a toll on the household income of adults with the disorder. Income lost is now pegged at $77 billion in the US, according to a study by Harvard researcher, Dr. Joseph Biederman.

Dr. Biederman said about eight million Americans struggle with ADHD, and it is associated with every aspect of their lives, including, school difficulties, emotional difficulties and workplace problems.

http://www.healthtalk.ca/adhd_09112004_9320.php

Also listed in message forum on http://www.lifelifters.com

Please help with calculating this person's vesting. We have differing opinions here at the office.

Fact pattern:

3 yr cliff vesting schedule

DOH = 2/15/02

DOT = 9/1/04

worked >1000 hrs in '02

plan switched to elapsed time vesting effective 1/1/03, was 1000 hrs before that.

How many years? 2 or 3?