During October 2004, I will be giving the employee's their notification

for 2005 for the Simple-IRA we have set up for them. The plan has been in place

for about five years. Since I am new to this I have several questions.

Question: For compensation do I look back from the day each employee was

hired through December 31, 2004 to determine who received at least $5,000 in compensation in any two years or is it from the date each employed was hired

through December 31, 2003. I might be getting hung up on the date the plan is

effective, January 1, 2005.

Question: The phrase "reasonably expected to receive at least $5,000 during the current calendar year is eligible to participate in the SIMPLE IRA". This phrase,

in my situation, does it refer to wages expected to be received in 2005? Also,

the phrase, "reasonably expected", what exactly does that mean. Wouldn't

most people qualify for the simple plan under this criteria if they meet the rule

Thanks for your help

Dave

The following is an excerpt from the PBGC's Model Notice which is required under ERISA section 4011.

------------------------------

[iNCLUDE THE FOLLOWING WITH RESPECT TO ANY UNPAID OR LATE PAYMENT THAT MUST BE DISCLOSED UNDER SECTION 4011.10(b)(6):]

Your plan was required to receive a payment from the employer on

1. . That payment [has not been made] [was made on
   1. ].

------------------------------

Reading it literally, it only requires the date(s) to be listed and not the actual amount of contribution paid/unpaid. But what use is disclosing just the date(s) without the amounts?

Am I misreading it?

Assuming amounts are required to be listed and the Participant Notice is required for 2004, which must be issued no later than 12/15/2004.

A plan's valuations are performed @ EOY and therefore the 2004 required quarterly contirbution will not be determined well after the notice's deadline and may well be zero when evenually computed.

What amount(s) should one disclose on the notice?

Plan was requesting a favorable determination letter from the IRS when they discovered that the CRA amendment from last year was adopted two weeks late. It was forwarded to audit cap for a document failure where they issued a letter stating the sanction to be a non-negotiable amount of $3,000. This was after it was explained to them in writing that the late amendment had absolutely no operational impact on any participant (this a basic profit sharing plan - no transportation fringe bfts.), the total trust assets are only $20,000 and it was amended only 2 weeks late.

Rev. Proc. 2003-44 states that the sanction for audit cap is a negotiated percentage of the Maximum Permissable Amount ( MPA seemingly defined as the amount charged if they were to throw the book at you). Also, "Sanctions will not be excessive and will bear a reasonable relationship to the nature, extent, and severity of the failures."

Have any of you had any similar experiences? We are the tpa and are taking responsibility for the oversight but we hope there is a way to reduce the amount. The assessment of a non-negotiable sanction of $3,000 on such a small trust for such a minor infraction seems excessive. Is there anything that can be done?

Thanks in advance.

I would like to be able to withdraw from my Roth without penalty if possible. I will be making my first home purchase in 1-2 months (approximately).

I have been looking around the web to find the exact laws on withdrawing from a Roth IRA regarding the first purchase of a home. Does anyone have a link or exact knowledge on this subject?

Would the money withdrawn have to go towards the downpayment or could it be used as 'living' money to pay for the mortgage, taxes...etc..

Thanks

-Rich

I have a situation where a professional worked for a large manufacturing corporation (corporation G). He recently branched off from the corporation and began his own company (Sole prop V). Corporation G was going to discontinue and out source this small segment of the corporation so the Vice President of the segment has branched off on his own. The employees that worked for him at the corporation are now working for him at his new company. The segment deos some sort of highly specialized plastic fabricating.

The odd thing is that the owner worked out some sort of deal with Corporation G to keep the employees on their payroll and he would lease them. The reasoning was that he would not be able to provide health benefits to the employees because he is a much smaller operation. Obviously this is not a typical situation and I am quite surprised the original corporation agreed to keep the employees on their payroll.

I have a situation where the employees have been common law employees of Corporation G for many years and continue to receive their paycheck from Corporation G. Sole Prop V pays the salary and an additional fee that is used to pay the health and retirement plan costs for the leased employees to Corporation G. Now the sole prop is looking to add a 401(k) profit sharing plan. The participation and benefits provided are not high enough to the leased employees at Corporation G for the owner of Sole Prop V to generate any meaningful retirement benefits.

I have received all of the pertinent information to determine that there is no control group or affiliated service group issues. I am waiting on the answer of whether the sole prop owner was ever an owner of Corporation G. He definitely is not an owner now.

The kicker is that the employees of Corporation G did not begin their work for Sole Prop V until 8/1/2004. This means they are not eligible for any retirement plan at the new company until 2006 if we use a standard 21 and 1 year of service. The sole prop has been in existence long enough because it was used to receive some consulting salary throughout the years (although the income was small in comparison to now) that the eligibility could be written so that the owner is eligible to begin participating right away.

The problem I am having is that these employees were working with the Sole prop owner previously. From their point of view nothing has changed except they moved to a different office location. They still have the same employer, they still do the same job, they just work in a different location. I feel like I should consider the employees eligible for the new plan instead of waiting till 2006.

In talking with someone in my office their comment was, "He didn't have ownership in that other company so as far as he is concerned they could have been working for Genreal Motors. There is no reason to look at them any other way than as newly leased employees."

I can kind of buy into that, but it doesn't feel right. If we can wait until 2006 then the owner can take advantage of higher contirbutions until then and we can take a new look at the design once the leased employees need to be factored into the discrimination testing.

Any thoughts? Any questions I still need to get answers to that I am not considering?

For normal EGTRRA catch-up contributions, is there a lifetime maximum?

I know with 403(b) plans, the "special catch-up" has a lifetime max. of $15,000.00.

Thanks in advance.

Anyone heard of this? Financial planner asked me the following:

"I am researching the prevalence and viability of adding a disability rider to a 401(k) product. "

Section 409(o)(1)(B) allows ER securities acquired w/ the proceeds of a loan described in 404(a)(9) to be exempted from the distribution requirements of 409(o)(1)(A) until the close of the plan year in which the loan is repaid. 404(a)(9)© says the paragraph does not apply to S corporations. What happens in the case of a C corporation that has a leveraged ESOP that includes the provision in 409(o)(1)(B) that later converts to S? Does the restriction on distributing stock acquired w/ a loan remain, or since 404(a)(9) does not apply to S corporations, does that mean the stock must now be distributed subject only to the rules of 409(o)(1)(A)? It seems reasonable that if a leveraged C corporation ESOP loses the benefit of the 404(a)(9)(B) interest exclusion upon converting to S, it would also lose the ability to delay distribution under 409(o)(1)(B) upon conversion to S. Of course I'm sure other arguments could be made too. Any guidance would be appreciated.

Has anyone considered this:

If an employee purchases service credit in a d/b plan with a rollover from an eligible retirement plan can 25% of the employee contribution be used to fund a 401(h) account?

A plan is terminated and gone through the PBGC 60 day wait period. Now the 180 days to pay period starts. The plan however has a final contribution which the owner cannot make now. Also, he could make up the asset shortfall if he could take until next June to fund and pay his benefit.

I know I can get an extension on the 180 days to pay, but how long an extension could I get? He would need about 5 or 6 months. (June/July 05).

The minimum funding deadline will not be until 10/15/05. Jan YE.

Any thoughts?

Thanks.

I have a small X-tested PS plan. Two HCEs, 11 NHCEs. The Ebars for the two HCEs are approximately 8.0 and 5.0. Ebars for the NHCEs range from approximately 11.8 down to 2.4. The plan fails the F & C test for the highest HCE. If I use rate banding without specifying the bands, the plan passes. Basically, Relius reduces both HCEs' Ebars to the low rate of each band, but I'm having trouble figuring out how Relius determines the bands. I would appreciate any help/advice in determining bands and figuring out Relius.

I've also seen some of the prior messages regarding rate banding in small plans and was wondering if feelings are still mostly against it in small plans.

Thanks.

Its been awhile, we don't have a great deal of plans failing ADP since the advent of safe harbor, so when refunds are actually made, is the excise tax imposed on just excess contributions or excess contributions + interest????

Thanks!

What does a plan sponsor due in this situation?

A few years back, salary deferrals for one pay period were not deposited timely to the 401(k) trust. Upon discovery the sponsor made the contribution to the trust, and filed form 5330 to pay the excise tax on the "amount involved" (the assumed interest on the assumed loan). BUT, the sponsor forgot to deposit the related lost earnings to the plan associated with the late deposit.

It seems clear under DFVC principles, that the lost earnings, plus earnings on the lost earnings are still due to the plan. But, is there a new or recurring prohibited transaction excise tax because the original error has not been fully corrected?

I have a client that terminated a pension plan in 1988. IRS and PBGC both approved of the termination. Annuities were bought for actives, term vesteds and retirees. Some actives were able to "grow into" early retirement subsidies if they continued to work for the employer and later satisfied the age and service conditions.

One participant who was terminated vested (had 14 years of service) at the time of the Plan termination was rehired several years later. He worked a few more years and if the Plan had continued, he would have qualified for early retirement benefits by virtue of leaving his second tour of employment after age 55 with 15 years of service.

He is claiming that his second round of employment should count toward early retirement eligiblity and that his pension benefit (now the obligation of the insurance company) should include an early retirement subsidy.

This does not seem correct to me, but I am unable to get a grip on any certain that could be used to deny the improved benefit. The fact that the Plan terminated does not completely eliminate the impact of any contingent events or future service since in the case of active employees, they must be able to get an early retirement pension from the insurance company if they meet the qualifications. What about terminated participants? Can their service after rehire impact their benefits from a terminated plan?

It is my understanding that under the Pension Funding Equity Act of 2004 that for plan years beginning after 12/31/03, for purposes of determining the plan's funded current liability percentage, you can recalculate the 2001, 2002 and 2003 funded current liability precentages using the new corporate weighted average interest rate permissible range.

My question is, can you also use that new interest rate range for purposes of calculating the 2003 Additional Funding Charge? My assumption would be no.

I recently received DRO that dictates the Alternate Payee is entitled to 50% of the participant's accumulated account balance in a money purchase plan as of 6/30/98. The plan is on a calendar year basis. Would the Alternate Payee be entitled to 50% of the participant's 1998 contribution if the plan does not require either a 1000 hr or last day provision? Has the participant accrued his 1998 contribution as of 6/30/98 subject to the DRO?

Not for profit has an ERISA 403(b) plan and they want to terminate and start a 401(k) in order to have more alternatives regarding investment types (i.e. stocks, bonds, etc.)

I know that there is an issue regarding whether an employer can really terminate a 403(b) plan or if it has to continue forever until the last participant terminates or the ER goes under.

I am reading the 403(b) prototype, and it expressively gives the ER the right to terminate the plan, however, Morgan Stanley is saying no.

Has anyone ever terminated an ERISA 403(b) Plan? Is this possible. The client has been asked to get legal opinion (and we will suggest this) but I just wanted to get some thoughts so I wouldn't be sending them on a wild goose chase.

Any help is greatly appreciated!!!

Hi, everyone,

We are having a debate here at one of the United Nations organizations regarding the eligibility of American employees to contribute to Roth IRAs. We know that in general foreign income earned under the limit is not considered compensation and so can't figure into the potential for contribution.

What we don't know is whether this applies to us as we work for an international organization, not a company nor a governmental body. Under treaty with both the US and Swiss governments, we are not subject to country tax in either country and we do not have to report tax in Switzerland (although we, of course, do in the US). We are filing (in general) forms US-1040 and 2555, reporting the income, but then not having to pay tax on it. In addition, we do contribute to the pension fund here, but for myself at least, I'm pretty sure I'll return to the US before being vested in the pension and will have to take out what I put in without any significant gain.

So my questions:

1. Can we contribute to Roth IRAs?

2. If not, what CAN we contribute to? (Many of us are in our mid-30s without retirement plans worth anything. I want to have something to live on when I'm 75!!)

Many thanks for your help!

Cheers,

Confused in Switzerland

Can you transfer a (deductible) traditional IRA to a 401k plan?

This year's add'l minimum liability is less than last year's, resulting in a negative charge to equity. Is this now reported as a credit or a zero?