If you have more than one IRA, it is my understanding you lump them all together to come up with your total but you only have to take your the distribution from one IRA account.

I have a plan whereby within the exlcudable group for ADP testing, an HCE falls into that category (owners son with less than a year of service & little compensation). I am being told that for testing purposes the plan can choose to either keep him in the excludable group or bring him in with the otherwise non-excludable group. Which I understand, but when you bring him in, don't you also have to bring in all the other NHCEs that would have been excludable? I am being told you can choose to bring in the HCE and leave all the NHCE exludables out. I didn't think you could pick and choose between the excludables. Can someone shed some light on this please...thanks!

I am taking over valuation services from another actuary. The funding method is an immediate gain method. The plan has accrued liabilities greater than assets. The prior actuary was bringing forward a negative unfunded resulting in a negative expected unfunded, and calculating the gain/loss by comparing this to the actual negative unfunded. I can see from this history this has been so for at least the past two years. This year the actual and expected both continue to be less than zero. I can match the prior actuary's key results to within 5%. Can I continue this exact funding method? The equation of balance works with the negative unfunded. The plan has a huge Credit Balance so if I set up an experience base to make the equation of balance work (to a zero as opposed to a negative unfunded) there will be a large amortization charge (but not so large there will be a full funding credit.)

A participant withdrew her child from her day care provider because the provider was allegedly harming the child. She stopped her DCAP election until she found another caregiver. Can she re-enroll in the DCAP program & if so how does this scenario work with change in elections? Thanks!

California employer wants to allow employees to "donate" unused paid time off/vacation pay to fellow employees who experience a catastrophic event (death, illness) for which they are financially ill prepared. Donated hours are converted to cash if the donee employee's immediate need is cash rather than time away from work. Here is the California employer's dilemma:

1) to avoid donating employees' experiencing constructive receipt for federal income tax purposes, the employer must impose a "substantial restriction or limitation" at the time accrued, unused hours are donated to the program. On the assumption that a 25% "haircut" is a "substantial" restriction or limitation, many plans therefore discount the hours by 25% at the time of donation.

2) under California labor law (see Labor Code Sec. 227.3), forfeitures of accrued, unused vacation time are prohibited. The "haircut" is by its very nature a forfeiture.

Are any California benefits or tax practitioners aware of a way to accommodate these conflicting tenets? I would appreciate any and all comments.

Do you think you can take over a DB plan from a previous firm and terminate the plan in the same year? Section 6.01(5) of Rev. Proc. 2000-40 seems to not allow it, but that doesn't make a whole lot of sense to me as to why. Thoughts?

1. When it comes to retirement plan, deferred compensation, and employee benefits issues, what I do know is greatly exceeded by what I don't know.

2. Every day, I learn something new and valuable at this message board.

3. I'm extremely grateful for all the knowledge and information that people are willing to share.

Here are the Facts:

DB Plan underfunded. Miminum funding amount $400,000. Total Eligible Salary $1,000,000.

If I only have DB plan, total $400,000 can be deducted due to minimum funding.

Question:

1) If I install 401(k) plan with only deferrals can I still deduct the $400,000? Or am I limited to the 25% of comp rule due to DB/DC combo?

2) If I add Match to 401(k) plan and the ER match total is $100,000. Is my Deduction limited to $250,000 or the minimum funding amount of $400,000? I do understand that the $100,000 would not be deductable.

Any thoughts

Would all members of the group (adopting ERS) need to sign a certificate of intent to adopt for GUST or can it be signed by the Main sponsor only?

I have a 401(k) plan with 2 participants; the business owner and one employee.

The business owner is over age 50 and makes catchup contributions. The plan also makes matching contributions - 50 cents for each dollar contributed and catchup contributions are matched.

The other NHCE employee defers 6.71% and gets a 3.36% matching contribution; so top heavy is satisfied.

I have a failing ADP test, but am able to pass by recharacterizing part of the owner's deferrals as catch up contributions. Here are the owner's percentages (before catch up recharacterization) 11.02%-ADP and 5.51% ACP

I also have a failing ACP test (only slightly) and would like to "shift" part of the ADP to the ACP, so that the ACP test passes. The numbers work and allow a shift of .15 from the owner's deferrals and .30 from the NHCE's deferrals. After the shifting and recharacterizing the catch up, the plan passes the ADP/ACP tests.

(Per the ERISA Outline book stating the using "shifting" on a failing ADP is an aggressive position.)

The ERISA Outline book says the plan may not apply the recharacterization rule first. All testing must be completed, including the shifting of elective deferrals if desired, before determining whether there are any remaining excess contributions that would be distributable but are eligible for recharacterization as catch up contributions.

Plan is using current year testing method.

So, in my way of thinking, this would be an acceptable way to pass the test, provided the client wanted to use an aggressive position.

Just wanted to get input and see if anyone else have done any shifting in passing ADP/ACP tests.

Thanks.

We were approached by an investment company to assist a client of theirs that failed to amend for GUST. In addition, we've learned that they have never filed a Form 5500-EZ with assets near $1M currently.

We considered VCP for the document correction. Any ideas on the settlement costs with the IRS? Are they reasonable, considering it's an owner-only plan.

Trying to correct the failure to file 5500-EZ's is problematic. The DFVC program does not apply to the Sole Prop because he's not covered by Title I of ERISA. Considering that the DFVC program has a cap of $750 per year, it would be nice to know our correction wouldn't be more expensive than that. Any suggestions on how we might correct this process and minimize the Sole Prop's exposure with both the DOL and IRS?

Does anyone know whether the IRS might approve a corporation's retaining its non-calendar year fiscal year under the following circumstances: C Corp has 5/31 fiscal year end. C Corp is majority owned by ESOP. ESOP plan year is also 5/31. C Corp intends to elect to be treated as an S Corp.

Assume that the only business purpose for retaining the fiscal year is to coincide with the ESOP's fiscal year.

Thanks.

We are giving and taking a case to/from a prior custodian. The other custodian wants our termination fee waived, which we refuse. The custodian then says "well, then I am charging an identical fee to the plan that you are receiving, and we will not send over the conversion money until that fee gets paid". Prior custodian communicated previously to us that the money would be sent over on the 14th.

Does anyone know if there are DOL rules that specify when the custodian should send over the money?

Is it allowed for a participant that is over age 70 1/2, has a loan that will be defaulted in 2004 to use that loan default to satisfy their 2004 required minimum distribution?

Do you need to file any Form 5500 schedules for a large unfunded welfare plan (e.g., Schedule C or G)?

For a large fully insured (combination of unfunded/insured), Schedule A needs to be filed. Do you need to file any other schedules (e.g., Schedule C, D, or G)? Also, please confirm there is no audit report needed for these plans, but the SAR does need to be provided to covered individuals.

Thanks!

This is one that I have never heard of. A broker for one of the major brokerage firms wants to set up a psp. I told him that we would use a volume submitter. He said that in order to set up the account at the brokerage firm, he has to complete the brokerage firm's prototype and that the prototype mirrors the volume submitter. I asked why I cant give them a fully executed plan document to set up the account. He said that's the way that they do it. I explained the problems that two plan documents could cause and probably didn't even scratch the surface. Any heard of this???

I have an off calendar year plan with a plan year ending 3/31/04. The owner turns 50 in August 2004. Can the owner go over the 415 limit by $3,000 since she is 50 during 2004, or since she turns 50 after the plan year ends, is the 415 limit still $41,000?

I have a situation where the participant died in 2002 after obtaining age 70 1/2 while in pay status. He had no designated beneficiary. The plan document states that the beneficiary would be his spouse. His spouse died in 2003 and she did not have a designated beneficiary. She was over age 70 1/2 at the time of her death. The plan document states that her estate would become the beneficiary. For RMD purposes, she would be considered as having no beneficiary.

1. How do I calculate the 2004 RMD for her? Is it based on her age in the year of her death using the single life table and subtracting one from the applicable factor each year?

2. Is there a time frame in which the entire benefit has to be paid to her estate?

Thank you for any insight!

A husband and wife are each 50% owners and the only "employees" of an LLC that sponsors a calendar year DB plan. The CPA sent me copies of the Form 1065 and K-1s to determine the compensation to use for benefits. The main problem (among others) is that there are "Salaries and Wages (other than to partners)" of over $200,000 that turns out was paid to the partners as W-2 compensation. There is nothing listed as "Guaranteed payments to partners". The K-1s show losses of less than $40,000 each. From what i understand, partners of an LLC should not receive W-2 compensation. What compensation should be used to calculate benefits?? Any advice would be appreciated. Thanks.

I have a client who is a controlled group and has a union plan with a graded vesting schedule and a nonuion plan with a 100% immediate vesting schedule.

If a union participant transfers to the nonunion plan, do they retain the vesting schedule on the old money being transfred from the union plan to the nonunion plan?

Is a 1099R required? To me this seems like a plan to plan transfer and no 1099R should be issued.

If this is treated like a plan to plan transfer is a 5310A required to be filed?