I neglected to report on 5500 that the EIN and plan Sponsor had changed from previous year. Could someone give me advice on how to go about making this correction? I called the IRS and the current year filing has not been recorded as of yet. They said to give it a couple of months and check back. Just wondering what some of you would do.

Thanks

One of our employees submitted the EOB from the insurance for services rendered without an actually receipt.

Is this acceptable documentation to process the claim?

Major HMOs such as Kaiser Permanente conduct brand campaigns to influence the decisions of Benefits Managers. What is the best way for small online activist efforts, such as http://www.kaiserpapers.org to get a consumer (not to mention victim) point of view over to Benefits Managers? They do not have the funding to launch a PR campaign.

In the process of researching TAP529 accounts for college I came across an interesting opinion I read in the website Savingforcollege.com. The author encouraged diversification, but if one needed to choose between the 529 or a Roth IRA, the IRA might be a good way to go. To summarize, reasons would be: you can withdraw Roth contributions tax-free and without penalty; flexibility of using the IRA for college and/or retirement (529 is college only); the investor can choose the type of investment.

I have two children (ages 10 and 8) and not a lot to invest. I know I won't be able to cover all their expenses and that loans will be used, but I'd like to get something going. There are so many types of investments from which to choose, I find it paralyzing and I end up doing nothing. (My spouse and I each have 401ks through employment.)

Would anyone have any thoughts to share on this option? Also, I've reviewed so much literature I'm not sure if I read this, but can you only invest in Roth IRAs if you are earning income? What if one of use becomes unemployed?

Thank you, in advance, for any help you can provide.

In Rev. Proc. 2004-4, the Service announced that it would not issue determination letters approving tribal plans as governmental plans under Code section 414(d). The Service may be holding back on such rulings because of pending legislation that would amend the Code and ERISA to state affirmatively that tribal plans are treated as governmental plans.

What are people doing in the meantime--adopting and operating 401(a) plans to comply with the rules for non-governmental plans? Requesting DLs as non-governmental plans? Holding off on applying? Applying as governmental plans as letting the applications sit with the Service, as with cash balance plans?

My client had a new recordkeeper for its 401(k) plan, and many errors have been discovered. They never got a DL, so can't use EPCRS. We'd like to get a DL, but are somewhat baffled about the best approach.

We also have some nonqualified plans which would not be top-hat plans under ERISA, but that is probably a separate post.

Any thoughts or advice?

Any reason why an employer, who hires one part time EE to perform bookeeping with annual hours less than 1000, can't have a profit sharing plan and only cover himself?

It seems this topic is being forced upon me more often and so I have been trying to research as best I can. But with anything that is not within my comfort zone, even if I think I have it figured out it makes me feel better to get independent confirmation.

The facts are that we have an S corp with Owner #1 (100% owner) is 70 and taking a salary of $150,000 and the amount seems to be flexible. Owner #2 is the spouse age 76 and he is collecting a nominal salary of $15,000 a year. This is also flexible, but historically has been low or none at all. There are 2 employees that make between 40k-60k that are in their late 40s to early 50s.

Of course the client wants to sock away as much as possible for themselves and as little as possible for the two employees. For the sake of argument let's assume both owners will work at least another 5 years.

In Sal Tripodi's ERISA outline book he gives an example of a DB/DC combo design in which the DB plan does not cover any NHCs. Since the plan's can not pass discrimination tests on their own, the plans are permissively aggregated for testing purposes. 401(a)(26) is passed because 50% of the employees are covered in the DB plan.

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Ok I think I am ok with everything up to this point, but I am getting a little hazy on the testing of the benefits to be certain that the benefits provided are not discriminatory.

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Tres.Reg 1.401(a)(4)-9(b)(2)(v)(D) deals with the special gateway test for DB/DC plans. The example in the ERISA Outline book explains how to look at the testing but assumes that all employees are covered in both plans. It basically takes the normal allocation rate for the HCE in the DC plan, adds it to the equivalent allocation rate in the DB plan and then compares it to the NHC average to be certain we are passing 401(a)(4) rate group testing applying the gateway rules (NHC allocation rate must be 1/3 the HCE allocation rate if the HCE allocation rate is less than 15% or the NHC rate must be 5% if the HCE allocation rate is between 15% and 25% and provides for 1% increases if the HCE allocation is higher). There is also mention that 7.5% to the NHC is a safe harbor amount even if the HCE allocation is over 40%.

In my specific case, the DB plan is a 75% formula reduced by 1/25 for each year of participation less than 25 years. The DC plan is run at 7.5% of pay.

When I run the discrimination testing in Datair, there are 2 tests that give me values for the 401(a)(4) test. The first is called the annual test. The most valuable rate for owner #1 and owner #2 is 3.0 (1/25*.75). The value for NHC#1 is 4.30 and for NHC#2 is 3.28.

The other test which I get values for is called Equivalent Allocation. The values for Owner#1 is 21.47, Owner#2 is 23.91, NHC#1 is 7.50, and NHC#2 is 7.50.

Based on my superior sleuth like abilities (ha) I feel comfortable saying that the values for the NHC on the first test is the same as testing the contribution based on benefits. The 4.30 and the 3.28 are EBARs. On the second test, the 7.5% is obviously just the 7.5% allocation rate that they received.

The testing shows that the first test (annual) passes because both NHC rates are higher than both HCE rates. THe second test fails because of course the values are reversed.

So the big question is, can I rely on the annual test to pass the 401(a)(4) testing? Or do I need to increase the NHC allocation in the DC plan to 23.91% so that the equivalent allocation test is passed?

My gut is telling me that we are passing the test because the annual test is passing, and perhaps I can lower the DC allocation lower than 7.5%. Although I am not overly concerned with saving a few hundred dollars in employee costs.

Thanks for reading my novel here and thanks even more if you have input.

When an EIN no. changes for a plan how should this be reflected on the 5500. Or is it?

Anyone know the correction method. there does not seem to be one listed but it would seem to me that you would have to redo all the tests using the appropriate definitions and if the plan fails you would correct using the method for failures to pass adp/acp

is it possible to exclude comp personal and vacation time from the definition of compensation? the plan document makes no specific reference to these types of comp.

Here's something for you to think about. I'm not a CPA so I don't claim to know the answer, but I wonder if this is possible. The situation is an S-Corp with W-2 income of $25,000 for the owner. This is the first year of the corporation and the $25,000 is the total income of the corporation. The contribution to a defined benefit plan is $37,500. Can he contribute $37,500 to the plan as a corporate contribution, creating a $37,500 loss which is passed through to his personal tax return to be written off against other income? In essence, he would have a $12,500 net loss. If the income is split between W-2 and plan contribution, the contribution at the corporate level would be $15,000 and the W-2 income would be $10,000. This would create an additional net income of $10,000 on the 1040. Is what I'm describing possible or am I way off base? Thanks for your thoughts.

The IRS allows participants with less than a year of service and 18 years old to be taken off the ADP/ACP testing regardless of the eligibility requirements of the plan.

Does this year of service look at the anniversary year of the participant in question or the plan year for testing? Where can I find that clarified?

I know that one of the requirements for a Flexible Spending Account is the uniform reimbursment rule requiring all funds be available for the participant at the beginning of the year regardless of the amount contributed by the employee.

What if an employee wishes to make all of his contributions at the beginning of the

plan year? My gut reaction is that this is not allowed, but was unable to find it in the regs.

We have a client that came to us in May to set up a brand new 401(k) plan. However, when they came to us they already made a SIMPLE IRA contribution for the month of April because their broker gave them wrong information (he told them the SIMPLE IRA and 401(k) are one in the same).

To make a long story short, they wanted a 401(k) all along - can this one payroll deduction (the employer contribution for this deduction also went in) be backed out, correct the W-2's, so the end result for 2004 is a 401(k) and the SIMPLE IRA did not exist? The account where the SIMPLE was established is the same fund company where the 401(k) will be established. The fund company doesn't know what to do with the 1099-R coding for the way the client would like to see this happen.

I understand the 2 year rule on distributions from a SIMPLE IRA and the SIMPLE can be the only plan for the year. My hope is that there would be a mistake of fact, or plan administrator error on the setup that would allow an exception.

Any help is greatly appreciated.

It appears that the IRS has eliminated 1099r code ='H' for direct rollovers to a qualified plan. Instead of using a 'G' or 'H', only code 'G' will be used to designate a rollover. This is gleaned from the 2004 instructions for the 1099r because code = 'H' is not listed anymore. But I cannot find a commentary on this change at the IRS website. Has anyone seen a publication specifying this change?

My company acquired another company on 8/15/02. The parent company has a 401(k) plan in place. They have amended the 401(k) plan to include the acquisition company effective 1/1/2004. Does the 18 month acquisition rule allow the parent company to exclude participation of the acquired company for the 2003 plan year.

Thanks for your help.

Looking for a comparison of the benefits of a qualified vs. non-qualified plan. Does anyone have a website, resource, etc. that you can share?

Thank you!

Does anyone see a problem with aggregating a SEP with a DB plan for 410(b)/401(a)(4) testing ? Can you do that ? I realize I'll have the 404(a)(7) deduction limits since I have a common participant, but assuming that isn't too restrictive can I do this ? Thank for any input.

An ER terminated 3 of his EEs. All 3 had vested balances in the company 401kPSP (a 404c compliant plan) in excess of $5,000. All 3 EEs declined to roll their assets out of the plan, instead those assets are held in an interest bearing account. Does the Trustee of the plan have to continue to permit those 3 former employees to direct the investment of their accounts?

Can the executor of an estate rollover a pension distribution to an IRA when the recipient dies within the 60 day rollover period ?