Is this article correct? http://www.foxnews.com/story/0,2933,125994,00.html

I always thought different and I think I read different on this board and some reference material- in that the conversion would have to include some of the after-tax and some of the pre-tax

Part of what she says is

Now here's where things get interesting. Consider rolling your after-tax contributions into a separate traditional IRA. This is a relatively new twist and is only possible because the 2001 Tax Act introduced a provision that allows rollovers of after-tax contributions.

Since your income will clearly be below the $100,000 limit for Roth conversions, once this money hits IRA #2, you can immediately convert it to a Roth IRA. From then on, any gains the account generates will be tax-free. Furthermore, unlike the owner of a traditional IRA, the owner of a Roth IRA never has to take any withdrawals. (With a traditional IRA, you must begin withdrawals the year you reach age 70 1/2.) As I've explained here before, when you convert money in a traditional IRA to a Roth, you have to pay income tax on the amount that has not yet been taxed.

But here's the beauty of the strategy I'm suggesting: By definition, you already paid income tax on your after-tax contributions! (Hang in here with me.) By detaching the earnings from these contributions (and sending these to IRA #1), the only assets in IRA #2 are those which have already been taxed. So the conversion costs you nothing!

You end up with a traditional IRA (IRA #1) containing all of your pre-tax money (both contributions and earnings) and a Roth IRA (IRA #2) with after-tax money that can benefit from tax-free growth for as long as it remains in the Roth.

The situation is that the individual considers herself self-employed, although her "vendor" issues a W2 and withholds taxes, but does not include her in their plan (she is a mortgage loan processor that works with a bank).

I think that most likely their plan is just excluding her in a class, and because the plan can still pass testing, that's okay. I don't see how the bank could treat her as an employee by issuing a W2, and then have her still be self-employed. She claims that she files a Schedule C as well, but on that same income. This bank is her only "customer". If they were treating her as a vendor, wouldn't they issue a 1099 rather than a W2?

The individual has a SIMPLE plan already and has been contributing routinely.

If this is legit-- Can someone please explain how this works?

I need some help on figuring out whether certain employees are considered participants for top heavy purposes. Let's say that the eligibility for a plan is "employee who is a member of the sales team". For two years employee satisfies the participation requirements and participates in the plan. In year three employee becomes a manager and is no longer a member of the sales team. However, employee has not terminated employment with sponsoring employer. Has employee's participation terminated? Is employee still required to receive top heavy minimums if plan becomes top heavy? Citation would be helpful, if available. thanks in advance.

A single employee (owner) plan terminates in late 2003. Plan is under funded. Since Funding Standard Account stops in 2003 is there any way to make a contribution for 2004 and claim a 2004 tax deduction ? The 2003 contribution was made and the 2003 corp. tax return filed, although he didn't contribute the 2003 max contribution available. He has since found more money he'd like to contribute in 2004 and deduct. What deduction options does he have for 2004 (if any) ? Thanks for any thoughts.

With my client sending employees to Iraq and Kuwait to service a government contract, the question about life insurance has come up. This group's current carrier has stated that any death claim for reasons including "act of war" will be covered, however AD&D, LTD & STD claims will probably not be covered. Curious to know if there are any carriers out there that provide a more liberal contract than what we normally see on the street (that might cover AD&D, LTD & STD claims when due to "act of war"). Feedback?

Incumbent Carrier's Position:

Our Group Life contracts do cover losses that occur as the result of war or

acts of war. Generally, Group Disability, Group Long Term Care, Accidental

Death and Dismemberment and Business Travel Accident contracts do not cover

those losses.

Does the contract exclude losses that occur as the result of war?

The response varies by coverage:

Group term life contracts: Contracts do not exclude deaths that

occur as the result of war or acts of war.

AD&D: Most contracts do exclude losses and deaths that occur as the

result of war or acts of war ("war" means declared or undeclared war

and includes resistance to armed aggression).

Short-Term Disability: Most contracts do exclude disabilities that

occur as the result of war, declared or undeclared, or any act of

war.

Long-Term Disability: Most contracts do exclude disabilities that

occur as the result of war, declared or undeclared, or any act of

war.

Long-Term Care: Contracts do exclude losses that occur as the result

of war or acts of war ("war" means declared or undeclared war and

includes resistance to armed aggression).

This particular case has the DAP contract. Therefore, the LTD would

exclude disabilities that occur as the result of war, decalred or

undelcared, or any act of war.

An AD&D example:

e.g#1. if the AD&D contract contained a war exclusion & the participant was

killed by an act of war, there would be no benefit payable

e.g.#2 - same AD&D contract - if the participant were on a military ship

and fell down a flight of stairs and were killed - benefits are payable

.....it's not a matter of "where" the insured is, rather it's "how" the

loss occurred.

We have a situation where we have not taking the amounts deferred into account for purposes of FICA reporting. All employee contributions are 100% vesting and therefore should have been taken into account when. How do we go about correcting this? The regulations simply state the non-duplication rule does not apply and that the entire amount will be taken into account for FICA purposes when it is distributed. Also, it states that penalties and interest may apply. I read this to mean that we do nothing now with respect to the prior years and when it is actually paid out, include it for FICA purposes. Going forward, we will operate per the regulations.

Any thoughts? Suggestions?

Thanks!

Governmental plans are exempt from various ERISA and IRC vesting and funding rules. But what if a plan starts out private, then becomes governmental--to what extent do the ERISA and IRC vesting and funding rules "carry over"? E.g., assume that a privately-sponsored qualified pension plan neither provided § 203(a)(3)(B) service notices nor the alternative actuarial increases when participants beyond normal retirement age continued working. Then a governmental entity obtains the private sponsor and restates the plan as a qualified governmental plan.

If the plan had remained a private plan, retiring participants would be entitled to the actuarially-increased benefit (because of the failure to provide notices); but, per § 411(e), a governmental plan is exempt from the 411 rules. Does the fact that the participant accrued most of his benefit under a private plan impose any requirements on the governmental plan, or is the governmental plan relieved of such responsibility once the plan becomes governmental?

Is it required that the 401(k)(3)(F) and 401(m)(5)© optional

discrimination testing method regarding otherwise excludable employees

for ADP and ACP testing be stated in the plan document?

One of my friends has a Keogh plan (only one employee). What form can he use to get an extension for filing, a 5558? Could he than file on 10/15/2004?

Hello,

I submitted my resignation with my former employer in late October, 2003. In my resignation email, I stated my last day would be January 1, 2004. My former employer agreed to this resignation date (via email). During the month of December 2003, my former employer asked me several times to assist the company by working 2 weeks into January, 2004. I agreed to this extension and arranged my schedule to accommodate him.

On December 30, 2003 I was working my regular shift (3pm-midnight) and my employer arrived into the office around 7pm and told me he had decided to let me go tonight. I told him I wanted to work into January and he said this is the last night I will be working. He prepared a resignation letter for me and said the only way I would receive my paycheck would be to sign the letter.

When I contacted him around the middle of May 2004, he stated since I did not work through the last day of the plan year (December 31, 2003), I'm not entitled to the contribution. He stated a specific page in the SPD which has the last day rule clause. The only problem is the original SPD document which my employer gave me, just happened to be missing that page. Its skips from page 2 to 4 and does not contain the last day rule page.

I still have the original SPD and I also have a signed letter by an ex-employee stating he heard the employer say he was going to terminate me on the night of December 30, 2003. I also have copies of the so-called resignation letter, which the employer prepared, an email which I sent to the employer stating my documented resignation sent in late October. In my resignation email, I state I will be leaving the company on January 1, 2004. The employer also replied to the email confirming this date. I also have a company schedule from December 30, 2004 and it has me scheduled to work all the way through January 3, 2004.

I have already made my initial claim (denied) and have recently filed my claim appeal also. Since I have not been notified, I don't believe I will be receiving my contributions.

With all of this evidence, do you guys think I have a legitimate case to bring a wrongful termination suit against the employer? I also wanted to know the details about contacting the labor board and having them contact the employer regarding these issues. Is this possible?

My total employment was from 5-11-2000 to 12-30-2003.

Thanks,

Slufoot2000

is it ok to use this option? Does anyone know if corbel's doc defines the testing age as NRA--would that then preclude you from using it? if not written that way--is relius relying on 401(a)(5)(f)(i)?

Sal's book says get determination letter before using--has anyone done that?

thanks

We have a 401(k) plan that is terminating and is in the process of distributing all the assets. At the beginning of the year, there were over 100 participants, 80 of whom had no account balance. By the end of the year there are only 37 participants. The assets are invested in a PSA. On Line 3 of the schedule H, there now is a line that states ' The opinion of an independent qualified public accountant is not attached because (1) The Form 5500 is filed for a CCT, PSA or MTIA; (2) ...(not needed).' Can I interpret this that the plan does not need to get an audior's report since the monies are in a PSA? Thanks for any insight.

Is the cost of a private room considered a reimbursable expense under a health FSA?

I have a plan that just gave me the correct birthday for a participant after everything has been done for the 2003 plan year including the tax return. Now the 401(a)(4) test fails. Am I correct that I can do a 11(g) amendment to give a contribution to one participant (100% vested) in order to pass the test?

Client has an employee who wants to make deferrals but not receive any matching contribution. Now I've heard it all! Seems he wants the current income the match represents.

Reading the regs and this board, it seems an irrevocable election would be required, and would therefore preclude deferrals.

Agreed?

This was news to me, but IRS Reg 1.401(k)-1(g)(2)(i) apparently allows a 401(k) plan with a non-calendar Plan Year to choose to define Compensation based on the calendar year. However, for purposes of ADP/ACP testing I don't see a similar opportunity to elect to look at deferrals (or employee/matching contributions) over the calendar year.

Am I interpreting the Regs correctly? Wouldn't this lead to unpredictable ADP/ACP test results if employees are hired late in the calendar year. For example, if a plan has a 7/1 - 6/30 Plan Year and an employee is hired 12/1, he would end up with a super high actual deferral percentage when dividing 6+ months of deferrals (12/? - 6/30) by 1 month of Compensation.

I have a new plan doing this and I'm not sure why.... Thanks!

Sorry for such a remedial question, but could somebody please take the time to explain the differences between the NPPC as calculated under FAS 87 and the pension expense calculated under ERISA?

Thanks in advance for any clarification.

How do you typically set the interest rate for plan loans to participants secured by a right of offset against the participant's account balance, and that requires payroll deduction payback. Assume a five year payback, level amortization each pay period.

It seems like prime plus one percent is the most common I have seen.

Have you seen any guidance from the DOL or IRS on how to determine a reasonable rate of interest, other than it must a rate that basically a commercial lender would charge on a similar loan.

An employer had a DB plan 10 years ago. The plan terminated and lump sum distributions were made. The employer puts in a new plan for 2004 and the owner is at his 100% of pay 415 limit. Retirement age under the new plan is 65 and 5 years of participation, so his NRA is age 78. He was 63 when he received the first distribution from the old plan. How is the 100% of pay 415 limit payable at NRA 78 computed, since the 100% of pay 415 limit is not increased actuarially after age 65?

1. Compute the monthly benefit from the old lump sum payable at the age it was received (age 63) and reduce the monthly benefit by it at any future age?

2. Compute the monthly benefit payable at the old plan's retirement age 65, and reduce by that same monthly benefit even if payable at age 78?

3. Compute the benefit as indicated in #2, but actuarially increase it to the new RA of 78 to use as the offset? Using AE from the old plan?

4. Other calculations?

Thanks for any help I can get.

My understanding is that safe harbor contributions are only required to be given to NHCEs and that they are permitted for HCEs. I also think that you can cap the safe harbor match to HCEs. How about giving the HCEs a less generous match than the safe harbor match (i.e., giving HCEs 25% up to 5%)? Would this still be considered a safe harbor plan if all NHCEs receive 100% up to 3% plus 50% for the next 2%?