I have a 2-part question, where I think the answer to one of my question may dictate the answer to the other.

Participant A is a QDRO recipient from a former spouse’s account from an unrelated plan.

Can Participant A roll over the QDRO proceeds directly into his/her 401(k) plan? Or does he/she have to go through a conduit IRA? The plan is amended for EGTTRA and allows other types of rollovers, but QDRO is not specified.

The twist. Participant A is a terminated employee, but still has an account balance in the plan. Can he/she do a rollover into a plan, where he/she was one time eligible, but is currently terminated?

Thanks for anyone’s thoughts…

A client of ours owns an LLC with a 401(k) plan (in which he does not participate). He plans to buy a company in another state which has a SIMPLE plan in effect.

(1) Can he continue to maintain both plans?

(2) If so, can he do so indefinitely, or is there a cutoff point?

(3) If not, how long does he have to change things, and what (in particular) happens this year?

Plan specifically excludes Leased Employees from participating in Plan. Assume that plan has 5 year cliff vesting (elapsed time method).

Assume employee performs services for 2 years through leasing organization and then is hired by Plan Sponsor and works for 4 years. It is my understanding that all service (6 years) would be counted for vesting purposes (assuming employee generated a benefit in the 4 years when eligible).

However, what if the service was 9 months through the leasing organization and 4.5 years employed by the Plan Sponsor. Would the employee still be fully vested (even though employee never completed the required year to become a "leased employee" under 414(n))?

Assume leasing organization does not provide the minimum required safe harbor plan benefit.

In 2001, Company X failed to permit Y number of eligible employees to make elective deferrals under X's 401(k) plan. Under Rev Proc 2003-44, one method of correcting is by contributing a QNEC equal to the ADP for the group in which the excluded employee would have fallen, plus earnings. However, for 2001, X does not have the ADP/ACP test due to a change in recordkeepers. What should be done to correct this?

A former employee of a company that sponsored a 401(k) plan has about $25,000

in her account. Because she isn't active she can't take a loan from the plan. She

would like to start her own business. Can she set up her own 401(k) plan, roll the

funds from her previous employer into the plan and then make a loan of about

$6,000? Thanks for the responses and if you have a better suggestion this, too,

would be appreciated.

Has anyone tried to calculate a QNEC under the proposed regs? We've had a request to do this and are looking for some good directions/experience. We would be happy to share general results in return.

In determining who is an "Owner-Employee" (not a 5% owner), does ownership attribution of Section 318 apply? Please provide any appropriate documentation.

Attribution clearly applies in determining who is a 5% owner, Highly Compensated employee and Key employee, but an Owner-Employee is a completely distinct classification and I do not see any evidence that says that attribution applies in determining who an owner-employee is.

Thank you.

I'm confused. We have received GUST approval on all of our clients' restated plans, using our volume submitter specimen. All of our clients also timely adopted the model EGTTRA addendum. The reliance on the good faith EGTTRA addendum expires in 2005.

What is the significance of this expiration? Are we to adopt something else? Are we in for another round of submissions?

Thanks for any guidance.

I prepare 5500s for large plans that have investments in insurance companies that only require limited scope audit. The plan also has another platform of mutual fund investments that would require full scope. How would one mark on the schedule H to indicate whether the auditor performed a limited or full scope audit? Also, what if a plan transferred their plan from an insurance company (limited scope) mid year to a registered investment company that required full scope for the latter part of the year. An auditor does not know what kind of opinion to write ( i would guess a split opinion). Moreover, how do I mark the opinion on the 5500?

Thanx

Employer has selected W2 pay as compensation in their prototype and has a large percentage of employees who have received non-statutorystock options this year that will be included in their income. Therefore, many of them will earn over $90,000 this year and be considered HCEs next year ( one time only). It is my understanding that if they had chosen 415 Safe Harbor comp, this income would not have been considered and would not be used in determining HCE status.

If my understanding is correct, is it possible to amend the plan before the end of the plan year (12/31) and change to the 415 safe harbor definition or is it too late?

One of our clients has a division of employees who expected their employment contract with the client to be terminated at the end of the August. However, the contract was extended through the end of the Plan Year. Employees made Plan Year Annual Elections to their FSA's based on expenses they would incur through the end of the contract period. Now that they have effectively been 're-hired', could this be considered a change in status that would allow these employees to increase their Annual Elections to their FSA's?

Any and all guidance would be greatly appreciated. If you can direct me to any reference material regarding this situation, that would be great.

Thanks in advance for your help.

I have a stupid question. I am 38 and trying to pay down debt so I can start saving for retirement.

Presently, things are tight with the mortgage and a small HELOC, 1 car payment, 2 kids in preschool, 2 529's.

I opened a Roth in '98. I have about $12K. I have a credit card for 5K at about 13%. I am wondering if I can borrow 5K from the Roth to pay off the card without the penalty, being that the Roth is 5 years old +.

Thanks for any explanations.

Do I have to convert the participants' account balances to annuities to report them on the Form SSA, or can I just show account balances?

Consider a Calendar Year Plan with EOY valuation.

Plan is terminated Aug 15, 2003 say and plan assets distributed by October 31, 2003. Therefore, on 12/31/2003, the plan has no assets or participants.

For the PY 2003, how does one perform a valuation @ 12/31/03 and prepare a Sch B?

P.S . This is purely a Val & Sch B question so let's not worry about proper notices to the participants, vesting, PBGC etc issues.

Employer wants to charge the participant for fees relating to QDRO review calculations. Is that permitted? Does anyone know where I can find something on this subject?

Thank you

Hello--I have a client, a small law firm, and one of the partners owns 50% of Corporation X. The law firm has a 401(K) plan. Corporation X does not have a retirement plan. I have 2 issues here:

1) The law firm uses 2 employees from Corporation X that they use for secertarial services. The law firm does not pay these employees directly. The law firm pays Corporation X a certain dollar amount and then Corporation X pays these employees.

I'm very new to affiliated service group and controlled group issues.

Would these 2 employees of Corporation X be able to participate in the 401(k) plan of the law firm??

3) Also, what potential 415 issues would I have, if any?

Thanks for your help!

I spoke to an employer recently about their health plan. They just changed to a higher deductible plan and have decided to reimburse employees a portion of their deductible expenses. I mentioned to them that they needed a sec 105 plan document in order to do what they wanted to do and not have the payments counted as compensation (subject to FICA and taxable to the employee). I explained there was a right way to do employee reimbursements and a wrong way and if they didn't do it correctly, there were potential penalties and back taxes. They were unsure of what I was telling them and wanted a legal or code reference. Does anybody know of a reference that would include the penalties, tax implications.

I'm having a little disagreement. I discovered an employee is over their annual limit already, due to computer error. I say his limit should be $13k, other says $16k due to catch-up. I said our plan doesn't allow it, other says all over 50s can catch-up. The final regs say "An employer is not required to provide for catch-up contributions in any of its plans." Seems cut and dry to me, but I want to make sure I am not missing something. Also, if the plan doesn't allow it, and we allow him to do the 16k anyway, then the whole plan could be in violation, right?

Thanks!

Does anyone have experience with amending a 5500 multiple times? Our concern is that this will cause a red flag for an audit for this plan. There were several errors that were made by the prior recordkeeper that we have discovered. The 5500 has already been amended once. Does this kind of situation ever cause an audit?

We are confident that if there was an audit, there would be no problems however we don't want to cause problems for this sponsor.

I am confused. I've had brokers and TPA's tell me two different versions of what you use for premium deduction totals when performing the 25% keyman concentration test. I was taught you use only the pre-tax deduction that the employee is responsible for (i.e. for his/her own portion, spouse, dependents, etc.). A broker said no, that you use all of the premiums whether paid for by the employer or the employee. Any guidance would be greatly appreciated.

Thanks.