A 401(k) Plan has been deemed to pass coverage due to the fact that no HCEs participated in the Plan. The Plan excludes a certain classification of employees.

The Plan Sponsor is being purchased, and one of the new owners is an existing participant, who will become an HCE due to his new ownership. The effect of now having an HCE participating in the plan will mean that the exluded class of employees will cause the plan to fail coverage testing.

If the Plan is a calendar year plan, and the purchase is effective during the plan year, would the transition period for an acquisition apply in this case, and if so, would the Plan continue to be deemed to meet coverage for that plan year and the following plan year?

Thanks.

Does anyone know how to file a 2002 fiscal year ending 10/31/2003 5500 using Relius Government Forms?

They (Relius) told us to redo the 2002 plan year in 2003 then submit it as a 2003 to create the .rg3 file. Relius said that the DOL would pick it up as 2002 beucase the DOL doesn't care what form is on only the information contacted within the form. The DOL would pick up the fiscal year from the top of the 5500.

Has anyone done this sucessfully? This is our 2nd or 3rd year for EFAST filing but our 1st non-calendar year plan fileing with EFAST.

Any guidance would greatly be appreciated.

My wife and I are both in our 50's. If our adjusted gross income for 2004 is 152,500, does this mean that our Roth IRA contributions limit for 2004 would be 75% of 3,500, or 2,625? In other words, as the limit goes from 3,500 to 0 as your income goes from 150K to 160K, is the limit pro-rated?

A company with Calendar yr fiscal year sponsors a DB plan with Calendar Yr Plan Yr - # of participants around 20. The company is not publicly traded.

For 4 years no one asked for FAS numbers and then suddenly the client's auditor (not their regular CPA) wanted FAS numbers for 2003 & 4 prior years. That was not a problem.

Now the auditor wants FAS numbers for June 30, 2004!!? I tried to discourage the auditor but he insists on having the mid-year numbers.

Is this common in the large plans or any size plans? If so, how does one handle this?

Of course, one can determine the ABO, PBO and the funded status at any time but what about the net periodic cost?

Must one collect the census data @ June or is it acceptable to make projections based on the last year-end census.

Just thinking loud - YOS for benefit accruals is 1000 hours during plan year. By June most employees would have worked 1000 hours and earned an additional year accrual thus producing a full year service cost and there will be no increase in the service cost from July thru December! Is this OK or for FASB, does one prorate the service cost for the half year even though the employees have earned a full yr benefit.

I'd like to confirm my thinking on two scenarios involving nonuniform discretionary matching formulas.

Scenario 1:

Salaried employees are matched at rate of 100% and hourly employees are matched at a rate of 50%.

Is this a current availability issue, where I would test each rate of match for nondiscriminatory availability under BRF?

Scenario 2:

Participants who defer at a rate up to 3% get 100% match and those that defer at a rate higher than 3% get a 125% match (on the entire deferral, including the first 3%, so not a typical tiered match)

Seems to me current availabilty is not an issue, since everyone has the choice to defer at a rate high enough to get the 125% match. Is this then an effective availability issue, subject to a "facts and circumstances" test?

Of course I realize that all contributions described must pass the ACP test. Any input would be appreciated.

We are currently looking for a hardship form which includes 401(k) deferrals as well as profit sharing hardships. We are also concerned about the language used in the form regarding the gross-up for federal taxes. Anyone have a form to share?

Does anyone have a source for an employee questionnaire regarding what they want in a 401(k) plan? I receive questions from plan sponsors asking how to increase plan particpation. I believe it might be beneficial to ask the employees why they don't join the plan. There may be more reasons than "I can't afford it." Perhaps a questionnaire could be sent out the Plan Sponsor could learn from as to why their employees aren't taking advantage of their plan.

If a plan uses the elapsed time method for the purpose of sharing in allocations or contributions, how do you determine who is entitled to an allocation or contribution? The adoption agreement (Corbel document) indicates that a participant must complete a period of service (rather than a year of service under the hours of service method) if the elapsed time method is elected. The document does not define a period of service for that purpose. Is a period of service 12 months or can a certain number of months be selected by the plan sponsor? Any input from those that use the elapsed time method would be greatly appreciated.

A surviving spouse is offered COBRA. She is 79 years old. The last day to enroll was 7-3-04. It is now 8-11-04 and her son-in-law has come to visit from out of town and calls about her COBRA coverage.

He said she is incompetent and unable to understand the COBRA paperwork she received - but now that he is here he wants to make an election for her. She has not been declared incompetent by any court, nor does she have anyone court appointed to handle her affairs - she is just old (we're all going to be there some day.)

I know he can make the election for her - my question is since we are past the 60 day election period is there anything we can do?

I have read the court cases - but none seem to address the fact that her election period has passed.

Opinions?

I plan on withdrawing $15K from my traditional IRA, held by a stockbroker, and then re-depositing the same amount back into the same account within 60 days. (I'm under 59 1/2).

If I've understood other responses to posts on this board, and correct me if I'm wrong, I can ask the broker not to withold any taxes.

I've talked with other people that have done this, and in almost all instances, even though the funds were re-deposited within 60 days, the broker issued a 1099 reporting that the funds had been (permanently) withdrawn. It then took an act of God to get the broker to correct this. I'm trying to avoid this.

Questions:

What kind of transaction(s) is this in the eyes of the IRS?

Can I request no backup witholding of taxes?

Is there any form, statement, or wording I should present to the broker when making the withdrawal request?

More importantly, when re-depositing the funds back into the same account, what should I tell the broker (in writing, of course) to let them know this is a re-deposit of a previous withdrawal? Are there any "trigger" words to use?

Can this type of transaction be done be done every calendar year, or do you have to wait at least 12 months? In other words, if I do this in August, can I do it again in January (new calendar year) or do I have to wait till next August?

As always, thanks for your responses.

Carl C

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?