I was reviewing this rule which had been posted on Corbel's website recently and wanted to know how the order of nondiscrimination testing works.

A calendar year profit sharing plan that has a 401(k) feature has two eligibilty provisions. For 401(k) elective deferrals, first of the month following 3 months of service. For profit sharing contributions, 01/01 and 07/01 following the completion of 1 year of service (hours of service method).

The plan is NOT top heavy. The highest percent of pay to a rate group that consists of HCEs is 20%. No greater than 5% owners were hired in the current plan year.

Is the "Otherwise Excludible Employee" rule performed prior to allocating the minimum gateway 5% contribution? Or, is the minimum gateway 5% contribution provided followed by the "Otherwise Excludible Employee" rule?

The reason for this question is that in this plan's case, the intention is to maximize certain HCEs, provide the minimum amount to NHCEs, while at the same time providing no contribution to certain other HCEs.

Anyone know where I can get a copy (preferably pdf) of IRS Notice 89-23 and IRS Announcement 95-48?

Can anyone point me to information on where we stand with the SEC's proposed 4 p.m. "hard close" and the redemption fee issues? I was under the impression that the 4 p.m. "hard" close was not really an option anymore, and they are pursuing other alternatives, but I can't really find an update anywhere. Also, when are they expected to give us something solid?

Thanks!

lets say an irs auditor is scheduled to walk in your door in order to audit a plan and while reviewing the files you notice an operational error. if you bring it to the attention to the auditor can you take advantage of SCP or even VCP or do you have to resolve the situation in audit cap because the plan is under examination?

I have a fully-funded health plan that covers NCEs, Key-EEs, and NHCEs. There are no employee contributions made to this health plan. Going forward new employees will need to pay for a portion of the premium with pre-tax dollars through a cafeteria plan.

Are we subject to nondiscrimination testing? I assume yes. If we limit the cafeteria plan to just NHCEs are we subject to nondiscrimination testing?

Thanks.

A participant who has been receiving RMDs has terminated employment and would like to be paid out the remaining amount of her benefit. As the benefit is very large, she is considering taking parts of it on an "as needed" basis. If erratic amounts are taken on an irregular basis, would the participant have to complete election forms prior to each distribution, or is there a way to have her just complete one set of forms in the beginning?

Also, if she rolls over half of the benefit into an IRA now and then begins taking erratic taxable payouts from the remaining half "as needed", would the IRA rollover not be considered an eligible rollover distribution if the remaining half is not completely distributed before the end of the calendar year in which the IRA rollover occurred (resulting in an additional tax liability)?

Thanks for all help.

What is the timing obligation of the employer to notify a terminated participant of his / her vested accrued benefit under various scenarios:

In a 401(k), PS or MP plan - individual accounts - where document says "as soon as administratively feasible at Participant's election";

In a 401(k), PS or MP plan - pooled accounts - where document says "as soon as administratively feasible after Plan Year coincident with or next following termination of employment";

In a DB plan - where document says "as soon as administratively feasible following separation of service";

Basically - must the employer as plan administrator be proactive regarding notifying the terminating participant of this entitlement or can the employer wait for the employee to come forth and ask for the distribution?

There was a recently discovered and corrected operational defect in the 401k plan.

I am looking for any sample letters others may have used to notify plan participants of plan defects / corrective action taken.

I would be insterested in any suggestions/advice from others who have had similar experience sending notices to particpants. Thank you!

Employer adopted a prototype 401(k) plan and did not check the

right box on the adoption agreement so as to exclude from participation

foreign nationals with no US-source income. The employer was unaware that a subsidiary it had recently acquired employs about 4 or 5 French citizens residing in France.

Would it be possible to justify excluding the French nationals if, for instance, the plan defined compensation as W-2 compensation, and the adopting employer did not provide W-2 compensation to the French nationals?

If the employer were ultimately required to retroactively include the French citizens in the plan by contributing the equivalent of average salary deferrals and matching contributions on their behalf, exactly how would this be accomplished?

Where would the money go and how would it be reported? Its my understanding

that, absent a tax treaty provision to the contrary, the money would be

taxed to the French citizens upon contribution to the Plan, and upon

withdrawal, as well.

Just want to cover my bases. Your thoughts are appreciated.

Many thanks in advance.

is everyone disclosing all the fees participants pay in the spd as a result of the dol guidance that came out last year?

If a participants in a qualified plan are responsible for paying quarterly investment management fees, why type of legal requirements must the plan meet regarding disclosure of those fees?

Thanks

Is anybody doing these or seeing any demand in the marketplace for them?

Thanks,

Elmer Rich

312-553-2117

Two participants took "loans." NHCE took $4,000 in calendar year 2000 and intended to pay it back, but a promissory note, security agreement, etc. was never signed. The NHCE is in bad financial shape and cannot pay back. We are trying to decide if we should treat this as an in service distribution (which will require a plan amendment), or a default. If a default, what year.

The plan document permits loans, but does not permit in service distributions.

HCE (who is the owner) took a $50,000 loan in 2001, but again, there is no promissory note, etc., and no payments have been made. HCE wants to make all the payments to date instead of taking it as a distribution.

Looking at EPCRS, I don't see any way to deal with this via SCP. It looks like a VCP submission. I think we could amend the plan to add an In Service Distribution provision, but the NHCE distribution would have been in 2000, a closed year.

If we went to VCP, when would IRS make us require us to 1099R the NHCE? Would they let the HCE bring all the payments current, execute the loan documents now, and then complete the 5 year amortization of the loan.

Any thoughts would be appreciated.

An employer prefunded a partial profit sharing contribution for 2004. Is it ok to hold this in a "suspense account" until year end (and receive earnings) and then allocate? How would we treat this contribution? This contribution is for one participant specifically and we can't show this money in his account until year end or it would be discriminatory? We weren't sure how the IRS looks upon prefunded contributions and if there were any rules relating directly to this issue.

We have taken over a group from another company. They allowed the claimants to use a cash register receipt for documentation where we asked for the actual Rx tag from the bag. Is a register receipt ok? I didn't think it supplied enough information? Thanks for any help on this.

I have a client (husband and wife) who owns 100% of a company. They currently have a SEP plan, but considering a profit sharing plan.

As employees of this company, the husband and wife receive salaries, and would be eligible for the profit sharing plan.

Independent of the company and unrelated services, the wife receives $50K during 2004, and it will be included on her Schedule C income tax return.

Can the wife participate in BOTH the company's profit sharing plan AND in a DB plan associated with her Schedule C income?

Participants defaulted on 401(k) plan loans during 1999 and 2000, but Employer never reported deemed distributions.

Fast forward to 2002. Employer seeks forgiveness from IRS under EPCRS, and IRS agrees, in 2004, that Employer can "make things right" if it reports the deemed distributions for 2004 (i.e., by issuing 1099-Rs to the defaulted participants early in 2005).

Here's the rub: Big accounting firm (let's call it E&Y) insists that loan defaults must be disclosed on 2003 Schedule G filed in 2004. But if Employer does so, there will be a mismatch since 1099-Rs will not be distributed until 2005. Further, Schedule G Instruction (I think) expressly provide that defaulted participant loans under individual account plans are not reported on Schedule G Part I. Nor are they reportable under Part III because they are exempt under ERISA 408(a).

Who is right? Worth a second opinion?

Part owner (<50%) of Company A is a participant in a Profit Sharing Plan that Company A sponsors. Part owner is also an owner (50%) in company B, which is unrelated to Company A. Company B does not sponsor a qualified plan.

Part owner in Company A wants to use some of her Profit Sharing assets and invest in Company B. It would be in the form of prefered shares. Is this a prohibited transaction?

We are frequently asked by our employees to accept credit card payment for COBRA premiums (also for payment of benefit premiums during leaves of absence). We administer COBRA (and leave billing) internally.

Do you have any experience with this? What are the caveats? The positives?

We are a BIG employer: around 150,000 benefits-eligible employees nation wide.

Thanks for your thoughts.