A tax exempt entity buys a taxable entity. Tax exempt entity maintains a 403(b) program with a matching contribution made to a qualified plan established by the tax exempt entity. I read the coverage rules that I can set up a 401(k) plan for the taxable entity with matching contributions provided that all employees of the tax exempt entitly are not in the 401(k) plan and that the 401(k) plan covers 95% of the employees of the taxable entity. Is this correct?

Is there also an issue if the matching contributions for the taxable entity goes to the tax exempt entity's qualified plan?

I'm considering a re-do of a 1/1/2003 DB valuation using 90% of the weighted average 30-year Treasury to create my Supermax.

An Additional Funding Charge is avoided since my funded % is over 90% using the "gateway" rate.

Also, the lookback rules of PFEA 2004 seem to indicate that I can recalculate using weighted corporate to see if quarterlies are necessary for 2004 - the funded % is over 100% and so quarterlies are not required.

Two questions : (1) Is my read on the lookback rules correct for 2004 quarterlies ? and (2) will using the low end of the range for max purposes force me to use this same rate for some other purpose ?

Thanks in advance for your time.

The final 401a9 regs were issued today (Monday), and my quick speed read indicates there is still no "account balance" method for determining the RMD in a DB plan (unless there is a single sum distribution). Does anyone come to a different conclusion? I know that some feel that the account balance method was never allowed unless there was a lump-sum distribution, but my impression is that it was common practice. For many of my clients, this will increase the RMD by a factor of 2 or 3 times, prompting them perhaps to terminate their plans and start a new DB plan. It doesn't seem like the IRS was concerned with equity between DB and DC plans on this issue. The regs state that employers do not have to comply with the final regs immediately, they can use a reasonable interpretation of 401a9 for the years 2003, 2004, and 2005. Does this mean we can continue with the account balance method until 2006? I suppose the answer is shades of gray based on a risk comfort level, unless it is in the plan doc and one has a favorable letter.

I'm a little confused on the issue of a business being able to take advantage of the tax credit for starting a new plan. For example, if an employer starts up a 401(k) plan, never had any other plans before, and the plan covers NHCE's, it is eligible for the tax credit. 50% of start-up admin costs, up to $500 for each of the first 3 years of the plans operation.

My confusion is that the credit seems to apply only to start-up costs. Is this true? If so, how could an employer, say in year 3, still be paying start-up costs? Also, would this mean that an employer would have to be charged at least $3,000 for start up costs (wishful think document providers:) in order to achieve full tax credit deductions of $1,500 over 3 years? I guess if the credit applies to on going admin costs, the answer is easy to figure out, as new admin costs apply year to year. But it seems to me that the credit is just for startup costs, which is baffling me as to how to apply the credit(s).

thanks

I have a rehired participant who would like to "buy back" his forfeiture. Does he have to repay his employee deferral in addition to his employer monies to buy back the forfeiture? The document doesn't seem to make a distinction between the money types, so I would assume the answer is yes.

A public school teacher's association has a VEBA for medical expense reimbursements. The plan is funded by the school district as part of the union contract.

Some teachers are letting the assets accumulate in the plan under the assumption that the balance will simply be distributed to their heirs or the estate at death.

To my way of thinking, the VEBA wasn't established to provide a death benefit to heirs. Is this permissible? If not, is there a regulation I can refer to?

If an insurance company pays claims on 12-31 and bills the client on 1-1, for Schedule A purposes, are the claims paid on 12-31 included? The 5500 workbook provides that most Schedule A information is provided on a cash basis method. Additionally, the workbook provides that for line 8b(1), to report actual claims paid, incurred, or charged. Based on the above, the information provided by the insurance company should include the claims paid on 12-31. Does anybody have any thoughts?

How do you report a mutual fund that was sold when there have been years of monthly buys and occasional sells (for participants cashing out). Purchase Price? Cost of Asset? Net gain (loss)? Is it just for the current year or since inception?

Thanks.

Kris

Ok... is this a first? I need some $ to grow my business.... I have a client that has a pension... if he invests in my company would that be a prohibited transaction? If it is pension assets I am sure it will be... but personal $$?

I have been asked a question on a 401(k) plan.

A plan has 1,000 eligible employees BUT only 60 defer. Does this plan require an audit because they have over 100 eligible OR can they bypass the audit due to the limited number participating.

My uninformed opinion is that the audit is required.

Thanks for any and all opinions.

Is anyone familiar with the rules relating to participation and/or accrual in a DB plan in this situation:

An employer has maintained a union shop, and was contributing to a collectively bargained plan for his union employees. The employer has never had a plan of his own.

This business is no longer "unionized" and he wants to start a qualified plan of his own. The employees are still the same people (ie they are no longer in a union). Can the plan, for eligibility/vesting purposes, assume that these ex-union employees have a date of hire as of their exit from the union?

Likewise, if the new DB plan is a unit credit plan with past service credits, for accrual purposes, can the plan ignore the union employees' service while they were in the union?

Thanks for your thoughts.

Participant dies, qualified plan provides for Death Benefit as a Lump Sum. Beneficiaries are 2 non-spouse survivors living in Puerto Rico. Which withholding and tax form reporting rule applies: Non-Spousal Death Benefit or Puerto Rico Lump Sum Payment?

company A 401(k). The company (Company B) that is not in the plan has been excluded and has their own plan. Company B is a union shop.

We found out today that company B is going into union negotiations and they wanted to know if there was a way for them to pull out of the (global) union plan and "roll" those proceeds into the company A plan.

The way I see it there is not a distributable event, so what transaction allows this to take place (if indeed it can)?

I am not sure what other specifics to furnish so I will watch the post and answer questions as they arise.

Thanks to all who have or will help me on this one!

Jim

How does an employer file 5500 when their contract year changes? For example, for years, the 5500 was filed on a calendar year basis, but the contract year with the carrier was October thru September. Last year, the employer extended the contract to 15 months so that the contract year would end in December and thereafter, they would have a contract year equal to a calendar year. The question is about reporting the extra three months since 5500s only allow for a 12 month reporting period.

I have an employee who was covering his dependent due to a child support order. The order has now been terminated and he is no longer required to carry the coverage for his son, who will be turning 18. Under COBRA, would this qualify for 18 months or 36 months of coverage?

Is there something, either informally( from IRS or DOL) or in the reg's, that allows a 401k plan to test ADP/ACP on partial yr comp --even if the doc says to use full yr comp?

We added 401(k) provisions to an existing profit sharing plan in 2003. They were added in November, 2003 and we anticipated using the 3% assumed deferral rate for the prior year to get through the testing hoop. Of course, all of the doctors immediately deferred $10,000, but the employees were only able to defer small amounts for the remaining 2 months. ADP test passes, of course, using the assumed 3% prior year NHCE ADP. Doctors would now like to fund additional employer contribution(s) to achieve maximum $40K. By funding a 100% match, we can achieve another $10,000 towards the $40K and significantly reduce the remaining PSP contribution for the staff. This appears to be permissible, but would you do it? Is it too abusive? And obviously, with such a low ADP for 2003, we anticipate amending the plan to current year testing method in 2004.

------ Are Conduit IRAs "aggregated" along with with all other Traditional IRA assets when converting to a Roth IRA? --------

- An individual converts 100% of all her Traditional IRAs assets ($10K) to a Roth IRA in January 2004.

- All contributions to her traditional IRA were pre-tax.

- A few weeks later her employer goes out of business and mails her 401(k) distribution paperwork.

- She distributes 100% of the $90K in her 401(k) to a Conduit IRA.

- The rollover distribution consists of 50% post-tax assets & 50% pre-tax assets.

- A few weeks later she finds a new job and rolls the Conduit IRA into her new employer's 401(k) plan as "plan assets" (not as a "Deemed IRA").

Does the she have to aggregate both the Traditional IRA assets and Conduit IRA assets in 2004 for purposes of determining the taxable portion of the conversion?

What if she simply left the assets in the Conduit IRA through the end of 2004 - would that make a difference with respect to the aggregation rules for determining the taxable portion of the conversion?

:angry:I am looking for information regarding questionable practioners who are in this plan and whether CIGNA does anything to screen the providers that are in the network. My information is that the CIGNA DMO is about to be the Defendant in a suit in NJ and Federal Court along with the PEO Extensis because they do not screen their providers, respond to customer complaints or enforce the network contracts when things go wrong. If anyone has the information I need before I review the RFP please respond.

Can anyone provide information regarding the law as it relates to acceptance of electronic beneficary designations? If the beneficiary designation form is provided online and we don't require a signed, printed copy, is it ok to accept the digital signature at the bottom of the online form? Thanks for any information you can provide.