Here's something for you to think about. I'm not a CPA so I don't claim to know the answer, but I wonder if this is possible. The situation is an S-Corp with W-2 income of $25,000 for the owner. This is the first year of the corporation and the $25,000 is the total income of the corporation. The contribution to a defined benefit plan is $37,500. Can he contribute $37,500 to the plan as a corporate contribution, creating a $37,500 loss which is passed through to his personal tax return to be written off against other income? In essence, he would have a $12,500 net loss. If the income is split between W-2 and plan contribution, the contribution at the corporate level would be $15,000 and the W-2 income would be $10,000. This would create an additional net income of $10,000 on the 1040. Is what I'm describing possible or am I way off base? Thanks for your thoughts.

The IRS allows participants with less than a year of service and 18 years old to be taken off the ADP/ACP testing regardless of the eligibility requirements of the plan.

Does this year of service look at the anniversary year of the participant in question or the plan year for testing? Where can I find that clarified?

I know that one of the requirements for a Flexible Spending Account is the uniform reimbursment rule requiring all funds be available for the participant at the beginning of the year regardless of the amount contributed by the employee.

What if an employee wishes to make all of his contributions at the beginning of the

plan year? My gut reaction is that this is not allowed, but was unable to find it in the regs.

We have a client that came to us in May to set up a brand new 401(k) plan. However, when they came to us they already made a SIMPLE IRA contribution for the month of April because their broker gave them wrong information (he told them the SIMPLE IRA and 401(k) are one in the same).

To make a long story short, they wanted a 401(k) all along - can this one payroll deduction (the employer contribution for this deduction also went in) be backed out, correct the W-2's, so the end result for 2004 is a 401(k) and the SIMPLE IRA did not exist? The account where the SIMPLE was established is the same fund company where the 401(k) will be established. The fund company doesn't know what to do with the 1099-R coding for the way the client would like to see this happen.

I understand the 2 year rule on distributions from a SIMPLE IRA and the SIMPLE can be the only plan for the year. My hope is that there would be a mistake of fact, or plan administrator error on the setup that would allow an exception.

Any help is greatly appreciated.

It appears that the IRS has eliminated 1099r code ='H' for direct rollovers to a qualified plan. Instead of using a 'G' or 'H', only code 'G' will be used to designate a rollover. This is gleaned from the 2004 instructions for the 1099r because code = 'H' is not listed anymore. But I cannot find a commentary on this change at the IRS website. Has anyone seen a publication specifying this change?

My company acquired another company on 8/15/02. The parent company has a 401(k) plan in place. They have amended the 401(k) plan to include the acquisition company effective 1/1/2004. Does the 18 month acquisition rule allow the parent company to exclude participation of the acquired company for the 2003 plan year.

Thanks for your help.

Looking for a comparison of the benefits of a qualified vs. non-qualified plan. Does anyone have a website, resource, etc. that you can share?

Thank you!

Does anyone see a problem with aggregating a SEP with a DB plan for 410(b)/401(a)(4) testing ? Can you do that ? I realize I'll have the 404(a)(7) deduction limits since I have a common participant, but assuming that isn't too restrictive can I do this ? Thank for any input.

An ER terminated 3 of his EEs. All 3 had vested balances in the company 401kPSP (a 404c compliant plan) in excess of $5,000. All 3 EEs declined to roll their assets out of the plan, instead those assets are held in an interest bearing account. Does the Trustee of the plan have to continue to permit those 3 former employees to direct the investment of their accounts?

Can the executor of an estate rollover a pension distribution to an IRA when the recipient dies within the 60 day rollover period ?

Our company is having a plan change where spouses are no longer eligible to be

covered under our health plan.

This change will happen at our next open enrollment period.

Do we have to offer the spouse COBRA? I don't think so because it's not a qualifying event.

Any opinions?

If a 457 agreement is in place for a terminated employee, does that agreement have to be amended to reflect recent changes in the law?

What do I do if an employer mailed their 5500 before the employer profit sharing contribution was sent in to the plan?

I was told by their accountant that they wanted to do their deposit ASAP. So, we sent over their contribution amount to be sent in, waited a few weeks and then sent over the 5500. My intention was to wait to receive a confirmation of the deposit but figured if there were any changes in plans, they would have notified us.

If he did send it (he has to check with his assistant), does he have to make the contribution immediately? Or is there some way to put him on extension and/or do an amended return later (pretend the first didn't exist?). Just looking for what our options are....

Thanks,

Rachel

Considering purchasing the Datair DC System to do a small number of small straightforward PS/K plans?

I would appreciate any input regarding thumbs up or thumbs down and a brief explanation.

Haven't looked in a while, but is there a correction progarm for a situation where the employer haphazardly forgot to sign the adoption agreement? All trustees signed it, but officer of employer for whatever reason didn't get his/her signature in the blank.

I recently received a statement from the auditor indicating that all of a plan's assets should be marked as "party-in-interest" because they are held with an insurance company. The plan assets are held with ING. Some of the assets are in proprietary funds and we have always marked those as "party-in-interest". Some of the funds do not appear to be ING-managed (ING does not appear in the fund name as it does on the others), so we have never marked them as "party-in-interest". I pointed this out to the auditor, along with the observation that they have apparently followed the same thinking in their prior audit reports. His response was that the schedules in the prior year audit reports were not correct and reiterated his assertion that all assets held at an insurance company were "party-in-interest". Any thoughts?

This seems to be an aggressive plan design but appears to be doable unless I am missing something. Please, let me know if I am missing something.

It is a 403(b) plan with an employer contribution (non-matching). The employer contribution only goes to certain HC employees. In order to pass coverage they are going to combine the the 403(b) employer contribution with a DB plan (that covers everyone) for the ratio percentage test and do a general test.

Site 1.410(b)-7(f).

Thanks

The CFO of our company was not determined to be a key employee at the end of 2003 and therefore he did not trigger the 3% requirement for 2004. The question is for 2004 he will be a key employee and that will effect 2005.Therefore the 3% will be a factor. Short of stopping the contributions of the top heavy employees how can we as a company make this equitable for them?

Online Version of Inte-Greater Software Becomes Available

I am happy to announce the availability of the online version of The Inte-Greater, a program that David Baker wrote for the DOS operating system about 13 years ago. It finds the integration level for a corporate-sponsored profit-sharing plan that results in the greatest share of the employer's contribution for one or more 'favored' employees (e.g., the physician who owns his or her professional corporation that also employs several staffers). Give it a whirl!

https://benefitslink.com/cgi-bin/inte-greater/

I have a client who wants to increase participation in the company 401(k) plan by offering incentives such as gift certificates, bonuses, etc. I have suggested making the match more attractive, but she feels that will not work. She'd like to do something "outside the plan."

I don't think this is a good idea, but am having trouble dissuading her. She also wants to take a tax deduction for the incentives. I have told her these would not be deductible as a plan expense, but she may deduct as a business expense.

Has anyone encountered this? Any suggestions?