Can someone verify the appropraite correction method for employers who fail to increase a participant's deferral percentage upon his/her written request?

Please provide references, if possible.

I realize there may not be too much guidance on this one, but thought I would get some thoughts.

Small company has leveraged ESOP and all employees are terminated upon sale of the company.

Plan has last day of year rule in order to share in contribution. All employees terminated, therefore no eligible participants as of year end.

It seems that the ESOP would have to default on the note payment since the company can't make a contribution that can't be allocated nor deducted.

In that case the stock would revert back to the original sellers (the owners), participants would be cashed out, and the plan would be terminated.

I assume we will need a stock valuation. Am I missing anything besides the fact that they should obtain legal counsel and preferrably file for a determination letter. Is my thinking in line?

We have a situation where an employer/sponsor of a 403(b) is switching vendors. Assume that the money at the prior vendor had been contributed pursuant to an individual annuity contract arrangement, the new arrangement is a group annuity arrangement. Is there a problem with transferring funds from an individual annuity contract to a group annuity contract? The funds will still be subject to the 403(b) rules, such funds will just be part of a group contract instead of an individual contract. Concerns? Thoughts? Any secondary materials on this?

Thanks

A potential client (sole prop) is interested in setting up a DB plan. He has no employees. He receives his earned income from various partnerships that being partnerships have other partners. Would these other partners need to be considered to determine if there is a controlled group before setting up a plan?? Thanks.

OK. It has been a long day and just returned from vacation.

A valuation is performed 1/1/2004 and generates a maximum deduction of 100,000. The plan is now amended to cease accruals and terminate as of 8/31/2004 (assume that all appropriate deadlines are complied with).

Can the client take the full deduction because the plan year is still 12 months??

Thanks for helping a tired actuary!!

During a year in which my wife makes no income, can I as the spouse earning income still contribute to her Roth IRA? Or does she have to earn income in order for a contribution to be made?

Thanks

I do not deal with cafeteria plans very often and need some clarification. An employer has a cafeteria plan that they make contributions to. Some of the employees put a portion of these contributions into the profit sharing / 401(k) plan. What is the correct money type for these contributions and how do the tax implications come into play?

For example, some employees elect to put the cafeteria plan contribution into the plan and also have a separate 401(k) election. Would the cafeteria contributions also be considered employee deferrals? If so, are the two contributions taxed differently with regard to FICA and FUTA? I don't think they would be considered nonelective ER contributions.

Situation: SARSEP plan year runs 8/1 to 7/31. Employer wants to make SARSEP contribs 8/1/04 to 12/31/04, then start a SIMPLE 401k 1/1/05. I checked the SEP/SARSEP/SIMPLE forum back to "the beginning" and did not see a relevant post. Sal's 2004 ERISA Outline (chap 12, section V, pg 12.33, sub-par 1d) discusses the exclusive plan rule for non-calendar plans, and gives an example of a fiscal year SARSEP maintained for a portion of the calendar year. I am lead to believe that if SARSEP contributions stop 12/31/04, it would be okay to establish a SIMPLE 1/1/05. But on the previous page (sub-par 1c) it says "If the qualified plan is not maintained on a calendar year basis, the employer must make sure no benefits accrue under the plan for any plan year that begins or ENDS (emphasis added) within any calendar year in which the SIMPLE plan will be in effect. My idea would be to "terminate" the SARSEP 12/31/04, then there wouldn't be a plan year ending in 2005, the first year of the SIMPLE. Thoughts?

p.s. Sorry for the long post, I wanted to lay out the entire scenario.

Does anyone have an opinion on whether the concepts expressed in Rev. Rul> 2004-57 do or should apply to 403(b) plans?

I am aware of the requirement that employee 401(k) contributions be segregated from the employer's assets ASAP. Has anyone heard of a timeing requirement for the deposit by the trust into the participants' investment elections?

We typically have an employer that has weekly payrolls, deposit the contributions into a trust-owned account weekly. The employer provides us with a cumulative contribution report once or twice a month which we use to determine investment splits. Actual investment buys are made only once or twice a month.

Participant works for an employer that participates in multiemployer plan A. Leaves to work for an employer that participates in multiemployer plan B. Fifteen years later (after participant has experienced a break in service with plan A), plan A merges into plan B.

I am trying to get participant credit for his service under plan A. Anyone have thoughts on whether ERISA 210(b)(1)/IRC 414(a) provides a potential argument for this proposition? (210(b)(1): if employer maintains a plan of a predecessor employer, service for such predecessor shall be treated as service for the employer.)

A stretch, but does is pass the blush test?

Participant works for an employer that participates in multiemployer plan A. Leaves to work for an employer that participates in multiemployer plan B. Fifteen years later (after participant has experienced a break in service with plan A), plan A merges into plan B.

I am trying to get participant credit for his service under plan A. Anyone have thoughts on whether ERISA 210(b)(1)/IRC 414(a) provides a potential argument for this proposition? (210(b)(1): if employer maintains a plan of a predecessor employer, service for such predecessor shall be treated as service for the employer.)

A stretch, but does is pass the blush test?

If a client has been consistently contributing and deducting DB contributions for the plan and fiscal year that coincide (both calendar year), but now wants to change so that the 2003 minimum funding contribution (made in 2004) is deducted for the 2004 fiscal year (2003 tax return would show zero contribution), is this a change in accounting method that requires IRS approval ?

We have a school district client that is considering a change to an ERISA 403b arrangement with a group annutiy provider. Does anyone have any cites or documentation or evidience for us to use to convice them to make this transition. The current arrangement has non-consolidated assets. In other words what concrete evidence can we provide to the district to convice them to move to this more controlled arrangement?

Thanks

Company currently sponsors a KSOP and is in the process of being sold. Company stock in plan will go away after the sale. As long as the stock is sold at the current fair market value, there is no problem replacing the stock with cash in the plan correct?

I have a 3 co. controlled group with 2 of the companies use a points allocation formula and the 3rd a pro-rata formula. Do I need to run a rate group test since the contribution formulas are not uniform?

We have an ESOP client who is thinking of setting up a 401(k) plan and wants to survey his employees as to their interest. Can anyone point me to a survey? We'd like to include questions about what an employee might defer if matched and if not matched. Thank you for your help!

A local union represents a universe of about 1000 employee/union members. Of this group, only 10 or 12 work on "special projects". These special projects are also projects subject to the Davis-Bacon Act. These 10 or 12 individuals work on the special projects for approximately 1/2 of the year (or about 800 hours per year). The employers would like to pay a portion of the prevailing wage to this small universe of individuals in the form of a retirement benefit without having each employer install a separate qualified retirement plan for its employees. The retirement benefit paid by the employers would be made to a SEP established by the local union. The local union proposes to sponsor the SEP and restrict participation only to union members who fit a particular job classification--which, as noted above, currently covers only about 10 or 12 of the union's 1,000 employee/union members.

I have a number of questions:

(1) can the local union sponsor a SEP (it appears that only "employers" may sponsor SEPs and the local union is not technically an employer)?

(2) assuming the local union can sponsor a SEP, can eligibility be restricted to decorative sheet metal workers (i.e., the small subgroup of union members which at the moment consists of 10 to 12 individuals)? The eligibility rules applicable to SEPs suggest to me that all employees except for those who satisfy prescribed list of exclusions must be covered by the SEP.

(3) finally, assuming (1) and (2) are not problems, different participants will work on different projects at the same time and the participants working on Project A may receive a larger contribution (based on their Davis-Bacon pay) than participants working on Project B. This differential seems to violate the uniform contribution requirement. It also seems problematic that only Davis-Bacon pay will be taken into account in determining the contribution as opposed to W-2 pay.

Thanks in advance for any thoughts.

I have a 401(k) where the employer incorrectly deposited $1,020 too much into an employees' account (a key employee, no less). Do we refund the employer? Is there anything else that needs to be done to keep the plan in compliance. It was truly a mistake by the bookkeeper.

I do not deal with cafeteria plans very often and need some clarification. An employer has a cafeteria plan that they make contributions to. Some of the employees put a portion of these contributions into the profit sharing / 401(k) plan. What is the correct money type for these contributions and how do the tax implications come into play?

For example, some employees elect to put the cafeteria plan contribution into the plan and also have a separate 401(k) election. Would the cafeteria contributions also be considered employee deferrals? If so, are the two contributions taxed differently with regard to FICA and FUTA? I don't think they would be considered nonelective ER contributions.