I re-read Notice 98-1, but it doesn't address this situation directly:

A 50%/50% S-Corp had a traditional 401(k) plan (owners are unrelated). The plan terminated 2/27/2004 and the corporation dissolved. One of the 50% owners then established a new S-Corp in 2004 and began a new traditional 401(k) plan for 2004. For his new plan, can he use prior year testing with a 3% assumed NHCE ADP? It seems to me that he can.

I have a client who wants to implement a safe harbor 401k NOW. They have a 9/30 existing ps plan. I don't think they can do safe harbor until 10/1/04 due to 3 month rule. This is my question: If I they do 401k for the next two months and I use prior year adp, can I use the assumed nhce adp of 3% for last year and then add a qnec of 3% to the nhce for this year for a total nhce percentage 6%? Thanks K

A piece of real estate is sold. The proceeds are placed in an irrevocable trust and the trustees (beneficiaries and buyers) of the trust pay the sellers of the real estate a private annuity.

I need help in valuing the annuity.

I have seen information pertaining to private annuities and valuation assumptions in 20.2031-7; Valuation of annuities,... (of the regulations) and I also see information about annuities in IRC section 72 and regulations thereunder.

What should apply? Specifically what interest and mortality table, from which set of information? What is the scope of applicability of each of the above code and regulations?

Thank you.

Gary

A piece of real estate is sold. The proceeds are placed in an irrevocable trust and the trustees (beneficiaries and buyers) of the trust pay the sellers of the real estate a private annuity.

I need help in valuing the annuity.

I have seen information pertaining to private annuities and valuation assumptions in 20.2031-7; Valuation of annuities,... (of the regulations) and I also see information about annuities in IRC section 72 and regulations thereunder.

What should apply? Specifically what interest and mortality table, from which set of information? What is the scope of applicability of each of the above code and regulations?

Thank you.

Gary

A client paid a lump sum from a DB plan to a 25 highest paid employee when the funding ratio was not suffcient to allow this. Getting the distribution back will not be easy - employee left on bad terms.

Is there anything the company can do to force the employee to return the money? Anything in the employee's interest that would make him want to return the money?

I assume we have to go to the IRS - is this CAP, VCR - which one?

The 5500 is due - does this get reported anywhere? Is there an excise tax payable now or do we wait to talk to the IRS?

I called the EFAST hotline and got connected to the DOL - the guy I talked to said it was reportable on the 5500 but would not tell me where -

Facts: HCE1 is the original founder of a company. He is over 70. He is an HCE based on ownership through stock attribution (i.e., his son now owns the company). The plan is a 401(k) plan. This is a balance-forward plan with one large pool of investments for all participants. The pool consists of cash and various stocks. For purposes of this question, the stocks are referred to as A, B,C,D,E, and F (all of the stocks are “normal” publicly traded stocks … all household names). HCE1 decides to take a large in-service distribution in the amount of $200,000. He elects to receive an in-kind distribution, which is allowed under the plan document. This is where it gets interesting. On his election form, he requests that he receive 500 shares of A, 800 shares of D and 1,250 shares of F. He is then paid-out in this manner.

We discovered this transaction after-the-fact and realized that we had an effective availability issues with a BRF. While any participant in the plan could elect to receive an in-kind distribution, there was no way that the owners would allow Johnny Lunchbucket to pick and choose the stocks he would receive. While this is the only in-kind distribution that was ever done, it is assumed that if a NHCE would ever make such a request, the investment committee (i.e., the owners) would determine which stocks would need to be liquidated to pay the participant and then those shares would be distributed to the participant. Because of the date of the transaction and the fact that it was not insignificant, we cannot self-correct. We are looking to use VCP (or whatever they call it now).

Questions: (1) How do you correct this under VCP? Its been over two years, does the participant return the shares and then have the company re-distribute to the participant? (2) How do you calculate the correction amount? The participant received the correct amount. Do you have to look at whether he picked winners or losers? And what if he would have received some of the same shares if he had not been allowed to pick and choose? What if the plan actually did better without the shares that were distributed? (3) Would it just be best to make a John Doe submission and let the IRS determine what they want us to do?

Extra Credit: How much wood could a wood chuck chuck if a wood chuck could chuck wood?

Co. A maintains a SARSEP (5305A-SEP) and contributions have been made for this year (2004). They are in the process of purchasing Co. B this year, after which Co. B will no longer exist as a separate entity. Co. B has a 401(k).

Co. A would like to terminate the SARSEP this year and assume sponsorship of former Co. B's plan as of the purchase date so all their eligible employees are covered under the 401(k).

Issue I see is 5305 indicates can't use this form if the employer "currently maintains" another plan during the same year. As of the establishment of the 5305A-SEP Co. A did NOT "urrently maintain"any other plan. Does that matter?

Or if they assume Co. B's plan does that essentially negate the 5305 and they MUST move to a Prototype SEP?

What alternatives does Co. A have?

Is there any transition relief in these type of situations?

Would Co. A have to "freeze" the former Co. B's plan as of the purchase not allowing any more contributions for the remainder of this year, terminate the SEP as of the end of the year and then "unfreeze" the 401(k) beginning next year for all?

What would happen to the former Co. B employees. Could they participate in the SARSEP?

The solution wouldn't be that Co. B should terminate their plan before the purchase date would it?

Appreciate any suggestions.

Have the 2005 deductibles and out of pocket limits been determined for

HDHPs to use in conjunction with HSAs?

Does a qualified plan have to specifically allow for loan rollovers? Is it acceptable if the plan is written to allow "rollovers from other qualified retirement plans" without a specific reference to loans?

For some reason I have it stuck in my head that the plan had to specifically allow for it, but I can't find a reference for it.

Thanks

Situation: Participant's spouse is deployed overseas for military duty. Participant would like to take a distribution from a plan with a QJSA requirement. Participant has POA for spouse (not sure yet if it is durable, limited, etc).

Is there any POA that would allow the participant to sign off on the QJSA waiver as the spouse to take a total distribution from the retirement plan? Does the POA specifically have to address the retirement plan?

Has anyone run into this issue?

How do you handle DCAP reimbursements after termination?

I found an FAQ that said "DCAP expenses continue to be eligible after your termination date, under the "spenddown provision" (spenddown is applicable only to the Dependent Care FSA). However, you may be reimbursed only for the amount fo Dependent Carew that has been taken out of your check. So if your last day of work is Aug 15th, you can file for child care reimbursement until the end of the plan year, but cannot be reimbursed more than the amount that was taken out of your check."

I am pretty sure that I researched that and found that it was IRS regulation, but now I can't find it of course.

Now I have a termed ee trying to get reimbursed but the TPA says the claims need to have been in within 90 days of termination. So I check the plan doc and SPD. And it is contradictory to me. First it says "You will still be able to request reimbursement for qualifying dependent care expenses for the remainder of the plan year from the balance remaining in your dependent care account at the time of termination of employment." Ok, to me that jibes with the above quote. Then a sentence later it says "You must submit all claims within 90 days of termination of employment." Well if you only have 90 days, then you don't have the rest of the plan year.

So I believe we need to make an exception in this case, as I was confused and wrongly informed the employee, but I think we also need to clarify the plan doc so it doesn't seem contradictory, so I am just curious on how others handle this. Does the DCAP have the rest of the plan year, or just a runout from the term date?

Thanks

I need to know how to roll over my 401(a) into 401(k)

A participant-directed 401k has a publicly traded Eer Stock investment option. The Eer Stk option is and will remain a frozen option. Some Eer Stock is employer contribution; some purchased. Company wants to go semi-private via reverse split by which all shareholders of less than XX shares will be cashed out. The Company proposes to treat each participant in the Eer Stk option as an separate shareholder of number of shares equal to his proportionate beneficial interest in the Eer Stk option. This results in most rank & file participants being cashed out while HCE’s that have large investments in the Eer Stk option retaining their post-split ownership. Two questions:

1. Are there any rulings that explicitly permit/prohibit treating each participants as a discreet shareholder (as opposed to treating the Plan a the single shareholder) for this type of transaction?

2. If one uses the Company approach, does the transaction result in a discriminatory benefit for the HCE’s?

THANKS

My client was told that they did not need an audit by an independent qualified public accountant because they had less than 100 participants. Then, the client was told that because they are filing a Form 11-K with SEC an audit might be necessary. I looked at the Form 11-K and it states that "plans subject to ERISA may file plan financial statements and schedules prepared in accordance with the financial reporting requirements of ERISA. To the extent required by ERISA, the plan financial statements shall be examined by an independent accountant, except that the "limited scope exemption" contained in Section 103(a)(3)© of ERISA shall not be available."

Does this mean that because ERISA does not require the plan to be audited for annual reporting purposes, the Plan does not need to submit audited financial statements with their 11-K filing? Granted it will still have to submit financial information, but no audit opinion is necessary.

Has anyone dealt with this situation before? Any thoughts? Opinions? Advice?

Thank you!

I have a plan where, in previous years, a Schedule A was filed.

This insurance still exists within the plan - I assume that it was, and is, an "asset of the plan" since the Schedule A was filed.

When I look at the Schedule I though, the balance in this insurance is not reflected within the balances in the Schedule I.

I was always under the impression that if it's an asset of the plan, then the balance would need to be included in the Schedule I.

Should this insurance balance have been included with the other mutual fund balances in the Schedule I?

Thank you.

What is meant by an Independent School District or ISD? I've seen 403(b)s listed as xxx school district and another as xxx ISD. Although the xxxs refer to the same city, town, etc. there are different addresses for the SD and ISD.

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?