For an initial plan year (say, 2002), I am fairly certain that you look at 2001 compensation to determine who is an HCE. Or do you rely on current year data? If the former, I assume that the 414(q) limitation for the lookback year (2001) would apply and not the limitation in effect for the test year (2002).

A participant's spouse left him 30 years ago without a divorce or legal separation. The participant has since died. In his will he left all to his parents. Obviously the will does not supercede federal law QJSA requirements but no one can find the spouse and they've hired detectives (multiple) to track her down and even other search organizations that can't find her. IRC 417(a)(2)(B) and Treas. Reg. 1.401(a)-20, Q&A #27 seem to provide that a plan can distribute benefits in a form other than a QJSA when it has been established to a Plan Representative that the spouse cannot be located. They have tried to do this but the Plan Representative is hesistant still despite some strong evidence of a thorough and lengthy search for the estranged spouse. Does anyone know of any court cases on this isses beyond the statute & regs cited above that might lend some support/comfort to the Plan Representative that they have the ability to pay death benefits out in a form other than a J&S in this situation ? Thanks for any thoughts as well.

I am dividing two individual retirement annuities with two different insurance companies. Both insurance companies are requiring "QDROs" to divide the accounts. Their phone reps have never heard of Code Section 408(d)(6) and I am finding myself having to educate them as to what the Code requires for IRA divisions, versus divorce distributions from qualified plans.

Is anyone else experiencing this phenomenon?

I have a plan that is a large plan for the first time in 2003. On the 2003 5500, line 7f is 99. In my experience, most plans carry the number from line 7f every year to line 6 in the following, so my number in line 6 next year would indicate that they would not need an audit for 2004.

On one hand, carrying the 99 forward to line 6 in 2004 would be consistent as to how their forms have been prepared. On the other, I don't want to tell my client that they don't need an audit if they do. There will be at least one new entrant as of 1/1/04.

Any advice?

My company was bought out for 3x the value of the quoted value of the ESOP stock.

I am not choosing to roll this into an IRA, I will instead be going for some instant satisfaction.

The question I have, is what should I expect to be paying to the IRS?

I understand that I may be charged 10% for not choosing to roll to the IRA, but come tax time, what should I expect? Will this money be considered a corporate dividend or will I need to claim it like regular salary?

Plan's prior actuary changed funding method in 02 to FIL. We've taken the plan over the plan for 03, so I believe we're restricted to FIL under sec. 4.03 of RP 2000-40. No other automatic approval is available, right?

What about 04? Can I change to some other method under 2000-40, or have I started another 4-year clock by the "change" in 03?

Code Section 4972©(7) (as amended by EGTRRA) allows employers to contribute up to the full funding limit. If this amount is greater than the maximum deductible amount, the employer can't deduct it but will not be charged the 10% excise tax. The rule says the employer must "elect" this. How does this election work? Is there a formal form? Is any documentation needed? Or, does "elect" simply mean "choose?"

Any feedback on the topic will be much appreciated.

CarryBack Contribution Defined- Contribution made from January 1 through to April 15 of the current year for the previous tax year.

I think there is disagreement on the issue because of the language is 408(d)(4).

Rule for making the contribution

An IRA contribution can be made from January 1 to December 31 of the year to which the contribution applies. The contribution may also be made From January 1 to April 15 of the following year, providing the IRA owner properly indicates that the amount applies to the previous year when the deposit instrument (check etc.) is delivered to the IRA custodian. Cite:

IRC 219(f)(3) TIME WHEN CONTRIBUTIONS DEEMED MADE? For purposes of this section, a taxpayer shall be deemed to have made a contribution to an individual retirement plan on the last day of the preceding taxable year if the contribution is made on account of such taxable year and is made not later than the time prescribed by law for filing the return for such taxable year (not including extensions thereof).

Rule for removing an excess contribution

The deadline for removing an excess IRA contribution is the tax filing deadline, plus extensions. 408(d)(4)(A) states (4)

CONTRIBUTIONS RETURNED BEFORE DUE DATE OF RETURN? Paragraph (1) does not apply to the distribution of any contribution paid during a taxable year to an individual retirement account or for an individual retirement annuity if?

(A) such distribution is received on or before the day prescribed by law (including extensions of time) for filing such individual's return for such taxable year,

One POV- The language in 408(d)(4)(A), specifically "paid during a taxable year" and "for such taxable year" means that the deadline for removing the contribution is the tax filing deadline for the taxable year in which the contribution was deposited to the IRA.

However, since 408(d) addresses “tax treatment of distributions” it appears that all it is saying is that the earnings on the earnings on the excess will be taxable for the taxable year in which the amount was deposited to the IRA.

For the 1099-R, Code 8 is used if the amount is removed in the year it is deposited to the IRA

Code P is used if the amount is removed the following year (by the tax filing deadline including extensions)

Reallocation of Excess amount.

Since a carry back contribution is deemed made in the previous year, the deadline for removing a carryback contribution that results in an excess is the same as the deadline for removing a contribution made in the previous year for the previous year (from January 1 to December 31 for the year in which the amount is deposited.

One POV- if the contribution is made from January 1 to April 15 of the current year for the previous year, reallocating the amount to the current year does not result in the 6 percent penalty being owed

Other POV- if the excess is not removed from the IRA, the 6 percent will apply. This is so even if the carryback contribution is reallocated to a current year contribution...unless, the IRA custodian can be convinced that indicating that the amount as a previous year contribution was an error and the transaction should be adjusted to a current year contribution.

Your thoughts?

If a QMCSO requires a group health plan to enroll the child of an eligible employee, but the QMCSO is not presented to the plan administrator until months after the employee's date of hire, is the plan required to provide medical coverage for the child retroactive to the employee's date of hire (assuming the QMCSO was in effect as of that date)?

I just ran into a C corp professional firm who has had a money purchase plan and a profit sharing plan with a June 30 year end. Their tax year is December 31 . The plan year ended for example 6/30/02 bases contributions on the 12 months of compensation ended 12/31/01.

They took this deduction on the 12/31/01 tax return. Is this correct ?

When is the plan contribution due for the tax return as well as minimum funding standards?

This is very confusing and I get different answers from TPA's.

Thank you.

Normal Retirement Age? If there is no policy or contractual language in place by an employer, can 65 be considered as the normal retirement age, allowing a person to take advantage of the opportunity to bank more $$ during those three years prior to the normal retriement age, even if the person continues to work after age 65?

Deferral only 401k plan with one 100% owner, wife and 3 kids work for him, wife and kids HCE by attribution not comp. Other non owners HCE by comp.

To select top paid group, what is the order of selection, by attribution or by comp?

401(k) plan with a discretionary match. Plan sponsor is a controlled group with two companies participating. In 2003, company 1 received a discretionary matching contribution while company 2 did not. [Plan passes 410(b) coverage for the match even with company 2 employees not benefiting].

Question: Should the employees of company 2 be a part of the ACP test if they were otherwise eligible to participate? The adoption agreement does not exclude them from participation in any component of the plan, therefore, the decision not to provide a matching contribution was strictly a managerial one.

Is there an exemption from CIP rules for brokerage accounts established for an ERISA plan, just as there is for accounts established for an ERISA plan at banks, savings associations, credit unions and mutual funds? My clients keep getting requests from brokerage firms for CIP information for 401(k) plans with inidividuals as trustees.

We are changing our plan year for our FSA from 1/1-12/31 to 7/1-6/30. What happens with the money that has been deferred? Can this amount be rolled over into the new plan year or for those that spent more than has been contributed can that be deducted from the new plan year?

I am hoping someone can refer me to an IRA expert that I can hire to write an opinion letter. I would like to purchase an asset in my IRA, but my IRA custodian requires that I provide such a letter before they will purchase the asset.

Thanks in advance.

Jeff

We have discovered that, due to an error on our part, we did not deduct the correct amount from an employee's paycheck. As a result, we have processed $600 of Health Care Reimbursement Claims but we only withheld $300 from the employee's salary. This was all for our PY that ended 12/31/2003.

We have asked the employee to pay us back but they are not cooperating. Do we have any recourse? Also, what are the possible consequences to us for not honoring the employees election of $600?

Is there any standard way of correcting this type of administrative error?

I realize the amount is small but it's the principle of the matter.

Any ideas would be appreciated.

Sheri

I've searched but have not found a conclusive cite. Plan is NON-QJSA, employer/plan is headquartered in common law state but has participants in community property state (CA). Does the sole fact that a participant lives in a community property state require spousal consent for a participant loan ?? Assume the loan is for 50% of vested balance (and greater than $5k). I assume ERISA preemption controls, but I've not found any concrete statement.

THANKS

Client just informed us that he understated the amounts of his in-service distributions in 2001, 2002, and 2003. His CPA will file amended 1040s for those years. I assume amended 1009Rs must be filed also. How is this done?

If a Plan has NRA of 62 how is the maximum lump sum calculated as of age 55 assuming participant has average compensation over $200,000?

1. 165,000 times annuity value at 62 (5.5% interest) discounted to age 55 at 5.5% interest; or

2. 165,000 reduced to age 55 (greater of Plan rate or 5%) then multiplied by annuity at 55 (5.5% interest).