I was terminated from my position as "no fault". At the time I was terminated I had spent more than I had contributed to my cafeteria plan for reimbursement of medical expenses. When I was terminated the office administrator misinformed me that I had insurance benefits until the the end of the month (I was terminated on the 15th.). I went to two doctors appointments and then was informed that I did not have insurance after all in a letter from my former employer. I asked my former employer to reimburse me for the doctor bills. I would not have gone to either appointment if I knew I had no medical insurance. They only reimbursed me for a small amount claiming that the amount I overwithdrew from my cafeteria plan compensated for the balance. Can they do this? I thought the "use it or lose it" went both ways. I know if my usage had been under the amount I had contributed into the cafeteria plan I would not have received a "refund". Thanks for any help.

I got the dreaded call from a physician client who wants to purchase a 5% interest in a LLC out of his 401(k) plan account balance.

Now that you are done laughing (and yes I tried to talk him out of it), does anyone see a PT problem with this? I don't think there is a PT issue here. The LLC is a separate business which is going to publish a monthly newsletter for professionals. His ownership is limited to the 5% purchase and he derives no other benefit or involvement in the LLC.

The 401(k) plan is set up for wide open self directed accounts so no problem there.

I do realize that there are possible valuation and UBTI issues.

Any comments would be appreciated. Tx.

Mark.

Can anyone give me their opinions as to the people who should serve on the 401(k) Committee? We are a 2000 employee company with $45 million in our plan. We also hold employer stock as an investment option.

Currently, our CFO, General Counsel and HR Director serve as the Committee members. Our General Counsel has been advised that he should not continue as a Committee member due to possible conflict of interests with our employer stock.

Would like any advice or suggestions as to the preferred composition of this Committee or whether one should be maintained at all.

Thanks

Do the contributions to each of these plans aggregate toward the 2004 IRS deferred compensation limit of $13,000?

Is there a standard way to estimate what portion of a participant's distributable balance in a defined contribution plan can be treated as the spouse's portion if that balance was used to purchase a 50% Joint & Survivor annuity payable at Normal Retirement Date?

Playing around with numbers, I come up with about 12-13% of the current balance.

Now that both the DOL and the IRS have sanctioned allocating certain plan administration expenses (such as QDRO preparation) to individual participant accounts, I would like to update some 403(b) plan documents accordingly.

From a practical perspective, however, how would this work if the plan assets are held in multiple individual TDAs, rather than in a group annuity environment? What if some TDAs permit allocation of expenses, but others don't? I am presuming the new plan language would defer to conflicting language in individual TDAs, but am open to all comments and suggestions.

Is it a prohibited transaction if an owner makes a contribution to his individual account under a profit sharing plan during the plan year, but does not make any contribution to his employees' accounts?

Am I correct in the following two situations?

1) In a 2003 "wait-and-see" plan year, Employer forgot to give "wait-and-see" notice by Dec 1, 2002. Plan can be ADP tested.

2) In a 2003 "wait-and-see" plan year, Employer gave out "wait-and-see" notice by Dec 1, 2002 but forgot to give out the supplemental notice by Dec 1, 2003. Plan can be ADP tested.

Can anyone provide some info on how to convert a stock bonus plan to an employee stock ownership plan?

Here is an interesting question regarding the tax deductibility of FSA contributions:

A participant in a FSA account makes an annual declaration of $1,000 in 2003. Throughout the course of the plan year she has $1,000 payroll deducted from her paycheck. The plan year ends, the grace period is over, and the employee has only claimed $700 worth of reimbursement from her account. She has now forfeited $300 (use it or lose it) into the plan. The employee’s W2 shows the full $1,000 as a pre-tax deduction.

This employee’s tax advisor says that she should not have taken the full $1,000 pre-tax deduction since she only received reimbursement for $700. He is advising her that she should have only taken $700 as a pre-tax deduction.

I am not a CPA, but this does not seem right to me. I feel that she should receive the full $1,000 as a pre-tax deduction. I think whether or not she received her full re-imbursement amount or forfeited an amount is immaterial.

Does anyone agree or disagree with this? Cited references would be very helpful.

Thanks!

I was just wondering, If I buy and sell stocks with my Roth IRA account what happens if I lose money? For example, if in the year 2004 I have lost money by trading using the money in my Roth IRA Account, do I claim that as a capital loss for 2004? Also what happen if I make that money back and then some in 2005? I know I'm not taxed on it if I make money but what happens to the money in your Roth IRA account if you lose more money then you put in?

Any help is appreciated. Thank you!!

If a profit sharing plan has non-deductible contributions in one plan year and carries them forward to the next, the plan sponsor still pays a 10% excise tax correct?

two companies involved - there is common ownership between the companies, but they are NOT a controlled group. Each company wants its own plan. Can an owner of both companies participate in both plans, and, does the owner have separate 415 limits in each plan or, since the owners are more than 5% owners, are they constrained by one annual additions limit?

Anyone filed Form 5310 answering Line 3c in the affirmative for a volume submitter plan and attaching a copy of the volume submitter specimen plan's opinion letter? Not technically a "determination letter" but per Ann. 2001-77 it serves the same purpose.

Given the recent GUST/EGTRRA (incl. 401(a)(9)) amendment activity, I would doubt that there are any amendments which would be required of a terminating money purchase pension plan. However,........ Anyone submitted a defined contribution to the IRS recently and had to amend to bring it up to speed with the current legislation, etc....? Was going to submit the 5310 with the current plan doc. plus the good faith EGTRRA amendment, but just wanted to know if there were any other amendments I needed to get into place instead of waiting for the IRS to kick it back to me. Thanks for your help.

I have a 403(b)(7) custodial account in which the account owner would like to make a tax-free transfer to the state teacher's pension fund for purposes of purchasing service credits. I know that the transfer itself is permissible, but I'm unsure whether this transfer should be reported as a direct rollover on IRS Form 1099-R or should be treated like a non-reportable "90-24 transfer" (i.e. non IRS Form 1099-R tax reporting). Any insight would be greatly appreciated.

Can someone please help me calculate the vesting in the following situation?

Plan changes from calculating vesting based on Plan Year/1000 hrs to elapsed time effective 10/1/02.

Participant was hired 2/1/00, terminated 12/31/03. Are the vesting compuation periods as follows??

1/1/00 to 12/31/00 - Worked 1000 hrs - credit 1 YOS

1/1/01 to 12/31/01 - Worked 1000 hrs - credit 1 YOS

1/1/02 to 12/31/02 - Worked 1000 hrs - credit 1 YOS

2/1/02 to 2/1/03 - Anniversary date - credit 1 YOS

There is an overlap in the 2002 year because of the change in vesting calculation.

Or is it

1/1/00 to 12/31/00 - Worked 1000 hrs - credit 1 YOS

1/1/01 to 12/31/01 - Worked 1000 hrs - credit 1 YOS

1/1/02 to 12/31/02 - Worked 1000 hrs - credit 1 YOS

10/1/02 to 10/1/03 - Anniversary date - credit 1 YOS

does the effective date of the amendment now become the date you count from for elapsed time purposes?

I tried to read Treas. Reg. 1.410(a)-7(f), and DOL Reg. 2530.200b-9(f), but there were no examples, and I am having trouble interpretting.

Thanks!!!

I know there are a number of threads that already address the issue of whether a 1099-R has to be issued for a mistaken distribution (I'll call it the "overpayment") when the participant repays it to the plan. The answer, at least in the case where the overpayment is not recovered until a subsequent year, seems to be a clear yes. I believe the only recourse the participant has then is to pay the taxes owed on the distribution for the year of receipt and then try to deduct that amount on the tax return for the year of repayment.

Let's say the plan recovers the overpayment in the year following distribution but then feels obligated (b/c its mistake created such a substantial tax liability for the participant that it has put him in a hardship situation) to "advance" the amount of such tax liability back to the participant -- the idea being that the "advance" will be treated as an overpayment (and likely be recovered by through the reduction of future payments). Consequences?

It was my understanding that ER contributions to a leveraged ESOP were subject to the same deductibility rules (25% of eligible compensation) but that this amount could be exceeded if the excess amount is required interest payments on a note.

I want to make sure my understanding is correct.

Scenario: ER contributions and corresponding note payments for the year were $350,000. $50,000 is interest and $300k is principal payments on the note. Does eligible partcipant compensation need to be at least $1,200,000 in order for the company to deduct the full $350,000 on their tax return?

If it is not, then do they have a nondeductible contribution subject to excise tax?

Or is it that if schedule note payments are $350k and the ER has to make at least this amount of contributions to prevent the ESOP from defaulting on the note, then it is fully deductible regardless of eligible compensation? Doesn't seem right but just want to make sure.

Thanks

I'd like to hear some recommendations for software to administer defined contribution and 401(k) plans. I'm with an accounting firm doing TPA work for a variety of plans. We're currently using Relius Administration, but want to re-evaluate. We're putting a lot of time into getting staff up to speed with this program. Would welcome any comments regarding the software you use. Do you like it? Does it suit your needs? Is it user friendly? Have you ever converted from one software vendor to another? What problems did you you run into with the conversion? Lots of questions, hoping for answers.