Let's say you have a 401(k) plan where the ADP fails. The owner takes a refund of contributions/earnings before March 15th and reports it on his 2003 return. Ok, same plan has a cross-tested ps allocation formula. Can this owner/participant still get to $40,000 using the "net" deferral amount (after refund)? Or must the entire amount he deferred prior to the refund be included toward his individual limit? Cites are appreciated. Thanks in advance.

Can a participant pay overnight charges to have a loan check sent Fed Ex or UPS from their retirement plan assets? It would, of course, be up to the participant to choose this option.

I have a small profit sharing plan with the owner and 2 other participants in the plan. The owner has about 95% of the $225,000 of plan assets. The owner argues that since he is the trustee and has no one else handling assets (other than the broker who should be bonded himself), the fidelity bond should only need to cover the assets of the participants other than himself. The plan has a fidelity bond of $10,000, which is plenty to cover 10% of plan assets that doesn't belong to the owner. This seems to me to be a logical arguement, but I can't find anything in the reg's that would allow it. Does anyone know of such a reduction to the fidelity bond requirement?

If the first year of a new plan is a short plan year, say 2/1/04 - 12/31/04, should you prorate the normal cost for that year?

The DB answer book indicates that for a short plan year, the charges and credits (in this case, the NC only) are adjusted, similar to a terminating plan.

However, a full year's benefit accruals will be earned for 2004 (1,000 hour rule). If you prorate the NC you will get a year-end expected liability less than the actual liability if all assumptions are realized. This will create a loss and I do not believe this is a reasonable funding method.

Thoughts?

My client maintains both a 401(k) plan and an ESOP as separate plans. Participants wanting to diversify must transfer their amounts to the 401(k) plan. They cannot elected to recieve a distribution from the plan. I was thinking that a 1099-R is not required for these transfers since the participant could not recieve a distribution. Does anyone know?

My wife and I are a few thousand above a certain tax bracket. I figure if I can get another $2,000 in deductibles, we can get $500 more in tax refunds. We are eligible for either Roth or traditional IRA contributions. We haven't contributed to our 2003+2004 IRA accounts yet which I fully intend to soon with a maximum contributions in mind. All things being equal, I prefer Roth IRA contributions but I realize if I make $2,000 contributions to an deductible IRA traditional account, I can lower our tax bracket and get another $500 back from the IRS. Now I've done some rough calculations to see whether or not this is worthwhile for me or not and I like to get some opinions around here. If I'm correct, my choice really boils down to comparing A $2,000 investment in a Roth IRA account vs a $2,500 investment in a traditional IRA account (assuming that I plow the $500 savings into the same investment vehicle (non-IRA though). I found that if I'm assuming anything less than 20% tax bracket when I'm in retirement around 20 yrs from now, the traditional IRA account with the extra $500 will do better than the $2,000 Roth IRA account. Now can I also avoid all of this if I can rollover traditional IRA account to a Roth account in the future? and essentially take a $500 extra tax refund this tax season? Is that another feasible option for me to take?

Thanks for any response

I have an employer that currently has a profit sharing plan and a SARSEP. If they implement a 401(k) feature, can the participants contribute to both plans if all contributions are aggregated for testing?

If the answer to that is no and they cannot maintain both plans, my guess is they would have to wait until 1/1/05 to implement the 401(k) feature?

Also, am I correct in my conviction that SARSEP accounts can now be rolled into qualified plans?

Who is responsible for holding or tracking employee payroll deductions relating to an employers FSA plan? Can an employer remit employee FSA payroll deductions to a TPA for holding and payment of reimbursment requests?

Assume 1/1/02 to 12/31/02 plan year.

ADP failed, resulting in refunds to some HCE's.

Refunds were not made by the 12/31/03 deadline.

Plan Sponsor is correcting the operational defect by the one to one method -distributing the excess contribution to the HCE's and contributing to the NHCE's an amount equal to that distributed to the HCE's.

The plan has a provision for catch up contributions and one of the HCE was age 50 by 12/31/02. Should their refund be recharacterized as a catch up contribution? Will the amount of the QNEC made to the NHCE's be before or after the recharacterization of the catch up monies?

Thanks for any help.

I just finished my taxes and decided to do the $3,000 to an IRA (b/c I am not eligible for company profit sharing plan for another year, etc.). Here's what may end up being a stupid question . . . am I able to start an IRA for 2004 (knowing that I am not eligible for the company profit sharing plan in 2004) and start contributing (bit by bit) through the year (2004) rather than having to come up with the $3,000 (or higher applicable limit for 2004 - I'll look it up later) when I do my taxes? I think so, but wanted to run it by you.

A property management company maintains a 401(k) plan. As part of the agreement between the management company and the property's owners, the management company has the responsibility to employ, supervise and direct, and fire all employees of the Property. In addition, the management company determines the actual number of employees that the property will need.

In some cases the employees are named employees of the management company. In other cases they are named employees of the property's LLC, partnership, etc. In all cases they are again, hired, fired, and directed by the management company.

The management company considers all of these employees as common law employees and thus able to participate in the management company's 401(k) plan.

It sounds to us like they are all common law employees by definition, but the fact that some are employees of the property has raised some question.

As always, thanks for any opinions.

A, Inc. is owned equally by 3 Partners.

A, Inc. owns 50% of Company B, A Joint Venture

Company C is owned 100% by one individual

Company C owns the other 50% of Company B

Both B & C have their own 401(k) plans. The document for each plan contains language specifically excluding the employee's of either company B or C.

Is this a Control Group? If yes, can the ADP/ACP testing be performed separately for each plan or must all testing be performed on an aggregated basis?

Any help is greatly appreciated!

HCE terminated employment 12/31/2002 but had compensation and hours in 2003 due to payout of vaction time with $0.00 deferrals. Do I include him in my 2003 ADP as a HCE with a 0% deferral rate?

i have a SH 401(k) with basic match and that has a PS component. For 2003, if the employer only makes the mandatory match and does not do an additional PS contribution, do i have to make an additional top heavy contribution? i read this in one of my resources:

With the enactment of EGTRRA, a 401(k) plan providing a safe harbor match contribution will no longer be required to provide additional employer contributions to satisfy the top-heavy minimum contribution rules so long as no other employer contributions are made to the plan. [i.R.C. § 416(g)(4)(H)] In addition, even if the exemption does not apply, matching contributions can be taken into account in determining whether an employer has satisfied its top-heavy minimum contribution obligation. [i.R.C. § 416©(2)(A)]

just want to make sure i'm reading this correctly.

thanks for the help.

Looking for consus.

A calendar year plan requires age 21 & 1 YOS for participation. Entry dates are 1/1 & 7/1 coincident/following the date the eligibility is met.

An employee hired on 1/1/02 who terminates on 12/31/02 obviously will have no benefit under the plan.

What about an employee hired on 7/1/02 who terminates on 06/30/03 and who has 1000 hrs credits for 2002 & 2003? I say, he does not accrue a benefit.

I have an individual who is looking to establish a 1 life 401(k) plan for himself, as a sole proprietor. While discussing with him though, it came out that he may or not really be a sole proprietor. Apparantly he works as an employee for a company, but "does some work on the side" which is what he is looking to use as the basis his retirement plan. I think that answer in itself is enough to raise my doubts as to whether he can sponsor a plan, but I was curious as to what "requirements" or proof is needed in order for an individual/organization to sponsor a qualified plan. I would think an EIN for starters, but what other proof would you look for?

I had a new plan with a short plan year, 1/1/02 - 10/31/02, and I filed a 2002 5500 From. Now, I am working on the 11/1/02-10/31/03 Plan Year. What form do I use?

A 401(k) plan with only elective deferral contributions was Top-Heavy for 2001, however the employer never made the minimum T-H contribution. Is this considered an operational failure of the plan that would need to be filed under EPCRS? If so, which program.

1. Under current law, am I subject to DRC for 2004 under the following:?

1/1/04 RP CL%, i = 105% = 5.51%: 83.0%

1/1/03 RP CL%, i = 120% = 6.65%: 83.9%

1/1/02 RP CL%, i = 120% = 6.85%: 93.4%

1/1/02 RP CL%, i = 105% = 6.00%: < 90%

1/1/01 RP CL%, i = 105% = 6.21%: 103.7%

In other words, for my 04 volatility test, can I use my 02 120% result or must I recompute 02 and use at 105%?

2. For DRC, in determining whether I am above or below a 100 participant count for all DB plans of an employer, are participants in collectively bargained plans counted (ie., plans run by a union in which employees of the employer participate along with employees of other employers)?

Question: A white coller employer (roughly 100 employees) wants to discontinue their unreimbused medical FSA because employer isn't comfortable with the $ exposure. Other then lowering the limit, what if any alternatives does the group have. If they take away the medical FSA altogether, is there something else employer could offer to those employees that would achieve the same or comparable pre-tax benefit?