I have a client with a profit-sharing plan; a long time employee asked the sponsor if he could take his portion of the PS allocation as cash rather than having it contributed to the plan. Does anyone know how this could be incorporated? What effect will this have on testing?

Any ideas would be helpful.

Thanks

I've had a Schwab prototype combination Money Purchase/Profit Sharing Keogh since 1987. I am a self-employed, single-owner participant required to file 5500-EZ. Last year I had to amend the plan for GUST. This resulted in Schwab dividing up my single Keogh account into two separate accounts -- one Money Purchase and one Profit Sharing.

Schwab tells me that I should file two 5500-EZ's this year. One for each plan. In the past I have always completed just one 5500-EZ, which I now understand may have been incorrect. If I follow Schwab's advice and return two 5500s for 2003, will that create a problem for me with the IRS? If I do file two forms, should I make one plan number 001 and the other plan number 002? Any suggestions or advice would be much appreciated. Thank you.

Here is some model langauage I have drafted to award benefits, allocate, and take vesting into account. Assume all terms are properly defined. Also assume that all other matters, e.g., time and form of distribution, are dealt with elsewhere. Much of this language may be taken from other QDROs I have seen or from other books and articles, but much of it I know is my own. If you recognize your work and I don't give you credit, I apologize. I am not able to differ between what are my own creations and what is something I've read from someone else.

"Award of Benefits.

Alternate Payee is awarded as her sole and separate property, and shall be entitled to receive directly from the Plan, fifty percent (50%) of Participant’s benefits under the Plan determined as of the Valuation Date, adjusted for all gains, earnings, dividends, interest, losses, and other similar investment returns and losses attributable to such amount from the Valuation Date to the date of distribution to Alternate Payee. Participant’s benefits under the Plan for purposes of this Paragraph shall include all of Participant’s benefits under the Plan as of the Valuation Date, whether vested or unvested, including any amounts allocated to Participant after the Valuation Date that are attributable to Participant’s services on or prior to the Valuation Date, [and shall further include] [but shall not include], if applicable, the principal outstanding balance, measured as of the Valuation Date, on any loans to Participant from the Plan. The Participant shall be obligated to repay any loans from the Plan that are outstanding as of the Valuation Date.

Allocation; Vesting.

The amounts awarded to Alternate Payee hereunder shall be taken pro rata from all of Participant’s accounts or subaccounts in the Plan as of the Valuation Date. The Plan shall establish separate accounts or subaccounts for Alternate Payee’s benefits awarded hereunder in accordance with the Plan’s normal procedures. In the event Participant is not fully vested as of the Valuation Date, the amounts awarded to Alternate Payee above shall be taken pro rata by account balances from Participant’s vested and unvested benefits. Alternate Payee shall be, and shall become, vested in each account or subaccount to the same extent Participant is or becomes vested in his corresponding accounts or subaccounts. All distributions to Alternate Payee shall first be taken from the portion of Alternate Payee’s vested benefits to permit Alternate Payee to continue to vest as Participant receives vesting credit under the Plan. Alternate Payee shall forfeit her benefits at the time, and to the same extent, that Participant forfeits his benefits."

I'm guessing most of you won't like it. I'm guessing most will want AP to take a lump sum and if she is not vested then she forfeits and the forfeiture reverts to the Participant.

Any thoughts?

Seeking guidance from the pros on deferrals from final pay of deceased employee. Plan is governmental 457 plan. Final pay may include earned wages and/or leave balance payout. In instant case, employee requested maximum deferrals from final pay. Beneficiaries are different for deferred comp account and final pay check, hence deferral from final pay is of great interest to both parties.

Final pay is a significant sum that would permit full year deferral, including catch-up contributions. Date of death was mid-January 2004.

How much deferral would you permit from final pay? Beyond the code definition of "compensation" eligible for deferral, is there any code cite, PLR, or other authority you can provide for permitting (or denying) deferral from final comp?

(Our Payroll Manager is requesting code authority for our current practice of permitting deferrals from final compensation in the case of deceased employees.)

Thanks in advance for the assistance and insights.

A plan with several adopting employers was erroneously tested using the current year method when the document states prior year. The employers are not members of a control group and are not tested together. I have three questions:

1. What is the time period for changing from prior to current year testing? Can the plan be amended during 2004 for a December 31, 2003 plan year?

2. What is the correction/impact for refunds made in excess of the corrective distribution amounts? Are the overpayments to be made back to the Plan in the same correction manner as a test using incorrect data?

3. What is the correction/impact for refunds made that are less than the corrective distribution amounts? Assuming that additional refunds are made prior to December 31, 2004, are the residual payments made after March 15, 2004 the only amounts subject to the 10% excise penalty? Do the HCEs then receive two 1099-R forms for 2004, one coded "P" for amounts taken prior to 3/15 and another coded "8" for amounts after 3/15?

Thanks!

6.55%

http://www.ustreas.gov/press/releases/archives/200404.html

I've looked through this board but I have not found a complete answer on this.

What is the result of a one-time irrevocable election of a participant - when the participant is first hired and first becomes eligible to participate in any plan of the employer - not to participate in the employer's profit sharing/401(k)/401(m) plan?

Here is what I think the answers are, but I'm not sure.

1. Profit Sharing Plan

(i) The employee will not receive contributions.

(ii) 410(b) - the employee is counted in the denominator, but not the numerator, for the applicable fraction (e.g., for the HCE fraction if the ee is an HCE or the NHCE fraction if the ee is not an HCE) for the ratio percentage test.

(iii) 401(a)(4) - EE is not eligible so 401(a)(4) does not apply.

2. 401(k) Plan/401(m)

(i) EE will not be eligible to make any 401(k) deferrals and of course will receive no match.

(ii) 410(b) - Same as 1(ii).

(iii) ADP/ACP - EE is not an eligible employee and therefore is not counted at all - numerator or denominator - for the ADP/ACP tests.

3. Forfeiture allocations

(i) EE will receive none.

(ii) 410(b) - ???

4. Other?

Thanks.

Domestic corporation (DC) sponsors a db plan. DC is in process of winding down its business, but cannot terminate db plan because it is not sufficiently funded. One possibility being considered is for the foreign parent of the DC to take over as administrator of the plan and satisfy its funding obligations. Can the foreign parent take over as plan sponsor? I am aware of the domestic trust requirements - but assuming those requirements can be satisfied - does this arrangement present any other qualification issues?

Hi,

If a plan covers a 100% owner of a corporation and his daughter, is the plan subject to PBGC coverage? If stock attribution rules apply, then the daughter would be treated as a substantial owner, but I can't find information on whether stock attribution rules apply for this purpose. Can anyone help?

Many thanks

Hi,

I am trying to figure out if a plan that covers the 100% owner of a corporation and his daughter can file an EZ. If 318 stock attribution rules apply, then the daughter is also a 100% owner and the plan would only covers owners.

Is that incorrect thinking?

Help!

Thanks

a dr with an S corp practice offers his employees a simple 401(k). the doctor also has a managment company. he is a 50/50 partner with his wife and in 2003 they drew income around 60k annuallly from it. his cpa wants to know if he could set up a plan outside the simple for him and his wife. the management company has no employees and he owns 100% of his practice. i think he would be able to do it separately of the simple 401(k) since i do not think it constitutes a controlled group, but i might be wrong due to his wife having some ownership. any suggestions?

Are catch up contributions excluded from 415 $40,000 annual additions limits? I cant's find any supporting data.

A target benefit plan provides for a funding of a benefit of 50% of pay. For the sole owner of the plan sponsor this produces the desired contribution for himself and an acceptably low contribution for his younger employee. Then the employee quits and is replaced by an older employee. In fact the new employee at 68 is 3 years older than the plan's retirement age.

It seems to me that her normal cost is going to be several times her annual pay. In years past this was limited to 25% of her pay by §415©. And now it is limited to 100% (since her annual pay is less than $41,000).

If he contributes 100% for her and 25% for himself, then it appears to me that 75% of the contribution for her is not tax deductible. And further that he may incur the 10% excise tax on the nondeductible contribution.

Hopefully, you can lead me to a different conclusion.

Are catch-up contributions excluded from 415 $40,000 limits? I can't find any supporting data.

If the time stamp on your post is incorrect and if you care about that, you can change it at “My controls”- go to “board settings “ under options. I noticed that my posts were off 1-hour, which is now resolved by checking the “Is daylight savings time in effect?” box

Who knows, maybe this could serve as an alibi in an important case -(I watch too much court TV)

What does distribution code 2 mean on 1099-R.

I know it means early distribution...but what's the exception? I can't figure it out.

Thanks.

Two companies are owned by the same one individual. Both are maintenance companies and as such employ mostly lower paid workers with a handful of higher paid managers, no one reaching the HCE dollar limit however.

Company A employs a total of 131, including the owner. Company B employs 30, none of whom are HCEs.

The owner prefers to have two separate 401(k) plans, despite the fact that each has the same provisions, contributions, etc.

Each plan excludes participation by any employees except those of the adopting employer.

Am I thinking of this correctly?: Company A passes coverage with or without Company B. Without company B the NHCE ratio would be 130/160. Company B would pass coverage because, while the NHCE ratio is 30/160 the HCE ratio is 0/1.

Since the plans cover all the employees of the employer (Company A and Company B) separately I am assuming that I cannot use answer 3d on Schedule T? And that I must show the ratio test for each plan?

To take it one step further, if the manager of Company B does reach the HCE dollar limit and becomes an HCE, Company B will not pass coverage without Company A. The Plan would now benefit 1 of 2 HCEs and 29 of 159 NHCEs. I'm thinking I now need to aggregate the plans for coverage and also ADP testing?

Thanks for any clarification.

How would one go about becoming a paralegal with an ERISA specialization? Also, is one of the different paralegal certifications better than another? What would you expect an "ERISA paralegal" to do or where would they normally work?

I'm having a heck of a time understanding the practical application of the new proposed regs under 1.410(b)-6(g), probably because I'm unable to relate them to a real life situation. Perhaps some of you 401(k) specialists can help me out?

Suppose you have a 501©(3) organization, that currently sponsors a 403(b). Now the employer decides to offer a 401(k) as well.

Under (g)(2) of the proposed regulation, it says that employees of a tax exempt organization who are eligible for a salary reduction under the 403(b) plan may be excluded if:

(i) No employee of the organization is eligible to participate in the 401(k) plan, and

(ii) At least 95 percent of the employees of the employer who are not employees of the organization are eligible to participate in the 401(k) plan.

I note that (i) and (ii) use separate terms - organization and employer. But (i) and (ii) seem to me to lead you in a circle. First, you have to satisfy (i) that no employees are eligible to participate, then in (ii) at least 95% of the employees must be eligible to participate! But it distinguishes, in (ii) that the "employees of the employer who are not employees of the organization" must particpate. Now, what the heck does that mean, and what type of arrangement gives you employees of an "organization" who are not employees of the employer? Some sort of affiliated service group where they want to exclude certain employers within the group from participation in the 401(k)?

Hellllppppppp...... Thanks in advance, and my sincere congratulations to those who can make sense out of this.

A few years ago, after more than 5 years working for my company, I quit. At the time I had 3 weeks of vacation. Two years after that I was rehired, with a rate of 2 weeks of vacation. Two years after being rehired, I questioned why my earlier vacation time of three years was not being given to me. I learned that because my time not working for the company was greater than 6 months, I had lost the right to my previous vacation time of 3 weeks, and was now at the two weeks of anyone who has worked under 5 years. That is fair enough. Nonetheless, I explained to my supervisor that my vacation service had been deleted. He then requested that my vacation be updated to what I had before, 3 weeks. Per my request, he didn't ask that the first two years back working be restored, since I had not inquired about it during that time. Human Resources replied to my boss, an executive, that nothing can be done. My question is, is vacation a sort of qualified plan, where this would be breaking the rules, or can a request by an executive be subjectively denied by a human resources representative?