How can a 401(k) plan correct the failure to obtain spousal consent for a loan to a participant where the plan requires spousal consent? Rev. Proc. 2003-44 provides that a plan can obtain spousal consent after the fact in order to correct a failure to obtain spousal consent for a distribution from a 401(k); however, the Rev. Proc. does not address correcting such failures with respect to loans from a 401(k). Will obtaining spousal consent after the fact suffice to correct the failure to get spousal consent for the loan, or does the plan have to treat the loan as taxable to correct the mistake? Treating the loan as taxable doesn't seem fair to the participant if it was the plan's mistake.

A client of mine failed the ADP test. I completed the paperwork to have the investment company process a withdrawal of excess contributions and faxed it to them yesterday (March 15th). They informed me that when this form is received after 4pm EST that the withdrawal will not be processed until the following day. Is a penalty owed by the client seeing that a good faith effort was made to get the distribution done in a timely manner?

.....But, the plan can be broken into components, with different component plans tested differently.

For example, the plan could be broken into components with one tested on the annual method and one on the accrued to date method.

.....

Ok Andy - I have a DB plan which could benefit by breaking it into component plans and having different formulas for the compenent plans. I want to stick to just one DB plan and but not split into DB/DC plans.

In a handout from an ASPA conference (2002 Summer Academy) on plan restructuring, one of the listed requirements is: Each component plan must satisfy 410(b) ....and then goes on to say "The special rules for rate groups (where the rate group is deemed to be a non-discriminatory classification) does not apply to component plans...."

Questions

1. I could not find where this is stated in 1.401(a)-9. Is it mentioned somewhere else?

2. Which deemed non-classification provisions of the regs/code does this refer to? Is this referring to the non-classification test in 1.401(a)(4)-2©(3)(ii) - rate group's ratio % between safe/non-safe ratios .. ?

3. If it is 1.401(a)(4)-2©(3)(ii), does this mean each rate group has to have 70% or better ratio? If that’s the case, wouldn’t the average benefit % test for rate groups become redundant?

Of course the above only applies if a component has a non-safe design.

------------------

Any special/common pitfalls one should look out for?

Being new at this, I am treading with care.

Thanks.

I originally opened my ROTH about 6 years ago when I was making less than $100K a year. About 3 years ago I advanced nicely and now make around $175K a year.

I was under the impression that since I make more than is allowed for ROTH contribution that I can no longer put money into it.

I was having a discussion with a co-worker on this topic and he said that you can only open it if you qualify, you can contribute no matter how much you make once you have it open.

Is this true? If so, I've been putting money into a traditional for years when I could have been adding to my ROTH.

Thanks in advance!

I have a profit sharing plan that the employer is contributing to under the auspices of funding retiree medical. It is not a 401(h) type account. The money contributed for the employee is fully portable and vests (qualifies for rollover status).

Contributions to this retiree health insurance account are made based on length of service and marital status: married participants receive a higher contribution than single; longer service employees receive a greater contribution. Again, the money does not have to be spent on medical. If an employee leaves, the money can be paid by the employee to a VEBA that will provide the medical coverage.

The problem (aside from married EE getting more than single) is that if both married parties are covered under the plan (employees have married employees). In that instance, neither employee receives a marital contribution, instead both only receive a single contribution.

My questions are:

1. Since this is a qualified retirement plan, can an employer discriminate on contributions based on marital status?

2. Even if the employer can discriminate based on marital status, can it still refuse to make a full contribution (marital vs single) for employees who happen to be married to othe employees?

Any comments are appreciated.

I have always explained to clients that Safe Harbor NonElective contributions must be allocated to ALL eligibles. This issue originally arose on the first of our clients to use the 3% methodology.

Recently, the "who gets it" issue has been complicated by Plan documents that now have "eligibility" requirements for Profit sharing [ like 1 yr, 1000 hrs/EOY employment].

Some practitioners have been telling their clients that only PS eligibles get it and they invoke the 1 year and 1000 hr rule.

An Example::

A Plan has immediate eligibility for CODA purposes, they apply a non safe

harbor match to those deferrals. They have a profit sharing and 3% safe

harbor NonElective contribution that is given to all employees who have 1,000

hours AND 12 months of service DURING the year. There is no "last day" rule. The

1,000 hour requirement is applied EVERY year.

Is this a legal safe harbor arrangement.

Company with underfunded DB plan (subject to PBGC if that matters) experiences financial distress in 2003 and freezes benefits. Withing a month or two of the freeze date, both before and after, 40% of the work force is laid off. Many are less then 100% vested.

Plan is to be terminated in effective in 2004, about 11 months after the freeze. Sponsor will come up with the shortfall needed to terminate in a standard termination.

Question: Do people laid off in 2003 who clearly would comprise a partial termination need to be fully vested as part of the 2004 plan termination, even though the plan was not sufficiently funded when the layoffs occurred?

How is "to the extent funded" interpreted in these circumstances?

An employee wants to stop his dependent care election due to a court order he received last week. We're asking for a copy of the order for our records and he does not want to provide us with one.

1) can he stop his D. C. election at this time for this reason?

2) if so, what do we need from him to verify this change? will his signed statement be enough?

A quick response would be appreciated because he wants this to be effective before his next paycheck.

Thanks.

can a cafeteria plan be administered by someone within our company or does it have to be by an outside company?

For RPA current liability purposes, is a no pre-retirement mortality assumption allowed? Stated differently, if a no pre-retirement mortality assumption is used for all other purposes, can it also be used for RPA current liability purposes?

Thanks,

Ishi

I received a 1099-r for $13,921 after defaulting on a 401k loan. It was a $10K loan and $3,921 in interest. Do I have to claim the interest and pay taxes and penalty's on it?

Our client is a wholly owned US subsidiary (company A) of a foreign company. Also, the foreign company wholly owns another US subsidiary (Company B) that is independent and separate, in all respects, from our company. Companies A and B each sponsor a 401(k) plan for their respective employees. Based on Section 414(b), companies A, B and the foreign parent are members of a controlled group which means employees in A and B must be aggregated for plan testing purposes. However, due to the difficulties with companies A & B cooperating in assembling the necessary information for a controlled group arrangement, Company A would like to designate itself as a QSLOB.

I have read IRC 414®, the regs thereunder, the preambles to the final regs and the proposed amendments to the final regs, and believe I have a good grasp on the elements required to become a QSLOB. However, none of these sources have shed light on who is considered the "employer" for purposes of filing the required Notice and submitting to the IRS a request for determination regarding administrative scrutiny.

Treasury Reg. Section 1.414®-4 provides that "[t]he employer's notice for the testing year must specify each of the qualified separate lines of business operated by the employer...." Further, the instructions for Form 5310-A states that "[o]nly one notice per employer ... is required." Based on those statements, it appears that the IRS contemplates the parent company file the notice on behalf of all its subsidiaries that wish to be designated QSLOBs. However, our client's foreign parent company has no interest in filing such a notice.

Instead, our client wishes to file the notice with the IRS on behalf of its own QSLOB status. It does not want to be responsible for Company B's own QSLOB status. Can our client file the notice on its behalf only; and then can Company B file its own notice? Similarly, with a request for a determination regarding administrative scrutiny, can our client submit a request for its own QSLOB status or does it need to be coordinated with the other members of the controlled group?

Any help or insight on this would be greatly appreciated.

Thanks!

I need some help on this one. Company A sponsors large self-insured health plan

named "Company A Health Plan" and sent HIPAA privacy notices to all primary members Feb. 2003. Company A also owns 98% of Company B which sponsors a small (under $5 million) self-insured health plan named "Company B Health Plan"

Company A also owns majority interest in several other LLC that sponsor small self-insured plans in the LLC business name.

Question: Are each of these plans a different Covered Entity? and if so,

if more than one the seperate plans uses the same Business Assoicate is it necessary to have seperate BA agreements written in the name of each plan?

My gut feeling tells me each of the plans sponsored by Company B, C, D... will need to have seperate privacy notices/BA agreements/plan addendums in the plan (Covered Entity) name. They will not beable to simply rely on the parent "Company A" HIPAA compliance as compliance for all its owned LLC company health plan compliance(since a company is not a Covered Entity it's health plan is).

Let me know your thoughts

I have a DB plan where the sole proprietor has more than one business and files more than one Schedule C. These are all one-man businesses--no employees.

He adopted a DB plan for one of the businesses a few years ago (let's call the business Business A). None of the other businesses has since adopted the plan. For the DB calculations, only Business A's income has been used in determining the benefits and contributions. For 2003, the contribution is about $78,000.

I received a copy of the 2003 Form 1040, and line 12 (re total income from all Schedule C's) shows a small loss. Although my sole proprietor has positive income from Business A (as shown on line 31 of that Schedule C), the other businesses had losses and lead to a negative amount on the 1040.

My question is:

a) Can he deduct the DB contribution for 2003 (at least up to his SE income from Business A's Schedule C), or

b) Is he unable to deduct any of the contribution because of the overall loss showing on line 12 of the 1040 (showing all of the Schedules C for 2003)?

Is a participant who is on strike considered to be on an unpaid leave of absence for purposes of making loan payments? Can he suspend for up to one year if the loan policy allows for suspension?

What about a person who is laid off? Are they considered terminated or on an unpaid leave?

Thanks

Has the Service changed its position on whether a corporation can deduct contributions made for employees of another controlled group member? My understanding is that it is not generally an ordinary and necessary business expense for one corporation to provide retirement benefits for the employees of another corporation, even if the two corporations are in a controlled group. Ours is NOT a situation that would be governed by Section 404(a)(3)(B), which permits one company of a controlled group to deposit a profit sharing contribution for another member of a controlled group if the other member does not have profit and the contribution is based upon the profitability of the company. Rather, profit sharing contributions are made notwithstanding earnings and profits.

If in a brand new Cafeteria Plan only first month employee contribution is funded. If one persons Health reimberment is greater than the money available, how do we handle.

I think i know the answer to this, but need a little confirmation. If a participant terminates with less than 500 hours (therefore not receiving PS alloc), but was eligible for deferrals, does the participant need to be included in the average benefits test?? Thanks.

A husband dies in January 2004. Can the wife make an IRA contribution on his behalf for the 2003 tax year and claim the deduction on their joint Form 1040. The husband qualified for the IRA contribution, no other retirement plans etc.

I want to be able to setup and calculate a New Comp plan.. Can anyone point me to a good source where I can learn ? As much as I dont want to take business away from the one who is doing it for me... I need to know how to do this if I am going to suggest it to a client.

Case I am working on (and I think a new comp would be a good plan) 2004 calendar plan year

Census below shows EE status, then DOB, then comp

Owner A.... 6/62.... $120,000 ....(comp can go higher.. $200K)

Owner B.... 7/61.... $120,000 ....(comp can go higher.. $200K)

EE 1.... 2/56.... $150,000 ....(right hand man, Key)

EE 2....9/57.... $80,000

EE 3.... 11/79.... $32,000 ....(enters 1/05)

EE 4.... 12/70.... $60,000 ....(enters 1/05)

EE 5.... 1/70.... $40,000 ....(enters 1/05)

EE 6.... 6/74.... $80,000 ....(Key)

EE 7.... 6/71.... $25,000

EE 8.... 5/69.... $52,000 ....(spouse of owner)

EE 9.... 9/64.... $52,000 ....(spouse of owner)

EE 10.... 5/63.... $25,000

EE 11.... 11/70.... $60,000

I am not asking for someone to perform the calculation.. maybe an opinion and as stated earlier... point me to where I can read more.

thanks!