Based upon the following details, what is the EE's allocation?

An EE's DOH = 06/01/03. Their compensation from 06/01/03 - 12/31/03 = $12,400. The plan has a 90-day service requirement with quarterly plan entry dates. Therefore, the EE is eligible to join the plan on 10/01/03. The EE's compensation from 10/01/03 - 12/31/03 = $5,400. The plan is top heavy.

The document defines Compensation to "include only Compensation while the Employee is an Eligible Employee".

The contribution allocation for this class of EE is 5.5%: for the owner class it is 15%.

My concern is that the normal allocation of $297 (5,400 x 5.5%) is less than the top heavy allocation of $372 (12,400 x 3.0%).

Is my concern valid? What's the correct allocation?

We self administer our flex plan, including premium pre-tax election, flexible spending accounts and flex daycare accounts. Fewer than 50 invididuals participate in the flex spending account and daycare accounts. However, over 100 participate in the pretax premium benefit.

Is our plan subject to HIPAA? I'm trying to determine if we need to amend our plan with regard to HIPAA, provide privacy notices and designate a privacy officer, etc.

cuhouston@houston.rr.comI own 85% of a closely held corporation. The company recently repurchased the other shareholder's stock (15%). The seller was not a related party. Can my Roth IRA purchase these shares from the company at the same price the company paid for them? Would it have been okay (better) if the seller had sold them directly to my Roth IRA?

I have a profit sharing plan(comp to comp, not cross-tested) with a last day and 1000 hours requirement and 3 participants. One worked 575 hours but did not terminate. She is only eligible for the top heavy minimum. They do not pass coverage without her so I think I can test under 401(a)(4), which passes. My question is: Does the gateway minimum come into play in this instance since it is not a cross-tested formula? Would she have to get a 5% Gateway instead of the 3% top heavy minimum since she is not eligible for the regular profit sharing allocation?

I am considering buying a small business. By purchasing it with my ROTH IRA, I am told that I don't have to claim the income from the business but allow it to accumulate as a business asset.

This makes me nervous as I don't want to put my ROTH in violation of IRS code. Can anyone help guide me or point out some traps to avoid?

My understanding is that you must add together all your IRA money when calculating how much of your basis in any IRA account is credited against a conversion of part of your IRA money to a Roth IRA. So, for example, assume I had two IRAs, one with $10K value and an after tax basis of $4K, and a second IRA with $30K and no basis. If I convert the first to a Roth IRA, I can only exempt $1K of the $4K basis since it is pro-rated on the total amount ($4K times $4K/($10K+$30K)). The same rule would apply to a distribution as a conversion.

My question is when do you calculate the value of the IRAs for the purpose of prorating the basis - at the time of the conversion, or at the end of the year for tax purposes. Suppose that the $30K is in a 401k. Could I convert the $10K IRA and exempt the full $4K basis in March, then in July roll over the $30K 401k into an IRA. The tax return would show a distribution from an IRA with an exempted amount, a residual basis of zero, and $30K still in an IRA.

We have an S-Corp (2 employees - both owners) - we are making a profit sharing contribution for 2003...when is it due?

Must the contribution be submitted by 3/15 when the S-Corp tax return is due?

Or can the contribution be submitted by 4/15 when the participants (two owners) individual tax return is due?

Thanks!

One of the new guys at work is eligible to make catch up contributions. If he maxes out his normal contributions at the 20% that the company allows, is he eligible to make the catch up contributions as well? He will probably be a HCE (barely) this year if that matters.

The HR rep initially told him that because he was "maxed out" on the %, he was not eligible for catch up. She then changed her mind and said she would look into it.

Thanks,

Ok, a multiemployer plan is generally defined as a plan to which more than one employer contributes and which is maintained pursuant to one or more collective bargaining agreements between one or more unions and employers. A multiple employer plan is all other plans to which more than one employer contributes.

A non-Taft Hartley plan covers the employees of more than one unrelated employers. Some of the employees of these employers happen to be "unit" employees. Is this automatically a multiemployer arrangement b/c the plan provides benefits in certain cases to employees pursuant to a CBA, or can it fall in the multiple employer category b/c the plan is not jointly trusteed by labor and management?

Thanks.

We're in the process of correcting a failed ADP test. Our client's 401(k) plan has two young HCEs plus one older HCE, age 54. Our system has calculated corrective distributions to the two young HCEs only. The older HCE deferred $1,511. Can we treat any of, or possibly the entire $1,511 as a catch-up contribution? Thanx.

Our plan allows for one outstanding loan balance at a time. The SPD states "The maximum loan amount is the lessor of 50% of the the vested account balance or $50,000 minus the highest outstanding loan balance in the prior 12 calendar months".

We are questioning if this is inline with how the regs word the calculation. Is there mention of "highest outstanding loans" in the prior 12 calendar months.

For example, if a participant took out a loan for $10,000, paid it off, and then took out another loan for $5,000, all within the past 12 months. Would the current available balance be $50,000-$10,000-$5,000 = $35,000?

Plan calls for current year testing. Switching to prior year testing would reduce refunds required. Proposed Regs say that plan document must specify method to be used. Therefore, plan amendment is required to switch method of testing (and use of current year testing for last 5 years to switch to prior year testing). Is anyone aware of any authority to adopt a plan amendment before March 15 (deadline for correction without paying excise tax) to switch to prior year testing? Normal rule for plan amendments is that they have to be adopted prior to year end (and perhaps earlier to avoid anti-cut back issue, which we don't have here).

this is bizarre but i have two entities adopting a prototype. one company just never participated in the plan, instead continuing to participate in its own plan. i know that both plans must be tested together regardless but assuming they each pass, i am thinking i have another issue. that is that one company adopted the plan and did not participate in it. anyone know if i have a problem?

Is there any required or approved format for an employer to make the request for estimated withdrawal liability? Any reason a short letter to the plan sponsor wouldn't suffice?

Start laughing..... now.

Client expects serious response to this. It must be Friday.

What is the general rule with respect to the effect on retirement plans in an acquisition setting? My understanding is that, with a stock purchase, the retirement plan of the acquired company is included in the deal (unless the purchase documents indicate otherwise). On the other hand, in an asset purchase, the purchasing company would not be responsible for the acquired company's retirement plan unless the retirement plan was among the assets purchased. Correct?

Hi, Everyone,

I recently purchased a house from a divorcing couple. Their real estate agent gave me their respective forwarding addresses, but let me know that the ex-wife does not want the ex-husband to know where she is living now. I was requested not to share her address with anyone. I don't know the details in this case, but I imagine that, in cases where domestic abuse was involved, ex-spouses may have good reason to want to protect the confidentiality of their new address.

That got me thinking about the QDRO Process that many of my clients use.

As counsel to the Plan Administrator, I usually draft letters announcing the determination result of the QDRO review process. The letter is then sent out by the Plan Administrator on the Plan Administrator's letterhead.

The home address of both the Participant and the Alternate Payee is standardly included in the determination letter.

Have any of you ever experienced any problems or complaints as a result of including both addresses in a determination letter? In other words, are any of you aware of an instance in which an ex-spouse may have obtained their former spouse's address FROM the determinaiton letter, and thereafter caused problems for the other spouse? Would a plan administrator face any liability in such a situation?

Of couse, the law requires the QDRO itself to contain both addresses. So if either part reads the QDRO, the addresses are shared.

Has anyone ever tried, putting a statement in the written QDRO procedure stating that both addresses will be included in the determination letter UNLESS either the Participant OR Alternate payee opts to receive separate mailings?

I appreciate any feedback on this topic!

Is disability wavier part of the normal cost if it is within the incidental benefit rules as part of the life insurance contract and therefore deductible?

My opinion is yes, it is deductible if it is within the limits, however I'm also getting conflicting arguments stating that it is not part of the normal cost and not deductible.

Your thoughts and insight would be appreciated.

A cash balance plan uses fixed factors (set forth in the plan on a chart and determined based on the age of the participant) to convert a participant's account balance to a life annuity. The account balance is divided by the fixed factor, the result of which is the participant's annual benefit. Has this method of calculating annuities been an issue in any of the cash balance lawsuits? Does anyone see any problems with this method of determining annuities?

Has anyone heard of an insurance company not providing the commission and agent information for usage on the Schedule A? If so, do you know there reasoning for not providing this information since it is a requirement of the filing?