What are the tax/penalty ramifications if someone takes funds out of an IRA where a 72t distribution is currently in place? Custodian said they wouldn't stop client from doing so but I wanted to make client aware of tax implications.

Am working with a client who was divorced last year. In October she was issued a distribution for her Profit Sharing balance which was in plan with ex-husband (she worker for him). The balance was over $5,000 - client said she never completed distribution paperwork. Husband simply wanted her "out of the plan". She just got a copy of the 1099-R (after numerous phone calls). No 20% withholding was done, distribution code was 1.

My understanding is that a plan cannot force out a participant if their balance is over $5,000. How should my client proceed in getting this rectified? She would like to roll over the full distribution amount to avoid taxation & penalty. As a side note, shortly after she received the check & deposited it a lien was put on her bank account from a credit card company that she was joint on with husband. Ultimately she had to pay them $6,000 to clear up lien. She does have enough funds available now to do a rollover. Any guidance would be appreciated.

This lady was told her by doctor to take a calcium and soy supplement to lower her cholesterol- she found this in what is called "Ultrameal" (in a shake form). We did a little research and it looks like it can also be used as a meal replacement (i.e. help with weight loss). We do have a prescription from her doctor but are very hesitant to reimburse this expense. She is going to provide a copy of the label to verify the ingredients but we're still not sure...

What's your thoughts?

Thanks,

Rachel

I have a small client, 2 owners and 2 employee's of which they maximize their contributions to $41k?

They are currently under a P/S only plan with their current TPA. The owners think that the 2 employee's do not appreciate the 17% contribution they receive a P/S.

Could a Safe Harbor Enhanced plan ($1:$1 up to 6%) be implemented so that the owners can take $25.3k ($13k Deferral $12.3k S/H Match on $205k comp) from the 401k side before the other $15.7k is obtained from the P/S side. The catch is that they think the employee's will not defer so the employer match contribution would be 0%. The owners percentage on the P/S side would be 7.8% and the 2 employees under an integrated formula would be slightly less than 7.8%. Thus the comparison would be the 17% they currently receive vs. <7.8% on this design for 2004.

The ages of the group do not favor a New Comp design.

My question is what if the 2 NHCE's do not participate at all? I would have the plan sponsor obtain a signature from each of them, during the S/H election period so it clearly identifies the match they are giving up. Is there any else I should do or is this scenario and BAD setup?

Thanks....

Are there any issues with a company allowing contributions to a 401k plan from an employees base + OT earnings? Our company will only allow us to take our 401k contributions from our base pay.

I will have some more follow up questions, but this one seems like a good start.

Thanks in advance...

I am assisting another employee in researching a prohibited transaction exemption. He believes the exemption was in the form of a private letter ruling as opposed to an individual PTE, but he is not sure. Here is the information on the case:

A participant received a loan from a qualified plan and subsequently gave the money to the employer. The issue at hand was if there was an indirect lending of money between the plan and a disqualified person. The IRS or DOL determined that it was not a prohibited transaction since the participant could do whatever he wants with the money.

Supposedly, this guidance was issued in the last two to three years. If you recall any specific information in regards to this guidance, please reply.

Your help is greatly appreciated. Thanks in advance.

Brian

What is an acceptable correction for this situation?

1) Can the sponsor (with the participants consent ) double up on the next few contributions to make it up?

2) Do the missed contributions have to be made up?

Any suggestions would be appreciated!

Thanks

Confused in non-qualified land!

We've taken over a 401(k) plan. Sole proprieter also participates in an unrelated 457 plan. It is my understanding that after EGTRRA there is no interaction between the two plans. I know very little about 457 plans, so I am hoping to get some confirmation.

Thanks for any guidance.

existing Partnership consisting of partner A and Partner B plus commom law employees, have an existing SafeHarbor 401(k) with Safe Harbor Match Contribution(SHMAC). On 3/14/2004 they will dissolve partnership and on 3/15/2004 will form new Partnership with Partner C and his employees. They want to terminate SafeHarbor Plan and start new SafeHarbor plan with Safe Harbor Non Elective Contribution (SHNEC) for newly formed partnership.

Do I have a successor plan issue?

Would it be better to have new Partnership assume sponsorship of prior Plan?

I'm researching Darrin Watson's "Who's the Employer" to no avail!!

Employer has a "nurse service program" where the employer pays an annual premium for employees to visit nurses --usually at a clinic off-site --for reduced rates. This program also enables a nurse to come to the office of the employer and administer flu shots. The employer has no involvement except to renew its annual contract to pay premiums and to distribute a brochure created by the clinic to employees. Employees are responsible for calling the clinic and no information about participants (health or otherwise) passes through the employer. I am concerned about ERISA, HIPAA, etc.

Does an employee's filing status on their Federal tax return have any effect on the maximum amount the employee can contribute to a dependent care FSA?

We are looking into establishing a wellness program wherein employees will receive health screenings. Would this wellness program be subject to ERISA?

While preparing to send 2003 info to me, client discovers 2002 5500 in his file.

Do you:

Advise him to send now with an excuse.

Advise to go the DFVC program route.

Advise not to file. When (if) the client gets contacted, tell him to say "Here's a copy of the return I filed".

Thanks

My fairly narrow question is this: What SEC rules/regulations govern E-mails and other electronic communications that are sent, received, and stored by TPAs in the daily valuation environment? Specifically:

· Security Requirements. When a TPA transmits an electronic communication that contains information on trades, what are the security requirements?

· Archive Requirements. When a TPA stores an electronic communication that contains information on trades, what are the archive requirements?

· Authentication Methods. What authentication methods must a TPA use to verify that an electronic communication came from a specific, valid source?

I am assuming that the TPA: Only serves as a recordkeeper; and, trades only through a trading partner. The rules/regulations I’m looking for are in addition to the IRS and DoL rules.

Thanks in advance for any insights!

A client made a QNEC during the first year of the plan (2002). They are on prior year testing in 2003, so does the QNEC that they made last year increase the NHCE percentages for this year's test?

If an employee's last check is in the new plan year, but terminated last day of previous year (usually vacation pay) and there is 401k/match taken from that check, how is it to be treated in the new year? Is the 401k/match to be considered in the ADP/ACP testing for the new year? Too late to back and change the prior year obviously. This this is true, for you Relius users, how should an employee be coded, Terminated or Cont to Participate?

Much Thanks!

The new HSAs cannot invest in life insurance contracts. Code § 223(d)(1)©. Are there group annuities out there that don't offer life insurance in which an HSA could be invested?

E/er has 401(k) plan which e/er said would be terminated as of 12/31/03. E/er wanted to set up safe harbor 401(k) effective 1/1/04 but did not want to amend the earlier 401(k) plan. Now e/er says that the old 401(k) was never terminated. Clearly there are operational issues with the old 401(k) if the e/er has not been following the plan document. Assuming a proper resolution to terminate was adopted, is there any way to address the "successor plan" issue in 98-52 in regards to setting up a new safe harbor 401(k) effective as of 7/1/04, e.g., set up new profit sharing plan effective 1/1/04 and then amend that PSP effective 7/1/04 to add safe harbor 401(k) provisions....??

If there is a calendar-year 401(k) plan in which the salary deferral contributions were limited to 15% for 2003, but by mistake amounts in excess of the 15% were deferred, would it be possible to retroactively amend the plan today but effective on Jan. 1, 2003 to increase the salary deferral limit to 75% for 2003?

I can't find anything that would prevent this. 411(d)(6) shouldn't apply. I assume there would be an operational failure for 2003, but if the retroactive amendment is made would that still be the case?

Hi there,

Quick survey: what does your financial institution/custodian typically do?

ER establishes SIMPLE IRA, ee establishes SIMPLE IRA at your institution. EE quits and closes account. ER sends in SIMPLE IRA deferral [on a timely basis] after the account has been closed.

What is your financial institution practice? Do you:

1. Reopen closed account, deposit funds, then close account & issue check?

2. Open new account, deposit funds, then close account & issue check?

3. Forward funds directly to ee? (If so, do you handle 1099R reporting)

4. Return funds to employer?

I am interested in anyone's input. thanks, jlg