Fiscal Year employer (3/31). Has had a SIMPLE Plan for a few years, wants to start a DB Plan for this year end, 3/31/04.

As I understand it a SIMPLE plan has to be a calendar year plan. The ER contributions made for the year ending December 31, 2003 should not be an issue - could remain in the SIMPLE. Would they count against the 404 limit for the year ending 03/31/04?

Would plan have to be effective 01/01/04 for this to be true? And thus short year issues arise...

Otherwise, deferrals & ER contributions since 4/1/03 would be invalidated? Or since 01/01/03?

If the SIMPLE is "invalidated" I think I read that the deferrals and ER contribs are included in Box 1 of W-2. So new 2003 W-2s are needed? Grossed up by the 2003 ER contributions...

And 2003 contribs must be withdrawn by April 15, 2004? (408(d)(4)) And the Jan/Feb/March 2004 contributions would have to be withdrawn by the employees as under 408(d)(4) by April 15, 2005. If done so there would be no 6%, 10% or 25% penalty. (No penalty). Correct?

As the SIMPLE is "invalidated" so does that mean that the ER would not be required to make the ER contribution for 2004? Although at one time there was an announcement commiting him to the contris.

Thanks for wading through this and any comments...

Search did yield: COMMENTS

Suppose you have a new non-safe harbor DB that is offset by a new profit sharing plan. The DB will provide 5% of pay per year of partic for shareholders and 2% of pay per year of partic for non-shareholders. All benefits are offset by the act equiv of profit sharing balances. The employer will make contributions of at least 7.5% in the profit sharing plan. However, they wish to provide no profit sharing contributions to the two shareholder employees in the profit sharing plan. The plan easily passes the general test and they will have no problems with 404(a).

1.401(a)(26)-5(2)(iii)(A)(2) states that an employee whose benefits are offset is deemed as benefiting but only if he/she benefit in the other plan on a uniform and reasonable basis.

Does this mean that we simply do not count the two shareholder employees for 401(a)(26) purposes because their benefits (in the DB) are not being offset? Or does this mean that we cannot count any participants because two HCE's did not receive the same contribution as every other eligible participant in the profit sharing plan?

Thanks much!

just want to confirm the tax treatment. the distribution is from a DC plan, the participant had not started RMD's and the beneficiary is taking the entire amount. i think you would withhold 20% even though it is going to a guardianship on behalf of the kids. anyone disagree or agree?

Deceased participant was in a same-sex marriage. Participant's enrollment form indicated he was married. Spouse is the designated beneficiary.

Should we allow a rollover? I assume the designated beneficiary's tax return will indicate single. Wouldn't a rollover of a death benefit by a single person or "non-spouse" trigger some kind of flag with the IRS?

I have set up a rollover IRA (traditional) and I am going to use a financial advisor to trade in the account. The financial advisor is not affiliated with the brokerage firm that hosts the IRA. If I let the manager withdaw her fee from the IRA, is this a taxable event? (I am over 59.5 so there is no 10% penalty problem) The brokagage firm I am using says it is taxable, but another firm says it is not.

I would like confirmation that I am interpreting correctly the rule that states that a 3% nonelective SH contribution cannot be used to satisfy permitted disparity. A prospect is considering establishing an integrated PS and 401(k). Because of pay levels of the HCEs, I am anticipating that the plan will not satisfy ADP if all the HCEs defer $13,000. To satisfy the nonelective SH, the employer will contribute 3%. If the employer wants to make a PS contribution of 3% on total comp and 3% in excess of TWB, the base 3% is IN ADDITION to the 3% SH -- Yes?

In the 2001 ASPA Q&A the IRS opined that "Participants not employed at the end of the Plan Year" was not a reasonable classification for purposes of the ABT. Has anyone heard anything more on this topic?

Have a participant that is out of work receiving pay from Worker's Comp. He has not been making the weekly loan repayments. My reading indicates the only reasons for not making repayments are Military Service or a Non-Paid Leave of Absence.

Does this guy have to make repayments? Is he risking the loan becoming taxable via a deemed distribution?

I know church plans not electing ERISA are exempt from 5500 filing requirements, but the article posted by CIGNA inplies that they are required to file Form 5300. Is this true?

Employer's fiscal year is May 1, 2003 through April 30, 2004. They sponsor a calendar year 401(k) plan (January 1, 2003 through December 31, 2003). What is the due date for depositing the top heavy and profit sharing contribution? Thank you.

While it's fun to communicate online, it's also nice to actually meet people face to face [at least once in a while ].

Since many of us will be at the Enrolled Actuaries Meeting, let's plan to meet at the bar in the hotel lobby on Monday afternoon right after the end of the sessions. No need to RSVP, just show up!

Dear Carol,

What are the chances of this bill becoming law this legislative session?

Thanks,

Joel L. Frank

I've seen this twice in the last two weeks, and I don't understand it. You have a LLC, taxed as a partnership. But the 2 "partners" are reporting income from the LLC both on W-2 and on a K-1. Can somebody explain to me how this works, or even if it is possible? I'd have said that if you are being taxed as a partnership, then all income would be K-1.

Is what they are doing correct? Anybody else dealt with this issue? Thanks!

Situation:

Allen and Barbara are each 50% owners of Company A&B. Barbara's daughter Claire works for the company as well.

In 1990 Allen and Barbara each sell 15% to the ESOP and elect 1042 on their sale. Since Allen and Barbara (and Claire by attribution) were 25% shareholders at the time of the transaction they can never share in the allocation of shares from loan #1.

In 2001 Barbara retires and sells her remaining 35% to the ESOP (Loan #2). She does not make a 1042 election this time. Thus, Allen and Claire can share in the allocation of these shares.

In 2005 Allen is planning on selling his remaining 35% and electing 1042 (loan #3). As was the case with Loan #1 Allen is a 25% shareholder and will never be allowed to share in the allocation of these shares.

Question:

Can Claire share in the allocation of the shares from Loan #3?

Is a car allowance included for compensation purposes under code 3401(a) and 415 compensation?

Can someone please clarify when it is okay to reamortize a loan and when a refinance is needed?

For some reason I always thought that you could only reamortize to change payment frequency, but now I am being told that I am wrong....Which is very possible.

Plan Sponsor discovers that 2 loan payments (in 2003) were deducted from Participant A's pay, but submited to recordkeeper under Participant B's SS#. Recordkeeper most likely returned the payments because Participant B did not have an outstanding loan.

Is this a prohibited transaction since money was withheld from Participant A's pay, but not deposited into his account? How would you correct? Have the Plan Sponsor submit the loan payments for Participant A along with earnings? Would they have to report this to the DOL, or is submiting the payment and earnings enough?

Thanks

Is third party sick pay included as "compensation" when determining the employer contribution for the plan year?

Can an employee make deferrals from third party sick pay?

Bottom line: Is third party sick pay included when determining an employee's compensation for the year?

Thanks!

Testing the Profit Sharing Contribution under a 401(k) Profit Sharing Plan using cross testing, is it permitted to impute permitted disparity or does the 401(k) feature prohibit this?

I am currently in the market for a KSOP record keeping system. Anyone have any experience with this company and its software?