A Participant is set to take a distribution from 401(k) plan, and elects to receive an annuity form of distribution. Presumably per plan document, trustee purchases an annuity with the Participant's account balance, then transfers the annuity contract to the Participant. Pretty sure that this is reported on Form 1099R, but not sure what code to assign the distribution to report it on the 1099R. Any thoughts?

A Participant is set to take a distribution from 401(k) plan, and elects to receive an annuity form of distribution. Presumably per plan document, trustee purchases an annuity with the Participant's account balance, then transfers the annuity contract to the Participant. Pretty sure that this is reported on Form 1099R, but not sure what code to assign the distribution to report it on the 1099R. Any thoughts?

Can someone get a profit contribution if they are under the age of 18?

If there is no age requirement, is there still a law that prohibits someone under the age of 18 to not receive a profit sharing contribution?

thanks

A small company, 5 ee's plus owner, current has a SEP. The employer would now like to get rid of the SEP and start a safe harbor 401k plan. The employer's fiscal year is 7/1 - 6/30, so if they want this in place for the current tax year (6/30/04), they need to establish it by 4/1/04.

My question, is what deadlines would pertain to eliminating/terminating the SEP? Does it have to be terminated by 3/31/04? Do the participants in the SEP have the same options regarding distributions as say a PS plan would (eg, option to rollover to IRA, new 401k, or cash? Thanks for any help.

Hello All,

I have an LLC member with income passed through to him via a K1. He then files a Schedule C and pays self-employment taxes similar to a sole prop. Can he make a 401(k) contrib from bonuses/earnings received after 12/31/03 and deduct same from his taxable income for '03?

Any help would be appreciated!!

Thanks,

GeeBee Fran

Plan recently had a short PY, and the sponsor wants to know when the PS contribution needs to be made for the short PY.

Thanks for your help!

If the proposal goes through in 2005 existing Roth IRAs will be changed to Retirement Savings Accounts or RSAs. At the same time Lifetime Savings Accounts or LSAs may also be established. After reviewing the proposal, it appears that converting or transferring funds from any existing RSAs to LSAs will not be an option. Any additional insight would be appreciated. Thanks.

Is there any way, barring death, to make an adjustment to or even cease deductions to an existing Cafeteria Plan? I know there are allocations for "change of life" situations, but they seem to be centered around marriage, divorce, etc. My current situation involves the use of a new childcare facility and deductions being based on the cost of the new facility. After 2-3 months I realized that the facility was substandard (a key member went on medical leave) and I have managed to assemble a series of friends, neighbors and family to help with the subsequent childcare. My my son is now only in the current facility in the AM or partime. Consequently my payments have been reduced. My employer is telling me that I cannot reduce my contributions to the Cafeteria Plan, meaning that I cannot retrieve the money in my plan account because I do not have receipts to substantiate payments.

I refuse to keep my son in sub-standard daycare to simply fulfill a benefits requirement, but how do I go about reducing or eliminating my participation in the plan?

Hypothetical. I'm 64. Convert to a Roth from regular IRA March 2004. Start to withdraw 2007 (3 yrs. later). Any penalty? I'm confused about being older than 59&1/2. Thanks

A while back, we had determined it was permissable for a person who had two Commuter FSA accounts (one for transit and one for parking) to use funds from one account to pay for services under another account, as long as the maximum was not exceeded. For example, a person could get reimbursed from the parking account for transit expenses as long as the total reimbursements didn't exceed the allowable for transit. Now we can't locate the supporting documentation. Anyone have any ideas on where I can find supporting info on this?

Participant takes a loan, then terminates the day following receipt of the check. No loan payments were ever made and the loan was not defaulted or offset. One year later the Participant is rehired and now wants to reamortize the loan to extend the term. The term of the unpaid loan is 5 years. I know the loan can't be refinancied or reamortized beyond the original date. But, my belief is the loan cannot be reamortized because it was already taken for 5 years. What we can do is reamortize it for the same term but add to the outstanding amount the interest not paid during the year. That or demand payment in full or default the loan now.

Has anyone dealt with an issue like this? What did you do?

LLC Makes a retroactive S Corp election in March of 2003, retroactive to January 1 of 2003. The IRS allows you until March 15, 2003 to make such an election.

The question is what do you do with member contributions contributed before the member was treated as a W-2 employee? Because the S-Election is retroactive to 1/1/03, there is no self employment income. Similarly, there is no W-2 compensation because the member simply did not know during the first two months that they would in fact be a regular W-2 employee.

The literal interpretation would be, no earned income, no compensation, no contributions. The contributions made before the employee became an employee should be refunded.

But this outcome is ridiculous in so many ways. Would it be reasonable to make some assumptions and estimates about compensation prior to the election?

Any help on this cunnundrum (sp?) would be greatly appreciated.

If a 401(k) Profit Sharing Plan has one NHCE who defers 0 in 2004 and then terminates in 2004, how do you handle the ADP testing for 2005? Given that the NHCE ADP is 0%, does this mean that the HCEs can't defer anything in 2005? Obviously, the HCEs could just get profit sharing contributions, which would satisfy this problem. But there are certain HCEs who do not want to contribute the 402(g) limit because it comes out of their pockets. So, we're stuck with elective deferrals. How do you make a QNEC when there are no NHCEs in the plan for the 2005 plan year?

I am relatively new to floor offset and am hoping that one of you seasoned veterans can help me. It involves a 412(i) plan and I am REALLY new to that area.

Someone else in our office prepared calculations for this plan, but that individual has left the company and I have to finish the year end work. There are a couple of things that do not seem right to me, but, what do I know?

The first question is about the accrued benefit under the 412(i) plan. Since the accrued benefit is the cash surrender value of the insurance policy, it seems like there is the ability to control this number by timing the premium payment. That does not seem right, and in this case there appears to be some variation on that from year to year.

The second question is about the offset piece. In this case, we are in the second year of the plans. Only one year's premium has been paid on the 412(i) plan, and the cash surrender value reflects that. However, there are two years' contributions included in the calculation of the offset. That also does not seem right.

Any pointers would be appreciated. Also, how do the new regs affect these issues, if at all?

Life insurance purchased as a db plan investment must be 'incidental' or less than 50% of the plan's annual contribution amount. The db plan uses the 100 times the death benefit formula for determining incidental benefits. I know a db plan can use excess amounts toward a subsequent year's contribution and that minimum funding requirements do not permit shortfalls in ER contributions. But is there any situation regarding plan performance, where the Plan's LI could lose it's incidental character while complying with the 100 times rule?

Is a person a 5 percent owner for RMD purposes if the person owns more than 5 percent of the company after the year in which the person attains age 70 1/2? The regs state a person is a 5 percent owner if he owns more than 5 percent of the employer in the year in which he attains age 70 1/2, and the LRMs state that such person remains a 5 percent owner thereafter, but the regs do not appear to address my situation.

In response to the all the current Mutual Fund commotion, as well as insider trading issues, we are considering:

1. Imposing fees on quick round trip trades in any fund. This could be along the lines of last week's SEC proposal (2% fee on shares redeemed within 5 days of their purchase).

2. Imposing a limit on number of trades a participant could make during a specified time period, or a complete ban on round trip trades over time periods shorter than XX days.

3. For the Company Stock Fund Only, greatly expanding our definition of what constitutes a 16(b) insider, and prohibiting all trades by that group in the period 10 days preceeding and 3 days following a earnings release date.

Background: plan has approximately 20,000 participants and $500 million of assets, a third party recordkeeper, and no two funds from the same investment manager.

So the question is: We are aware that many companies are thinking about these issues, but has anyone done anything yet?

RCK

Wow!! The new rules being proprosed are a doozy!

Conversion of cash balance plans will now require the benefits earned by the participant to be not less than that he would have earned if the conversion had not taken place. (Of course, regulations will specify how to determine all this).

This, depending on the regulations, would kill conversions and just force employers to terminate their defined benefit plans. They would just install a cash balance for future purposes only (might even be generous and allow employees to increase their benefit by 'rolling' in additional monies from the old defined benefit).

The other provision which is really wild is the new 'yield curve'. Better yet is that it is phased in with weighting over a 3 year period.

I can't wait to see what the final result of this proposal is. Of course, they do recognize that small plans might consider this overkill, so they have opined that maybe a single rate might be more applicable in that case.

i have a client that wants to allow a $1,500 hardship w/d from a 401(k) plan for an employee to purchase a vehicle. i have advised against this but my client is insisting that the hardship is that the employee needs to get to work. has anyone ever heard of this before? also, you do withhold the 20% fed tax on hardships, correct?

thanks for any help...

Ok, I have a cross-tested profit sharing plan only.

A = Shareholders (1)

B = all others - NHCEs (3)

Client wants to make a $2,000 contribution only to the plan. However that does not pass top heavy, b/c it only comes to about .75% of compensation. However, would it pass the top heavy rules if I spread the $2,000 across Group B and gave nothing to Group A....the total contribution then is only 2% of compensation.

Any thoughts???

I always thought it had to be 3% regardless in order to pass top heavy, am I wrong here after all this.