Employer has been operating med. exp. reimb. plan in a manner that e/ee's can accumulate expense dollars? from year to year. E/er now wants to make such amounts non-cumulative. E/er proposes to tell all plan participants that as of Jan. 1 next year, amounts will no longer be cumulative and that prior accumulated amounts will be lost unless reimbursements submitted before that date. Employer has had no written plan in place, but plans to get one in place setting forth the "new" rules as of Jan 1. Issues??? Thanks.

What is the ERISA documentation/record retention requirements? Six years I thought. What what needs to be kept, and by whom (the recordkeeper vs. plan sponsor)?

As of January 1, 2003, taxpayer “Smith” is a member of an LLC – “Smith, Jones & Co.” The LLC is classified for federal income tax purposes as a partnership, and Mr. Smith as a partner. Mr. Smith’s “earnings” (made up of “draw” or “guaranteed payments” and his share of LLC profits) constitutes self-employment income.

On February 28, 2003, Smith, Jones & Co. files Form 8832 (Entity Classification Election), electing to be treated as an association taxable as a corporation, and on March 1, 2003, Smith, Jones & Co. files Form 2553 ( Election by a Small Business Corporation). Both of these elections are to be effective retroactively to January 1, 2003.

For calendar year 2003, Mr. Smith expects to make $120,000 ($10,000 per month), and wants to contribute $12,000 ($1,000 per month) to their 401-K plan. During January and February, Mr. Smith took a total “draw” of $24,000, and wrote his personal checks to the 401-K plan totaling $2,000.

Beginning March 1, 2003, Mr. Smith receives a salary of $10,000 per month, and has $1,000 per month withheld and paid into the 401-K plan. At December 31, 2003, Mr. Smith’s total wages are $100,000, and the total 401-K contribution on his W-2 Form is $10,000. Mr. Smith also receives a Schedule K-1 (Form 1120S) for 2003, showing the $20,000 of “draw” for January and February, as well as any additional profits for the year. None of these K-1 profits are self-employment income, since Smith, Jones & Co. is retroactively treated as an S corporation for the entire year.

How can Mr. Smith qualify the $2,000 paid into the 401-K plan during January and February for deductible 401-K contribution treatment? Is there any support for “grossing-up” his Form W-2 to include either the $20,000 paid to him during January and February, or the $2,000 paid into the 401-K period out of this January/February income? Does Mr. Smith need to withdraw this $2,000 (plus earnings), and recontribute it out of March – December wages, in order to perfect the 2003 contribution deduction/deferral?

1.Can I roll a SEP account(or part of the account) to a ROTH IRA?

2. Can I still make a contribution into a roth IRA for 2003?

thanks so much!

dbuckner@bellsouth.net

Have an existing 401(k) plan and wish to convert it to a Safe Harbor 401(k). If the employer wishes to make the basic match safe harbor (100% match up to 3% of pay plus 50% up to 5% of pay), do existing match accounts need to be 100% vested?

Clearly, future match contributions must be 100% vested, but what about existing match contribution accounts?

Thanks much

Client failed the ADP test. We calculated how much money needs to be returned to the HCEs. Unfortunately one of the HCEs left the company in 2003 and received a full distribution in February of 2004. He rolled the money to an IRA.

We must return money to him to pass the ADP test.

The financial institution holding the 401(k) money has said that they must issue a 1099 showing the rollover to his IRA. They have suggested that I contact the receiving institution and get them to disburse the the appropriate amount.

What is the appropriate course of action?

Thanks in advance.

Assume a defined contribution plan that allows loans. If a domestic relations order provides that the plan will loan the alternate payee $200,000, can this be a QDRO? The main issue is, I believe, whether this arrangement violates the requirement of Code section 414(p)(3) that the order not require a "type or form of benefit . . . that is not otherwise permitted by the plan." The plan would permit a loan to the participant, but obviously couldn't do so for more than $50,000.

I don't think this works, but am interested in the opinion of others. Thanks.

On my employer form 403b withdrawal form, I checked off the option stating to max out 403b contributions, which should mean $13,000 contributed a year, or $500 every 2 weeks ($500 x 26 = $13,000). Yet, when I get my paycheck, it says it only deducted $481.48, which would only contribute $12,518.48 in 52 weeks. Does anyone know what's going on here?

What is the effect of a participating employer of a multiple-employer plan choosing to withdraw from participation in such plan? Is this akin to a termination of a single-employer plan?

Doctor A had a practice that employed two valuable employees. They had a 401(k). The doctor decided to terminate the practice and the 401(k) Plan. Employees were given distribution options. The doctor then joined as a partner in another practice and the two employees were hired by the new partnership. Money was rolled from the old plan to the new partnership's plan.

In doing the final accounting of the old plan, the prior TPA made an error. Basically, one of the valuable employees got a sizeable chunk of the Doc's rollover account. She subsequently fell on hard times and took a distribution of the rollover balance in her new account and spent the money. The error was discovered by prior TPA after the money was distributed by the current TPA.

The participant can't pay back the excess amount to the plan and there is a dispute (of course) as to who should pony up to make the Doc's account whole (seems pretty clear to me!). Doc and prior TPA are trying to come to an equitable solution so the participant can pay the $ back. Prior TPA suggested that the plan issue a promissory note from the Doc's account to the participant. The Doc's account could hold the note as the participant pays back the money with interest.

I know that the Prior TPA should pay the amount that the Doc's account is short and go after the participant outside of the plan (or perhaps have the participant make installments to them rather than the plan). I know what the appropriate correction should be but, would the loan from the Doc's account be a prohibited transaction assuming the Doc would even agree to this? I have tried reading about PT's and the exemptions for participant loans but all the information I read talks about loans from the participant's own account rather than from someone elses account. Help?

A plan has eligibility requirements of 6 months and Age 21. With 6 month eligibility, there is no provision for hours so even part-timers get into the Plan. This was not the intent of the employer. The liberal eligibility period has pushed the number of plan participants up over 100, even though only about 25 participate. An independent auditor's opinion is now required, which really has increased the Plan's admin costs. We just walked into this situation and we are trying to alleviate the concerns of the client. What would be the soonest that the plan could be amended to increase the eligibility to one year? We realize the existing participants would still be counted, but it would stop other part timers from getting in to the Plan. Are there anti-cutback rules to consider? What would have been the latest the plan would have needed to be amended for this eligibility to change in 2004?

Any help is greatly appreciated.

A nonresident alien, who worked and lived outside the U.S., is participating in a U.S. qualified pension plan. If the participant terminates employment and directly rolls over the U.S. qualified pension plan dollars into a U.S. IRA, how does the withholding work?

IRS Publication 590 only refers to withholding on U.S. citizens and resident aliens who receive a distribution outside the U.S.

Thanks!

I am seeing the new hype with a new real esate transaction involving the IRA forming an LLC that can purchase your personal real estate. I was wondering what your thoughts were in regards to this new IRA design.

Does anyone know if childbirth classes are reimburseable? I read on line from other companies that they are only if they address specific medical issues such as labor, delivery, breathing techniques, and nursing. Also, I have checked the IRS website and there is nothing that covers childbirth classes.

Any information would be great. Thanks

1. Can a foreign national (not a citizen) in this country on a Visa who has a social security number and pays US taxes participate in a 401(k)plan (he has no greencard)?

Has FASB released anything regarding the calculation of this 'expected payments' grid?? The calculations seem anything but trivial.

There was a discussion on this site regarding a plan which pays lump sums. The participant had a 100,000 lump sum and a 2% probability and therefore his expected payment was 2,000.

IF this same plan did NOT permit lump sums, would the expected payment be the anticipated benefit at retirement multiplied by a probability of the participant making it to retirement?

Terminees and retirees pose additional problems with their guaranteed payment (10 year certain) or additional probability (participant dies and spouse is entitled to payment)???

Thanks for any and all comments.

ok geniuses

have a plan with the following results:

HCE 4.11 2.06

NHCE 2.17 .70

so plan passes ADP and fails ACP

if I shift .33 NHCE deferral to ACP I have

HCE 4.11 2.06

NHCE 1.84 1.03

Now plan fails ADP and passes ACP.

Am I now allowed to treat part of the HCE deferrals as catch up (where before the shift I couldn't)?

Froze DB plan effective last September (Board authorized, 204(h) Notice given and amendment signed) Client now wants to go in for a determination letter for the amendment that freezes the plan (already have GUST II letter that was issued in December 2003). I don't think we need to go in for a letter. As always, your thoughts and ideas welcome.

Is anyone aware of a financial modeling tool for employers to see the monetary costs/benefits associated with Defined Contribution Plans (125's) versus HSAs?

I am doing some research on both subjects and think it would be interesting to compare employer savings for each type of plan. I think there are compelling financial benefits to each for employers and employees but I have not seen a financial comparison.

It appears the following bands will satisfy the "regular intervals and smooth increases" tests under the final regulations.

<3 years of service .6% Contrib

3 to 5 yrs 1.2%

6 to 8 yrs 2.4%

9 to 11 yrs 4.8%

12 to 14 yrs 9.6%

15+ years 14.6 %

Obviously the owner is the only one with 15+ years. Does anyone see anything wrong with using this formula? Thanks.