Here is an interesting question regarding the tax deductibility of FSA contributions:

A participant in a FSA account makes an annual declaration of $1,000 in 2003. Throughout the course of the plan year she has $1,000 payroll deducted from her paycheck. The plan year ends, the grace period is over, and the employee has only claimed $700 worth of reimbursement from her account. She has now forfeited $300 (use it or lose it) into the plan. The employee’s W2 shows the full $1,000 as a pre-tax deduction.

This employee’s tax advisor says that she should not have taken the full $1,000 pre-tax deduction since she only received reimbursement for $700. He is advising her that she should have only taken $700 as a pre-tax deduction.

I am not a CPA, but this does not seem right to me. I feel that she should receive the full $1,000 as a pre-tax deduction. I think whether or not she received her full re-imbursement amount or forfeited an amount is immaterial.

Does anyone agree or disagree with this? Cited references would be very helpful.

Thanks!

I was just wondering, If I buy and sell stocks with my Roth IRA account what happens if I lose money? For example, if in the year 2004 I have lost money by trading using the money in my Roth IRA Account, do I claim that as a capital loss for 2004? Also what happen if I make that money back and then some in 2005? I know I'm not taxed on it if I make money but what happens to the money in your Roth IRA account if you lose more money then you put in?

Any help is appreciated. Thank you!!

If a profit sharing plan has non-deductible contributions in one plan year and carries them forward to the next, the plan sponsor still pays a 10% excise tax correct?

two companies involved - there is common ownership between the companies, but they are NOT a controlled group. Each company wants its own plan. Can an owner of both companies participate in both plans, and, does the owner have separate 415 limits in each plan or, since the owners are more than 5% owners, are they constrained by one annual additions limit?

Anyone filed Form 5310 answering Line 3c in the affirmative for a volume submitter plan and attaching a copy of the volume submitter specimen plan's opinion letter? Not technically a "determination letter" but per Ann. 2001-77 it serves the same purpose.

Given the recent GUST/EGTRRA (incl. 401(a)(9)) amendment activity, I would doubt that there are any amendments which would be required of a terminating money purchase pension plan. However,........ Anyone submitted a defined contribution to the IRS recently and had to amend to bring it up to speed with the current legislation, etc....? Was going to submit the 5310 with the current plan doc. plus the good faith EGTRRA amendment, but just wanted to know if there were any other amendments I needed to get into place instead of waiting for the IRS to kick it back to me. Thanks for your help.

I have a 403(b)(7) custodial account in which the account owner would like to make a tax-free transfer to the state teacher's pension fund for purposes of purchasing service credits. I know that the transfer itself is permissible, but I'm unsure whether this transfer should be reported as a direct rollover on IRS Form 1099-R or should be treated like a non-reportable "90-24 transfer" (i.e. non IRS Form 1099-R tax reporting). Any insight would be greatly appreciated.

Can someone please help me calculate the vesting in the following situation?

Plan changes from calculating vesting based on Plan Year/1000 hrs to elapsed time effective 10/1/02.

Participant was hired 2/1/00, terminated 12/31/03. Are the vesting compuation periods as follows??

1/1/00 to 12/31/00 - Worked 1000 hrs - credit 1 YOS

1/1/01 to 12/31/01 - Worked 1000 hrs - credit 1 YOS

1/1/02 to 12/31/02 - Worked 1000 hrs - credit 1 YOS

2/1/02 to 2/1/03 - Anniversary date - credit 1 YOS

There is an overlap in the 2002 year because of the change in vesting calculation.

Or is it

1/1/00 to 12/31/00 - Worked 1000 hrs - credit 1 YOS

1/1/01 to 12/31/01 - Worked 1000 hrs - credit 1 YOS

1/1/02 to 12/31/02 - Worked 1000 hrs - credit 1 YOS

10/1/02 to 10/1/03 - Anniversary date - credit 1 YOS

does the effective date of the amendment now become the date you count from for elapsed time purposes?

I tried to read Treas. Reg. 1.410(a)-7(f), and DOL Reg. 2530.200b-9(f), but there were no examples, and I am having trouble interpretting.

Thanks!!!

I know there are a number of threads that already address the issue of whether a 1099-R has to be issued for a mistaken distribution (I'll call it the "overpayment") when the participant repays it to the plan. The answer, at least in the case where the overpayment is not recovered until a subsequent year, seems to be a clear yes. I believe the only recourse the participant has then is to pay the taxes owed on the distribution for the year of receipt and then try to deduct that amount on the tax return for the year of repayment.

Let's say the plan recovers the overpayment in the year following distribution but then feels obligated (b/c its mistake created such a substantial tax liability for the participant that it has put him in a hardship situation) to "advance" the amount of such tax liability back to the participant -- the idea being that the "advance" will be treated as an overpayment (and likely be recovered by through the reduction of future payments). Consequences?

It was my understanding that ER contributions to a leveraged ESOP were subject to the same deductibility rules (25% of eligible compensation) but that this amount could be exceeded if the excess amount is required interest payments on a note.

I want to make sure my understanding is correct.

Scenario: ER contributions and corresponding note payments for the year were $350,000. $50,000 is interest and $300k is principal payments on the note. Does eligible partcipant compensation need to be at least $1,200,000 in order for the company to deduct the full $350,000 on their tax return?

If it is not, then do they have a nondeductible contribution subject to excise tax?

Or is it that if schedule note payments are $350k and the ER has to make at least this amount of contributions to prevent the ESOP from defaulting on the note, then it is fully deductible regardless of eligible compensation? Doesn't seem right but just want to make sure.

Thanks

I'd like to hear some recommendations for software to administer defined contribution and 401(k) plans. I'm with an accounting firm doing TPA work for a variety of plans. We're currently using Relius Administration, but want to re-evaluate. We're putting a lot of time into getting staff up to speed with this program. Would welcome any comments regarding the software you use. Do you like it? Does it suit your needs? Is it user friendly? Have you ever converted from one software vendor to another? What problems did you you run into with the conversion? Lots of questions, hoping for answers.

We have a PS plan where we are using accrued-to-date for 401(a)(4). One participant reached NRA and took an in-service distribution of all but $10,000 of his account back 3 years ago. I assume we need to add back his distribution to his balance when testing correct?

Thanks much

When the IRS revised the Schedule Q with their August 2001 version of the forms, they added a new #1 and renumbered the rest of their list of requirements for the Demo 6 submission. The first item in the list now requires plans to "provide the portion of the nondiscrimination test that provides the data for each participant and demonstrates that the plan satisfies 401(a)(4)."

A review of the IRS website indicates a possible response to this item is to just reference the Demo 6 itself -- but they go on to imply that you should send all the data that would be necessary to complete the general test.

In the past, I just sent in a few sample calculations without the full blown test results. I'd be curious to know what others typically send to the IRS as part of the Demo 6 filing.

Doctor is 100% owner of medical corp with one employee.

Doctor's wife has a trade or business that operates as a sole proprietor that established a DB plan and covers the doctors (husband) as an EE.

My reading seems to imply that the group is a common controll group and that the spousal exception rule does not apply (since the spouse is an EE).

So, both businesses would be 100% owned by the the doctor (he is deemed to own 100% of his wife's sole prop) and failing to cover the EE of the doctor's corp would be a problem.

Does anyone see this analysis as wrong?

If so, please tell.

Thanks

Have not done one of these in the last 3 years. Any new developments, regs, etc ?

Does anyone know where the basic requirements are located for the establishment of a type of benevolence or hardship fund?

Employees want to set up a fund that employees could contribute to. If an employee suffers some sort of hardship (i.e. death of spouse, house burns down, etc.), a committee would evaluate and provide funding assistance to that individual.

It seems to me that this type of fund would be a welfare benefit plan under ERISA.

I am looking for someone to share the following:

A participant statement program that will combine on one statement a 401(k) profit sharing and Money Purchase account information under the same plan.

I would greatly appreciate it if someone has such a statement.

Can a Multiple Employer Plan be on a prototype document? Simple question but I am a little confused. Thanks.

The teachers' association wants to know if they need to file a 5500 for their VEBA. Since it's a public school, I'm thinking that they meet the government plan exemption for filing 5500s. Can anyone point me to a site that will help to determine what meets the criteria for "government plan?"

My wife and I are planning on purchasing our first home in the next few months. I have been contributing to a Roth IRA since 2001, so the account is not old enough to withdraw any of the earnings. My question is, can I still withdraw my contributions to use toward a down payment for the house without paying additional taxes or the 10% penalty? Thanks for your help.