Mutli-part question.

Non-safe Harbor DC plan.

1) Has anyone ever used an Accrued-To-Date method for a DC plan?

If so, how are the Accrual Rates determined?

(i) Each participant's accrued benefit is determined using the Current Account Balance Or the Total Employer Contributions allocated to date (ie. ignoring gains and losses to date)?

(ii) Testing Service is the Service from the date participation eligibility (age 21/1 yr service) was met - regs 1.401(a)(4)-11(d)(3)(i)(B).

(iii) If the "Years during which a participant benefited" is used as the Testing Service, does this include only the Years during which the participant actually received an allocation of Employer Contribution or All Participation Service whether or not an allocation was received during a year (eg. the employer skipped contribution to its PSP for some years)?

DB/DC Combo (not an Offset arrangement).

Situation: DB/DC plans are aggregated to pass the 410(b) coverage test and hence must be aggregated to test for 401(a)(4).

For 401(a)(4), must both plan use the same method to determine the accrual rates i.e. for both plans, use either the Annual method or the Accrued-To-Date method?

I have a target benefit plan (should be new comp but the client just won't let go) that I'm trying to run in Relius. I'm facing several issues that I won't go into here, but the main one is this:

The business is an LLC. The 2 partners have both W-2 income and K-1 income from the business

9.0 handles this if it is a regular profit sharing or 401(k), but not if it is a target. Calculating the contribution and then solving for 1/2 SE tax is easy enough. But taking the next step is where it is getting hairy. Compensation used is the average of the highest 3 consecutive years.

Does anyone have any thoughts?

Tim

Does anyone have any idea what P.S. 58 stands for?

I know what it means with respect to insurance benefits and 1099R

reporting. But I've never actually understood what the P.S. is an

abbreviation for.

I thought it would have something to do with an IRS event in 1958 but the

earliest IRS reference is for 1955 (Rev. Rul. 55-747, 1955-2 C.B. 228.)

How is testing prepared for multiple "brother-sister" controlled groups? There are three entities involved (K, A and G). K and A are one controlled group and A and G are the other. Are employees from all three entities considered in one test or are separate tests performed for KA and AG?

Our 401(k) Plan failed the ADP test for pye 12/31/2003 and we are making refunds of excess contributions to some of our HCE's. These refunds will be made by the end of February. I am getting questions from the employees regarding how to report this on their 2003 income tax returns. I know that they must include the amount of the refund in their taxable income for 2003.

Do they just adjust the amount they report on the line for "wages, salaries, tips, etc."?

Do they change the amount of deferrals they report or do they still report the deferrals indicated on their W2?

Thank you for any guidance!

Just read the post regarding partner deferrals to a SIMPLE IRA Plan. I have a different issue: Husband and wife S-Corp pay themselves their W-2 compensation at 12/30/2003, taking out their maximum SIMPLE IRA elective deferral. However, due to circumstances, the deferrals were not submitted to their IRA broker until 2/2/2004. The broker refused to take the deferrals as they were outside of the 30 day window for making the contribution, and they won't budge.

What is the client to do? I'm not that versed in SIMPLE's, so any help would be greatly appreciated.

I think I have this right, but for confirmation I was wondering if anyone else has computed this.

For DB plans not reflecting EGTRRA in 2003 valuation, 2003 415 $ limit:

($90,000) * (sum of 2002 3rd Quarter CPI-U) / (sum of 1986 4th Qtr CPI-U)

= ($90,000) * 541.8 / 331.2

= $147,228

Rounded to next lower $5,000 mulitple,

= $145,000

Does anyone have any current practical experience on a late Volume Submitter amenders for GUST (just discovered a plan was missed). Has anyone recently submitted a late amender for GUST to the IRS under their closing agreement program ? (forget the revised names of these programs). I believe Rev. Proc. 2003-44 is the appropriate guidance, and I know the penalty sanction is supposed to "consider" part of what the max sanction amount would be (e.g., 40% of amount if trust was disqualified or something like that), but practically speaking, the last time we did restatements for TRA 86, it seemed like in the immediate 6 months or so after the deadline most late amenders were getting slapped with some fairly modest fees ($1,000 - $2,000) as a practical matter. Anyone have any current experience with what late Volume Submitter amenders are receiving as penalties in general currently ?

Can I contirubute to an IRA or a Roth IRA if I have disability income that is non- taxable ? If not, do I just remove the money I contriubuted for the years I did not have taxable income? Do I pay income tax on the interest?

Employee is a member of an ineligible class meets eligibility requirements other than that. The employee subsequently becomes member of an eligible class. I know the employee is immediately elgibile, but I need the cite that says you don't disregard service while a member of an ineligible class. I've had a brain freeze & can't find that cite on my own.

Thanks in advance for any guidance

Hello!

We are attempting to export a list of Divisions out of Relius v. 8.3.7. We can get the Division Code to export, but not the Division Name. When we create a new DER, Division Code is available, it shows up as the Division Name (in a combo box) yet it exports as the Division Code.

We need to export a list of Division Names and Numbers. Any suggestions are appreciated!

Regards,

Brian K. Speck

I know that Relius will test separately for those HCEs and NHCEs who have not yet met the statutory minimum age and service conditions if a plan provides for more generous entry provisions. How would we get Relius to exclude only those NHCEs who have not met statutory minimums? 401(k)(3)(F).

My understanding was that a plan maintained by an affiliated service group is treated as one employer, the plan is a single employer plan (Prototype if they see fit) and tested (including ADP/ACP) as one plan.

Situation is this - 5 separate entities. 4 of the 5 constitute a controlled group. The 5th is not part of the CG but is part of an affiliated service group with the other 4 because one of the 4 is a management company and the client's attorney determined an ASG existed under the ASG management service organization analysis under 414(m)(5).

The client's attorney is telling them that even though a 5 member ASG exists, the plan needs to test (ADP/ACP) the 4 CG members separate from the non-CG member and the attorney is citing reliance on Proposed Reg. 1.414(m)-3©.

Doesn't appear to me that this is what that Proposed Reg. is stating ? Plus, those regs. were withdrawn, can they/should they be relied on?

A Safe Harbor 401(k) consisting only of deferrals and the safe harbor match do not need to test for top heavy. However, a S-H plan consisting only of deferrals and the SHNEC does not automatically satisfy top heavy.

Can you explain the rationale for this? Granted the SHNEC can be used to satisfy the t-h minimum but why subject the SHNEC plan to t-h testing, when the S-H matching plan gets the pass? Seems like more participants would be getting a minimum contribution under the SHNEC than under the matching method.

If I have a safe harbor plan that isn't ACP safe harbor because of after-tax contributions, then how do I complete the ACP test? Do I include just the after-tax or do I include the SHMAC as well? What if it's not ACP safe harbor because the SHMAC and/or a regular match exceeds the prescribed caps? Do I test only the match that exceeds the caps or the entire combined matching contributions? Please list any and all available options and site regs if you can.

I'm pretty sure I know the answer to this, but would like some verification.

A company with a 401(k) plan wants to amend it to allow for a discretionary employer contribution, subject to a vesting schedule. Is there any way the vesting can be based on years of service beginning on the date of the contribution, rather than total years of service under the plan?

In other words, assume the contribution is subject to a 5-year cliff vesting schedule. Do all participants who have 5 or more years of service at the time of the contribution have to be automatically fully vested in the contribution, or can the plan provide that, for purposes of vesting in this contribution, only years of service after the date of the contribution will be counted?

My client maintains a cross-tested profit sharing / 401k plan. The owner's wife, who receives comp. of about $30K, arranged to have a $12,000 401k contribution made in late December, 2003.

It turns out that this 401k deferral causes the plan to fail the general nondiscrimination testing, which is performed on a cross-tested basis (the ave. benefit prong). Note that the plan made 3% safe harbor contributions so as to automatically be deemed to pass the ADP test.

My question is ... what corrective action is available? Can a portion of the 401k deferral amount be refunded to the wife? Can a portion of the deferral be recharacterized as a 2004 deferral? Would it matter if the money was not actually deposited into the self-directed plan account until Jan., 2004? Note that the general test will pass if $7,500 of the 401k deferral is refunded or recharacterized.

Thanks for your help and input.

We amended our client's 401(k) plan for EGTRRA incorporating a graded vesting schedule for matching contributions as follows:

1 Year = 0%

2 Years = 0%

3 Years = 50%

4 Years = 75%

5 Years = 100%

Even though this schedule is more favorable then the standard 6-year graded schedule, would this schedule have to vest at least 20% in Year 2 to comply with EGTRRA?

A 501© client is offering a 403(b) plan to his employees under an ERISA plan and the plan currently allows elective deferrals only. 5500's have been prepared annually for the client, but it's unknown whether or not they've been filed. Is it possible to restate, or convert, this ERISA plan into a non-ERISA arrangement where the individuals have individually sponsored TDSA's? What are the consequences to the employer and to the employee if this change occurs? Thank you for your comments and opinions.

We have a client with 3 large pension plans. The 5500 auditor is KPMG. As part of their routine data gathering, they are requesting some odd things. Here is a sample:

1) pension calculations for retirees who commenced 30 years ago

2) employment applications to verify hire dates for persons who retired in the 1980's (some of whom hired back in the 30's and 40's)

3) copies of payroll reports from 7 years ago to verify compensation used in the FAE definition

Obviously, some of the information does not exist but the auditor does not seem to know how to react to unavailable information. Exacerbating the situation is that the client was spun off 2 years ago, and many of the personnel records stayed with the prior owner.

In virtually all other data requests I have handled, the information request was largely limited to things that happened during the year audited. Did the audit standards or rules recently change, causing auditors to have to "re-audit" old information that was possibly audited in some prior year?