A plan excludes OT, Bonus, Comm. The plan is 401(k) and pay period match only. I ran compensation ratio test - plan fails - NHCE inclusion % = 80%

HCE inclusion % = 100%

I tried testing 401(k) and match contributions under 401(a)(4) but plan does not pass ABPT - only 67%.

What can I do for this plan? Does the employer have to do a QNEC to pass 401(a)(4)?

Can I amend the plan to not exclude these compensation items within 9 1/2 months after plan year end? If I amend, plan do I just run ADP / ACP on gross compensation or does the employer have to still make some sort of employer contribution becuase NHCE's did not get to contribute or receive match on gross pay in 2003?

Any thoughts would be helpful.

Our current document provides that:

The Employer may make Qualified Nonelective Employer Contributions. The Employer shall contribute on behalf of all eligible Non-Highly Compensated Participants eligible for an allocation, a contribution equal to the amount, if any, as necessary to satisfy the Actual Deferral Percentage limitation and/or Contribution Percentage limitation. Such contribution shall be allocated first to the lowest paid Non-Highly Compensated Participant up to 25% of Section 415 Compensation, then to the next lowest paid Non-Highly Compensated Participant until the Actual Deferral Percentage limitation and/or Contribution Percentage limitation is satisfied.

Is it possible to amend the document to provide that "such contribution shall be allocated first to the lowest paid Non-Highly Compensated Participant up to 100% of Section 415 Compensation..." or would that exceed the overall deduction contribution limit?

For someone who wishes to make up missed deferrals while on a 6 month leave in 2003, are those deferrals reported on his 2004 w2 along with his "regular" deferrals made in 2004? Or would he have to file an amended 2003 return? In our case, he would end up with a total of about $19k total deferred. Still working with our recordkeeper on how they will account for the made up deferrals, given the limits built into their system.

I just want to confirm what I believe to be true.

A plan is a SH 401(k) plan that is top heavy. For the plan year, the only contribution made is the 3% NEC, however, DOP compensation is used so that several participants do not get 3% of full-year pay (required if the plan were considered for top heavy). I presume this is okay since the plan is treated as not top heavy.

However, if additional contribuitons were made, then the new entrants would need to get the 3% full top heavy contribution.

Can someone please confirm that this is how they understand it as well.

Many thank

If we have a POP plan, can we also pre-tax contributions to employee HSA accounts? We're in the process of setting up the POP.

Do we need to upgrade to a different type of Cafeteria plan to include the HSA? We don't want the dependent care and FSA.

We have an employee who had a child on 12/31/03. On 1/12/04, the employee contacted us to make a change to the Health FSA based on the status change.

We make the increase he requested for the 2004 FSA election, but he is now arguing the point that he should be allowed to make an increased FSA contribution for 2003, even though payroll for the 2003 year was over and one with by the time he made his status change election.

His opinion is that the tax benefit to the employee (salary reductions) and source of funding need not occur within the same year.

In practical terms, any status change after Dec 15 could never be made, since payroll withholding of an additional amount could not be accomplished before the end of the year. He is stating that this does not agree with the intent of IRC 125 and TR 1.125-4.

Any thoughts on this?

Thanks.

Plan year = 08/01/02 - 07/31/03

Plan allows salary deferrals up to 20% of compensation

Compensation is measured on a PY basis

Plan allows for catch up contributions

My ADP test is failing and I have two participants over age 50 with the following contribution amounts:

A - compensation = $117,000

contributions = $15,139

contributions deposited 01/01/02 - 12/31/02 = $11,000 of which $7,040 was contributed from 08/01/02 - 12/31/02. $8,099 was contributed from 01/01/03 - 07/31/03.

B - compensation = $109,418

contributions = $14,025.35

contributions deposited 01/01/02 - 12/31/02 = $12,000 of which $1,068.97 was contributed from 08/01/02 - 12/31/02. $12,956.38 was contributed from 01/01/03 - 07/31/03.

For the plan year, can you please help me determine if any of the contributions included above can be treated as catch up contributions?

I will admit up front that I have probably left out some important information, so please be kind with your analysis and I will provide any additional information that is required. Thanks.

Plan was amended for GUST effective April 1, 2003, with a March 31 Plan Year end. What is deadline for SPD to be given out? Thanks!

Have a small profit sharing plan (10 participants) that requires employees to be employed on the anniversary date of the plan to receive a contribution. One of the participants terminated employment prior to year end with 750 hours and therefore did not receive a contribution. However, this participant did receive contributions for the past three years (i.e. he has an account balance).

We are using the accrued to date method when testing for 401(a)(4). Is it correct that he should have an accrual rate even though he did not benefit this year?

Thanks.

Company A is a fully owned subsidary of a large corporation. Company A sponsors a plan with approximately 2,000 participants.

One entire location of 100 participants is being closed. Of the 100 participants less than 10 are being offered a position at another locaiton.

Does this qualify as a partial termination for the 90+ participants that are being terminated without an opportunity to complete their vesting?

I searched for and read the archived messages of the recent past about inherited IRAs... Seems to be a continuing trouble spot. So here we go again....

I have this situation: Mother with Trad. IRA dies in 1999, RBD was 4/1/1994. No living spouse. She named her two children as primary beneficiaries. Each child has taken RMDs each year starting in 2000. Now one beneficiary wants to transfer her portion to another custodian. Our organization cannot and would not open an IRA for a deceased person. I know PLRs have clearly stated a beneficiary cannot rollover his or her portion, however, ttee to ttee transfers are permitted.

Does this mean the transfer can be made to an IRA in the decedent's name that was preexisting at death (another inherited IRA) or are there custodians out there who will open an IRA in the name of a decedent?

Our policy now is we will do the transfer provided the new custodian acknowledges the IRA is in the decedent's name and that they will accept the inherited IRA. We also require the beneficiary to execute a hold harmless letter since our position is that this is a grey area with the IRS and we believe the transaction is not approved by the IRS.

Can anyone enlighten me further on this issue? Any information is greatly appreciated. Thank you.

FAS isn't one of my strong points. Regarding distributions, i understand distributions weighted for timing and actual distributions. However, i'm a little confused about expected distributions and the interest on them. Are expected distributions only for retired participants in pay status?? and is the interest on expected distributions only on those distributions or is the interest on the expected distributions the interest on the weighed distributions. Please help!! thanks.

If controlled group member #1 amends its plan for catch up but controlled group member 2 does not until a following plan year, what is the penalty?

Can anyone tell me what should happen when a patient has an insurance coverage change during the time he/she is admitted to the hospital? Does the coverage in effect at the time of admittance cover until the patient is discharged? Or should coverage change on the effective date of the change? What about if there is a change in the insurance company?

It would seem logical that the coverage and company should stay in effect until discharge. Seems I recall policies stating that employees or dependents who are hospitalized at the time the policy, or policy change, becomes effective, are not covered until discharged.

Now for the kicker. Is this covered by State regs, federal regs or other? A cite would be helpful?

tks

Ronc

As a TPA we receive much confidential information about plan participants. (SS#, address, etc). Does anyone know if it is required or advisable to include some type of disclosure or privacy statement in information we provide to our clients?

Thanks!

1. Can a participant just choose to have their loan deemed? Say they haven't reached the end of the cure period, but want to have their loan deemed because they say they won't be able to make payments. The loan policy says that a loan will be deemed, if at the end of the cure period, missed payments have not been made up. Would it be a violation of the loan policy to default the loan early?

2. When does the cure period end for a participant who is returning from a 12 month leave of absence? Loan policy allows participant to suspend for up to one year for unpaid leave of absence. I know that a loan goes into default after the first missed payment, and will either be deemed or offset at the end of the cure period. Is the first missed payment in this case, the first payment due after the leave ends? Example....

Participant goes on leave on 2/1/03, was current on monthly loan payments when leave commenced. 12 month period ends on 2/1/04. If he does not resume payments, would you deem after 6/30/04, because the 3/1/04 payment is the 1st on missed, or do you consider the 3/1/03 payment to be the first one missed?

Thanks

From my understanding the money you originally put into a Roth IRA can be withdrawn at anytime without a penalty. It is just the gains when withdrawn are taxed and penalized if they are non-qulified withdrawls.

What can I cite to an IRS Auditor to prove my point with the above?

I've shown her my total contributions to the Roth account based on brokerage statements which show I have more than enough contirbutions to cover the withdrawls I made.

I even pointed to parts of IRS Pub 590 (which she told me about) which state in not so many words what I am trying to get across.

Any suggestions would be greatly appreciated.

I have a rollover IRA with an institution and I want to roll over about 75% of it to another institution. I will liquidate enough assetts so that I have the amount I want to roll over in cash. The rollover form from the new institution has the option of rolling over 100%, or designating which assetts to roll over. I am afraid this will get screwed up. So here's the question: Can I use the checkbook I have from the first institution to just write a check to the second institution? I know this is not an institution to institution transfer, but I believe I could even keep the funds for 60 days if I wanted to. So could I also transfer the funds from the first institution to my bank checking account, and then write a check to the new institution? I believe I can elect no withholding in either case so that should not be a problem.

We have a situation whereby there are five taxable employers that currently sponsor five separate nonqualified deferred comp plans. All five are part of the same controlled group of corporations. For administrative ease, we are combining the five plans into one. The parent corp of the entire controlled group will administer the plan - it is a tax-exempt entity. Do we have to have one of the five taxable entities sponsor the plan? Our concern with the tax-exempt entity sponsoring the plan is whether 457(f) will be implicated. Thoughts? Concerns? Insights?

If a match for the 2003 plan year isn't going to be made until May of 2004, is there anything wrong with doing an ADP test now and then doing the ACP test after the match comes in? What are possible consequences of doing this? Thanks a lot.