I have an LLP with 4 partners. They have a regular 401k plan. Their deductions for their contributions flow on to the same line of their individual tax return regardless of whether they are classified as a deferral or a match. They send in contributions monthly and try to split the money between deferrals and match on the recordkeeping system ( knowing that this is purely an estimate since they don't really know their pension income ).

What is the administrator supposed to do with this data after year end ? Does he reclassify deferrrals and match for the partners somehow ? It would be better for ADP testing to show as little deferral as possible. Should his software make this computation after the partner net/net pension income is computed? Shoul they then go into the recordkeeper and reclassify these moneys between deferral and match ?

Thank you.

Can someone direct me to code sections on this.

A custodian receives a rollover distribution request and does not process the distribution for over 3 months.

1) Can the custodian be sued?

2) Can the plan sponsor?

3) What if the distribution instructions lacked a required letter of acceptnace by the new carrier, and delayed in notifying the participant of the incomplete forms, thereby delaying the processing of the distribution for over 3 months? Anyone liable? The letter of acceptance is an aknowledgement by the new carrier of the participant, what plan it is, and acceptance of the impending distribution.

Safe Harbor 401(k) plan using basic match formula (100% on 3% and 50% on next 2%). Match is calculated per pay. Payroll provider calculated match incorrectly for a NHCE that was deferring a flat dollar amount not a percentage. Only one participant was affected and it was not incorrect on all payrolls.

Would this cause it not to meet the safe habor and be subject to the ADP and ACP test? Or could a correction be done for the match for the one participant? Any ideas on correction method?

Thanks ahead of time !

Can someone help me out with Permissive Disaggregation rules?

I understand that if the plan's entry requirements are less restrictive than the statutory maximum, then you can run additional tests and rely on those results for coverage and ADP/ACP.

Here is where I'm confused.

-You run 1 test with the total group.

-You run 1 test with the otherwise excludable group (those who do not meet the statutory requirements)

-You run 1 test with only those that meet the requirements.

So as long as you pass one of the three tests, you can rely on those results?

Is it true that you in order to rely on Permissive Disaggregation results for ADP/ACP, you must pass Permissive Disaggregation for coverage? Does that mean you must pass both Permissive Disaggregation tests, or just one?

Thanks for any clarification anyone can give me!!

A takeover safe harbor 401(k) plan allows union employees to defer and receive matching contributions, but they are ineligible for any nonelective sources, including the safe harbor nonelective contribution.

I can't find anything that says this is permissible. Notice 98-52 and the ERISA Outline Book simply mention that all employees eligible to defer (except otherwise excludable employees) must receive the safe harbor nonelective.

Confirm or deny my findings please.

I have a new client who wants to establish a retirement plan for 2004. They are both partners in an S Corp. They are divorced husband and wife. A 60/40 split of ownership. They have drawn approx $20,000 in Salary for 2003 and $30,000 in dividend.

My 1st questions - can the dividend + the salary be used as basis for their contribution? I think it can because it flows through to their personal returns.

#2 - Because they are divorced, is a Single K an option for these clients?

Thanks for your response

Can a participant in a governmental 457 plan roll over assets to a conduit IRA? That is, roll the assets to a traditional IRA and after enrolling in a new governmental 457 plan, roll the assets into the new employer's 457 plan? If so, can the rolled over monies be treated like other 457 monies?

In essence the monies will go from a governmental 457 to IRA to another governmental 457.

We administer a 401(k) plan that covers only union employees (some of the union employees are highly compensated by virtue of their compensation). Do we need to run an ADP test? I know this question may sound strange but based on Treas. Reg. Sec. 1.401(k)-1(f)(7), Example 4 (take a look at (iv)), it appears that if the plan fails the ADP test, then all of the deferrals made by union employees will have to be included in their compensation.

The IRS writes, "nless Employer T corrects the ADP test failure in the collectively bargained portion of the plan. . . all elective contributions made by collectively bargained employees for the year will be includible in income. . ." The IRS seems to be saying that a union 401(k) plan automatically satisfies the nondiscrimination test. However, in order for a 401(k) plan to be a qualified CODA (which is apparently a separate issue), it must pass the ADP test (even if it is a union 401(k) plan). I am confused!

Thanks in advance for any thoughts.

Is an entity that is organized under 501©(3), yet receives a substantial income from commercial type insurance subject to 457?

Have standard Profit Sharing Plan where participant was taking monthly installments - over his RMD amount. So RMD was satisifed and inservice for balance was allowed. He was still employed and over 5% owner. Participant passed away March 2003. His beneficaries are his son and daughter. When do they have to take the remaining amount in the plan.

I believe that since distributions had already started, that they have to take out as rapidly as it was being taken but need to verfy. Also does that need to start in year of death or year following?

Thanks for any insight.

We had forfeitures from our health FSA last year which exceeded our administrative costs. I would like to return the forfeitures to participants as taxable cash. Do I have to include participants who are no longer employed with us? If so, how do I treat the payment (subject to FICA, 1099 nonemployee compensation, etc.)?

Thank you.

In FAB 2003-3, the DOL provided guidance on allocating plan expenses between plan participants (as well as allocating expenses to individual participants). In the FAB, the DOL concluded that where a service provider's fees are determined based upon account balances (i.e., pro rata) a per capita distribution of those fees may be arbitrary.

Has anyone dealt with the converse to this conclusion? It seems the DOL favors pro rata distributions, so is it possible to allocate on a pro rata basis a service provider fee that is determined on a per capita basis? I strongly suspect the answer is not what I would like to hear, but I am curious as to whether anyone has dealt with this.

Thanks --

If a plan has J&S provisions and a participant must begin receiving RMDs, does the participant's spouse have to consent to those distributions being single-sum distributions?

Thanks.

We have a NQ deferred comp plan where a participant left the company last year and is going to receive a lump-sum payment now. He submitted a W-4 stating that he is EXEMPT from Federal Income Tax. Is the company required to take standard withholding? or can we accept the fact that he is stating he is exempt from Federal withholding?

Does a profit sharing plan that provides a flat 5% contribution to all participants have to be tested for nondiscrimination?

Currently we provide enrollment packages for new participants with hard copy prospectuses of all the funds the plan offers. We also distribute prospectuses whenever a new fund is offered. We would like to eliminate this and have hot-links to the fund family web site on our web site instead. We would give the plan administrator a small supply of prospectuses for participants without access to a computer. We would send a pin number to the employee as soon as he is eligible to participate in the plan; he would then be able to access our web site and be directed to the fund family web sites.

Does anyone know if this is common practice? What are the DOL/IRS rules on prospectuses? Anyone have any experience with this?

Thanks!

Can a company file their corporate tax return without having the completed 5500 for the same year?

Suppose a company has both a fiscal and plan year on a calenar year basis (1/1/2003 - 12/31/2003). Does the company need any information from the 2003 Form 5500 and attachments in order to file the 2003 corporate tax return?

A few employees were not notified of their eligibility to participate in the 401(k) plan for 2002 and 2003. The correction is to contribute QNEC's equal to the ADP for those years.

How are earnings calculated?

If you distribute a blackout notice to participants and do not meet the original end date on the blackout notice, is there a formal procedure to follow when you extend the time?

A special rule applies to a payment or distribution received from a SIMPLE IRA during the two-year period beginning on the date on which the individual first participated in any SIMPLE IRA plan maintained by the individual's employer (the two year period). Under this rule the penalty tax on early distribuitons is increased from 10% to 25%.

It is my understanding the two-year period begins on the first day on which contributions made by the individual's employer are deposited in the individuals's SIMPLE IRA.

Does that statement mean your two year period is counted on the first dollar contributed or the last dollar contributed?