My client has a super Top Heavy Defined Benefit Plan (12/31 YE). They ceased accruals and froze the plan in 2003. The DB plan may be terminated by 12/31/2004 YE or, since plan is underfunded, plan may be continued for funding purposes only. Can the client install a Safe Harbor 401(k) with the 4% SH match formula in 2004 and be exempt from making TH minimums for 2004? Also, if no NCHE's defer can the HCE's still put in the $13,000 deferral and not receive a match because no NCHE received a match?

I'm allocating a QNEC to correct an ADP Test. The QNEC is to be allocated to all participants, including HCE's. There is 1000 hour/last day requirement on all employer contributions. Since the QNEC is tested in ADP - is it also tested under the 401(k) provision for 410(b)?

I had to suspend allocation conditions for the 401(m) to pass 410(b). If the QNEC is tested under the 401(a) provision for 410(b) I'll have to suspend allocation conditions - which increases the employer cost...again!

Thoughts and/or comments are appreciated.

May a premium conversion plan provide for a semi-annual enrollment period without violating cafeteria plan/constructive receipt rules? 125 regs appear to only define "period of coverage" as a 12 month period with respect to health FSAs and Dependent Care plans. Can this be interpreted as meaning that for non-health FSA and Dependent Care benefits (such as medical coverage) the applicable period of coverage durin which participants are prohibited from changing elections (unless the 125 exceptions apply) may be six months?

I have a 401(k) plan that matches .50 up to 5% of deferrals.

There are 2 HCE's, the owner and his son. The owner is on disability and has no comp or hrs for 2003. He is not terminated and may work part time in the future. The son has comp for 2003 and defers about 12%. Should the owner be considered in the ADP/ACP test?

If he is included in the test, they pass....if not included they fail.

Any help would be appreciated

I received my unemployment check for time I was laid off, but I just received Notice of Restitution for this money. Basically I was not eligible for the benefits because I stated that I was in a class and that I could not rearrange it for work.

I suppose I shouldn't have revealed this information, but now I am going to try to protest it. Has anyone been through this before? Should I be honest or try to say that I mistakenly checked off yes to the class questions.

No work was offered to me during my time of unemployment. The first job that was offered - through my electrician apprenticeship, was accepted. How do you get around this red-tape?

For a given fund, can Relius deduct a redemtion fee for a round trip trade? For example, if the fund specifies an X% fee for a trade in and trade out (or vice versa) within Y days, can the system automatically deduct that fee?

Does anyone know if OmniPlan and OmniPlus have this capability?

A similar post has been placed in the Schwab RT area.

Plan has 3 month eligibility (no hrs req't).

What is someone works for a month on a project, say for the entire month of January. Then works on another project in May for two weeks. Is this person eligible for the plan? Why or why not.

A 401(k) profit sharing plan participant received a RMD in 2003. There were several problems with this distribution. First, the plan contained vestages of a money purchase pension plan and the participant, although I'm certain that he never intended to take the annuity, never waived his right to receive a Qualified Annuity Benefit. However, the plan administrator did not purchase an annuity with the portion of the participants' plan account attributable to the money purchase plan. Second, the plan administrator has yet to prepare a 1099-R and did not withhold on the distribution. How would you correct these problems?

A client received a notice from the US Bankruptcy Court informing them to stop the loan repayment deduction for a participant in their 401(k) plan. The Notice cited the 6th Circuit Court's 1995 decision in Harshbarger. Is there any more current information that I can look at regarding this situation?

Old Company was a group of 60 doctors, 80 nurses, and 20 administrative staff. Old Company closed and each doctor group formed new corporations at their own hospital. There were no spin-offs, no stock sale or purchase, simply the Old Company went out of business 12/31/2003.

One of the new corporations would like to set up a qualified plan. The size is small, consisting of 5 doctors, 15 nurses, and 3 administrative staff. In 2003, working for Old Company, many of the nurses made in excess of $100,000.

The plan design would benefit if I could classify the nurses as HCEs in the initial 2004 plan year, based on what they earned in 2003. However their earnings in 2003 were from Old Company.

Is there any type of same desk rule where even though this is a new corporation, the employees remained the same, they are doing the same job, they are working at the same place, and I can use their prior year wages to determine HCEs?

After 2004 it is no problem, as "normal" determination will take place in 2005. It is only in the initial plan year that I am questioning.

Thank you.

We have a plan that is interested in using salary levels in $25,000 increments with the last salary defined as >$100,000 as the group classification. They are doing this to balance out the expected soscial security replacement ratios for the various salary levels. Is there any reason to think this may be considered an inappopriate class definition?

The small plan sponsors invariably want to know the plan cost attributable to each participant. For the Individual Aggregate and Unit Credit methods, this question is easily answered. However, answering this question for the EAN and the FIL methods has always been a challenge and problematic. I have used the following approach to allocate the Min/Max funding to each participant.

(a) Allocate Normal Cost in proportion to each participant’s EAN NC.

Plus

(b) Allocate S412/S404 net Amortization Charges in proportion to each participant’s UAL, where each participant’s UAL = Total UAL * Participant’s EAN AL / Total EAN AL.

However, at times the results produced are not palatable to the sponsors and are not consistent from year to year, even after allowing for changes in wages etc!

Your thoughts on and approach to this would be appreciated.

does anyone know where I can find instructions/forms to apply for a waiver of the min funding standard on behalf of a client ??

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