There is a disagreement in our office regarding the calculation of a participant's maximum lump sum.

With the increase in benefits up to a maximum of 13,750 a month what is the new maximum maximum lump sum? Obviously it depends on compensation, motality, and attained age and retirement age (monthly benefit provided) as well as the current 30 year Treasury bill interest rate.

Does anyone have a formula? Our software that we are using doesn't seem to be correct.

Is there software or some other type of service that can provide me with the rate of return for a handful of mutual funds for a specific period of time. I have the ticker symbols of the funds involved and need to get what the fund returns were during the period in which the plan had late contributions. The contributions have been deposited already. I intend to use the highest rate of return in order to complete the PT correction. Thanks.

PAL

I have a client with two plans, a 401(k) with a 3/31 plan year and a PS with a 6/30 plan year. The plans need to be aggregated for the top heavy test. The plans are top heavy.

To calculate the minimum top heavy contribution, should we use the compensation for the 3/31 plan year or the 6/30 or something else.

Upon termination of employment, a client paid out his son from a plan more than his vested balance ($7k more). The client wants to stick to the amount distributed and suggests that the payout amount be determined by the current end of year value which would bring the sons account up to the amount paid (and a little extra, $300+/-). I indicated he couldn't.

Can the client calculate the amount of the distribution on a trust valuation which is not an end of year date? and if so would he be setting a precedence for future distributions? (small company, 2-3 EEs at best including owner)

A Company has a money purchase pension plan with a 5-year cliff vesting schedule. The plan will be frozen effective March 1, 2004. The Company also has delayed forfeitures, (i.e. no forfeiture until 5 one-year breaks in service). The Company knows that it will have to fully vest those participants who have terminated employment but not yet forfeited, but the issue is how to compute the accrued benefit/account balance. Specifically, must the account balance of the inactive participant be adjusted for investment gains and losses for the time period after their termination of employment?

Couple filed as self employed and funded their individual SEPs. As of 1/1/03, they became an LLC and hired an employee. Do they need to change their SEP documents, etc.?

Trying to amend/restate a target benefit plan using Corbel's volume submitter document. Old adoption agreement provides for a participant's total benefit to be reduced by 1/20 for each year of service less than 20 years. Corbel's checklist seems to state that the term cannot be less that 35 years, ie, 1/35th for each year of service less than 35 years. I guess it would need to be 35 in order to maintain safe harbor status????? There shouldn't be a problem with utilizing 35 as the plan was recently terminated prior to Dec 31 and everyone is 100% vested. Any comments on using 35 to maintain the safe harbor status given that it has already been terminated?? Thanks for the help.

By Real Estate, I mean a building or house. Not a REIT fund or something like that.

A participant has a 403(b) with a 501c(3) org that is not governmental, non-church, that has employer contributions (no vesting) with a plan doc has an ERISA TSA.

If that participant separates from service and retains the 403(b) account, is that account still an ERISA 403(b)? or is it not subject to ERISA anymore because it no longer has a plan.

Does the participant need spousal consent for beneficiary changes?

Would loans be subject to provider guidelines or would the ERISA or plan docs still dictate loans parameters?

If the 403(b) is not subject to ERISA anymore, does the participant gain or lose any benefits?

Thanks for any help!

My wife currently has a Roth IRA with Edward Jones. The funds for this Roth were rolled over from a previous employer's 401k plan. My wife has since left a second job and has another 401k plan that we would like to rollover into an IRA then a Roth.

My question is can we open up a second IRA account with a brokerage firm other than the established Edward Jones account, or will this 401k plan need to be put into the Edward Jones account?

Thanks to all that reply!

A 401(K) PLAN HAS AN EMPLOYEE DEFERRAL LIMIT OF 10% OF COMPENSATION. A PLAN PARTICIPANT DEFERRED 20% OF COMPENSATION FOR THE PAST TWO PLAN YEARS, THE PLAN IS SILENT ON HOW TO CORRECT AN EXCESS ON A PLAN LIMIT VIOLATION. THE PARTICIPANT IS OVER 59 1/2, WHAT WOULD BE THE BEST WAY TO CORRECT THE EXCESS???

1) DISTRIBUTE THE EXCESS AND TREAT IT AS AN IN-SERVICE DISTRIBUTION AGE 59 1/2

OR

2) ADJUST THE PARTICIPANT'S SALARY REDUCTION AGREEMENT TO A PERCENTAGE TO MAKE UP THE AMOUNT OF THE EXCESS.

ANY ONE'S HELP WOULD BE GREATLY APPRECIATED.

THANKS.

Are employees enrolled in a premium only plan under Section 125 required to sign an Election to Participate form each plan renewal year before their deductions can be taken on a pre-tax basis?

Can you require that all health premiums deductions be pre-tax under a premium only plan or do you need to give the employee a choice?

Have a 3-person target benefit plan. The target benefit formula is based on a High 3 Year Compensation for averaging purposes. Situation is the owner, who had established a high average in past years, had his compensation greatly reduced in 2003. The results are as follows:

Owner: Salary of 62,500, TB contribution calculated at $40,000 (new EGTRRA limit)

2 Other participants: Combined salaries of $164,659, combined TB contribution of $18,654. Note that both calculated TB contributions were in excess of the 3% TH minimum.

Problem that arises is the 25% IRC 404 limitation. Here the deductibility limit would be $56,790, while the combined contribution is $58,654, leaving a nondeductible contribution amount of $1,864.

Plan document was timely amended for GUST and EGTRRA using the Relius/Corbel volume submitter document. The document does have the following language present in Section 4.1:

"Formula for Determining Employer Contribution":

Notwithstanding the foregoing, the Employer's contribution for any Fiscal Year will generally not exceed the maximum amount allowable as a deduction to the Employer under the provisions of Code Section 404. However, to the extent necessary to provide the top heavy minimum allocations, the Employer shall make a contribution even if it exceeds the amount which is deductible under Code Section 404.

I'm not sure if this language means anything in this case (from the GUST restatement) as this was clearly drafted prior to the EGTRRA increases in the 415 limits (remember, this wouldn't be an issue pre-EGTRRA since individual contributions were limited to the lesser of the applicable dollar amount and 25% of compensation).

Trying to see if this language would at all support a reduction in the owner's contribution to the amount that would allow the entire contribution to be deductible. Any thoughts on this situation or do we put in the full amount and file the Form 5330 with the 10% penalty on nondeductible contributions?

I have a client who has the following Cobra situation. Employee and spouse on active health coverage. Employee loses coverage so both eligilbe for Cobra. Only spouse elects to continue coverage through Cobra. While on Cobra spouse has a child and adds child to her benefit. Now, spouse wants to discontinue Cobra for herself, but continue the benefit for the child that was added after the event. Is there any legal requirement that allows this or does the spouse (as the original beneficiary) have to retain her Cobra to be able to continue the coverage of the child? Thank you.

is it correct to not provide a 3% TH cont to a key employee who is eligible, but who failed to work more than 500 hours during the plan year? plan is standardized protoype and requires 500 hours to receive contribution.

409(h)(3) states that banks that are prohibited by law from purchasing its own stock are not required to have the put option. When are banks prohibited by law from purchasing its own stock?

Fees earned as the administrator of an estate (a personal representative, executor, etc.) are taxable and on that basis appear that they can be taken into account in determining the maximum IRA contribution that an individual may make to his IRA for the year. They also are earned for services performed. However, they are not employee wages and although self-employment income, are not subject to SECA. So they don't fit squarely within the definitions of self-employment income through 219 as well. May an administrator consider these earnings to reach the $3000 and catch up contribution limits?

Thanks

Theresa Lynn

If a partner in an LLC has a net loss income reportable for the year, is it possible for that partner to make a 401(k) contribution on his/her own behalf?

Most documents provide that those employees who, during a given year, terminated due to death, retirement or disability will share in an employer allocation, regardless of the allocation requirements.

Death and disability are easy to determine.

Retirement can be as well, as long as the employee stated that they are officially retiring.

But what about those employees that are of retirement age, and just terminate during the year, and go work for another company?

Since they are of retirement age, are they entitled to an allocation? They didn't state that they are "retiring", they're just leaving the company to work for another company.

Also, if a person is of ret. age, and still employed, BUT HAS NOT worked the required number of hours, should he/she receive an allocation?

I would say yes, because you would be penalizing the person for still working for their company.

Thanks in advance!

Is there such a thing as a legitimate retroactive plan document amendment (not going through EPCRS, but conforming the plan to actual procedures). E.g., if you have a corporate resolution specifcially merging two prototype standardized plans, but the plan document amendment was never signed (even though the adoption agreement is accurate because it was based on the expiration of the 410(b)(6)© period - particpants in plan two will participate in plan 1 as of end of 410(b)(6)© period). I know it's a long shot, but I thought I would ask.