In a 401k plan, what is the best way to remove the discretionary profit sharing accounts altogether? There will be no future discretionary profit sharing contributions, and we will 100% vest these accounts. The client wants to pay all participants their funds in these accounts to simplify recordkeeping. We could add in-service distributions using the "2-year rule" but that would not permit us to distribute all funds at this time. The 401k deferrals and matching contribution funds would stay in the plan and these contributions would continue. Thanks for all your input and ideas...

A Plan operates for the first several plan years as a calendar year plan with a 6 month wait. To make things easier administratively (enrollments, etc) they set up dual entry dates of April 1 and October 1.

Later the Plan is amended to a one year wait. If the entry dates remain April 1 and October 1 is this now a violation of the statutory entry?

As always, thanks for any insight.

Plan was effective in 2003 (effective date of deferrals was also in 2003). However, no deferrals or matching contribs were made, nor were any other benefits accrued in the 2003 plan year.

Can the employer use the deemed 3% for both adp/acp testing in 2004, as there weren't any contributions made in 2003 or do they have to amend the plan to use current testing?

Last year the rank and file received a 10% SEP contribution. Due to miscalculations of partners' income, the partners received a bit more than 10%. What are the ramifications and what are the options for correction?

401(k) plan, not a safe harbor. In the plan document, under Matching Contributions, the box is checked that reads: "Such amount, if any, equal to that percentage of each Contributing Participant's Elective Deferrals which the Employer, in it's sole discretion, determines from year to year." Am I correct in interpreting that to say if the employer tells the participants that they have a 6% match that, a participant who earns $126,000 and defers $12,000 should get an employer match contribution of $7560?

Thank you for your help.

We have a situation with our flex spending account in which some participants were reimbursed more than they had deducted for the year. We are still researching how this occured but in the meantime need to plan on how to correct this. It has been suggested that a 1099 be issued for the excess amount or that we contact the participants and request that the excess be paid back. Has anyone had a situation such as this and if so, what correction did you use?

Thank you!

This situation just doesn't smell right to me but I can't put my finger on it.

Father owns 100% of two corporations. Business B derives all of its income from Business A.

Father transfers ownership of Business B to his two children (X age 10 and Y age 5). Business B pays each of the children a heafty salary. Business B sets up a separate 401(k) Plan for X and Y. Their salary is enough to allow them to defer the maximum plus to receive a safe harbor non-elective contribution a sizeable profit sharing contribution (integrated).

Business B has no employees other than X and Y. It's obvious, based on their ages, that X and Y perform no services to Business B for which they are paid. Father now derives all of his income from Business A which has several other employees and its own 401(k) Plan.

I am sure that I am leaving out some vital information but it seems clear to me that Father is paying X & Y through Business B solely to put more into a qualified plan. What's wrong with this picture or am I just being paranoid?

For purposes of self employeed net income do we need to back out catch up 401(k) contributions? Because it is not used for testing my reaction is no but need confirmation. Thanks for your help

ED

I'm piggy backing off of jhilliard's question of the expenses coming out of a plan, whether it be recordkeeping fees or audit fees. Does anybody know where it is in writing that allows a plan to do this (beside the plan document) such as an IRS reg. or notice.

Thank you

I've only used a couple of these, so I want to check my stuff here. I calculate that up to 12 people would be in the top-paid group. In reviewing lookback year comp for this client, the top 8 employees have comp more than $90K in 2003. The president of the company (who I suspect is an owner, but we can't get confirmation yet) is NOT in the top-paid group as ranked by comp.

1. Should I look at the results as a maximum number who should be included?

2. Should I only include those with comp greater than $90K?

3. Should the owner be included regardless of comp?

4. If the owner is included, does that reduce the number of top-paid people I should include? (down from 12 to 11, or 8 to 7)

Thanks for your assistance with this. These calcs always tie me up in knots.

Michael

I have a 3% safe harbor cross tested 401k plan. If there are no profit sharing contributions the keys can do the 13,000 deferrals w/ no questions.

However i get confused when there is going to be a profit sharing ( cross tested )

allocation in a given year.

Why does the safe harbor ( 13,000 deferrals plus 3% safe harbor employer contribution ) have to be brought into the mix for testing the cross tested piece?

This seems as though it should stand on its own.

Is there any website or resource out there that explains in a page or 2 what the exact tests there are in these plans that I could use to perhaps explain to a CPA ?

Needless to say I am not an administrator - I just sell these plans ( and get surprised every day by what I don't know after 20 years !! ).

Me and my wife both work and have an AGI under 150K. We are planning to set up Roth accounts. Is the $3000 limit to contributions a combined limit or can each of us contribute $3000 for a total of $6000?

401(k) Plan - deferrals only. Doctor (HCE) plus 2 NHCEs. Doctor deferred $12000 and neither NHCE deferred. In Relius, when I run the ADP test for corrections and use the "statutory exclusions", Relius gives me a QNEC amount for the one NHCE who has been there awhile. If I don't use the statutory exclusions, then a QNEC is computed for both NHCEs. I know this is stating the obvious, but because over the years I have learned to be skeptical of software sometimes...is this ok? Is it acceptable for the Dr. to give just a QNEC to the one NHCE and pass the ADP tests utilizing the statutory exclusions? It makes quite a $ difference in the required QNEC amount. Thanks in advance for all replies.

My late wife and I did a living trust with the objective of passing her assets to her kids and my assets to my kids.

What are the pros and cons of naming the trust as beneficiary for my IRA, versus naming my kids individually as beneficiaries?

I will appreciate any help anyone can provide.

Thanks.

I am a graduate student working on a project on how to create a benefit plan for a small, privately held company. Is there anyone that can help me out on where to find good information?

May an employer offer a small sum of money to an employee who opts out of the health insurance plan if proof of spousal coverage can be shown?

Would there be any problem if too many people opted out?

Not my plan but was asked by a co-worker to post this question:

In a 401K (Union) plan are there any restrictions on paying for the plan audit from participant balances?

Thanks

I have a client who sent their integrated PS allocation calculation to us for review. I have not had many plans in the past that utilized this method of allocation (or at least they didn't ask me to review it). Our compliance person is saying the allocation is wrong but wanted me to post a question to make sure.

Would it be appropriate to allocate 3 percent as a safe harbor allocation and then allocate 7.028754 percent to comp over the $87000 level?

I am being told the allocation would need to be more like:

3 percent for safe harbor, 5.7 percent (maximum integration level) and an additional 5.3 as a comp-to-comp allocation.

The goal is to maximize the key personnel.

Any help would be great!

I have a client who recently attended a seminar (dangerous situation!) where they sang praises to the idea of an "individual 401(k) plan". The big attraction he came away with was that he understood that these individual 401(k)'s DO NOT require owners over age 70 1/2 to take MRD's. I cannot find any reference to this at all. Has anyone heard of such a thing?