I have a 3-person client who is providing a nonsafe harbor DB benefit equal to the 415 limit for the owner, and 2% of pay accrual for the rank and file. The DB benefit is offset by 10% of pay contributions provided in the DC plan. The 2 non-owner employees are in their 30's so the DB benefit is completely offset by the DC contributions/balances. The owner is in his early 70's, and gets about a $250,000 annual contribution in the DB plan, and has nothing in the DC plan.

Since my 2 non-owner employees accrue nothing in the DB plan, and are not even considered in the participant count (at least for PBGC purposes), am I still subject to the overall 404(a)(7) limit of the greater of 25% of payroll or the DB min.?

Or can I reason that I do not have any of the same participants in both plans (since my non-HCE's have no benefit and are projected to have none), and that the deduction limits apply to the plans separately?

Everything appears to test out OK when cross testing the PS contributions.

I am working on a DB/DC-cross tested floor offset plan. 1.401(a)(4)-9(B)(2)(v)(D) states that each NHCE in the DB/DC plan must satisfy the minimum aggregate allocation gateway. I have to include about 40 people in the DB plan (to pass 401a26), but only about 25 in the DC plan to pass 401(a)(4) on a combined basis. So, 15 or so participants will get a 0.5% of earnings annual benefit accrual in the DB plan and nothing else - so I presume...

But do I have to give the 7.5% to these 15 or so in the DC plan since they are NHCE's who receive a benefit in the combined DB/DC plan?

I anticipate making 300,000 of schedule C income in 2004. However, much of this money will probably be made towards the end of the year. I would like to fully fund my SEP with $40,000 the first week of January 2004. Can I do this even though I haven't yet earned the income?

Does the IRS now allow 457 plans to have In-service distributions like a 401k plan would? Could a 457 allow for In-service distributions based on years of service and retirement age (ie 59 1/2)?

Treas. Reg. § 1.403(b)-3 Q&A 4 provides that for purposes of calculating a participant's required minimum distribution (RMD) from more than one 403(b) plan/annuity, a participant can total the minimum amount from each 403(b) and take the total minimum distribution from any one of the 403(b) plans/annuities (rather than taking a portion of the total minimum distribution from each plan/annuity). Does anyone know whether a plan or annuity contract must specifically provide that a person's total RMD for the year may be taken from its plan or annuity contract or is this something the participant can decide to do? In this case, the plan and applicable annuity contracts are silent on this point. (At most, the annuity contracts state that minimum distributions must be made in accordance with the provisions of IRC § 401(a)(9).) Does silence on this issue mean that a person must take a portion of the total RMD from each of the plans/annuity contracts? When the participant (who is now retired) called her former employer, she was told that she could not take her total RMD from just one of the annuities (because that was not a permitted distribuition option), but had to take a portion of the total RMD from each annuity. Is there any authority one way or the other?

Also, would it be easier to avoid this hassle by rolling over the participant's 403(b) accounts into a "rollover IRA"?

Thank you.

Employer has a profit sharing plan (no 401(k) feature). He wants to terminate effective December 31, 2003. Same employer wants to adopt a new safe harbor 401(k) Plan effective January 1, 2004. Profit Sharing money will be rolled into Safe Harbor 401(k) Plan. Is there any problem with this? What about S/H notice requirement? Thanks for any and all input.

A participant who died earlier in 2003 with her daughter as sole designated beneficiary had deferred her RBD for RMDs. Can she use the Uniform Life Table or does the Single Life Table have to be used with the daughter's life expectancy?? Thanks.

Here are some situations that I would appreciate clarified:

A. Safe harbor 3% plan with cross tested profit sharing ( owner getting 20% allocation and employees getting 5% ( 3% safe harbor plus 2% PS ). An employee enters 7/1/03 on a 12/31/03 plan year end. The plan is top heavy. What compensation period do they pay on and what %?

B. Same as A. above but not top heavy.

C. Same as A. above but no profit sharing contribution this year.

D. Same as A but an active participant terminates 6/1/03 with 900 hours ans the plan has a last day / 100 hour rule. Since he gats the 3% safe harbor up to 6/1/03 does he also get 2% gateway minimum ?

Thank You

Is a child (over age 21) of a majority owner considered a majority owner through attribution for PBGC purposes? Can they waive benefits?

We've got a whole bunch of multi-life profit sharing plans sponsored by sole props and partnerships being amended at this time to 401(k) and safe harbor 401(k) plans effective January 1, 2003. The rank-and-file, if they want to and can defer, really only have one or two payrolls left in 2003 in which to do so. But the self-employeds have all of 2003 on which to base their deferrals. To me, this seems inherently discriminatory, and I'm wondering if these types of amendments run afoul of BRF.

Could anyone tell me in relatively plain English what 1.417(a)(3)-1©(2)(i)(B) means when it provides for "Stating the amount of the annuity that is the actuarial equivalent of the optional form of benefit and that is payable at the same time and under the same conditions as the QJSA." They don't seem to provide an example of this approach. Thanks!

A participant from one of our clients requested a loan. He had an

outstanding loan balance of $27,000 in December of 2002, the loan was then

paid off in March 2003. The participant then took another loan in April of

2003 for $13,000. Now he is requesting another loan and the amount being

calculated is being reduced by both highest outstanding balances

($27,000+$13,000 = $40,000) in the last year. Is this correct? Or should

the amount be reduced by only the highest outstanding balance ($27,000)?

How do we address this issue?

My one HCE is 71, accruing the 415 max, and this is a new Plan. Can I consider my HCE's accrual rate to be 8% at a testing age of 65, even though his benefit is much higher, as a percentage of pay, due to the post-age-65 actuarial increase in the 415b limit? The actual accrual rate for him is 32000/200000 = 16%.

Any good design ideas to maximize efficiencies with a 71-year old owner and a 40 year old employee?

Hi,

I am currently working as a temporary employee with a company since March 2003 on W2 basis without benefits.

I am not eligible to participate in the company's 401K program, due to temporary employee status.

I would like to set aside pre tax retirement savings out of my 2003 year income.

How do i go about this ?

Please suggest a pre-tax retirement savings plan i could participate in and invest a maximum amount (IRA or Individual 401k or SEP or any other) ?

Thanks

Raj

Employer has maintained a MPPP with a 25% formula. Contributed 25% for PYE 8/31/03. Effective 9/1/03, employer wants to "amend" MPPP to a PSP. 401(k) deferrals will also be allowed effective 1/1/04. Participants will get 204(h) Notice about change. Can employer adopt the 401(k)PSP as a restatement of the MPPP -- i.e., no final 5500, no new trust ID, no new Plan #?

A Client with a SIMPLE IRA has a fiscal year ending 9/30/02. The elective contribution for the owner was made in Feb of 2003. Can that contribution be deducted for the fiscal year ending 9/30/02 or must it be deducted for the fiscal year ending 9/30/03?? Thanks.

Participant is not a 5% owner and is still actively employed. He took RMDs in 2001 and 2002. He decides he no longer wishes to take RMDs. Can he discontinue the payments? Here is my logic (or lack of): (Assume plan allows participant to begin RMDs when he hits 70 1/2. Also assume plan allows 59 1/2 withdrawals.) Participant techinically has not hit his required beginning date because he has not retired and is not a 5% owner. Could we classify the 2001 and 2002 payments as 59 1/2 withdrawals and not issue him any additional payments until he retires from the company?.

Thanks for you help.

Could someone please tell me what happens to a 403(b) when the employer no longer qualifies as a 501©(3) org? Is there some sort of termination process? Is the loss of 501©(3) status a distributable event for the employees? Would a direct transfer to the employer's newly adopted 401(k) be permitted? Can the 403(b) accounts be maintained by the employees indefinitely? Any help would be appreciated. Thanks!

If a profit sharing plan does not have a last day or hours requirement, is it still possible to change the number of groups listed in the plan document?

how do you handle people on H1B1 visa's. I think they are resident aliens which means they must be excluded under another classification besides the stautory nonresident alien exclusion.