For 2002, do you not have to file 5500s for cafeteria plan?

Is a church sponsored 403(b) plan with a match exempt from discrimination testing (ACP), as well as 5500 filing requirements?

I read some where that there were new rules for loans effective 1/1/04. I have not seen or heard of anything more about this.

Do you know where I could find out about these changes?

I am having a debate with a friend who is a CPA. He is now thinking about telling his client to forget about his DB plan and put the money away in a taxable account; due to the new 15% tax. Here is the scoop

48 year old Dr. looking to retire at 60. Contribution to a DB plan approx 100,000. Makes well over 200,000 in comp.

Assuming the Dr takes the 100,000 he would have contributed to the DB. He pays 40% in tax and invests the 60,000 into an investment making 5%. In 13 years paying 22% in taxes (15% fed and 7% NY State) he would have approx 991,000.

The CPAs argument is that the lump sum payment from the DB is not that much larger than the amount in the taxable account. His thought is that is goes against everything we have been taught to believe, which is you'll make more moeny in the retirement account than paying taxes each year. According to him the difference between the two is not a slam dunk as you would think it would be.

I know that a few other CPAs I have talked to have been to seminars on this topic. Any thoughts?

Some colleagues and I are having a lively debate about elective deferral compensation. Here is the scenario:

The payroll period runs from December 28, 2003 through January 10, 2004.

An individual makes $100 a day

The individual works Monday through Friday.

The individual is eligible to participate in the plan on January 1, 2004.

The individual signs and submits to the plan administrator the elective deferral agreement on January 5, 2004.

The individual made:

$300 through December 31, 2003

$300 from January 1 through January 5, 2004

$400 from January 6 through January 10, 2004

$1,000 total compensation for the pay period

What amount of compensation do the elective deferrals come from?

(a) $1,000 (pay period compensation)

(b) $700 (compensation from date of eligibility)

© $400 (compensation from date of signed and accepted elective deferral agreement)

Thanks!

I'm just curious...

Two (more than 5%) owners hire their minor sons (one is only 17 years old), have a plan that has immediate entry (no age or service requirements) for deferrals and are able to defer the max because of the fact that their sons do not defer at all so the ADP is lower for the HCE group.

Because of attribution rules, the sons are considered owning the same percentage as their fathers, so they are also in the HCE. The thing is, they are really part timers and, of course they are not deferring. This is making it possible for their fathers to defer the max.

Does this seem right? Am I missing something...or am I being too cautious.

Any imput?

I have received mixed messages and was looking for some guidance for a situation involving participant loans. Due to various issues, a Plan had several instances where loans were in default, but no 1099 was ever given (in some cases default was two years ago):

- Participant terminated with unpaid loan balance and received cash distribution for all non-loan assets. 1099 was issued only for non-loan assets.

- Participant was active, but payments stopped on loan before repayment completed. No 1099 was ever issued.

Do either of these instances qualify as a prohibited transaction? At the inception of the loan, all the DOL rules were met for the prohibited transaction exemption. I have heard some indicate that the failure to issue the 1099 constitutes losing the exemption, and would need to be reported as a PT. Others have indicated that this is a reporting issue with penalties for failure to issue the 1099, but not a prohibited transaction, since the loans met the exemption rules at inception.

Anybody have similar instances and how they were treated?

If both spouses have employers with cafeteria plans, is it double dipping if each one signs up for the DCAP for the full $5,000 (meaning a pre-tax benefit for the family of $10,000)? Will the couple end up paying taxes on the amount above the current $6,000 credit limit?

Thanks

An employee has life insurance through a cafeteria plan way over $50,000. This employee has also taken a policy out on their child. Is the PS-58 costs calculated on the age of the employee or the dependent?

It is my understanding that a waiver of participation from a 401(k) plan must be irrevocable because of the cash or deferred rules. However, can a participant (who is not an owner and never will be an owner) waive in and out of participation in a defined benefit plan. Please understand that I realize that once an owner accrues a benefit under a defined benefit plan, the owner cannot waive that benefit.

The situation is this - A large not-for-profit has hired a director for one of its divisions. The employment agreement is for one year and requires only 10 hours of work per week. The employment agreement will be renegotiated every year. While it is anticipated that the employee's position shall likely not change to full-time over the years, this is a possibility. Employees are eligible to participate in the defined benefit plan after 6 months of service. The employee is not receiving additional compensation in return for waiving out of the plan.

I do not want to force the employee to sign an irrevocable waiver if I do not have to. If I make the waiver irrevocable and in the future the company wants the employee to move into a full-time position, then the company would not be able to provide a defined benefit accrual for the employee. In other words, must the waiver of participation for a non-owner in defined benefit plan be irrevocable?

I am a new Benefits Manager and I am just now working on updating my firms Cafateria documents. So, naturally I have a few questions I am hoping someone can help me with.

1. If the firm reimburses mileage up to $.37 (and the IRS amount is .375, can an employee run the difference through the Cafeteria Plan?

2. Do you have to have a formal Plan document in order to operate a Cafeteria Plan?

3. Does anyone have an easy to read chart that will show employees how much they will save in taxes by deferring some of their compensation (medical and child care)?

Thanks!

Plan was established through financial advisor who is now in jail. Financial institution to which the advisor was associated has been swallowed up in two subsequent acquisitions by financial institutions.

No one can put there hands on a copy of a plan document which establishes the plan.

Have questions about EPCRS program:

If customer applies under EPCRS and receives IRS blessing, does blessing extend to DOL as well?

If we contact DOL as part of due diligence to see if there is any chance an SPD was filed in earlier years, could this trigger a DOL audit?

If DOL audits while client is applying under EPCRS, what impact does this have on the filing/outcome if any?

What is the minimum Sched C necessary to defer $14,000. Is it $14,000 or is it grossed up by the SE ded, $15,065...

You would then still owe income tax on the amount paid as SE tax, $1,065?

Thanks

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Gotta love that Saddam picture!

I have a client who has never had any distributions from their plan until now (Dec). This is the only client I have in which the investment company does not prepare 1099's, 945's or 1096's. (It has been at least 5 years since I have done these types of forms.)

There were 2 distributions with 4 checks to each. One set of checks issued on 11/28 (received 12/2), and one set issued 12/02 (received 12/06). (This investment company issued separate checks for each fund, as well as separate withholding checks for each fund.) No one check is for over $2,500, but together they are.

In the past (5 years ago), we filed a 945-V and sent the withholding checks in monthly. In looking at the instructions for filing form 945 it mentions that the withholding checks must be deposited into a depository. Then it goes on to say that they can be sent with the annual 945.

I called the IRS to get their opinion, and after talking to 6 people (over an hour), I never got a straight answer.

My question is....since the checks were received in December, and no other checks will be issued before the end of the year, can I send in the checks with the annual 945? Will the client be penalized? What if the distribution happened in February? Do other TPA's or Investment Providers make their clients set up separate depository accounts for each client's TIN for federal withholding?

Please help! I'm getting more frustrated by the minute.

Excuse me if I'm wrong, but isn't there a regulation change that is suppose to take place soon which will allow the use of 100% of current liability when calculating the Full Funding Limitation. If this is true, for what plan years will this be allowed or our we still waiting on the regulations to be passed?

We are a TPA. A participant asked if we would reimburse bio-feedback. He was a little vague on what it was, and among us, we can't define it either. Does anyone know what bio-feedback is and whether it would be reimburseable?

Thanks!!

Carolynn

A governmental entity switched to non-profit in 2003 subjecting their Plan to ERISA.

Most likely the Plan can't be excluded from the Additional Funding Charge due to the "0 participants in prior plan year exclusion" just because it was not then subject to ERISA (it actually had 400 participants in the prior year). However, can the Plan's Funded Current Liability Percentage be determined for the prior 2 plan years and then apply the Volatility Rule? Any help on this would be appreciated.

what is the maximum allowed for dependent care per year?

Plan funding method is Aggregate with AL of $10,000,000 and assets of $9,000,000. Entry Age Normal PVAB is $11,000,000 since a frozen plan with PVFNC of $4,000,000, EANC of $1,000,000, and FSA balance of $0. This leads to Full Funding Limit of $0 ($11,000,000 - $4,000,000 + $1,000,000 - $9,000,000, not less than 0). This result seems a bit odd. Any thoughts or comments would be appreciated? Thanks in advance!