I am an American living abroad. I have two questions.

First: I understand that I cannot use any untaxed income to set up a Roth IRA. With my income being below the $80k foreign earned income exculsion for the forseeable future that means I cannot use it to set up a Roth IRA. However, before leaving the states I had money in a savings account. I would like to use this to set up an account.

It, however, gets a bit murky because when I initially went abroad I took more money than I ended up needing to get settled. That was then eventually sent back to the states and deposited in my account. I have also deposited savings earned abroad into the account.

Can I use my savings and if so how do I establish the amount of savings which was earned in the US and the amount that was earned abroad?

Second: My wife is not an American citizen. Can she set up a Roth if she has income earned and taxed in the US? If she can't set up her own, is there any way we could set up an account together so that I could contribute an additional $3000 per year?

Do these fall under Section 125 ?

Do they require a plan document? Anyone know where I can find a generic plan document for a reasonable price that can be modified to my company's specifics? We don't need third party administration because the business is very small at this time.

Thanks. If I've posted this in the wrong area, please let me know. I couldn't any posts relating to this subject.

Lisa-Beth

C corp currently pays 50% of health ins. premium for all e/ee's. Any discriminatin issue if corp pays 100% for a separate class of e/ee's, e.g., officers? Keep in mind that the officers are all >5% shareholders. Also, corp considering adopting a mandatory retirement age of 65, however, corp wants to continue funding the health insurance for one e/ee who is older than 65 and who also happens to be one of the principal shareholders. Same question as above... The health plan is not "self-insured" for Sec 105 purposes. I see less of a problem with the first scenario than with the second... Thanks for any comments, suggestions....

I can't find any information on the Social Security Administration Employer Reporting Service (I have Rev Proc 94-22). Anybody have information on the SSA Employer Reporting Service or know where I can find it? (Can't find it on the SSA website at this point)

We'd like to avail ourselves of the protection under Rev Proc 2003-44, which provides this concerning missing participants:

(d) Locating lost participants. Reasonable actions must be taken to find all current and former participants and beneficiaries to whom additional benefits are due, but who have not been located after a mailing to the last known address. In general, such actions include use of the Internal Revenue Service Letter Forwarding Program (see Rev. Proc. 94-22, 1994-1 C.B. 608) or the Social Security Administration Employer Reporting Service. A plan will not be considered to have failed to correct a failure due to the inability to locate an individual if either of these programs is used; provided that, if the individual is later located, the additional benefits must be provided to the individual [*46] at that time.

Had a client ask about this. We do nothing whatsoever with Section 125 plans, so I haven't a clue.

Can anyone either give me a 1 paragraph synopsis, or point me to a source/website that I can look at to simply tell the client "this is what you have to worry about, and go see someone who does 125 plans?" Thanks!

Does any one know if there is a floor or a ceiling to catastrophic coverage in the legislation introduced (and likely to be approved)? A few years ago, I talked with Bill Archer about the Archer MSA. Even he did not know of a maximum and a mimimum on catasrophic benefits. I am not referring here to the out-of-pocket costs limit for the HSA. I am asking that once the coverage pays at 100%, is there a particular maximum or minimum the plan must offer, in order to be deemed catastrophic coverage? Also, does any one know of any state regulations for MSAs that define catastrophic, other than the "definition" in code section 220.

Thanks,

Don Levit

Is it necessary to file Schedule A in addition to Schedule D for pension plan's investment in a Poled Separate Account of a Direct Filing Entity? The plan lists amounts in line 1©(10) of Sch. H.

Thanks.

I have a DB participant who is currently receiving annual minimum distributions from his DB plan based on the "account balance" method. His first distribution took place in March of 2003 (RBD was 4/1/03), and I am working on his 12/31/03 distribution. Am I off base on these requirements?

1) It is my understanding that even though the 2002 Regulations are "delayed" for DB plans, the Uniform Lifetime Table in the 2002 Regulations must be used for 2003 distributions (even for DB plans using the account balance method).

2) Since he did not receive his first distribution until 2003, the 12/31/02 value is not reduced by the amount of the calendar year 2002 distribution (pursuant to the 2002 Regulations).

Thanks.

Is spousal consent required when the participant’s account is over the cash out limit, but the loan is less than the cash out limit? Example, the plan’s involuntary cash out limit is $5,000. The participant’s vested account in $11,000. Participant requests a loan for $4,000. Do you require spousal consent? I always thought that the “total accrued benefit” determined whether or not the loan was subject to consent… but, I’ve heard otherwise from other sources. Any thoughts or regulatory guidance?

In other words, how do you interpret the last sentence of the following reg?

1.401(a)-20 Q- 24. What are the rules under sections 401(a)(11) and 417 applicable to plan loans?

A- 24. (a) Consent rules. (1) A plan does not satisfy the survivor annuity requirements of sections 401(a)(11) and 417 unless the plan provides that, at the time the participant's accrued benefit is used as security for a loan, spousal consent to such use is obtained. Consent is required even if the accrued benefit is not the primary security for the loan. No spousal consent is necessary if, at the time the loan is secured, no consent would be required for a distribution under section 417(a)(2)(B). Spousal consent is not required if the plan or the participant is not subject to section 401(a)(11) at the time the accrued benefit is used as security, or if the total accrued benefit subject to the security is not in excess of the cash-out limit in effect under §1.411(a)-11©(3)(ii).

Thanks

Oscar

A colleague asked whether an IRS distribution code of '2' on an annuity should be changed to '7' when the recipient reaches age 59 1/2. I gave her my opinion ('No') but am interested if there are situations when this might occur.

Are shareholders (who own more than 2%) in an s corporation prohibited from participating in a flexible spending plan? Does this prohibition also apply to a dependent care spending account?

thanks for any help...

I am under 59 1/2. would like to withdraw some of my Roth Ira money. I would not take more than I put in at the origin of my Ira. Can I do this without penalty or tax problem?

Thanks

I need the help of some experts in 401K rollovers. Here's a situation and I'm going to talk in round numbers.

Let's assume a 48 year old person has $1,000,000 in his 401K and is considering leaving his employer and changing to a new job. Let's assume he leaves Jan 1, 2004. First question, what is a reasonable time it should take for a 401K fund manager to rollover the 401K into rollover IRA assuming it would be rolled directly to a rollover IRA brokerage account at Fidelity.

Okay, now let's assume it is mid Feb and the $$ is in a rollover IRA. Also, assume that you know of a stock(s) that has the potential to double in 2004. In the mid Feb 2004 time frame (or as soon as the $$ gets into the rollover IRA), could you convert the Rollover to an existing Roth IRA (or a new Roth IRA??) that was opened in 1998 and gradually average up if the stock(s) are indeed rising. Okay, now imagine it's the end of 2004. If the Roth has lost slightly or gained less than 20%, could you just "recharacterize" it back to a regular IRA with no tax consequences? I realize you have to keep your income below 100 K (I think) in order to roll the IRA over into a Roth.

If the Roth has gained say 60% or more during the course of 2004, then when you file the 2004 tax return you'd have to pay the tax on the 1,000,000 converted in Feb. 2004. So, now assume it's April 2005 and taxes are due. Can you withdraw $400,000 from the Roth (I know you would have to pay the 10% early withdrawal penalty) and use that $$ to pay the taxes on the Roth conversion?

If this strategy works and is legal, then there is little risk. If the Roth doesn't go up enough , you can simply recharacterize it to a regular IRA. If the Roth does go up by 60% to 100%, then you can use the profits to help pay the taxes and you then have a tax free retirement next egg.

I would appreciate comments about the overall strategy. I realize that most people would laugh at getting a 60%-100% return in this market, but for the sake of argument, just humor me on this and address the strategy.

Thanks,

Hello everyone, I'm not sure if this is something anyone will be willing to give up, but I'm wondering what your companies charge their clients get their GUST restatements completed and what they would charge to have their plan documents totally amended. For example, what you charge a client to have a GUST restatement and what would you charge to have a plan document amended from a Profit Sharing plan to a Safe Harbor 401(k) Plan?

I'm trying to figure out what is logical to charge my clients?

Thanks for your help all!

I had a CPA try to tell me that if his client puts in a 3% safe harbor employer contribution into the SEP portion of his plan, then the ACP testing and minimum 50% participation rules are thrown out. This would then enable the owner to put in his $12,000 plus $2,000 catch up regardless of what any employees deferred !

These SAR SEPS are old plans and there is not much out there on them but I don't think he is correct. Any thoughts ? Thank you.

Can a 401(k) plan be rolled into a RRSP? A participant is moving to Canada and I can not find out any information on whether this plan would accept rollovers from 401k plans.

A union health plan currently offers coverage to the employee with the option of coverage for employee +1 or employee and family. It varies among the different employers. One employer, as of January 1, 2004, will be only offering coverage to the employee and not to the spouse or any dependents. Is this a COBRA qualifying event for a spouse or any dependents currently covered by the plan?

If anyone can help, I'd appreciate it. Also, if anyone can point me towards any web site that has this information that would be great also.

THANKS!

Company A provides a 3% Safe Harbor contribution to all eligible employees. They send this in on a quarterly basis. They sent in for the third quarter in early October. One of their employees became eligible on 9-1-03 and was not included in the money sent in for the 3rd quarter in Oct. They now realize this error and are sending in the money for the missed participant. Are there any rules to indicate that the employer needs to make up interest or pay a fine as with EE deferrals??? Any insight would be appreciated. (The EE is not an HCE or Key). Thanks!

Employee A quits her job. She calls to start her termination process from the companies Safe Harbor Plan, wishing to cash out. Her company has hired someone to replace her and then quickly fires the replacement. She has been asked to come back part time for a while. She does. She has only been terminated from the company for a little over three weeks. She has not had a break in service and continues to fulfill the eligibility requirement, therefore she is entitled to continue in the Plan, but the question is... Can she continue her termination process and cash out??? Thanks for your help.

November 21, 2003

by Dave Baker

Yesterday's BenefitsLink Retirement Plans Newsletter contained links to two message theads started by Janet Krueger on a Yahoo! discussion group, which itemize her reasons for disliking cash balance plans and her view of what it would take in order to design a "good" cash balance plan.

(The newsletter is archived online at http://benefitslink.com/2003/2003_11_20_retirement.html )

A reader wrote to ask about Ms. Krueger; the links in the newsletter failed to explain who she is. Krueger is a former employee of IBM; she and several IBM employees reportedly started a web site several years ago at http://cashpensions.com (see http://www.uswestretiree.org/a47.htm and http://www.pensions-r-us.org/member_groups/ibm_employees.htm ).