In 2003, I over contributed to the profit sharing part of my company's 401k plan. My company is an LLC and I am the sole owner.

I simply put too much money (about $7,000) in the 401K during December 2003 based on my earnings.

How do I go about withdrawing these funds and what reason do I use to explain to the IRS why I am doing this?

Thanks for your help.

A client has a calendar year 401(k) plan with a match of 25% on the first 6% of deferrals. The match is funded annually after the end of the year. They have not yet made the matching contribution for 2003.

For the 2003 plan year the plan fails the ADP test so we are returning excess contributions to two of the HCE’s and will forfeit their related match. The plan document says forfeitures are to be used to reduce the employer’s match.

When the match is made a portion of it will be forfeited and the forfeitures are supposed to reduce the match. But, how can it reduce the match if the full match has already been made?

Since we cannot use the forfeiture to reduce the 2003 contribution could we use it to reduce the 2004 match?

Any comments would be greatly appreciated.

Is there any report that shows me Post 88 deferrals. I know I can go into Census & see it, but there are several different funds & it will take me forever to do the math.

Thanks for any help.

I know that you do not have to file a 5307, but when is it typically due? I.E., I recall something like the plan year following the plan year in which you amend the plan?

Thanks,

Ronnie

A plan has been a controlled group for the past few years. All companies of the controlled group adopted the same plan. Last year due to ownership changes one company is no longer part of the controlled group. When testing this plan, would it be tested as part of the controlled group or we it be treated as a multiple employer plan?

Assume Organization A acts as an IRA custodian. If Organization A or any of its affiliates participate in the underwriting syndicate of an initial public offering (IPO), is Organization A prohibited from offering shares of the IPO to its IRA owners by reason of its participation in the underwriting syndicate. My concern is that the IRA's purchase of shares in the IPO could be considered a prohibited transaction.

If a client amends their plan to remove the safe-harbor language for a prospective plan year, when can they switch to "prior" year testing?

Since the plan must default to current year testing while a safe harbor 401(k), does this automatically "lock" them in for the five-year period, whereby they would need to submit for an approval letter to utilize prior year testing?

Any thoughts????

Calendar year/plan year. Deferral limit written into the plan is 1-15%. Employer wanted to take advantage of the EGTRRA change and decided to allow (beginning 4-03) participants to defer the maximum dollar amount allowable (which in many cases exceeded 15%) BUT forgot to tell us until now (post '03). Would a retroactive amendment be acceptable?

Employer had several lump sum distributions that were processed by their investment firm. Investment firm sent entire balance to participant and did not withhold any taxes.

Obviously, in preparing the 1099-R's we would need to show "0" tax withholding, but my question is -

Is the employer required to withhold taxes from the distributions? Meaning, if they do not withhold anything are they on the hook for anything?

Thanks,

Ronnie

In reviewing our QDRO procedures, it's been noted that we do not approve any DRO that requires the calculation of any gains/losses from the date of division to the date of distribution. Our procedure has been to segregate the amount in the DRO as of the date of receipt but that amount is kept uninvested. This doesn't seem correct to me. The way I read the regs is that while the DRO is being determined to be qualified or not, the amount that would have been payable to the alt. payee (if the DRO had been determined to be qualified) should be segregated and gains/losses should accrue as normal. If the DRO is determined to be qualified, then the amount that has been segregated, which should include gains/loss, is paid to the alt. payee. Is this correct? If so, is the segregated amount kept invested in the same manner as the participant's?

If this is correct, at what point does the 18-month period start? Upon receipt of the DRO? For example, if I receive a DRO today that has an order to pay 50% of benefits as of 12/1/03, do I need segregate the amount as of that date and calculate gains/loss up until today? Or do I segregate the amount as of 12/31/03 and let the gains/loss accrue starting today and disregard the period between 12/31/03 and the date the DRO was received?

Thanks for any help!

I seem to remember that either the IRS or DOL published a brochure on QDROs, but could not find it on their websites. If there is something available please provide the link.

SITUATION:

Divorce decree says Jane gets 50% John's 401k. Attorney for John doesn't want to do a qdro because "it's not in the divorce decree". I guess he just wants John to take an in-service dist and give the money to Jane. Doesn't make sense to me, since dist would be taxable to John, and he would have to pay early w/d penalties.

I'd like to give John's atty something that explains the nuts and bolts of QDROs. Thanks.

I am going to start putting money into a Roth for 2004. Does anyone have any advice on which Vanguard fund to put the money into? Thank you.

I used to be in a construction union and have approx. $40,000.00 in their multi-employer pension plan. I believe it was a defined benefit plan. I no longer work with them.

And I want to get the $$$$ and put in an IRA or something. The company that manages the plan refuses to give me my money. Do I have any recourse against the managing company? Can I get my money? I am not old enough for the normal retirement, at 62 years. Thanks.

JWD

I have a plan with a six month wait to get a distribution following termination of employment. The plan received from the Bankruptcy Court a "Stipulation and Order to Allow Mr. Dimmick to close out his 401k - Chapter 13 Bankruptcy Case No. ####". The stipulation states that the debtor may close out the 401k in order to purchase a vehicle to allow travel to and from work. He is in fact terminated, he just hasn't satisfied the six month wait specified in the plan document. What to do, what to do??

a client adopted the 3% safe harbor in 2002. For 2003, the client made the 3% contribution, but the safe harbor notice referenced the safe harbor match. The intent of the client for 2003 was to make the 3% contribution. Are they stuck with the match formula because that's what the notice said or can they allocate the 3% safe harbor?

Hi -

If HCEs rec'd distributions from plan in March, 2003 for excess annual additions, when is that taxable to them, 2002 or 2003?

I thought that it would be taxable for 2002; the 1099R would be issued for 2003 because that's the year the distribution was actually made, but the HCE would have included it in their 2002 tax return. Is this correct?

thanks for your help!

Can a DB Plan require a participant who has been fired, but who has met 5 year and other vesting requirements under Plan, to wait until normal retirement age to receive a benefit? In other words, can Plan force participant to forgo early retirement options that otherwise would be available but for the fact that the participant was fired and did not "retire"?

does a regular before-tax ira with a named beneficiary receive a stepped up basis at date of death? i guess another way of asking the question is how is beneficiary taxed on distributions?

Employer who got government contract some time back was required to provide $.25 of health benefits for every 1 hour of work performed by its employees. Thus each employee has $X of health benefit dollars. E/er has been allowing for reimbursements for medical expenses out of the said $x set aside for each employee. Employer has been allowing said amounts to be cumulative on an annual basis. Thus, no "use-it-or-lose-it" rule. Employer has also been allowing employees to take the cumulative amount of $$ in their "account" upon termination of employment. E/er has no written plan document and has been operating as described above for some time.

Tax-wise, there's no requirement that the plan be in writing assuming it were a straight 105/106 plan although ERISA would require a written plan doc. Given the ability of the e/ee to take the cash on termination of employment it would seem that the issue of whether or not the arrangement involves a cafeteria plan arises. I believe that a cafeteria plan is required to have a written plan doc. for tax purposes.....

Any suggestions on how to cure this thing going forward, e.g., get rid of e/ee's ability to take cash, and get a document in place for prospective benefits....?

I would very much appreciate the group's thoughts on the following scenario.

The Company has an employee who was covered by subsidized COBRA coverage from his wife's former employer and therefore did not enroll in the Company's health plan during last year's open enrollment. Now he wants to enroll and says he will simply stop paying the COBRA premiums and therefore lose coverage under the COBRA coverage.

I know the regs permit mid-year election changes when there has been a loss of coverage (1.125-4(f)(3)(ii)). It strikes me that this section contemplates losses of coverage beyond the control of the individual and not a loss of coverage voluntarily incurred by the individual. I could not find any authority on point, though.

This situation is clearly not covered by the HIPAA special enrollment rights in Section 701(f) of ERISA because that requires the COBRA coverage be "exhausted."

My inclination is not to let this employee enroll in the group health plan until either the next open enrollment or the occurrence of a true change in status. Any thoughts?

Many thanks--Julie