Can a participant beginning orthodontic treatment late in the year pay for the entire course of treatment up front to receive a full payment discount, and claim the entire amount not covered by insurance as a reimbursable medical expense under a medical flexible spending account in the current plan year, even though the course of treatment is expected to be 18 months?

Participant directed 401(k) Plan executed an amendment changing Matching Computation Period from payroll-to-payroll to a Plan Year basis (Plan provides 50% match on deferrals up to 5% of Comp).

Plan continued to calculate on a payroll basis and did not provide "true up" contributions for those employees who did not contribute throughout the year, but still deferred above the 5% for the Plan Year.

Section 3.01 (3)(b) of Appendix B of Rev Proc 2003-44 provides an aministrative convenience procedure which indicates that participant-directed Plans with Multiple Investment Funds should use the fund with the highest rate of return for the lost earnings calculation (if most affected employees are NHCEs).

I have heard from some people that the IRS has continually approved the use of a "Plan Level" return in lieu of the highest return methodology (even in participant directed plans). Has anyone else seen this as an accepted method?

Also, if many affected participants are HCEs, what method is accepted?

A 401k plan effective 1/1/03 was adopted 10/15/03. It is my understanding that compensation from the adoption date may be used for ADP testing. This plan has one owner and four or five NHCEs. Can I use comp from adoption date for the NHCEs and whole year comp for the HCE for ADP testing?? Thanks.

Hi,

if a client has both after-tax and pre-tax monies in a qualified plan, can he roll only the after-tax contributions to an IRA, or does he have to roll over 100% of the qualified plan? I'm asking what the law says about this, I realize that the plan itself may limit this.

Thanks in advance,

Alex Shore

Client wants to change tax withholding form in communication package to specify additional options for federal withholding on rollover-eligible distributions: a percent > than mandatory 20%, or a flat amount in addition to the 20%. I don't know of a reason not to allow this, though I heard a rumor that federal flat amounts are no longer kosher; I have no information to verify or refute that. Anyone aware of any restrictions on this?

Hypothetical - A terminated participant (MM) was paid out his DC vested balance in 1997. Client signed off on payment in 1997. Client changed TPA's and Trustees. In the confusion of transferring, new TPA never received information that MM was already paid out, so they set up a beginning balance based upon last ending balance. MM was paid out again in 2000. Client signed off on second payment in 2000. Error was discovered in 2001 and client sues new TPA for instructing client to pay MM again after he had been paid. MM went bankrupt in 2001.

No evidence was produced that new TPA knew about prior payment to MM. Any thoughts on what to do if this hypothetical situation should ever occur? Thanks.

Hi,

I need a basic lesson on how trust deeds are treated for purposes of the Form 5500. The way I understand it, a trust deed is a note that is secured by property. Is this treated as a loan (other than to participants) on the Form 5500? Is it treated as an asset that does not have a readily determinable market value? Is it considered a single debt that needs to be taken into account for the 20% question?

I'm thinking the answer is yes to all three, but if I could get some confirmation, I would feel better.

Many thanks!

An employee has joined a union and is no longer eligible to participate in the employer's 401(k) Plan. The employee now wishes to take a hardship distribution for payment of medical expenses. The plan does allow for hardships. Does anyone know if this union employee is still eligible to take a hardship distribution or are hardship distributions limited to active participants?

Thanks,

Steve

Can an employer maintain a section 129 dependent care reimbursement plan outside of a cafeteria plan? I believe they can, thus allowing self-employed individuals (partners) to participate, but I can't find any guidance.

Can VEBA contributions be accrued or do they have to be made on a cash-basis ?

Thanks for any input. Let me know if I need to provide more info.

404(a)(1)(A)(ii)

(ii) the amount necessary to provide with respect to all of the employees under the trust the remaining unfunded cost of their past and current service credits distributed as a level amount, or a level percentage of compensation, over the remaining future service of each such employee, as determined under regulations prescribed by the Secretary, but if such remaining unfunded cost with respect to any 3 individuals is more than 50 percent of such remaining unfunded cost, the amount of such unfunded cost attributable to such individuals shall be distributed over a period of at least 5 taxable years,

This wonderful paragraph has puzzled me for a bit and I wanted the madness to stop. Can anyone give me an example of a situation where this comes into play? I have an idea, but I am not at all sure.

I'm not sure where to post this but came across a unique situation. A DB plan purchased a trust deed from a participant who happens to be the 100% owner of the employer who sponsors the plan.

1. Is this a participant loan subject to the rules of 72p?

2. If not, then is this a prohibited transaction (sale between the plan and a party in interest).

I don't see trust deeds much and wasn't able to find any information in any of my research guides.

If anyone has experiene with trust deeds and the rules, please let me know what you think.

Many thanks

Purported QDRO identifies plan as "XYZ, Inc. Profit Sharing Plan" when in fact the name of the plan is "XYZ, Inc. Amended and Restated Profit Sharing Plan". Technically, the DRO should be rejected, but practically speaking is that what most plan administrators would do? or would they accept it? Thanks.

A participants medical practitioner has suggested that the participant purchase an ergonomically correct key board, mouse and chair, and not just the cheap kind, to alleviate the affects of carpal tunnel syndrome (the participant apparently has the condition). If eligible, how do you determine the difference in cost between what would normally have been purchased and what would you say to purchasing a second set for the home?

Lovely....

We have a new comp plan with 2 highly paid doctors. There are 6 eligible non-highly comp participants.

They have not contributed the last two year. We restated their doc and switched it to a new comp effective 1/1/03. The doc states comp can be waived. There are two groups. 1.) Dr's 2.) all others. We have a letter from them dated in 12/02 that they want to optimize the contribution. I'm confused here. Can I put the two doctors (one with a -0- comp, he worked 1000 hours) in group 1? In otherwords, one Dr. would be in with $1.00 (or -0-) salary and the other would be in with $200,000. Is that ok assuming the doc permits it?

Any suggestions would be appreciated.

P

I need to send out two types- One that says the Plan is going to continue the Safe Harbor and one that says the Plan will discontinue the Safe Harbor contribution. If you could point me in the right direction for wording purposes, that would be great. Thanks!

Existing plan has a two year wait for eligibility with 7/1 and 1/1 entry. Upon entry, participants are 100% vested. It's a profit sharing plan for a partnership which has always contributed 15% of total compensation, allocated comp to comp. They want to add a safe harbor 401(k) provision and use their fully vested contribution for the safe harbor non-elective. They would also make catch-up contributions available. Is the two year wait a problem? Site? The objective, I believe, is to let the partners take advantage of going over the 415 limits by the catch-up amount.

Should the 3% safe harbor non-elective contribution be tracked separately from any additional profit sharing money? I'm thinking it should, but maybe I'm complicating things? Thanks for any help and ideas!

We service a sole proprietor's one-man plan, wishing to invest in a real estate property that has rental income. The plan does not have sufficient cash with which to purchase the property outright.

Questions are:

1) If the plan obtains a loan from an unrelated third party, would there be a problem with unrelated business income tax due to the debt financed property? Is there any way to avoid the UBIT?

2) Can the sole proprietor form a "partnership" with the plan, so title would be held by the partnership and each would contribute their respective share of the investment, recognize ongoing gains and losses proportionately until it's sold?

I work for a small community bank that has stock that is not listed. My wife and I are wanting to fund out IRAs with stock this year. Can we do it, and how?

I assume we just need an institution to take custody of the IRAs?

Thanks,

Sam

Two questions regarding QDROs:

1. Is a divorce decree or property settlement required for a person who indicates on their pension forms that they are divorced but it is not subject to a QDRO??

2. When a person is divorced and would like to remove his or her spouse from their account, what type of documentation do they need to provide us? (Divorce Decree or Property Settlement or both)?

Thanks for your help.