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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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!

If a split dollar arrangement is an ERISA welfare plan, does this mean that there must be a SPD? I do not recall having seen a split dollar arrangement that had a SPD or that incorporated the SPD requirements into the agreement itself, but I wanted to get folks thoughts on this. Put another way, is there an exemption to all or some of the SPD content requirements for a split dollar arrangement that constitutes an ERISA welfare plan?

Thanks!

Reportable compensation is used in determining 401(k) deferrals.

For corporations, it is W-2 compensation. S-Corp. distributions are not includable.

For partners in a partnership, it is K-1 earned income. Unearned income (such as interest, dividends, royalties, etc.) are not includable.

For a sole proprietor, it is Schedule C income.

My question involves payments, (to an LLC), that are due on a quarterly basis but are not actually paid (due to exigencies of business anticipated by all parties to the contract) until year's end. These payments are guaranteed and part of the K-1 earned income. My question is, can these guaranteed payment amounts be used as compensation basis for 401(k) deferrals throughout the calendar year or must the LLC partners base there deferrals on the k-1 compensation when it's actually paid at yearend?

An employer sponsors a money purchase pension plan (volume submitter), which it amended and restated for GUST on September 30, 2003. The MPPP is a calendar year plan. The employer would like to terminate the plan as of 12/31/03 and then apply for a determination letter speaking to the termination and the GUST amendment prior to the deadline for submitting for a GUST determination letter of January 31, 2004. Pending the receipt of a favorable determination letter, the employees would start rolling their funds out of the plan as soon as is administratively feasible. Subsequently, the employer would file a final Form 5500 for 2004 (short plan year).

When does the employer need to issue ERISA 204(h) Notices to Plan participants? Is the plan really terminated as of 12/31/03 because there are consent minutes of directors saying that the termination of the Plan is effective as of that date and that the employer won't make any further contributions? Or is the "termination" effective when all of the participants funds are rolled out of the plan? Appreciate that there are no employees who will qualify for a contribution in 2004 (end of the year requirement).

1. Did MSAs survive?

2. If yes, better to be MSA (grandfather now if necessary?) or HSA?

3. If you're an S Corp, is answer affected?

I am searching for regarding fiduciary liability and imprudent investment decisions. Specifically, a one-fund dc plan has a "satisfactory" rate of return over its life or any certain long-term period, but for one year, the assets tanked.

Any help in pointing me towards citations about whether the plan's rate of return and investment policy can be looked at over time, or whether the one calendar year can be disassociated from the rest, would be appreciated.