I am reviewing a cross tested profit sharing plan allocation for a plan year ending 10/31/02. There are three HCEs and 41 NonHCEs. The owner's alloc rate is 21.88%, his wife's alloc rate is 17.5% and the other HCE's alloc rate is 3% as is all the NonHCEs. Testing on an accrual basis, each rate group's ratio is greater than 70%. Shouldn't this plan still have to meet the 5% minimum gateway?? When wouldn't the plan have to meet the 5% (or 1/3) minimum gateway?? Thanks.

Profit sharing plan maintains a separate brokerage account for each plan participant. The plan has over 100 participants.

The plan mistakenly contributed too much to a participant's account. The mistake was a "mistake of fact".

This is not a multiemployer plan.

The plan refunds the contribution to the employer .... but according to IRS regulations and the plan document, the plan CANNOT pay/refund to the employer , the interest earned on the contribution (while the contribution was in brokerage account).

MY QUESTION:

What is the plan supposed to do with the interest ? The participant has recently quit. She was only 40% vested. The plan disbursed her 40%. The brokerage account still holds the 60% forfeiture plus all of the interst earned on the mistaken contribution. The 60% forfeiture will be used to reduce next year's plan contribution. But waht about the interest ?

We have been asked to assist with a situation where, through misunderstanding or oversight, a plan administrator filed two 5500s for a number of years for one plan. The facts are as follows. Prior to 1997, the employer sponsored a profit sharing plan and a money purchase pension plan. The employee accounts under both of these plans were with Investment Broker A. In 1997, the employer terminated the money purchase pension plan and restated the profit sharing plan as a 401(k) profit sharing plan. At this time, new accounts were opened with Investment Broker B. Accounts also remained with Investment Broker A. The upshot of this was that each employee employed at that time had two investment accounts but was a participant in only one plan. This in and of itself is obviously fine. However, the plan administrator filed two 5500s for 1997-present. Although the 5500s reflected the same plan name, the three digit plan number was different. Otherwise, the underlying information was identical.

We need to correct this mistake and are looking for guidance on how to do so. Obviously, filing one 5500 is a start but we are concerned about what the reaction of the Service will be. I'm going to start by putting an anonymous call into them.

Plan withholds from payroll at several service centers. Data is accumulated centrally in a large spreadsheet (as required by custodian) and submitted to custodian, who withdraws funds based on the sheet.

For February 2003, one division accidentally re-reports January 2003 activity. As a result, custodian withdraws funds for February (timely) based on January information. Some participants receive too much in February, others too little. Net impact is small underpayment.

In this situation, is there any basis that a prohibited transaction has not occurred? Is there an exception for mistakes of fact or plain clerical errors?

Because of unusual circumstances, I have not worked in 2003 and have no income from wages. I am single, self-employed. I am not a student. I have close to $30k in a SEP-IRA and would like to convert the maximum amount I can without paying any taxes using the the itemized deduction and the personal exemption. How much can I convert into a Roth Ira? Any road blocks?

P.S. My accountant is not helping me figure this out.

Below are my specifics:

- capital loss carryover to 2003 = (-2500.)

- capital gains = 0.

- mutual fund dividends = 750.

- interest = 30.

- total itemized deductions (including health insurance, medical and dental expenses and personal property tax = 6300.

I have received conflicting opinions and would like to ask for some clarification related to filing for a Late Remittance of Employee Contributions. Suppose I have contributions withheld in late December 2001 ($10,000) (would be due sometime in January depending on the "administrative ability to segregate") and were not remitted until June 2002. The lost earnings from the January due date until June 2002 are $400.

Question #1

Since the payment was not due until January 2002, am I correct that this would not have been reported as a late remittance on the 2001 Form 5500? The prohibited transaction did not exist until the due date.

Question #2

On Schedule H, Line 4a, would the dollar amount reported be the total contributions ($10,000) or the lost earnings ($400)? Generally, I have heard the answer is the $10,000.

Question #3

On Line 4d (assuming item was not corrected via VFCP), would the amount reported be the $10,000 or the $400? This is where I get conflicting answers. Some indicate these shoud be the same at Line 4a, while others indicate it would be the lost earnings (the actual prohibited transaction). Which is most commonly used?

Question #4

If a Schedule G is prepared, am I correct that the "date" would be the due date (January 2002), not the date of the deferrals? Also, I would imagine the dollar amount would be the $400, which is the dollar amount of the non-exempt transaction (the lost earnings). Since this Schedule should be associated with a Form 5330, and the Form 5330 would definitely have the $400, I would think they should agree.

I have actually heard that in some cases, Line 4a and 4d would have $10,000, but Schedule G would have $400. I am looking for some clarification or references (Form 5500 instructions are a little vague). Any thoughts are appreciated.

Hi,

Help.

Can the assets held in participant-directed brokerage accounts be combined into a single asset on the financial statements as well as the Form 5500? In other words, can the auditors use the simplified reporting method that is available to Form 5500 preparer in which all assets can be combined into "other assets" and any change placed in "other income". If anyone knows, I would like to advise the auditor to check the AICPA guide. They are questioning why we combined the assets on the Form 5500 and are telling us to break them out.

Many thanks!

All cases involve a governmental 401(a) pension plan/statute. I'm surprised that the 1099R instructions seem to be ambiguous on the treatment of the following situations:

Case 1: Participant retired, in pay status, over 59-1/2, receiving payments under a 100% J&S, properly coded for prior years in Box 7 of Form 1099R with a "7" for normal distributions. Participant dies. Should distributions to widow continue to be coded "7" because they just continue as normal distributions under the J&S, or should they be coded "4" because they are paid to the widow now on account of the retiree's death?

Case 2: Same as Case 1, except the payment to the surviving spouse is under a separate plan/statutory provision that styles the continuing payments to the spouse as a "death benefit" rather than as a J&S?

Case 3: Same as Case 2, except the death benefit provision in the plan/statute provides that while there are minor children of the deceased participant living, only 50% of the monthly amount formerly payable to the retiree is paid to the surviving spouse, and the remaining 50% is shared among the minor children until they age out of minority. Then the surviving spouse's annuity is bumped back up to 100%?

Cases 4, 5, and 6: Same as Cases 1, 2, and 3 above, except that before the retiree's death, he or she was in pay status on account of disability and the payments while the retiree was alive were properly coded "3" in Box 7?

If you are issuing a 204(h) notice for a db plan, must the notice state what the benefit formula was prior to the freeze or can you merely state that no further benefits will accrue?

A survey: Is it common (or uncommon) for an employer of approx. 500 employees to allow employees to "sell" paid time off in a cafeteria plan and use the proceeds to "purchase" other cafteria plan benefits? Any special administrative issues to be aware of?

A soap opera setting. Owner of a company dies in an accident in 1998. Beneficiary designation shows that he had put his children as beneficiaries but form was not completed correctly: spouse (2nd wife/trophy wife) never signed off on the form (the broker's fault, not hers). The story goes that there was a pre-nup. where the wife signed off on the company ownership/benefits and was set up with a life insurance policy of some kind so the children were supposed to get the $.

Children are each paid $15k in the year after death from his plan account balance(PST/401k Plan). No further payments are made to them.

5 year dist. rule is coming up fast. The trustees are planning to pay the balance of the distr. benefit to the spouse/widow.

It would seem as though this account has begun to be distributed. Shouldn't the $ due the spouse be paid out or started to be paid out in some type of annuity format? The current tpa is telling the trustees that they don't have to do anything with the death benefit and it can stay in the plan. Should the trustees force the $ out (approx. $300k)? call their attorney,? call Lifetime Movie Channel?

We are now in our open enrollment period. Active employees must take both medical and dental, they are bundled. However for COBRA we unbundled and the COBRA enrollees can take whichever they need. A medical COBRA enrollee asked me today if she can now add dental since it is open enrollment, or since she did not elect COBRA for dental at her initial enrollment, is that now not available to her? I know with COBRA she has to have the same rights as similarly situated non-COBRA participants, but that doesn't really apply here since they all have to have both. Thoughts?

Can anyone recommend a software package that will enable me to calculate contributions, deductions, etc.... for proprietorships and partnerhships? I'm currently doing them by hand if small enough and using a spreadsheet for integrated profit sharing contributions. I know this is a longshot but nothing ventured, nothing gained.

What is the deemed allocation if the net increase in the account balance over the measurement period is 0 or negative, i.e., investment losses equal or exceed the actual allocations? Seems like it should be 0.

Hi,

We have a few 1-participant plans that have effective dates in 2000 and 2001 and have NEVER had assets exceeding $100k. However, EZs were filed for 2000 and 2001, apparantly due to an oversight. The employer does not employ leased or other employees, there are no other plans to aggregate, and the plan covers only the sole proprietor and his spouse.

Can we just stop filing until the plan is terminated and then file a final in the year all assets are distributed? The instructions seems to imply yes, but I don't want to make assumptions and then get a failure to file notice.

Does anyone have any experience with this issue??

If so, I greatly appreciate the insight.

Many thank!!

An employer has an insured health plan. Employees pay their portion of the premiums through a Section 125 arrangement. The employer wants to charge employees different percentages of the premiums for different coverage options. For example, assume that the total premiums are:

Employee only: $300 per month

Employee and spouse: $400 per month

Employee and dependent child: $400 per month

Employee and family: $500 per month

The employer wants to charge employees the following:

Employee only: $200 (67% of total premium)

Employee and spouse: $300 (75%)

Employee and dependent child: $200 (50%)

Employee and family: $350 (70%)

Is there any reason why this can't be done?

If a client agrees to pay employees the cost that would have been incurred under a health insurance plan, had the employee elected to be covered by the employer, can that compensation be excluded from compensation for purposes of benefit accruals? I know the definition of compensation can be anything, as long as not discriminatory, but is this something that has been seen by other people?

I don't see any direct references in the plan document to such a provision.

Thanks

I have recently lost my job. Can you withdraw monies from a Roth IRA if needed to make mortgage payments?

HOW DO Y'ALL HANDLE THIS?

We have a 90-day (consecutive/calendar days) run out after the end of the plan year for participants to get their claims in...In the past, we have advised them that we must have the claims in our office by the 90th....not the post-marked date.

We've now be quasi-challenged on this....

Thanks in advance for your input on this!!!

Does the six month extension for enactment of the final COBRA regulations also include the extension for the initial notice to the employee? In the proposed regulations it appeared to be carved out from the January 1, 2004 effective date.