I have a client who is in the entertainment industry. She currently employs two individuals and all others associated with her are paid on a contract basis. Years ago they switched the plan from a profit sharing plan to a SEP-IRA. At this time her balance was sufficiently high enough that she didn't make contributions for herself, only her two employees. I wasn't involved so I'm not sure of the logic there. So, the question is can an employer opt out of receiving a SEP-IRA contribution. I know that they can write it into a qualified plan document that HCE's are excluded from contributions but I wasn't sure about the SEP.

Since there was no amendment in place opting out years ago and I am assuming she should have been covered, what income gets used to determine a contribution? is it only w-2 and schedule c income? And if there is a loss on the Schedule C? Do they then legitimately not make a contribution for her?

And going back and making her whole..I am assuming that I go about it the same way is if a person was ommitted from a profit sharing contribution?

Any help would be appreciated...

IRC 45E permits employers to take a tax deduction and or credit for startup administrative costs of new qualified plans established after 12/31/01. However, the employer may not have maintained another Qualified Retirement Plan covering the same employees during the prior three years.

Would a SEP or SIMPLE be considered a qualified plan for this purpose?

Thanks to all who reply!!

would a notice to participants be required if vesting method is changed from "computation period" to an "elapsed time" method?

Anyone ever been asked to by participant to "measure" their account returns based on investment in a real estate parcel. Rabbi trust would hold the investment (if acceptable to trusteee). I can't see a reason why this would be taxed differently than a hypothetical mutual fund investment as long as the participant was not receiving any current use of the parcel. Could the investment be distributable in kind?

We adminster a small DB plan. 3 owners and 10 non-owner common law employees. Last year all 10 non-owner employees terminated employment. A partial plan termination occured so we made all employees 100% vested and distributed their benefits. All that remians are greater than 20% shareholders of the corporation. The company will not ever have employees again.

This company was recently approched by a potential buyer who wants to make a stock purchase.

My understanding is the plan is no longer covered by PBGC since only greater than 20% shareholders remain as participants. Is anyone aware of a cite that proves this? Or disproves this?

This is important because the plan is underfunded and shareholders are willing to waive a portion of their benefits. However, if the plan is still a PBGC plan, they cannot waive benefits and the potential buyer will run away as they feel the underfunded plan will be their liability.

Thanks.

A participant works for sponsor for several years and participats in their 401(k) plan until he quits but does not take a distribution. Some time later he comes back and works for Sponsor as an independant contractor. Sponsor allows the x-participant to defer on the payments on contract. Administrator catches the error during testing.

In distributing the erroneous deferrals (in the following tax year) to the x-participant, should they be tax reported on a 1099R? (Distribution code 8...P...?) or how about a 1099Misc since the original earnings were not wages but payments on a contract? Any thoughts?

well, 'I' couldn't make it to give the talk, so the scarecrow (with that marvelous brain given him by the Wizard) showed up instead. He even shared a few pension songs. Wow. He looks a lot better than I do, and is a lot smarter, at least that's what I heard.

Just one of the songs

Yesterday, 65 it seemed so far away

Now its come today, it’s here to stay

I wish I had a 401k

Suddenly, I’ve not half the cash I used to see

Bill collectors shadow me

Oh, retirement came suddenly

My sa-vings are so low, I don’t know just where I’ll stay

I did something wrong, I should have saved and put away

401(k)s, deferring’s such an easy way to save

Now I need a place to hide away

Oh its too late, for a 401k

Mm mm mm mm mm mm mm

Does anyone know if Rev. Proc. 2003-72 grants an extension only for prototype and volume submitter retirement plans, or does it also cover custom DB and DC plans?

Thank you.

Is anyone aware of any ERISA requirements which would preclude a foreign national from participating in a 401(k) Plan? Or better yet, an ERISA provision which affirmative permits such participation?

We are deliberately avoiding the question of why the individual might want to participate.

Thanks,

Tom

Does anyone want to comment on a claim we recevied for "sunscreen shirts'? They were ordered from a company specializing in sun protection garments and were quite expensive.

We denied the claim as being for personal use. The participant did not give any information with regard to having had skin cancer (a very real possibility in South Florida) or any other medical condition.

Thanks.

Does anyone know of any required amendments by the end of 2003, assuming GUST and EGTRRA good faith amendments are done?

Our software (Relius) is calculating the t/h minimum for a deferred retiree (NRA=65, current age =68) as follows:

2%x (avg. comp x YOS) to age 68, then increasing that amount actuarially from 65 to 68. Relius says this is the IRS position, per 1.416-1, Q&A M-3. How does M-3 give this double dip, rather than the usual "greater of actuarial increase or recomputed benefit"?

Concept is fairly straightforward (saw it in Sunday NY Times a few weeks ago)...either a new or current participant can 'pre-program' future increases in his/her deferral rate. For example, a participant could enroll today at 5% and also select to increase the rate by 2% each January until maxed out by HCE/Plan/IRS limits.

Although this would take some coordination between a provider and a plan sponsor, the concept seems fairly attractive. When tied together with retirement calculators and even negative election/passive enrollment, it seems to have even more positives

I can't yet seem to identify any plans or providers that have taken advantage of such a program, and how the results have been. Can anyone help?

Our company is offering MSA's to our clients this Plan Year. It is my undersatinding from past reading that if an employee leaves the company and elects COBRA the employee would fund the account going forward.

Can someone help me find how MSA' are handled for COBRA? The Client wants something in writing. I can not remember where I saw my inofrmation.

Thank you.

When completing the final form 5500 for a terminated money purchase pension plan, in the area that indicates number of participants as of the end of the plan year, should you list this as zero since all the plan assets have been distributed as of that date.

Thanks,

Waz

Please provide your opinion of the following excess correction method:

Customer puts in $3,280 in Trad IRA so far this year. Customer stops all future contributions. We know $280 is excess even though tax year is not over. Can we redesignate $280 as a contribution for 2004 without paying 6% tax penalty?

Here is my train of thought:

1. Tax code says one can redesignate the contribution for 2004, but customer would owe 6% penalty tax even if this decision is made prior to tax filing due date. (Essentially the customer would elect to leave the funds in the account).

2. Instead of leaving the $$ in, instead customer takes w/d of funds (knowing that they would owe taxes on earnings plus 10% penalty tax on earnings).

3. Customer gives financial instutution instructions to redeposit funds back into same IRA as contribution for 2004. Thus, the $295 withdrawal (the excess amt plus an assumed $15 in interest) would be redeposited as a $295 IRA contribution for 2004. Customer would receive 1099R representing w/d of excess.

The end result of 2, 3 & 4 above is that the customer has essentially elected to leave the funds in the plan and has circumvented the 6% penalty tax.

I wonder if the ability for a taxpayer to designate a contribution for a future tax year is only available to the taxpayer under excess contribution rules.

If the taxpayer is taking a withdrawal, rather than simply leaving the funds in the account, then they do not have the option of instructing the financial institution to earmark the redeposit as a 2004 contribution if we are not in the 2004 tax year at the time the transaction is processed.

I am interested in everyone's thoughts on this....

A sponsor has filed bankruptcy and creditors want last remittance of 401(k) deferrals made BEFORE bankruptcy returned to employer. I think it was supposed to be an avoidable preference. It was 401(k) only and it was remitted prior to bankruptcy, so I don't see how it can revert back to employer (antialienation or plan assets??), but I can't find any authority specifically dealing with 401(k) salary deferrals. Who is correct? Does anyone have a cite I can rely on?

A sponsor has filed bankruptcy and creditors want last remittance of 401(k) deferrals made BEFORE bankruptcy returned to employer. I think it was supposed to be an avoidable preference. It was 401(k) only and it was remitted prior to bankruptcy, so I don't see how it can revert back to employer (antialienation or plan assets??), but I can't find any authority specifically dealing with 401(k) salary deferrals. Who is correct? Does anyone have a cite I can rely on?

I am currently in the process of developing a Marketing Report regarding California health care plans (with a focus on HMOs) using Kaiser as a benchmark. I am primarily studying the following:

1. What criteria motivate Employers to choose the vendors that they choose for Group Health?

2. What criteria motivate Employees to select one health vendor over another offered by their Employer?

3. For individuals not covered by corporate or other organizational plans, what criteria motivate those Individuals to purchase from the vendors that they purchase from?

Anyone with either survey information (or survey links) that they can point me to or personal anecdotal information they would like to share, please post.

Thanks for your assistance in this matter.

Existing company with a 3/31 fiscal year-end sponsors a 401(k) Plan. All 100 or so employees, except the 2 owners transfer to an new corporation that takes over sponsorship of the plan on 12/31/02.

The old company, I am told, is not a controlled group or affiliated service group with the new company.

Does anyone see problems with setting up a new DB plan with a calendar year-end for 2003 where the old company would take the deduction for the 3/31/03 fiscal year-end?