Reg 1.401(a)(4)-9(b)(2)(v)(D)(2) provides that when testing an employer with both a defined benefit and defined contribution plan, the minimum aggregate allocation gateway is deemed satisfied if each NHCE in the DC plan receives a minimum allocation of 7.5%. Has anyone tested successfully where the minimum allocation was not used and what were the testing results? Any pitfalls to look out for?

Here is the definition of actuarial equivalence in a plan's document:

1983 Group Annuity Table with Projection H, with mortality rates based on calendar year of birth of 1930 and interest at the rate of 7% per annum

I thought I knew how to apply a projection scale to the underlying mortality rates, but this description confuses me. Is the reference to 1930 somehow limiting the ages of the rates to project -- and how is the number of years to use in the projection determined? An example would be great.

Thanks!

I have two 5300s pending with the IRS, and the IRS agent assigned to these files has, for the first time in my experience, requested that I remove the ADP and ACP language from the plan document because I have another provision that allows the employer to utilize the safe harbor methods of 401(k) and (m) to satisfy discrimination. I don't understand why the ADP and ACP language cannot co-exist in the document with the safe harbor language. The client may want to use safe harbor in year one, and rely on the general ADP/ACP test in later years.

Has anyone had this experience with the IRS?

An employer who sponsors a 401(k) Profit Sharing Plan failed its ADP test and distributed excess contributions and any income earned on the contributions to participants within 2 1/2 months after the end of the plan year. I'm not certain whether the employer is required to file Form 5330 in this setting. Although the instructions to Form 5330 are clear that there is no excise tax liability if the excess contributions are distributed within the requisite time period, the instructions are not entirely clear whether such employer must file. The "Who Must File" Section states that a Form 5330 must be filed by: "9. Any employer who is liable for the tax under section 4979 on excess contributions to plans with a cash or deferred arrangement." This leads me to believe that the answer is that there is probably not a filing requirement. Anyone have any experience with Form 5330?

Can anyone tell me how to terminate a 401(k) plan? The employer no longer wishes to provide the plan and hopes to close it and then replace it with a SIMPLE IRA next year.

Hello,

Our hospital is changing its hours of full time employees. Instead of being full time at 60 or 64 hours you now have to be 72 hours in a pay period. With the increase in hours there will be different levels of benefit eligibility. In our department there is not enough hours for everyone to increase to 72 hrs. Our boss has said he will decide who gets to increase their hours based on four different criteria. They include seniority, skill level, dependibility and attitude, and need for the increased benefits. I wondered if this is legal for him to decide based on need, such a subjective thing. Does anyone out there know the legalities involved in this. The age group in the dept. varies from 32 to 52, some are the insurance carriers for the family, and some want to be "full time" to get the fmla.

Thanks,

Melissa

I am a CPA and have a number of Plans which have improperly excluded certain portions of compensation for deferral and matching purposes (e.g. manual checks, bonuses, etc.). In the past, the general rule I've recommended Plan Sponsors to follow (after discussing with their ERISA counsel) is to make a corrective contribution for the deferral (at the ADP%), the lost match (at the ACP%) and lost earnings.

In reading APPENDIX B of Rev Proc 2003-44 (Section 2.02 (1)(a)(ii)(E)), there is discussion of the Special Rule for Brief Exclusion from Elective Deferrals. The example is specifically geared towards realizing an eligible participant was not given the opportunity to defer, but still allowing that participant 9 months to make contributions in the Plan Year.

If a Plan Sponsor does not withhold deferrals on a one-time bonus payment, could the principle of this section be applied? While this would affect a wider population than the example contemplates, the participants still would have the rest of the entire year to defer (> the 9 months in the Rule). The Plan Sponsor would still be liable for the lost matching contributions, but making up the deferrals is the portion most Plan Sponsors find difficult to swallow (especially since most employees probably prefer keeping their entire bonus).

Has anyone considered applying the principle of the "Brief Exclusion" rule to other common errors like these?

Call for Presentations

Convey your message to more than 1,800 compensation, benefits, and human resources professionals. WorldatWork the premier knowledge leader in compensation, benefits and total rewards is conducting a call for presentations for its 2004 Annual Conference and Exhibition, May 23-26 in Boston.

Your presentation should focus on key topics, leading-edge techniques, new information and/or emerging trends in total rewards strategies, solutions, or applications.

Tracks Include:

Compensation – Benefits – Executive Rewards – The Work Experience

Submissions Open: September 15, 2003

Submission Deadline: October 15, 2003

Submit your presentation online at www.worldatwork.org/callforpresentations

I'm an attorney. My friend/client will turn 65 on November 22nd. All of his money ($500,000) is in TIAA-CREF. He was about to sign up for a ten year annuity from TIAA-CREF when I asked, "how do you know that's the best deal for you?"

I volunteered to help.

Now I need YOUR help. What's the best way to shop for an annuity for him? He wants a guaranteed income of about $4000/month for ten years. His money is currently distributed among three mutual funds in TIAA-CREF. He'll be surprised if he lives more than ten years.

Thanks. If you'd like, write to me directly at mkogut7007@juno.com

I have a situation where for minimum funding purposes the unfunded accrued liability is not negative. HOWEVER, the unfunded accrued liability is negative for 404 purposes. The reason is a large credit balance.

Is this a legal?? There is an actuary explaining that the prohibition on a negative unfunded accrued liability is for 412 ONLY. I looked at Revenue Ruling 81-213 (the one IRS always seems to reference in answer to this question) and it primarily addresses 412.

Can the unfunded accrued liability be negative for 404 purposes??

Here are some numbers:

Accrued liability 4,000,000

Assets 4,200,000

Credit Balance 500,000

What bases (if any) should be established for the current valuation??

The RR appears to establish a base for 412 equal to 300,000 (Section 7 of the RR).

Now, for 404 is the base a negative 200,000 (maintaining the equation of balance) or zero (this is just one of those situations where the equation does not work).

Thanks for any comments

Is there an integrated allocation where the compensation used is in excess of the $200,000 limit?

After looking at several allocations I've become confused. Some formulas indicate a percentage of

comp as a base contribution plus 5.7% of comp in excess of the TWB. While another formula indicates

a formula of allocating 5.7% of the sum of each participant's comp plus excess comp. However, if this

allocation causes someone to exceed the Cumulative Permitted Disparity Limit the allocation shall be based on the participant's comp rather than comp plus excess comp. If someone could clarify what is

comp, excess comp and total comp it would be appreciated.

A new client literally just walked in the door who hasn't filed his 5500EZs for 2000 and 2001 (the actuary went MIA). I assume he will still have to file with the EBSA, but the DFVC is not available to an EZ filer. What will happen when he files the back forms? Back in the days pre-EFAST the IRS was always very lenient in these cases. What about the DOL?

I have self-employed income and employ my 15 year old daughter to help with some of the work. I pay her over $3,000 per year which I deduct from my income tax. I want to contribute $3,000 to a Roth ira for her. Do I need to issue her a W-2 in order to do this and if so, how do I go about that (paperwork, etc). Do I need to file an income tax return for her? Thanks for any input on this.

Jay Glass

FMLA-We are a national organization, headquartered in NYC, An employee, work location DC, home address, VA, is currently on FMLA, maternity disability. She will be taking the full 12 weeks. Return date from FLMA is 10/6/03. The field office manager called; she would like to take an additional unpaid leave from 10/6/03 to 12/31/03. The field office has let me know that they would hold the position open for her. My question, would it be considered discriminatory (unless we let everyone do it) that we let an employee have an unpaid leave after her FMLA ends, knowing that the position would be kept open. Would a precedent be sent whereby we would have to keep all positions open past the FMLA return date if we granted this employees request (with the approval of the field office). Thanks

Employer has self-funded health insurance, premiums are paid by employer and employees (17%). Employer pays its share for each month on the 1st day of that month. Employee pays her share on 1st and 15th (deducted from paycheck). Employee terminated on the 10th, having already "paid for" 1st - 15th insurance for that month. Employer deducted insurance for 15th - 30th from her last paycheck so that employee had "paid for" the full month (her 17% at least). Employer terminates plan coverage as of date of termination so that employee has paid for something she will not receive (coverage from 10th to 30th). DOL has called and I am looking for any sort of legislative or administrative authority allowing the termination of coverage as of date of termination, even though employee ends up paying for more days in that month. Any direction would be much appreciated.

I have a client who maintains a profit sharing plan that he has not funded in 2003. Also, no forfeitures will be allocated. If he terminates his Profit Sharing Plan now, can he adopt a SIMPLE plan by October 1, 2003 or must he wait until January 1, 2004? Thank you.

I am a married graduate student. Using Taxcut software,

I determined the maximum tax benefit for the tax credit

available to offest my taxes. The software actaully calculated

a refund for 2002. I have two questions:

If the tax credit is "nonrefundable", why did the software

show that I would get a refund?

AND more importantly, since almost half my initial contribution

was offset by the tax credit (I put in $1000, but saved $500

in taxes), can I just take the money out of the Roth IRA

without penalty, as is the standard case for initial contributions.

This would seem a bit absurd, since I could keep putting

money in a Roth for a year, then take it out and redeposit it

later for a 50% tax credit. If the law would not allow me to take a

credit if I withdraw the same year (say, by calculating the

"net" increase in the Roth for the credit), then can't I still withdraw

all my contrib.s after 2006, when the credit ends (I'll

probably still be in grad. school), thereby "earning"

roughly 50% on my contrib.s due to tax credit, while

facing no penalties for withdrawal?

I have been lucky and earned nearly 400% on my Roth in

one year, so the idea of taking some out early is a bit tempting.

Had this sent to me by email:

"After every flight, pilots complete a gripe sheet which conveys to the mechanics problems encountered with the aircraft during the flight that need repair or correction. The form is a piece of paper that the pilot completes, and then the mechanics read and correct the problem. They then respond by writing on the lower half of the form what remedial action was taken and the pilot reviews the gripe sheets before the next flight. Here are some actual logged maintenance complaints and problems, as submitted by Qantas Pilots, and the solution recorded by maintenance engineers. By the way, Qantas is the only major airline that has never had an accident.

P = The problem logged by the pilot

S = The solution and action taken by the engineers

----------

P: Left inside main tire almost needs replacement.

S: Almost replaced left inside main tire.

P: Test flight OK, except autoland very rough.

S: Autoland not installed on this aircraft.

P: Something loose in cockpit.

S: Something tightened in cockpit.

P: Dead bugs on windshield.

S: Live bugs on backorder.

P: Autopilot in altitude-hold mode produces a 200 FPM descent.

S: Cannot reproduce problem on ground.

P: Evidence of leak on right main landing gear.

S: Evidence removed.

P: DME volume unbelievably loud.

S: DME volume set to more believable level.

P: Friction locks cause throttle levers to stick.

S: That's what they're there for.

P: IFF inoperative.

S: IFF always inoperative in OFF mode.

P: Suspected crack in windshield.

S: Suspect you're right.

P: Number 3 engine missing.

S: Engine found on right wing after brief search.

P: Aircraft handles funny.

S: Aircraft warned to straighten up, fly right, and be serious.

P: Target radar hums.

S: Reprogrammed target radar with words.

P: Mouse in cockpit.

S: Cat installed."

I am a self-employed individual (with no other employees). My company is organized as a sub-chapter S corporation. I have established an SEP-IRA on my behalf into which my company places contributions.

If I were to become an employee of another company (of which I am not an owner) with a 401k plan (in which I would be an active participant immediately) during the middle of my fiscal (calendar) year, can my sub-S company still contribute to my SEP-IRA up to the maximum of 25% of my W-2 income (from my sub-S corporation)/$40,000?

If so, do the contributions have to be made prior to my new employment or do I have until my sub-S taxes are filed for 2003?

For example, if I were to have $100,000 of W-2 income from my sub-S corporation in 2003, could I contribute $25,000 to my SEP-IRA in 2003 even though I also had $20,000 of W-2 (2003) income from my new employer (that had a 401k plan)?

Thanks.

With all of the recent (and pending) increases on contribution limits, I'm looking for information on how much people actually contribute to 401(k) and 403(b) plans. Does anyone know of reliable sources for this data?

Thanks,

Rob Ring (I posted this message at the 401(k) board also)