We have the ABC profit sharing plan. ABC plan adopted 12/24/01, effective 01/01/01

ABC is a law firm. ABC just informed us, that unbeknowst to us, they formed another law firm with Lawyer D. The DABC firm was formed 01/09/01. D & ABC each own 50% of DABC, no other relation between D & ABC

I just got the good news a few minutes ago so I'm just digging into it. It seems to me that this an affiliated service group situation. (I hate affiliated service group rules).

A couple of preliminary questions:

1. The ABC plan requires a year of service. I should be O.K. for 2001 because DABC wasn't formed until 2001, those employees wouldn't meet the YOS requirement. Does that seem to correct?

2. I don't know much about D yet. If D has employees I assume that this is 1 affiliated service group & I need to consider D's employees also. Seem correct?

3. If D has affiliated service group/controlled group issues apart from DABC. I don't see that I need to consider those issues because they wouldn't be related to ABC? Seem correct.

Thanks in advance for any guidance.

We have a potential client who received some bad tax advice, in my opinion, and is in a bit of a fix. I wanted to bounce an idea off some of you gurus.

In 2002, client contributed 40,000 to a Money Purchase plan. Client also installed a 412(i) plan in 2002. The contribution to the 412(i) plan is far in excess of the 25% of comp. limitation, so the MP plan has a portion that is nondeductible, (the amount in excess of 6% of comp as per IRC 4972©(6)(B)) and will be nondeductible for many years, as the annual 412(i) cost will exceed the 25% limitation for the forseeable future.

First, the client was told that this excise tax is "one time only." I disagree. I don't reach the same conclusion from the statute. Furthermore, the form 5330 is pretty clear in the instructions that this excise tax is payable EACH YEAR that the MP contribution remains nondeductible.

Here's my bizarre idea. If you look at IRC 4972©(7), as added by EGTRRA 653(a), it appears that you might be able to take an aggressive interpretation to say that this allows you, for purposes of calculating excise tax only, to pay no excise tax whatsoever. I read the EGTRRA conference committee report, which doesn't say anything additional to support this interpretation in the situation I've outlined. I've told the client to seek ERISA counsel with regard to this idea. But in the meantime, I wondered if any of you have considered this issue, and what conclusion(s) you reached?

I have a client who wants to have the forfeitures reduce administrative expenses and allow the client to either supplement employer contributions and / or matching contributions or reduce employer and / or matching contributions. Has anyone seen this kind of flexibility built into a document

An employee has recently married. I know this is a status change to add the spouse to the health insurance, but does this mean only to the plan the employee is currently enrolled in? The employee wants to change health plans (the employer has two different plans to choose from) at the time the spouse is added.

Plan sponsor inadvertently made residential participant loan (permitted under plan) with a 30 year term instead of 15 year specified in plan doc. The single loan is insignificant both in terms of asset size of the plan and the number of "proper" loans outstanding.

Plan sponsor wants to retroactively amend plan to allow 30 year loans as a self-correction. Under EPCRS, retroactive plan amendment is not available for plan loans under SCP. Amendment is available under VCP, but client wants to stay under IRS radar and avoid time and expense of VCR filing.

Loan reamortization is not available under plan, and affected participant cannot afford repayment and accelerated repayment schedule under a 15 yr. loan.

How risky is doing a retroactive amendment under SCP, even though it isn't "technically" permitted under Rev. Proc. 2003-44 (EPCRS)? Are there any other options available to the plan sponsor?

I know that the instructions for the Model SEP say that you cannot use the 5305 SEP if you maintain any other qualified plan. But if you are terminating a qualified plan and then establish the SEP, is there a problem using the model, or must the client go to a prototype instead?

Other than a conversion to a cash balance plan, are there any other practical means for converting a unit benefit DB plan to a DC plan?

If a DB plan participant enters into a same-sex marriage in Canada, is the same-sex partner considered to be a "spouse" under the terms of the plan? Does the answer depend on whether the participant's state of residence prohibits same-sex marriages? The plan document does not define the terms spouse or marriage.

I am an American living and working overseas although I keep my assets in the U.S. I would like to minimize my tax burden by putting the maximum allowable amount into Roth IRAs each year. Can I do that if I declare myself self-employed (as I am)? Does my income have to be earned in U.S. dollars in the U.S. or can it be earned in another currency? Thank you.

A sole proprietor has a SEP for which no contribution was made for 2002. During 2002, sole proprietor became a participating employer in a company's profit sharing plan. Can the sole proprietor contribute to the profit sharing plan in which he is a participating employer instead of the SEP?

A client has a sole proprietor who has had a bad year(s) and does not want to make any contribution for the calendar year 2002. Unfortunately, there is no way this is going to happen with the facts. The SP and his advisor (do not know whether it is an attorney) has stated that they are willing to waive part of their accrued benefit such that a contribution will not be required.

I advised the client that the waiver is great for termination to make the plan whole BUT may not be recognized for minimum funding. The SP and their advisor want a specific IRS case or cite as to why they can not use the waiver (especially because there is only one participant).

The only thing I have been able to find is some very old Q&A / discussion whereby everyone agrees that it can not be done (it appears the reference is to 411(d)(6)???)

Any ideas??? Thanks in advance for any commentary.

Husband has a 401(k) Plan with a previous employer. Husband and wife are in the process of a getting a divroce. Wife wants to receive a portion of husbands account balance as a rollover without obtaining a QDRO in the interest of accelerating the process.

Is there any way to do this? Is there a loop hole for married people that one spouse can roll to the other spouse's account?

A makes participant contributions in 1985. The er does not pick up the contributions and A's contributions are all made on an after-tax basis. B is eligible to make contributions in 1985, but does not. In 2003, B elects to buyback his service for 1985 by making contributions for that year. The er now picks-up ee contributions. Can B's contributions made in 2003 be picked up despite the fact that they could not have been in 1985, the year for which the contributions are being made? The PLRs seem clear that you can pick-up buybacks of past service, but don't seem to address what happens with respect to years in which pick-up wasn't possible.

An LLC that is taxed as a sole proprietor established a 401(k) plan in 2002. What is the deadline for the sole proprietor to make 401(k) deferrals since it is unknown until after the year end what his profit will be? The due date for filing his personal return plus extensions?

My company is implementing a plan where it is contributing $2,000 worth of company stock to a plan for me. The company is then reducing my gross pay (semi-monthly) by the $2,000 over the year. My company sent around a powerpoint printout hyping this great deal. In it, they claim I am better off sice the $2,000 will not be subject to current income taxes and not subject to FICA.

My question is, can they do this? If so, how are they doing it?

P.S. I am told that I have to participate.

Can a SEP invest in real estate?

When your establishing a new retirement plan - safe harbor 401(k), when do the participants need to be notified of the plan. Is is so many days after its been implemented or so many days before?

Thanks.

Has there been any new guidance given on when a cafeteria plan needs to be amended? I am unclear of when or why I would update an existing cafeteria plan document. I understand that the FMLA provisions should operationally be in the plan but am unclear as to when it and various other laws are required to be in the plan.

Help

I'm involved in a debate about the definition of 'benefit commencement date' in DB plans generally. I know plan documents come into play, but are there any industry 'standards' or cites or articles of a generally accepted definition, such as we have with 'annuity starting date' (or is that a good definition itself?)

can somebody please point me in the right direction - I need to find a concise description of what investments are permitted in DB plans.

Thanks!