What are you all going to use as the third party substantiation?

The only concern that we have had with regard to using the computerized cash register receipts is that no name appears anywhere. It would be so easy for someone in danger of losing money to get slips from an ineligible person and submit them.

Or are all of those claims just blanket-approved?

Thanks for your insights.

An attorney with Mullen & Henzell in Santa Barbara, CA, recently received a Compliance Statement on an Employer Eligibility Failure under Revenue Procedure 2003-44. The IRS did NOT impose the additional 10 percent fee on the "Excess Amount" (elective and matching contributions made over a 4-year period) that were permitted to be retained (remain) in the SIMPLE IRAs (subject to IRC Sec 408(p)). The attorney made a very convincing argument as to why the penalty should not apply. FFI, the attorney's name is Christine P. Roberts (805) 966-1501.

I have a client who has an employee eligible to start deferring into the 401k as of 7/1/03, however the employee has already made $200,000 in comp by 7/1. The payroll company & 401k provider have said he cannot defer into the plan once he reaches $200,000.

My question is, if he has just become eligible and has not hit the $12,000 limit (or any other plan imposed limits) why can't he defer? What am I missing?

Thanks in advance!

I'm looking for guidance (more of a confirmation, really) on the definition of the term "employee" as used in the regs. for VEBAs. We have a client who has let in non-bargaining unit employees. After several years, the non-bargaining employees exceed the 10% limit. This is a bad thing, right?

Is a possible solution setting up a second VEBA within the same trust? A non-bargaining unit VEBA and a bargaining unit VEBA? If that is the case, then what's the big deal with letting the non-bargs in in the first place? Aren't they employees?

Thanks!

We filed our 5500 by the 7/31 deadline and now must issue SAR's to participants and beneficiaries by 9/30. We are unclear if we are obligated to only provide a SAR to those deemed participants or beneficiaries as of a specific date. What date is appropriate? 12/31/02, 7/31/03 or 9/30/03?

It might be really confusing if a former associate terminated employment after 12/31 and is no longer a participant once we file. Any guidance is appreciated.

Anybody have a IRS cite corresponding to the requirements for "meaningful benefits" in DB plans? Something like a .5% of final pay benefit? I need to read up on this quickly.

A draft order provides for the segregation of a fixed $ amount for the alt. payee - w/o any adjustment for earnings/losses between the valuation date and the segregation date. The recordkeeper segregated a larger amount for the alt. payee stating that the amount transferred must represent the historical cost basis of the assets pursuant to IRC sec. 72(m)(10). I'm a bit confused as to how this Code section dictates that the participant's investment in the contract trumps the Order which directs that a fixed amount as of a date certain be segregated. Am I missing something - either obvious or subtle?

Is there a program for the 5500 EZ that is similar to the DFVC program?

Anyone taken over a one person plan that had never filed 5500 EZ's? He has had more than 100k in the plan since day 1 since it has rollover money in it.

Our company has a formal tuition reimbursement policy that includes graduate work. However, associates seeking a graduate degree must also obtain executive management committee approval. We are looking for common practices for master degree approvals from other employers.

Does your organization reimburse master's programs under its tuition policy? If so, is the eligibility criteria the same as for bachelors or are other factors considered, such as tenure, job performance or career growth potential? Is the maximum annual benefit higher than for undergraduate programs?

When the FSA Administrative fees are paid by the employer, can the cost be charged to the employee withholding account? Or do the accounting records have to somehow reflect that only forfeitures were used to pay the admin. expenses?

Does anyone have any information on if it is still allowed in plan documents to have a "bad boy clause"?

I am looking for software that is relatively simple to do proposals for cross tested plans. Any recommendations? I appreciate all input.

I'm working on testing, etc. for a controlled group and would appreciate any input on the following controlled group testing/allocation issues:

Company 1 PS Plan - Covers only salaried employees

Company 1 401(k) PS Plan - Covers all employees

Only NHCE's get Non-Elective

Non uniform PS allocation formula. %'s differ per division

Company 2 401(k) PS Plan

100% owned by Company 1

Uniform PS allocation formula within plan

Company 3 401(k) PS Plan

100% owned by Company 1

Uniform PS allocation within plan

Coverage Test - can run per plan using the whole population as denominator. If one plan fails with this method, an Average Benefits test on the whole group of plans would need to be performed.

ADP/ACP Test - can run per plan if Coverage tests pass the same way, otherwise all plans need to be combined for ADP and ACP testing.

Non-Uniform PS allocation for Company 1 - A rate group test, for this plan only, would need to be performed since the allocation rates are not uniform. Since this portion of the plan only benefits NHCE's, wouldn't this automatically pass or would the other plans need to be considered due to controll group issues?

Thanks!

Laurie

Is there a specific time requirement within which an employer has to forward payroll deducted amounts for repayment of a loan from a participant's 401(k) account? The employee reports that the repayment amount is taken out of each pay check but that it is not forwarded to the plan administrator for weeks making the posting of the repayments several pay periods behind.

Thanks for your help.

looking at a plan where the owner died in 1998. Daughter becomes eligible to participate in the plan in 1999. She had no actual ownership since her date of participation but was included as hce due to attribution. She will acquire no ownership of the company until 2005. The current administrator is showing her to be in the hce group which I know is not valid based upon her current ownership (0) and her wages are not in the hce classification range.

the adp test is using her to pass the tests because she isn't deferring. moving her into the nhce group will fail the test in the first year she is being considered a former key employee.

My question is when did she become a former key employee? 2001?

If this plan has been using prior year testing what year did she fall into the nhce group, 2001 or 2002?

The plan has not been updated for gust or egttra yet either.

Is there a minimum age to be in a DB plan in the 1970 & 1980s? Any legislation? Or was is just based on the plan rules?

A client desired to install a 401(k) plan effective January 1, 2003 (the plan year will be the calendar year). This is a new plan and the client's only plan. The client consulted with "Attorney A" in November 2002. Consistent with the client's wishes, Attorney A prepared a deferral election form which the client passed out to all of its employees in late November 2002 (the plan provided for immediate eligibility). A trust account was established and participant's began making elective deferral contributions shortly after January 1, 2003. Attorney A told the client that the plan document does not need to be completed or signed until December 31, 2003. Since then the plan document has been completed and was signed by the client on September 3, 2003. Another attorney, "Attorney B", just reviewed the client's 401(k) plan. Attorney B asserts that a 401(k) feature cannot be retroactively installed and that all of the deferrals made by participants between January 1, 2003, and September 3, 2003, are impermissible deferrals. Attorney A, on the other hand, asserts that there is no problem with any of the 2003 deferrals since the 401(k) plan was signed no later than December 31, 2003, and is retroactive to January 1, 2003. Can anyone help me figure out whether Attorney A or Attorney B is correct? Thanks.

We did a number of involuntary cash-outs (accounts < $5,000) in 2001. As it turned out two of our participants had bad addresses. It was not discovered that they never received their checks until 2002. The checks were never cashed; we stopped payment and reissued them in 2002. We are thinking there's no constructive receipt here (they didn't expect these checks).

Of course the 1099Rs reflect withholding and distribution in 2001 so the IRS is now saying they made ineligible rollovers. One of the participants put in his own money to make up for the withholding.

Our payroll says they will reissue a 1009R for 2001 showing only the withholding and a 1099R in 2002 showing only the distribution. This puts the participant who put in his own money in the position of making an ineligible roll of the amount equal to the withholding.

I wonder if this would qualify under Rev. Proc. 2003-16 for waiver of the 60-day rollover requirement .

Or, does the IRS prefer that the amended 1099R be handled differently ? We are not sure about showing the withholding in 2002 since it actually went to the IRS in 2001.

Surely this has to happen in other companies. What's the best way to handle this?

I've asked this under 401(k) board, but its more of a document question. so I will ask it here.

I've got a Parent/subsidiary controlled group. Two employers A & B; each maintain its own Plan. B can't pass coverage on its own, so we aggregate. Now here is my problem, since I aggregate for coverage, I've got to aggregate for ADP/ACP. A uses current year testing; B uses prior year testing. Can B retroactively be amended to use current year?

B has already amended for GUST, but I am hoping that since we are still within the remedial amendment period that its permissable to do that retroactivce amendment.

Taxpayer maintains a mutual fund IRA account and names a trust as beneficiary. The trust provides that part of the trust will be paid to several charities and part will be paid to a friend. After the death of taxpayer, can the friend take a distribution from the trust over his or her life expectancy provided that the distributions to the charities are made shortly after death? Or would the beneficiary designation have to be rewritten to provide for two trusts as beneficiaries, one trust with the charities and one with the friend as beneficiary (with no other nonperson as contingent beneficiary)?