What does a Roth IRA invest in? Does it invest in mutual funds? Can I set up a Roth to invest in an index fund? Or am I way off here? Thanks for any help.

What would the minimum funding deadline be for a plan with a year ending on 1/5/03? I'm inclined to push forward the PYE 12/31/02 deadline by 5 days and say 9/20/03. Is this correct? Has anybody else had a similar question?

I have a client that has a Profit Sharing and Pension Plan. There is an employee who has become eligible in the plan and does not want to receive any benefits he is entitled too. Is there anything I need to do for that besides probably have the eligible participant and the employer sign something saying he wishes to opt out of the benefits???

I know, I said the same thing, why would you want to opt out???? Ha ha!

Thanks.

SEP Plan has three year requirement. Employee has three years and would be eligible for a contribution in 2002. Employee terminates in November 2002. Is the employee still eligible for the 2002contribution since no hour or last day requirement allowed in SEP?

Second - To utilize the increased deduction limit of 25% of compensation for 2002, did the employer have to have amended the plan for EGTRRA in 2002. If they sign in 2003, would the new 25% only be effective for 2003 contributions and the 15% still apply to 2002 contributions?

Do any firms that only do balance forward recordkeeping get a SAS 70 audit? We are getting asked for this by auditors a lot now. I know that daily firms that handle investments usually get them but we don't handle any investment transactions.

Would the answer change if your firm was agent of record?

Assume a 401(k) plan with a June 30 plan year end. Participant with the following employee 401(k) contribution history:

7/1/01 – 6/30/02 $0 contributions

7/1/02 – 12/3/02 12,000

1/1/03 – 6/30/03 14,000

7/1/02 – 6/30/03 26,000 (total deferrals for the plan year)

What would be the maximum profit sharing contribution for this employee for the 7/1/02 – 6/30/03 plan year?

A) 16,000 (able to use the 2,000 catch-up contribution)

or

B) 15,000 (because he already used 1,000 of his catch up contribution in the 2002 calendar year)

The cobbler's children have no shoes.

I forgot to file for an extension of time to file the 5500 for my calendar year S corp company's calendar year profit-sharing plan. Now it's August 1.

I guess I'd better hunker down and do the 5500 today or as soon as I can-- there's no way to get an extension now, is there?

My accountant obtained an extension of time for the company to file its corporate income tax return (until September 15), but yours truly signed and mailed the thing into the IRS just last week.

Plan participant was excluded from making deferrals (and receiving ER match) in 2002 and 2003. The plan sponsor will be correcting the operational defect with a QNEC. The particiapnt is a NHCE. The plan passed ADP in 2002.

For the 2003 plan year. Do I include the QNEC in the ADP test? How do I handle the matching dollars?

Thanks!

A plan has inservice withdrawal provision. Is this considered a protected benefit? Or can they get rid of it at any time?

I see in regs that hardships are not protected, but I cant find anything on insvc.

Thanks!

Any comments out there on IBM losing the cash balance suit? Looks like this could make an already unsettled situation even more dicey.

Pursuant to the consistency rules, it is my understanding that if an employee experiences an event which would increase the number of eligible children, he or she may join or increase his or her contribution level to a dependent care plan, but not stop or decrease. Is this correct?

Looking for answer for public water agency, for plan limits with use of both 457b and SEP? SEP is inplace, 457b is not - yet?

In an effort to save money, my California group client would like to pay $100/month to each EE (about 5 ee's of a 90-ee group) who refuses medical or dental benefits because they are covered by their spouse's (other employer) group insurance. Currently, ER pays 100%, about $400 per month for EE medical and dental, although EE is also covered by spouse's equal-or-better-benefit group coverage. Most California carriers don't care what the ER does so long as ER enrolls 100% of Eligible EE's (Eligible EE being a full time EE without other group coverage). ER is not incentiveizing EE for declining group insurance. The $100 paid to the declining EE would be additional compensation.

Any problems with this kind of an arrangement?

Your thoughts and cautions!

John

An employer is in the practice of "firing" employees on a Friday, having them immediately fill out an application for a position within a different area of the company and then "rehiring" the fired employees to start in the new area/position the following Monday. For all practical purposes, what the employer is doing is transferring employees from one area of the company to another, but for whatever reason it treats these transfers as a fire and rehire. The employees continue participating in the employer's qualified plan to the extent that they were eligible prior to the rehire.

My question is whether this "fire and rehire" would consitute a severance from employment or separation from service that would permit the employee to take a distribution from the plan. Any input or direction on this issue would greatly appreciated.

Thanks.

An employer that is not part of a controlled group has two underfunded pension plans. The employer will sell the assets of the company. The employees will either go with the buyer or be terminated. The employer still maintains the plan in this situation. If the employer finds it does not have sufficient funds to make minimum contributions to the plan, and it desires to terminate the plans in a distress termination, what assets will the PBGC look for? Specifically, can it look to the assets of the principal owners?

If a safe harbor plan with a basic match is terminating, is the plan sponsor required to give 30 days notice (i.e., delay the desired plan termination date to allow a notice period)? Notice 2000-3 does not specifically address plan terminations, but does seem to require 30 days notice. Either way, the plan will have to run the ADP test, but a "cost conservative" client would prefer not to delay termination to provide notice. Any thoughts?

I am a TPA. We have a plan filing as a large plan filer for the first time for 2002. This is a PSP, trustee-directed balance forward plan with 10 managed accounts held at two brokerage houses. At the client's request, several years ago we stopped providing a full accounting of the trust assets due to the exhorbitant trust accounting costs. Instead, we prepared a condensed version of the accounting to produce the financial statements. We reduced the time involved from 20 hours to about 4. We treated each managed account as a single investment. We accounted for all monies coming into the trust, out of the trust and transfers in between the managed accounts, but made no distinction between unrealized and realized gains. After all, this was no longer required on the new Schedule I. Knowing that 2002 was an audit year, we discussed the issue with both the client and the auditor and asked if this condensed method of trust accounting would be enough to complete the audit. The auditor said it would be, but cautioned us that since the 5500 Sch H did require a distinction between the unrealized and realized gains on the 5500 which was our responsibility, that the decision to perform the full accounting would need to be made by us and the client. The client decided that they were not willing to spend $2,000 to come up with an accurate distinction of these numbers since it all comes out in the wash anyway. All that said, now we have the issue of the Schedule H attachments referring to Assets Held for Investment and Reportable Transactions. The auditor is looking to us to provide those schedules. I attended a session at the ASPA Summer Conference on this issue and specifically asked the speaker whose responsibility this was. He said it was part of the audit and therefore the auditors responsibility. But the auditors are claiming that they are engaged to audit the 5500, not prepare it, and these are 5500 attachments. Well, I would argue that the audited financial statements are also part of the filing...should I be responsible for those, too? Certainly not. I have also asked other TPA practioners and they all indicated that these schedules are normally provided by the auditor.

Any thoughts or opinions on this issue would be most appreciated, particularly from experienced auditing firms. By the way, the reason this has escalated to such a big issue is because there are literally thousands of stock and bond positions held at year end.

I have a plan that wants to exclude a particular group of employees, say the employees of office A. As of now, everyone in office A is eligible to participate, and roughly 75% of them do.

What the company wants to do is exclude the employees in office A, but let the ones already contributing to continue, therefore making the non-deferring, and future employees not eligible for the plan.

That can't be right. Right?

Our 401k administrator sends distributions to a bank account where it waits for presentation of the check by the participant. The bank earns interest on this money. It gives the plan "earnings credits" that are used to offset the bank fees. When the rates are high, the earnings credits exceed the bank fees (not the situation now). Our company would like to use the excess earnings credits to offset its bank fees. We have advised that the earnings credits can only be used by the plan or its participants under the exclusive benefit rules; to use it for the company would be a violation of ERISA sec. 406(b)(1) as explained by the DOL in Advisory Opinion 93-24A.

They say that under the bank regulations, the bank cannot pay the trust interest so they will be forced to let the earnings credits inure to the benefit of the bank. Field Assistance Bulletin 2002-3 states that as fiduciaries we should monitor to be sure the plan is paying reasonable bank fees. In essence, the bank's compensation is increased by realizing the excess earnings credits (interest earned by the bank in excess of the bank fees). Doesn't this put us in a Catch 22 position (we cannot use the excess earnings credits but if the bank can't offset its fees, they in essence earn more compensation)?

Does anyone else have this problem? Is there a solution? (We have advised that if the $ did not sit in the disbursement account as long, there would be less in earnings credits/interest for the bank.)

I have never been involved with a cash balance plan but understand the concept.

My question has to do with how the annual contribution is calculated.

Is one funding method favored over another? I can see how unit credit would make sense because one would fund for the current accrual each year. I think I could also make a case for individual aggregate, especially for a small plan.

In order to determine the PVB for a participant, does one take the current cash balance account and project with an assumed interest rate to NRA and project the current contribution rate (with a salary scale?) also to NRA, sum the two, convert to an annuity (under funding assumptions) and then discount to current age?

In order to calculate the EAN Normal Cost, do you take the current compensation, project back to entry age using a salary scale and then go forward (and then backward) to get the EAN PVB?