Where can I find info regarding the one time irrevocable election not to participate? We have a takeover plan which originally was profit sharing only. Dr Y participated. Dr X made irrecovable election not to participate. Amended to add 401(k) in 2000. Drs X and Y say they made an irrevocable election "not to participate" at that time. Prior TPA did not include X or Y on ADP test nor did they (when other owners did) receive the 3% Top heavy minimum. They can't do that -- can they? Once some time period has elapse, I thought Dr Y could not make such an election. Also, seems like there was some issue about owners not being able to use this election for 401(k) plans --

Plan Doc says -- participant may "waive Participation in the Plan for any Plan Year. A waiver will be permitted only if it does not adversely affect the Plan's tax qualified status."

Could Dr Y have made an irrevocable election years after the original PSP effective date? Are X and Y included in the ADP test?

One of my clients would like to "pre-fund" employer contributions to a cross-tested plan. The plan provides that the discretionary contribution is "an amount as specified annually by the Employer" and will be allocated "to each eligible Participant within a classification group". Does the fact that the total amount of the contribution has not yet been determined preclude funding some portion of the contribution? Further complicating matters is the presence of 1000 hours/last day requirements.

The plan contains a 3% safe harbor non-elective formula, so I am pretty sure that the client could fund that portion throughout the year. Since we know that the gateway provisions will then apply to all eligible employees, is the client safe in funding an additional 2% throughout the year?

I have a client that has a defined benefit plan with a September 30 plan year end. The client's fiscal year also ends September 30. The plan was terminated on Febuary 25, 2002 and the benefits were paid out in April 2003. The owner had to forego his entire benefit and had to contribute an additional $70,000 to fully fund the non-owner benefits in April 2003. The plan was covered by the PBGC. There were no unfunded guaranteed benefits (IRC 404(g)). For the October 1, 2002 actuarial valuation, we prorated the charges to the funding standard account as required by Rev. Proc. 79-237. The maximum tax-deductible contribution was $45,000, which was contributed in April 2003. When and how can the remaining $25,000 be deducted.

Can the owner deduct the $25,000 for the fiscal year ending September 30, 2003 under IRC 404(a)(1)(D), unfunded current liability?

I'll post this here, although the question does not involve a multi--it involves a collectively bargained single-employer plan. This group's wisdom seems most applicable.

We have a situation in which the actual plan document has not been amended to reflect changes to the benefit amounts and other terms that have been agreed to in collective bargaining agreements.

The employer is now bankrupt and member of the controlled group is assuming sponsorship of the plan to avoid very expensive termination liability. The controlled group member will now operate the plan.

I assume the new sponsor has to give effect to the terms agreed to in the cba. Nothing else would seem fair. Are there any concerns about doing so when the plan document does not provide for these terms?

In some instances the provision in the plan document is more participant favorably and in other cases the cba's are more participant favorable, in case that makes a difference.

Any thoughts or suggestions would be very helpful.

Julie

I am working with a client that adopted a 401(k) plan as of 12/1/02. The client decided to adopt the plan based on a cross-tested allocation that was performed prior to adopting the plan. The provider did not realize the client wanted to adopt a cross-tested plan and provided them with a prototype document, which the client signed off on. The client is now ready to make their 2002 contribution and was told by the provider they will be unable to do a cross-tested allocation for 2002 and that they will need to restate their current document to a volume submitter if they want a cross-tested allocation for 2003. Is there any way that this client could make a cross-tested allocation for 2002?

We have a client that did not keep a copy of their filed 5558. They filed their 5500, checking the extension box, but did not provide a copy of the 5558. Now they have received the standard letter requesting a copy of the 5558 within the next 30 days.

Any suggestions on how to respond? The client wants to be truthful in telling DOL that they filed it and did not keep a copy.

In cross testing DC plans, the mortality table factor is applied to all allocations in determining EBARS. Hence, the choice of table, setting aside permitted disparity, makes no difference in the ranking of EBARS or the average benefits test. However, it would seem in the combo scenario with owner(s) accrual rate principally or entirely from the DB plan, that the table with the strongest q's will produce the highest DC EBARS and therefore the most favorable testing? Any comments?

I have a safe harbor 401(k) plan that used the safe harbor match. The only money in the plan other than deferrals and match is the top heavy contributions required for years prior to 2002.

The plan document says that forfeitures are allocated as a discretionary contribution. I have forfeitures to allocated for the 2002 plan year. Will this allocation trigger the top heavy rules again, requiring more top heavy contributions to be made?

These forfeitures aren't from a discretionary source, they were required top heavy minimums.

I have a participant who's hardship withdrawal request includes enough to cover his withholding and his 10% penalty. Is anyone aware of any reason that he cannot include that 10% penalty amount with the deposit of the federal withholding for the distribution? He works for a small company so they are flexible if this is allowed.

Here is the scenario.

Company A sponsors a DB plan and a DC plan. Initially no one participates in both plans and 404(a)(7) does not apply.

Then, due to turnover and the requirements of 401(a)(26), one of the DC participants becomes a participant in the DB plan but on the condition that she will not recieve any further annual additions in the DC plan.

404(a)(7) mentions "beneficiaries" and since the employee in question would still have an account balance in the DC plan it seems to me that she would be a beneficiary in the DC plan even though she will no longer recieve annual additions in the DC plan 404(a)(7) will now apply to limit the overall deductions of the DB and DC plan.

I have spoken to a collegue who disagrees with me. Does anyone else have an opinion (and hopefully something else to back it up)?

I did find PLR 8252162 where two employees terminate membership in a DC plan, enter a DB plan, AND transfer their vested account balances from the DC plan to the new DB plan. In this case, the IRS opined that 404(a)(7) would not apply to the new DB plan and the existing DC plan. I suspect that the transfer is the key issue here.

I was looking for the rule that limits FICA to the first 6 months of sick pay or disability payments. I think I found what I need in the definition of wages and the exclusions therefrom in Code section 3121(a)(4). Does anyone know if there is any guidance on how employers must handle this? A company is continuing to withhold FICA from sick leave pay and then eventually refunding the amounts over what is due for the first 6 months. I'm wondering if this is a violation of a specific rule. Thanks for any help or thoughts on this.

My profile reads "Terminated with a break in service".

What does this mean and how does it affect the distribution.

My plan defines compensation as W-2 income. If one of my employees receives a W-2 from me and a W-2 from a third party for "sick pay" do I combine the W-2 totals for purposes of doing ADP and ACP testing? The document does not specify.

Haven't run into this yet, but undoubtedly will soon. Line 3C on the 5310 says that if you don't have a determination letter, you have to submit initial plan, all amendments, etc....

Under IRS Announcement 2001-77, there will be batches of Prototype and Volume Submitter plans where adopters no longer file for determination letters, and instead use the document sponsor's Opinion or Advisory letter as a determination letter.

My question is this: has anyone talked to the powers that be in the Plan Termination unit at IRS to determine if such plan adopters can, under Line 3C(1), answer "yes" and submit a copy of the most recent Opinion/Advisory letter plus subsequent amendments, or must they answer "no" and be forced to go back to day one, or at least to the last actual determination letter? It would seem consistent with the spirit of 2001-77 to allow the former rather than to require the latter, but I don't know. Anybody have any information/experience? Thanks!

We have an existing top heavy 401(k) plan that is considering a change to a safe harbor match beginning 1/1/04. The employer will cease to make any further discretionary profit sharing contributions.

Since the plan has accumulated balances in the employer discretionary profit sharing source, can they qualify for the top heavy exception?

Self-employed taxpayer wants to set up an MSA for the remainder of 2003. Under current tax code version of Code Section 220, will taxpayer be allowed to take deductions in subsequent years, or is he only limited to a deduction for 2003.

Thanks.

Is there a good source out there than can help me figure out what information I need to gather to complete discrimination testing on a cafeteria plan?

Owner of company is terminating his 401(k). Calendar year 401(k) terminating in mid-2003. He wants to know if he can make a deductible IRA contribution for 2003. I suspect no since he was eligible for a 401(k) during part of the year (even though participation was poor and he was unable to make any significant contribution due to ADP test). Any thoughts? Any ideas?

Is there a deadline for completing discrimination testing on a cafeteria plan and its underlying benefits?

What is the ability of the plan administrator of the plan (the plan is the covered entity) to sign the business associate agreement with a TPA? Also, if the contract provides for services other than those covered by the Business Associate agreement (e.g., provides for services for the employer to use for its HR function): (1) may Business Associate portions be part of the agreement - one section, (2) may the agreement be structure to have provisions 1-8 (non-BA provisions) binding on the Plan Sponsor (or employer) and the 9th provision (BA provisions) to be binding the plan with the plan administrator signing along with the TPA, and (3) then make the employer/plan sponsor, plan administrator and the TPA all sign the agreement?

Help!