In two different sessions of the EA Meeting, Marty Pippins claimed the 120% corridor under JCWAA for 2002 and 2003 does not apply to 404 maximum calculations.

I don't agree. Section 404(a)(1)(D)(i) says "unfunded current liability determined under section 412(l)." The 120% rule is in 412(l)(7)©(iii) without any restriction to its use (it says it may be used "to determine current liability under this subsection"). It seems the reference from 404 should pick up this rate.

Anyone know why Marty was saying it is somehow restricted to the 105%?

When a MP plan is merged into a PS plan, what submission process would be used to get a determination letter on the MP plan? I would consider using the 5310 and submitting it as a plan termination, but it's not really that. Thoughts?

I have a top heavy 401(k) plan. The employer makes a matching contribution of 50% of deferrals up to $1,000. I want to apply the match towards the top heavy minimums for the non-key employees. It is my understanding that only the difference between the match and the 3% TH minimum needs to be contributed. There is one non-key whose match exceeds the 3% TH minimum. For simplicity let's say this individual's match is equal to 4% of their comp. Does this mean that each non-key employee will need to be allocated 4% of their comp.? How else could I justify one non-key employee having annual additions totaling 4% of their comp. when all the other non-keys are only getting 3%. Help!

What should plan do where participant took loan a while back and account balance used as security and now participant terminates employment when value of participant's account won't cover balance owing?

I would greatly appreciate if someone could explain the "phase out" limits on a Roth IRA for married/joint filer with income over $150k. I cannot find the formula in the Roth regs. Thanks

During 2002 I worked for two employers. I earned over $3,000 from each. One employer provided a 401k plan; the other had no deferred compensation plan or pension plan. Am I eligible to have a deductible IRA for 2002 (up to $3,000) because my second employer did not cover me under a deferred compensation plan/pension plan?

Husband and Wife opearte a Sole Prop business and file separate Sch Cs.

Total net Sch C for the business is $100k which is split 50/50. Therefore, net Sch C for each owner is $50k and 1/2 FICA is $3,500 (rounded for illustration). The sum of their Sch Cs less 1/2 FICA is $93,000.

Total plan cost is $90k say, which is less than the $93k in total Sch C less 1/2 FICA. Actuarially allocated costs are: $55k for husband and $35k for wife (computed individual costs under the Ind Agg method or allocated under the EAN or FIL methods using a reasonbale approach).

Scenario #1 - A joint income tax return is to be filed.

What can be deduced for the pension plan: full $90k or $81,500 (Husband's Sch C less 1/2 FICA of $46,500 plus $35k for the wife), carrying foward a loss of $8,500?

Scenario #2 - Separate income tax returns are to be filed.

What is the deduction for pension plan for each of them: $46,500 for husband and $35k for the wife or can the pension plan be split 50/50 and $45k deducted by each?

(they each have a higher Hi 3 average established in the past so current year eligible compensation does not affect the cost).

hello, my question is, can you have more than one roth IRA as long as your combined contributions do not exceed 3,000.00/ yr? this is for a married filing jointly annual income of 100,000.00/yr. any help woould be gladly accepted. thanks!

A participant in a tax-exempt 457(b) plan terminated employment in 2001 and elected to defer her distribution until 2005, when she reached age 65. In December 2002, she requested (and received) a partial payment of $32,000 to pay for a down payment on a house. Does this amount to a revocation of her initial election to defer her distribution and result in the all the amounts deferred under the plan being taxed because now they are "paid or made available"? Or is just the $32,000 taxed?

This just came in from company ready to start a 401k, I was wondering if you had an answer or know of a reference source. A small (engineering) company (s-corp) owned by several people (of which 2 are brothers), owners intend to create various LLP’s and corporations. Each company will be created to take a separate process/technology to market, with intent to limit liability exposure of original company from anything that might happen with the new processes/technology/companies in the future.

Ownership of the companies intends to be set up so that several will be considered under control group for purposes of the 401k plan benefits. (Each company will get its own 401k plan, identical benefits.)

The question is are there any laws or codes that could create a binding tie between the companies simply because they share 401(k) plan provisions under a control group? Have anyone seen this happen?

Thanks.

frankh@wellington401k.com

HIPAA deadlines are keyed to calendar days, no?

If anyone can provide a citation that would be appreciated.

The last post by lori recieved so much input, I thought I would run another scenario:

Owner of an S-corp, age 48

Income of $700,000

Projected income - $700,000 - $1,000,000 for the next 12 years. He owns a vary stable business that has become more profitable every year of operation.

20 full time employees - nobody anywhere near his income level

I understand the uncertainty associated with the legislation regarding 412(i), but what hurdles might this owner have to overcome based on income levels and number of employees.

Thank You for your input.

What are the typical options for taking a distribution from a non-governmental 457(b) plan? Is it possible to do a rollover to an IRA? Are the options different between governmental and non-governmental 457(b) plans?

I love the new format, but I can barely read the topic titles. Can you please enlarge those letters?

Thanks.

Facts - a profit sharing and 401(k) plan provides that distributions from the plan may only be taken in the form of lump sum distributions. The plan does not permit other forms of distributions (e.g., installments).

Question - how much, if anything, is the plan required to say about the application of the required minimum distribution rules under IRC Section 401(a)(9)? Regulation § 1.401(a)(9)-1 Q&A 3 specifies which provisions must be included in a plan to satisfy Section 401(a)(9), but I am not sure if these provisions are required by plans that only permit lump sum distributions.

If provisions regarding 401(a)(9) are required, does anyone have any suggested language?

Thank you.

Facts - a profit sharing and 401(k) plan provides that distributions from the plan may only be taken in the form of lump sum distributions. The plan does not permit other forms of distributions (e.g., installments).

Question - how much, if anything, is the plan required to say about the application of the required minimum distribution rules under IRC Section 401(a)(9)? Regulation § 1.401(a)(9)-1 Q&A 3 specifies which provisions must be included in a plan to satisfy Section 401(a)(9), but I am not sure if these provisions are required by plans that only permit lump sum distributions.

If provisions regarding 401(a)(9) are required, does anyone have any suggested language?

Thank you.

Regarding a state DB plan with a 7/1-6/30 plan year.

When 401(a)(17) was amended in '93 by P.L. 103-66, I'm being told that state employees hired before 7/1/96 were grandfathered in with no compensation limit under 401(a)(17). But several IRS Notices since then, including the latest (IRS Notice 2002-71), apparently say that a compensation limit does apply to those employees. Notice 2002-71 says the limit for 2003 is $300K.

Which is correct? Pre-7/1/96 employees have no compensation limit, or the limit is $300K.

Thanks,

Ken Davis

Regarding a state DB plan with a 7/1-6/30 plan year.

When 401(a)(17) was amended in '93 by P.L. 103-66, I'm being told that state employees hired before 7/1/96 were grandfathered in with no compensation limit under 401(a)(17). But several IRS Notices since then, including the latest (IRS Notice 2002-71), apparently say that a compensation limit does apply to those employees. Notice 2002-71 says the limit for 2003 is $300K.

Which is correct? Pre-7/1/96 employees have no compensation limit, or the limit is $300K.

Thanks,

Ken Davis

I know the regs say for a safe harbor hardship, all distributions and loans must be taken first. Someone told me that if a loan would be considered a burden itself, then it doesn't have to be taken and the participant can go ahead and take the h'ship without first having a loan.

Is this true? Is it written anywhere?

Your thoughts are appreciated as always.

A client of ours has asked me how they should be handling their S-Corp shareholder recordkeeping. The ESOP's leveraged shares were issued in one certificate, and they issue a new certificate to the ESOP each time they purchase additional non-leveraged shares. From what I can see, the ESOP holds 5 certificates in total. The question concerns how to reflect the distribution/ re-issue of shares when a participant is paid out.

In the past, when a participant was paid out, the client issued a company check to purchase the whole shares which they deposited to treasury stock. They did not re-issue certificates to reflect the shares going from the ESOP to the participant to the company. On the shareholder log they entered a negative entry, netted against the leveraged certificate, to reflect the repurchased shares. The shares that were repurchased were from both leveraged and non-leveraged participant accounts.

We are in the process of making a distribution and I advised the client that if the participant takes a lump sum distribution, they should issue him a certificate for x # shares. The client thinks he would have to issue the participant 5 certificates and re-issue 5 certificates to the ESOP - one for each purchase.

I can see the ESOP needing to have at least two certificates -- one representing the leveraged shares that are pledged as collateral for the ESOP loan and another certificate reflecting the non-leveraged shares. When distributions are processed and the company buys stock from the plan, each certificate should be re-issued to reflect the respective decrease in plan assets. If they want to continue to issue new certificates for each non-lev. purchase, then only one of those certs would need to be re-issued. The participant would receive, at most, two certificates -- one for their leveraged shares and one for their non-leveraged shares.

I'm surprised that the lending institution didn't put a covenant in the loan agreement that no shares could be sold/distributed until the loan was paid in full. We have requested but not yet recd a copy of the latest loan agreements. If such a covenant does exist, then how should lump sum distributions be processed? Can the participant be paid out entirely in non-leveraged shares and the shares inside the ESOP be "rebalanced".

In an audit, wouldn't it be necessary to tie the stock certificates to the plan assets? Does anyone have any experience with this? I think the requirements for shareholder recordkeeping are probably governed by the State business code -- any thoughts?