One of the owners of a small C-Corp passed away just before the SEP contribution was going to be made for 2002.

I believe that the SEP contribution should still be made for him.

Is there anyone who thinks it can't be made?

I have a money purchase plan with 1,000 hour last day rule that

was frozen in November 2002. Is the plan subject to the minimum

funding requirement in 2002 or is it exempt due to the last day rule?

2001 PYE ratio was 53.80

2002 PYE ratio is 60.02

top-heavy 2002?

the plan is top-heavy in 2003.

We have a takeover plan. The period ending 12/31/01 should have been audited and the Schedule I versus H should have been prepared etc.. (It closed in the 2000 year with more than 120 participants.)

We're going to break the news it must be audited for 2002. What about the 2001 year? I suppose the proper thing to do would be an amended return. What are the penalties?

I'm thinking this new client will simply want to "roll the dice" and see if IRS ever picks up on it. The are not going to be happy at all about the audit and having to pay for one. It's a 401 k plan with a 2 month eligibility. The have over 200 employees and only 40 actually defer and receive match. The other TPA firm only counted the ones who participated and said all other elected to opt out of the plan. I know they can't do that for acp/adp but I've never had that issue come up on the 5500 count. I'm thinking we have to count everyone who had the opportunity to defer regardless of whether the employer had them sign a form to "opt out". Am I losing it here? Also, if the client "rolls the dice" will my beginning number of participants be a red flag (it will really vary with the closing from last year.)

Help!

My client wants to terminate his Profit Sharing Plan that has Life Insurance policies as well as mutual funds as investment vehicles. He wants to have the insurance policies distributed in kind (I think it is because the participants insurability has changed). Does anyone see a problem with this?

I know it is too simple of a question to even ask, but--

Assuming I can pass the gateway, can I give the key owner an allocation of more than 25% of the total profit sharing contribution?

I've taken eligible comp times 25% and reached "X". The key makes $80,000. This is a straight ps plan. If I can pass the gateway can I actually give the key let's say 35%???

As long as my total amount is 25%, I pass the gateway, does it matter how high I take the key's allocation %???

We work with many brokerage firms that have 40l(k) funds invested for participants in various mutuals funds. We are a 3rd party TPA firm. We have a takeover plan. The prior TPA sent the brokerage firm's statement (1/01/01 thru 12/31/01) cash basis along with the SAR. The census data was not included (e.g., date of hire, vested %) on any statement to the participant. Also, it was simple a cash statement. It did not account for the deferrals/match contributions that came in the following year for the prior year. The 5500, of course, did. So did the SAR.

We have also sent an additional statement based on an accrual basis, which reflects all of the census info and vesting percentile.

Am I doing too much work? Does the DOL/IRS have any regs on what the participant must receive on an annual basis (I know an SAR and SPD must be given at the appropriate times).

All of are plans are based on annual valuations.

Any thoughts would be appreciated.

An employer currently maintains a defined contribution plan, which it intends to continue. Now the employer wants to add a defined benefit plan, but it would like to exclude service before the defined benefit plan's effective date for purposes of vesting. Is this permissible?

We think that the literal language of Section 411(a)(4)© and Treas. Reg. §1.411(a)-5(B)(3)(v)(B) (which I have paraphrased below) does permit this. However, we also suspect that the IRS may take the opposite position. Has anyone had the IRS review this type of situation?

Section 411(a)(4)© provides that a plan can exclude service before the plan's effective date for purposes of vesting for any period in which the employer did not maintain a predecessor plan.

Treas. Reg. §1.411(a)-5(B)(3)(v)(B) provides that an employer is considered to have maintained a predecessor plan if the employer terminated a prior plan within 5 years of establishing the new plan.

I have a 401(k) plan with a 3% nonelective safe harbor

Employer is also allocating an additional employer profit sharing contribution.

Relius 410(B) test shows a terminee who gets the safe harbor but not the additional profit sharign as benefiting

Is this corrrect?

Are there possible 401(a) (4) requirements?

A group of new employees (acquired through a corporate acquisition) become immediately eligible to participate in the company's cash balance plan. Suppose these new employees have the right to roll over lump sum distributions from the prior employer's qualified plan.

Can the receiving plan grant these employees the ability to convert the rollover balances into a starting cash balances? If so, do you think it would be necessary to create a minimum balance based on maintaining a separate account?

One more complication. What if the receiving plan only wanted to accept the roll over on the condition that the employee also agreed to convert it to a cash balance?

Employer is making 50% matching contribution to employee's 401k plan. After the employee terminates his employment, it is discovered that during the final year of his employment, employee had neglected the employer's work and actively promoted his own business while he was on the employer's payroll. Is there a mechanism for the employer to recoup at least its own matching contributions to the employee's plan?

Does form 1042-s require a tax ID number in all cases?

Thanks

Jane

I have a non-resident alien bene who is unable to set a SS# and does not have an ITIN.

She says she is not required to obtain a ITIN.

Is there an exception that would allow us to pay out the distribution without obtaining a ITIN or SS#?

Thanks for your help.

I am reviewing a ESPP document that was prepared by another professional a few years ago and I have found one item that I am hoping somebody could help me with. The drafter included a provision stating that "the contributions of the participants shall remain the property of the participants at all times as long as they remain segregated according to participant, though the company may use any unsegregated contributions as it sees fit." Though it generally makes sense to me that an ESPP is a funded plan, I am seeing nothing in the statutes or regs or in my reading to confirm this and none of the other plan documents I have read have included similar language or provisions. Has anybody else seen similar language or are you familiar with a cite to support it?

Thanks in advance,

Kristen

Raleigh, NC

do I need to worry about this test for a DC plan?

Under the new claims regs, a plan can have a voluntary level of appeal if no fees or costs are imposed on the claimant as part of the voluntary level of appeal. Does that mean that the plan would be responsible for the claimant's legal fees if the claimant hired an attorney for a mediation or arbitration? I want to say no, but would love to hear what others think.

Day care provider charges $225 per week, regardless of how many days the child attends. During one week the employee-parent works three days and child attends day care for those three days. Employee parents requests reimbursement for $225 which is the amount they had to pay the day care provider for that week. Should reimbursement be limited to $135 (three- fifths of the $225)?

Can an owner of an S-Corp reclassify his compensation post 12-31? And in doing so make deferrals into his individual 401(k) plan at any time up until 4/15? Everything I have read, including earlier message boards say yes this is allowable because the individual is not subject to the ERISA standards of section 21510.3-102(B)(1).

So, then if there is a reclassification and thus an increase in the Self-Employment portion of the SS tax then it would typically be done after the submission of the 945's in February thereby making a revision of those forms necessary and a penalty for late filing.

Are there any other drawbacks or pieces that I am missing here?

Back in 2002 the excerpt posted below was on Sal Tripodli's website. Does anyone know of any updates on this or formal guidance? This provision of EGTRRA with regard to plan terminations is REALLY poorly drafted-- even for a Code provision.

IRS apparently interprets IRC §416(g)(3) as applying 5-year add-back rule to plan termination distributions (added March 28, 2002).

We have learned that the IRS Headquarters in Washington, DC, interpret IRC §416(g)(3) as applying 5-year add-back rule to plan termination distributions to the extent such distributions are made for reasons other than severance from employment, disability or death. There is some disaggreement in the pension community about the proper interpretation of this provision. An opposing view is that the placement of the rule for plan termination distributions in the last sentence of IRC §416(g)(3)(A), which provides for a 1-year add-back rule, implies that the 5-year add-back rule in §416(g)(3)(B) for distributions made for reasons "other than severance from employment, death, or disability" was not intended to apply to plan termination distributions. We support this opposing view, but apparently IRS feels differently, although it is not clear when any official guidance will be released. The 2002 Edition of The ERISA Outline Book reflects the view that a 1-year lookback applies to plan termination distributions. Given the apparent interpretation by the IRS, we have posted references to pages of the 2002 Edition that are affected. For details, click on "ERISA Outline Book" in the menu in the left margin of this page. At the Outline Book page, there is a submenu under "Outline Book" to search for current developments by chapter and date, and for an Errata Page. The IRS position on the lookback period is discussed in the "Current Developments by Chapter" (see the item added under Chapter 1 for March 28, 2002) and in the "Current Developments by Date" (see the item dated March 28, 2002). The Errata Page, which lists items by Chapter, also includes a discussion of this issue under Chapter 1 in an item dated March 28, 2002.

I have an employee who has been terminated and is turning in reimbursement claims prior to her term date for over the amount that she had contributed. Her employer is telling me that she signed a form when she started working there that they can take out the extra amount from her final paycheck to cover her claims. The problem is she terminated in February and has had no more checks since then for them to deduct from, and they are trying to get me to write her check for less the amount of the overage to even everything out. Is this right or isnt she eligible to get the whole reimbursement that she had claimed for the whole year even though she hasnt contributed it due to termination?