Employer with final average pay (5 year) DB plan allows employees to work for unrelated employer for one year as an "externship". Employee is paid 1/2 salary by employer and 1/2 salary by temporary employer.

Employer is concerned that "externship" will reduce final average compensation in some cases, would like to credit compensation at full rate in effect prior to "externship", or at full rate counting both 1/2's.

The plan is integrated and it is preferred that the plan remain a safe harbor.

Can this be done as a safe harbor?

If not, can it be done outside of safe harbor rules, and if so, what is tested?

The program would cover almost exclusively NHCEs, but there is a possibility that a HCEs might qualify.

Thanks for any thoughts.

I HAVE A 401K PROFIT SHARING PLAN THAT IS ALSO SAFE HARBOR 3% NON-ELECTIVE CONTRIBUTION FOR 2002 PY.

HOW IS THE SH 3% SET UP IN THE PLAN SPECS? DO YOU LOAD IT IN AS 3% MINIMUM DEFERRAL FOR EVERYONE?

ALSO, DOES THE SH 3% COUNT TOWARD THE MAX DEF IN 2002 OF 11k?

OF COURSE, THE DOCS ARE MAXING OUT, AND IT IS DIFFICULT TO FIGURE OUT ALL THE PARTS OF THEIR CONTRIBUTIONS.

THANKS FOR THE HELP

CARSON

If a broker (non-RIA) helps a plan sponsor to narrow down investment choices in a participant directed plan, will the broker be considered a fiduciary on the plan? For example, a broker offers a multiple fund family mutual fund based participant directed 401(k) plan. The program allows the plan sponsor to offer up to 12 investment choices in the program from a list of over 1,000 different mutual funds. If the broker provides a list of "mutual funds for consideration" to the plan sponsor, would this constitute providing investment advice thus becoming a fiduciary on the plan? Would it make a difference how many mutual funds the broker would be showing (would it make a difference if the list of "mutual funds for consideration" listed 12 choices vs multiple choices per investment category)?

Any thoughts would be appreciated!!

If an employer offers domestic partner coverage on their medical plan can they stipulate that the coverage is for same sex domestic partners or must they offer to all domestic partner situations?

THANKS!

I presently have a client who has a 401(K) and is going to use the safe harbor match to satisfy the ACP. My question is if he is the only one contributing to the plan even though other employees are eligible would the safe harbor match satisfy the top heavy.

Would the employer need to make any type of contribution to the non participating employees if the safe harbor match does not satisfy the top heavy test

A sole proprietorship has a DB plan with a beginning of the year valuation date. My question relates to what estimated compensation to assume for the current plan year. The salary scale is 0%.

Traditionally, I have assumed the same earned income as in the prior year (line 31 of the Schedule C) and reduced it for 1/2 of the SE taxes and the current year deduction, the old circular calculation of fun.

I have a plan I am new to this year in which the compensation assumed was last year's net earned income (last year's earned income reduced by last year's SE taxes and deduction). In other words, it is like a plan sponsored by a corporation, where the W-2 compensation is assumed to be the same as the prior year.

Do you think this is an acceptable assumption?

I am working on a cross-tested plan for the second year. I just found out this year that the youngest employee is the son of the owner (different names, so I didn't pick it up). I'll be able to do a corrective amendment for 2002 so that we pass the average benefits test for 2002, but I am concerned about the prior year. If I retest the plan for 2001 it fails miserably. Can I do a corrective amendment now and give contributions to pass the test for 2001. Does this fall under self correction? Or is there a better way to fix this problem?

Non-contributory (I think) defined benefit plan holds employer stock (assume the 10% holding rule is not an issue) and now wants to sell that stock. Employer is listed (not sure which exchange). Is the plan subject to any SEC filing requirements for the sale of the employer stock?

Thanks.

Section 412©(12) requires that the funding method of a collectively bargained plan described in Section 413(a) must anticipate benefit increases scheduled to take effect duright the term of the collective bargaining agreement.

Does this prohibit a plan not described in 413(a) from recognizing future benefit increases?

Suppose a single employer calendar year DB plan adopts an amendment in calendar year 2003 that schedules a benefit increase effective July 1, 2004. Can the January 1, 2004 valuation recognize this future benefit improvement?

A bank's common stock is publically, though thinly traded. The bank's 401(k) plan allows for segregated, directed investment accounts in a non-discriminatory manner. The bank president and several other participants have directed accounts in which they hold bank common stock. The bank president owns about 14% of the outstanding stock in his directed account, and with the

shares he now owns outside the plan, either directly or indirectly, controls over 50% of the common stock.

The president wants to take the bank private. The bank, which he and his family control, will offer owners of the stock cash or preferred stock. The president will take preferred stock. The other two participants have elected cash. The bank will probably redeem the preferred stock at a later date.

With regards to the president's directed account, without an exemption I believe we have a prohibited transaction with either the offer or the redemption. The problem is, how will the president ever get his money out of the plan?

I just read PTE 2002-51, which appears to offer relief. Am I correct? Any thoughts are appreciated.

Which, if any, of the following belong on a W-2 as "information only" and/or part of gross earnings:

1. Premium payments made by the employee using pretax payroll deductions.

2. Donations to a "use it or lose it" cafeteria program made by the employee using pretax payroll deductions.

3. Donations to a medical credit card made by the employer to cover employee out-of-pocket medical expenses. (Unused balance carries to future years.)

4. Employee use of the credit card in #3.

Thanks!

I have a client with several late deposits of employee deferrals throughout two years.

Can you attach a supplemental schedule to Form 5330 sumarizing all the PT's (and Schedule G to the 5500 for that matter) and reference this schedule on the Form?

Otherwise, how would you handle 8 PT's in one year that weren't corrected, and 8 more in the next?? Because a PT is a new PT on the first day of each year (if not corrected), in year two you've got 16 PT's! I would need 4 separate 5330's!

Any advice compadres?

If you have a failed ADP test and refunds are being made to the HCE's and the corresponding match has to be forfeited due to the reduction in the deferrals, do you have to rerun the ACP test with the new lower match amounts? Thanks for your input

Can IRA assets be used to purchase past service credit in governmental pension plans? If so, could it be done by trustee-to-trustee transfers? How would it be reported? Cites would be helpful.

A consultant has suggested the adoption of an ESOP to be used in a floor-offset arrangment with a company's existing defined benefit plan. This raises the following questions, for which I have not as yet seen any answers: (1) is the floor DB plan subject to minimum funding standards? (2) if so, how do contributions and assumed benefits under the ESOP affect the funding requirements under the DB plan? (3) Does the floor DB plan have to pay PBGC premiums or is it subject to Title IV of ERISA at all? If so, do contributions to the ESOP affect the possibility of a variable premium?

If I read the older messages correctly that the social security and medicare taxes are applied to compensation after the deferrals to pay premiums in a Section 125 Premium Only Plan, then would this order of payroll occurances be correct? Or is my original assumption not a correction one?

Gross Pay

Less deferrals/contributions to section 125 POP plan

FICA/FUTA Pay

Less FICA/FUTA

Less 401(k) deferral (based on FICA/FUTA Pay)

Net Taxable Pay

Less taxes

Less loan repayments (based on Taxable Pay)

Net Pay

When a NHCE exceeds the 15% imposed plan limit and the ADP test is run the following year, is the NHCE ADP calculated using the original contribution before return of the excess over 15%, or is it rerun to determine the ADP when the correct amount is input?

In 2001, Company X and Company Y have no relationship. In July 2002, X acquires all stock of Y, and Y is a wholly-owned sub of X. The Plan of Y was terminated prior to the acquisition. Y has adopted the 401(k) of X as a controlled group member and participating employer. No employee of Y is a 5% of either company.

To determine HCE's for 2002, is one of the following assumptions correct:

1) Y has adopted the plan, so Y may be considered the employer. Y had an employee who made $100,000 in 2001. That employee is considered an HCE for 2002.

or

2) X is the plan sponsor; X did not pay any compensation to Y in 2001. Therefore, no employee of Y received compensation from the "employer" in 2001 and thus no HCEs.

Here's Part 2. Assume that instead of terminating the Y plan, it was merged into X plan. Y adopts X plan as a participating employer . In this case, would Y employees' compensation in 2001 be considered for the 2002 HCE determination?

Any cites on this?

Thanks.

:confused:

Please help. Here's the facts:

Participant currently has a vested account balance of $23,738.26. This balance includes an outstanding loan balance of $7,489.39. In April 2002 he took out a loan of $9,000. As of Dec 2002 that loan was paid off. In Oct 2002 he took out a loan of $8,000 which has the remaining balance of $7,489.39. It looks like he may have gotten too much in Oct but would he be eligible for approx $4,300 now(i.e., (23738.26/2)-7489.39)?

First... Yes, I've scanned the multiple threads dealing w/ plan/broker minimums for self-directed accounts. Don't want to reignite that fire, but would like to learn any actual experience, rulings, and opinions on this variation. Plan allows any participant (willing to pay fee) to have a self-directed brokerage account. An HCE participant wants to purchase a limited partnership interest. The minimum LP investment exceeds the entire balance of most plan participants, but I'm still inclined to side with the non-BRF faction. However, because a participant would also have to be an "accredited investor" - which can be met by an annual income threshhold, does this become a compensation based benefit ?? THANKS