I have a client that is a wholly owned subsidiary of a 501©3 and is a "for-profit" organization. The question has come up regarding a "controlled group" situation (even though there is no ownership in the 501©3) and the fact that each entity offers their own retirement plan. Does ERISA consider "for-profit" employees under their LLC or are they considered employees of the 501©3? Does ERISA or the IRS provide guidance on how to make that determination? Thanks!

DB plan is funded less than 110% on current liability basis (by any measurement). Former highly paid participant terminated in 1998, reaches NRD in 2003, wants lump sum. Participant was an HCE when he left, about the 10th highest paid.

Can somebody clarify the rules for former HCE's for me?

Here is the language in 1.401(a)(4)-5(B)(3)(ii):

(ii) Restricted Employee Defined.

For purposes of this paragraph (B), the term restricted employee generally means any HCE or former HCE. However, an HCE or former HCE need not be treated as a resticted employee in the current year if the HCE or former HCE is not one of the 25 (or a larger number chosen by the employer) nonexcludable employees or former employees of the employer with the largest amount of compensation in the current or any prior year......"

I'd like to understand the intent of the second sentence. My former HCE obviously has no compensation in the current year. How is this to be interpreted?

Does this just mean that he had to be out of the top 25 every year?

Thanks for any help.

Trying to reverse a loan distribution transaction (Relius 8.0). It says that there are loan payment transactions that need to be reversed prior to doing this, but this has already been done.

I've printed up loan payment reports, loan history reports, etc. and I cannot seem to find the payment this error message is referring to. Any suggestions???

Thanks in advance.

I turn age 70 1/2 in October 2003 and have 2 conduit IRA's which hold only money from my former employers' retirment plans. I am currently employed and a participant in my current employer's 401(k) plan. I was told that if I roll both IRA's into my current employer's 401(k) plan, due to the RMD rules for retirement plans (no distribution due until April 1st following my termination date) I would not have to take RMD's on that money.

When I went to do a direct rollover to my 401(k) plan, both IRA custodians sent me a check for the 2003 RMD amount and sent the remainder to the 401(k) plan as a rollover. The both cited the tax code saying that even though I am not age 70 1/2 yet, I will be during the calendar year 2003, and any rollover made in 2003 cannot include the RMD amount. Is this correct?

Secondly, now that I have rolled the money into the 401(k) plan and RMD's were started am I still required to take RMD's on the money rolled into the 401(k) plan even though I am actively employed?

What would be the wording for the Summary Annual Report, for the surviving plan, in the event of a plan merger? Let's say that the surviving plan's beginning balance is $100, ending balance is $300, and the amount received from the disappearing plan is $150, and there were earnings of $50 during the year. Do you think that following is appropriate, specifically the sentence in bold type, or is there specific language that is supposed to be used:

The value of plan assets, after subtracting liabilities of the plan, was $300 as of the end of the plan year, compared to $100 at the beginning of the year. During the year, the plan experienced an increase in net assets of $200.... During the plan year, the plan had total income of $50 including employer contributions of $0....

Additionally, the value of plan assets increased due to net transfers to the plan of $150.

I would like to know how others view this expense - a woman had cosmetic breast implants in the past, but apparently they became infected and needed to be removed (and replaced?). Of course, it is the wife of the first name partner in a law firm. Any help would be greatly appreciated. Thanks.

Just wanted to run this by the brain cells of those who may have had a similar situation come up.

It appears that if a participant, for whatever reason, is participating in two separate plans, two separate employers, that;

IF Ssn is the same, then the compensation entry fields are one and the same.

In other words, in order to have separate comp & entry fields, the multiple-plan-participant would need to have a unique division code for compensation & deferrals etc.

I guess one could just create a 'non-default' division for each plan, just in case? There are some fields that remain separate at plan level, but the ones that matter appear to be aggregated.

Not 100% sure how exactly this would work. Any input appreciated.

Regards,

Bill

My question concerns whether or not a 401(k) safe-harbor plan can be adopted for 2003 (say, April 1, 2003) under the following circumstances.

S-Corp A currently sponsors a PS plan. S-Corp B currently sponsors a non-safe-harbor 401(k) plan. A and B are unrelated. Two new entities are being formed: LLC C and LLC D. S-Corp A will own 50% of each new LLC and S-Corp B will own 50% of each new LLC. Because of this ownership, LLC's will be a controlled group.

All S-Corp A employees will no longer work for S-Corp A. All will work for LLC C, effective March 1, 2003. All S-Corp B employees will no longer work for S-Corp B. All will work for LLC D, effective March 1, 2003. The new controlled group (LLC's C and D) wants to establish a 401(k) safe-harbor plan, effective as of April 1, 2003. It is contemplated that the existing PS and 401(k) plans will be merged into the new 401(k) plan some time this year.

Are there any problems with this approach? Specifically, because S-Corp B already sponsors a non-safe-harbor 401(k) plan, does this preclude the adoption of a safe-harbor 401(k) plan in 2003 for the new entities? If the plans weren't merged, would the result be different?

Please keep in mind that we know that neither of the existing S-Corps will form a controlled group with each other or the new LLC's. Also, all existing and new plans have/will have calendar fiscal years.

Thanks in advance for all comments.

What is your experience over the past three years with the Schedule R? Are you finding that few defined contribution plans (other than money purchase pension plans and stock bonus plans distributing employer securities) are required to file Schedule R?

Thank you.

Question:

The employer is a Partnership. One of the partners would like to elect out of the employer profit sharing contribution portion of a 401(k) Profit Sharing Plan, but still defer in the 401(k) portion of the plan. Is this allowed?

Thanks.

Two entities, A and B, adopted a 401k plan as a controlled group. The ownership has changed and the controlled group does not exist anymore. A is a group of HCEs only. B has HCEs and NHCEs.

A wants to suspend its participation in this plan and immediately adopt a new plan. Are there any pitfalls to doing this?

If an individual has a defined benefit plan and the minimum funding requirement for the DB is $100,000 can this person fund $14,000 of elective deferrals into a 401(k) plan? There are no other employees other than the owner who is 55 years old and draws $100,000 of W-2 wages from the business.

Is payment of unused sick time a fringe benefit or supplemental wages?

Can a government Money Purchase 401(a) plan be merged with a 457(B) deferral plan similar to a merger of a Money Purchase Pension plan with a 401(k)/PS plan. thanks for your help.

As I understand USERRA, the law allows the employer to report "make-up" elective deferrals, those attributable to time spent on military leave, to be reported on the W-2 form or on a "separate statement." The W-2 form booklet provides instructions and codes as to how to report the USERRA contributions. My question pertains to the "separate statement". How pervalent is using a "separate statement" as compared to the W-2? I am suggesting that the client report the USERRA contributions on the W-2 but their payroll department is providing significant push-back. I am trying to determine what is the "norm" and or "best practice" in this area.

What is the best action to take when an employer fails to make the appropriate Federal Tax Deposits and pays out a participant without withholding 20%. The 1099R will reflect the taxable income to the participant with no tax withheld but what should the plan sponsor do in such a case?

A plan sponsor/trustee has decided to change 401(k) providers. The PS/T sends letters to all participants, including former employees with remaining account balances.

Letter says 1) accounts under $5,000 will be cashed out.

2) accounts over $5,000 have two choices - to do nothing and have money transferred with the rest of the plan, or 2) to fill out the appropriate paperwork and have an IRA rollover account set up with the current provider.

Former EE/Participant fills out paperwork for choice #2 - wants to have his funds stay with current provider in an IRA account.

PS/T sends notification to former EE/participant, stating that funds have been rolled over to new provider. It appears that the PS/T ignored the election made by this particular participant.

Aside from the annoyance factor (having to undo what was done), is there a misappropriation of funds issue or some other fiduciary breach issue here?

What would be the maximum deferral for a participant in a 401k plan that is under 50 years of age in a plan that has a plan year 12/1/02 - 11/30/03?

Would it be $12,000?

Thanks,

Ronnie

We are about to takeover Auto Dealer's Plan. Auto Dealer is owned by ABCD Partnership. I am trying to analyze controlled group issues. Clearly I need to be concerned about other businesses owed ABCD Partnership. It seems to me I should also be concerned with any underlying businesses that may be commonly owned by A, B, C & D as individuals.

Am I missing something here? I just want to be safe; employer's are often times reluctant to give me such information & I don't want to ask for more than I have to.

Plan Year is 12/31-12/30. Plan defines comp as comp for calendar year ending with or within the plan year. A participant's 2001 W2 was 100,000, but only 27,000 in 2002. Which do I use to determine his status as an HCE for the plan year beginning 12/31/02? The comp actually earned in the lookback year (27,000), or the comp that applies for benefit accrual and funding (100,000). Assume the calendar year election is not made.