A person wants to take a hardship....

He wants the money to pay off his brother. they own a house together, and he wants to buy his brother's half of the house.

Is that the purchase of a primary residence?

HELP! USERRA requires that military service be treated as service for the employer for vesting and benefit accrual purposes. What does this mean for a Cash Balance Plan that does not use service to determine benefits? Does the Plan have to make a contribution for the period during which the employee was on military leave? If so, what should the employee's compensation be based on? Any help would be appreciated! Thanks!

The trustees of 3 different plans would like buy a large piece of real estate with plan assets and apportion it among their plans.

One person owns 100% of plan 1's employer and 79% of plan 2's employer (other 21% owned by his brother). The majority owner is also a co-trustee of both plans, trusteeing with his son-in-law in plan 1 and trusteeing with his wife in plan 2. His daughter owns 100% of plan 3's employer and she co-trustees it with her husband, the above son-in-law.

They have obtained a legal opinion that a controlled group / affiliated service group does not exist. Is there anything that would prevent the three plans from purchasing and each owning a one-third interest in this investment?

I represent a financial institution which sells SIMPLE IRAs to small businesses. (Non DFI only).

I have an employer who sent us employee salary deferrals for a terminated employee. However, by the time the funds were sent to us the ee had already closed the account.

We have a $50 minimum in order to open an account.

Administratively we are wrestling with the question of what should we do w/the term ee's funds. Should we pay it to ee or return it to er? Please keep in mind that the funds are never deposited into the participant's [closed] account.

My research tells me that there is no IRS/DOL guidance.

I believe that it is appropriate to return the funds to the employer. It is then up to the employer to decide whether it will refund the deferrals to the term ee or open an account w/another vendor who may accept amounts under $50.

Another position presented to me is that it would be appropriate for us to forward the ee deferrals onto the term ee outside of the SIMPLE IRA arrangement. I disagree (along w/the fact that there is no distribution code in the 1099 instructions which describes this transaction). The reasoning provided to me under this alternative is that after payroll has run (i.e. the assets are now "separated from the employer"), the assets are now the ees assets and not the employer's.

Lastly - does anyone know how the DOL views the employee deferrals to SIMPLE/SARSEPs? Are they employer assets or employee assets or plan assets. Citations would be helpful.

Thanks,

jlg

Retired employee receiving a monthly pension has decided that she no longer wants her pension due to religious beliefs.

Actuary told client to keep paying retiree as she owes taxes on the funds. Retiree says she will willingly pay taxes due, but still does not want the pension. She does not want to donate the funds to a charity.

She is now writing personal checks to the trust for the amount of her benefit and mailing them in. We have received two checks so far for 3 months worth of benefits.

Has anyone encountered this before and if so, what did you do? deposit the checks? hold them and let them go stale dated? something else?

One question that just arose under IRC 404(a)(8)© is whether you would want to proceed with a 412i plan for a sole proprietor which would be partially funded with insurance policies, since under 404 the premiums are not deductible? Am I all wet, or is an underlying condition of 412i that the plan sponsor be incorporated in some fashion?

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Actually, answered my own question (I think) in that IRC 404 is explicitly talking about true cost of insurance (ie PS-58) rather than actual premium paid, which is same case regardless. Of course, the current taxation of PS-58 is undersold in the presentations I've seen WRT 412i plans.

Got a company with one plan.

Is it possible to set up two separate plans with all HCE's and some NHCE's in one plan, as a safe harbor plan using the 4%Match, and all other NHCE's in another plan that is a straight 401(k) plan (distinctions made by production/nonproduction personnel).

I'm assuming the only way to pass coverage is to aggregate the Plans because al HCE's are in one plan. But then because you aggregate for coverage, you must aggregate the Plans for ADP/ACP testing? But then one Plan is a Safe Harbor and exempt from ADP/ACP.

Also, since there are no profit sharing contributions in either plan, I'm assuming I don't have any issues with 401(a)4. Is that right?

My real question is "does the need to aggregate a safe harbor and a non-safe harbor plan to pass coverage blow the safe harbor all together?"

A group's cafeteria plan is on a calendar year cycle but the medical anniversary date is March 1st. The group currently pays 100% of employee-only medical coverage and 93% of depedent medical coverage. The group intends to pass a portion of the rate increase to the employees. Employees will now be responsible for 50% of dependent coverage. I expect many employees will want to keep their employee-only coverage (as the cost has not changed) but drop their dependent coverage (as many carry dependent coverage just because it's so cheap). Can we allow employees with family coverage to switch to employee-only coverage due to the significant cost increase (the regulations say "similar" coverage" -- does this mean "family to family", "single to single", etc.). There are no other medical options provided under the cafeteria plan.

This may be a dead horse issue for you guys but I didn't see an answer.

Plan is safe harbor 401(k) using the 3% Employer discretionary contribution to satisfy the Safe Harbor and Top Heavy.

For additional employer contributions, the employee must be employed on the last day of the plan year and have 1000 or more hours.

I understand that those that get the SH contribution must also pass the minimum allocation gateway regardless of the end of year employment and hours of service.

Some people became participants on 7/1/2002. For those I calculated 5% of participation salary and it is less than the 3% SH. I left them with the 3% SH, just as I would if it was just a straight PS contribution with 5% of salary contribution.

The 5% gets the HCE's to $29,000 and $11,000 deferrals bring them up to $40k each.

Now, suppose the employer wants to make a larger contributon to the plan in order to keep the NHCE's happy. Do only those who have 1000 hours or more and employed on the last day of the plan year get this extra contribution since the 5% to those "Safe Harbor only" satisfies the gateway?

I say that is correct but wanted some verification.

Thanks

I am working on a Top-Heavy plan that previously made regular employer match and non-elective contributions. Balances remain in these sources. Starting in 2002, the Employer is only making a Safe Harbor match. Some people don't defer and therefore did not get a match.

My question is, since the plan is now a safe harbor and only the 401(k) deferral and Safe Harbor match sources are being funded, is this plan waived from making a Top-Heavy minimum? Or, does the plan have to only consist of the deferral and Safe Harbor source in order to qualify for this waiver? I've done some reading in Sal's book and can't find a definitive answer.

I'm just how others are handling this type of situation.

Thanks

May a plan be designed to permit an employer to "target" specific non-highly compensated employees for receiving QNEC's? As an example, assume a plan has 20 NHCEs and 4 NHCEs. The plan sponsor wishes to design a plan that would permit the flexibility to allocate a QNEC only to "A" and "D" only, who are a NHCEs. I can't find anything in the Regs. requiring uniform allocation of QNEC's, but maybe some has already encountered this issue.

Also, same issue, but targeting a QNEC for only a HCE? Here I think you'd have to satisfy the general test as well, but has anyone designed a plan to accomplish this?

I have a client who earns a salary of $89,000 in a corporation. She also earns in excess of $100K as commissions and reports it on a 1099. Can she do this and still participate in the 401(k) and setup a SEP based on her 1099 income? If so, what are the restrictrictions, etc. I should be looking for with this issue.

Three companies are under common ownership. Two are adopting employers under the largest employer's plan.

The largest of the companies did not have a good year. If it is possible, what are the issues if they want to make a matching contribution only for employees of the two smaller companies?

Has anyone ever heard of this type of profit sharing plan? I've never heard of this terminology. I'm guessing it is some type of age weighted plan.

This is from the February 2003 PEO Insider article by Kelly A. Michel. She refers to this as an option instead of regular New Comp plan when the ages of the owners and employees are close.

The example gives allocation of 20% to the two owners, 16.8% to three employees (age 50 - 60) and 6% to employees less than age 50.

Wouldn't you be able to accomplish this same allocation with a regular New Comp plan by setting up three rate groups and defining them as: Rate Group 1 is owners, Rate Group 2 is non-owner employees over age 50 and Rate Group 3 all other employees?

Effective for tax years beginning 2003, distributions from Education Savings Accounts and 529 plans will no longer be reported on Form 1099-R. The IRS has issued the 2003 version of Form 1099-Q. This form will be used to report distributions from Education Savings Accounts and 529 plans

Form 1099-Q. can be viewed at the following URL http://www.irs.gov/pub/irs-pdf/f1099q03.pdf

The instructions for filing form 1099-Q, http://www.irs.gov/pub/irs-pdf/i1099q02.pdf

This question or more a search for understanding then having any real practicle value, but here goes.

For a calendar year plan would it be permissible to have a OBRA rate of 6% and an RPA rate of 6.85% for the 2002 valuation. Please read 412(l)(7© for your interpretation. I think it's OK, but am curious others' opinions.

I ask the question because a colleague prepared it this way, although I would usually use the high-end of the corridor on both rates.

The plan is TH for the determination date of 12/31/2001. In the plan year that this determination date is related to (1/1/02 - 12/31/02), the plan only had deferrals being made. They were made by some of the Keys. The plan also had some forfeitures reallocated as well.

I am getting confused by some readings. In some instances, I think I am reading that since the plan did not have any Employer contributions to the plan, then technically the TH minimum is NOT require. But, in some instances, I believe I am reading that the TH minimum is required.

And if it is not required based on the fact they only had deferrals throughout the year, would the fact that they allocate forfeitures (which IS employer $'s), force them into the TH minimum?

Hi,

I have always thought that an employee had to be a participant AND employed on the last day of the plan year to receive a top heavy minimum contribution. However, if a group of employees is spun off into a new plan during 2002 and none of the spun-off employees are participants in the top heavy plan as of 12/31/2002, we are being told they still need to get a top heavy contribution for 2002 because they were covered during the plan year.

I am trying to find guidance and everything I finds contradicts.

Any help is greatly appreciated!

In 1998, I converted my traditional IRA to a Roth. Since then I have been contributing the maximum to a traditional IRA. I would like to withdraw my 2002 contribution to my traditional IRA and deposit in the Roth IRA. Both are held at the same brokerage.

How do I go about doing this?

Plan has dual eligibility requirements which allow for deferral immediately but maintains a 21/1 for employer discretionary $'s. Plan is cross-tested. There are a handful of employees who must receive TH min since they were eligible to defer. As such, they are being given the minimum gateway (1/3 of highest HCE allocation %).

Question: Can I include those who receive TH only in my EBAR testing, even though they are not yet eligible for the employer cross-tested contribution??