Does anyone have the definitions of compensation in layman's terms (415, 6051, & 3401(a))? I am trying to give this to some clients and everything I can find is so long and technical that I am finding it hard to communicate the definition even though I have a good understanding of the subject.

We have heard that a qualified plan distribution may not be rolled into an IRA that was established to hold assets contributed through a SARSEP (and vise versa). One of our clients would like to terminate its SARSEP (simply by ceasing to make future contributions to the IRAs) and roll the SARSEP assets (held in IRAs) into a newly-established qualified retirement plan (a defined contribution plan). The bank currently sponsoring the SARSEP (and holding the IRAs) claims that such a rollover is not authorized by EGTRRA's liberalized rollover rules. Is the bank's opinion correct? We think the bank is wrong and that such a rollover (from an IRA initially established to hold SARSEP contributions to a qualified retirement plan) is permissible. Your thoughts are appreciated!

This plan has nonresident aliens who live and work in the U.S. while participating in the plan. If the participant terminates employment and the individual is residing in the U.S., the normal U.S. withholding rules apply.

If the participant has contributions and earnings that are all effectively connected income (worked and contributed to the plan after 12/31/86) and moves back to their resident country can the individual claim a lower treaty rate on effectively conntected income? How does the payor withhold?

1. Normal U.S. withholding only;

2. 30% withholding only;

3. 30% withholding unless there is a lower treaty rate. For the individual to request a lower treaty rate what form does the individual provide the payor ... Form 8233??;

4. 30% withholding and can request a lower U.S. graduated rate by providing payor with Form W-8ECI; or

5. 30% withholding unless there is a lower treaty rate (same as #3. above). If there is no lower treaty rate, the individual can request the lower U.S. rate (using Form W-8ECI).

Help! Thanks

I'm looking for some insight into the not-so obvious differences between bundled and unbundled 401(k)'s. Besides the advantage of the single point of contact, why are bundled plans more popular for small businesses? Are there cost differences or other considerations I should be aware of as a plan sponsor?

Any experiences or insight is appreciated!

Thanks

The IRS has stated that.

An M&P or volume submitter plan that has been amended in a way that would cause the plan to be treated as individually designed is still eligible for the extended GUST remedial amendment period under Section 19 of Rev. Proc. 2000-20, regardless of the nature of the modification or whether the modification was adopted subsequent to, or in conjunction with, the initial adoption of the M&P or volume submitter plan.

How far can this go? Let's say that you have a volume submtter plan as a "base" for your TRA '86 restatement and there are thirty changes within the document that don't fit in the volume submitter? The document does not use an adoption agreement-- so all of these changes are not done with some kind of "snap off" amendment but rather are done internally in the document. The document was orignially filed as an individually designed plan with a 5300? The volume submitter plan of the practitioner is entitled to the extended remedial amendment period. Is the employer who adopted this "inidividually designed" plan still entitled to the extended GUST remedial amendment period?

A participant in a voluntary nonqualified deferred compensation plan wishes to donate the accumulated balance of his deferral account to a charitable organization. He does not wish to receive or be taxed on the balance that is scheduled to be paid to him in a few years but instead wishes that it will be paid by his employer directly to the charity. Is there a way to accomplish this such that he both avoids income taxation on the payment and entitles him to an income tax deduction for the gift?

ex. 1 hce and 4 nhces. ER wants to exclude 2 from plan, so it fails 70%. but it will pass the general test and abpt and f&C test. some confusion here, one owner says the plan needs to pass coverage (70% ) before calc'ing ebars. the doc allows to pass by the abpt unless the plan chooses "add back " . why would this plan need to pass 70% ?

We have a potential new client who leases his employees from a leasing company that offers a 401k plan.

The employer wants to take the employees back from the leasing company and open a 401k safe harbor for 2003 (he currently has a straight PS plan.)

Here is the question, does the fact that the leasing company offers a 401k to the employees prohibit the employer from adding a 401k safe harbor to his current PS plan for 2003?

If a plan uses the alternative safe harbor definition of compensation 1.414(s)-1©(3) but also specifically excludes the "income from the exercise of Employer-granted stock options" is it still a safe harbor definition? Is an Employer-granted stock option a fringe benefit? because if it is, I think the plan still has a safe harbor definition of comp, but if not, I'm not so sure. Thanks.

What is a nominee 1099-R? and when is it used?

Thanks

I have a client who wants to implement a cafeteria plan and wants to base the employer contribution amount (i.e. employee flex credit amount provided monthly/annually) on either: years of service, or on employee class (example - salaried or hourly employee). Are either of these criteria permitted under the applicable regulations? The employer's health plan options are fully-insured, if this helps in answering this question.

Is this plan design OK ???

Can you have a Cross Tested Safe Harbor 401(k) where you make a 3% Safeharbor contribution to all eligible employees. But you do cross-testing on the Non-Elective Contributions to make sure you pass the discrimination tests. Where you make the 3% safeharbor contribution that is fully vested, but you have a 2-20 vesting schedule on Profit Sharing and Match.

Company employs many part-time employees who work less than 1000 hours during the year. If Company imposed a 1 year of service requirement for eligibility, none of these employees would ever become eligible. Here's the rub: The Company does not want to impose a service requirement under the 401(k) plan. They want to let their otherwise eligible employees participate immediately.

But, if we have to count all of these part-timers -- who will not participate -- in the 401(k) test, the Company's HCEs will not be able to make meaningful contributions.

Any thoughts on how we can exclude these part-timers and not have a service eligibility requirement under the plan?

Thanks for your help.

BACKGROUND INFORMATION:

We are the TPA for a client (doctor's office with approx 1 owner and 10 NHCEs) who maintains both a Profit Sharing (no 401(k) feature) and a Money Purchase Plan (both calendar year plans on standardized prototype documents). During 2001 (after 500 hours were accrued by some employees) we inform the doctor of the beauty of EGTRRA and only one plan is required, add a k, etc. etc.) The doctor informs us that he has entered into a business venture that will increase his staff substantially over the next few years and decides he no longer wants the MP plan, however, to leave the PS for a year or two since the new employees won't happen right. We inform the doctor at that time that a contribution will have to be made to the MP plan for 2001, however, no contribution will be required for the PS Plan and properly freeze the MP Plan and merge it into the PS Plan.

During 2002, service provider agreements were signed, meetings were had with the client, contribution calculations have been prepared, valuations completed, discussions were had with the accountant regarding the tax return, 5500 filed, etc, etc.

We then send them a bill.......

It is now December 2002, after not receiving payment, we contact the doctor. The doctor informs us that he will not be paying our bill, since he told us during 2001 that he no longer wanted the MP plan. In addition, he did not fund the MP plan contribution.

THE PROBLEM (other than the obviously missed funding requriement):

To prove to us how much he didn't want the MP and PS plans, he told us that during 2001 he went to his bank and opened up a simple 401(k) to which the employees made deferrals and matches were deposited.

Our advice to the client was to obtain the services of a pension attorney.

With ALL of that being said (even skipping a few items such as the client telling us in that same phone call that he doesn't want the simple anymore and wants the 401(k) PSP instead) how is this fixed? What happens to the deferred contributions made by the employees? Or any other comments are appreciated. As I mentioned previously, they have not paid our bill and we told them to get a pension attorney, so this is strictly for curiousity sake (and threat to others as to what will happen if they do this).

Thanks in advance.

Jill

Has a model notice been circulated (whether by the IRS, or privately) that contains the additional explanatory material the proposed regulation requires?

We have a few small business clients that may receive the 50% tax credit for start up costs. What do they need to do this - does nayone know what form they must file? I have tried the IRS website but had no luck. Thanks! Mike

I have a plan document that excludes the following employees:

"You are not eligible if your job position is classified as a consultant, independent contractor, leased employee, or student intern.

You are not eligible if you are a:

· Non-resident* alien** who does not receive income from sources in the United States

· Resident alien** whose income is paid outside the United States or who is covered by one of the company's retirement plans outside the United States

Non-resident* who is a United States citizen*** but who is covered by one of the company's retirement plans outside the United States"

If all others are allowed to participate in the 401(k) and 401(m), on Schedule T can I mark that all nonhighly compensated employees participate? Or am I require to complete page 2?

(I'm not sure whether these "aliens" are included in the excludable list, or whether leased workers can be excluded).

Thanks!

If a commissioned-employee makes an election to contribute $5,000 into his company's cafeteria plan for health benefits -- but only earns $2,500 during the entire plan year, is the employee required to come up with the remaining $2,500? What if the employee only incurred $2,500 in re-imburseable expenses -- is the remaining $2,500 that was elected waived? Any thoughts?

Once we're all amended for GUST, we must use prior year ADP test results for Non-HCEs to determine amount current year HCEs may defer as the default method. If we choose to use current year results we must document this fact and stick with it for at least 5 years - right?

However, during the GUST RAP we were allowed to continue to use current year without obligating the employer to stick with that method for the 5 years following the year on which we were working, right?

So, for my employers whose remedial amendment period has been extended yet again, may I use current year for calendar year 2002 and still use prior year in 2003 as long as I document all this when their documents are finally compeleted? That will give me the flexibility to change to current year at some point in the future if I want to but won't obligate me to do for 5 years until then.

Am I on track? or way off base?

a plan converted a db plan to a cash bal plan eff 1/1/2001.

the executed plan doc is 12/27/2001.

apparently there was a prior version of such cash bal plan (also w/ eff date of 1/1/2001) that may have been in effect from 1/1/2001 until 12/27/2001 when current version was executed.

the issue is that under first cash bal plan, the act equiv converted cash bal to annuity in such a way that pvab was greater than cash bal. and in subsequent plan the act equiv converted cash bal to an annuity such that pvab was less than cash bal account.

plan paid cash bal account in all situations.

question is: should the accd ben under prior act equiv be preserved through 12/27/01 and thus if pvab greater (using old act equiv) than cash bal, then pvab s/b paid?

or can plan retroactively apply the 12/27/01 amendment eff as of 1/1/01 and not be required to pay pvab under old and greater basis?

look forward to other interpretations.