say an individual is an S corp.

if on the individual's 1040 he shows S corp income of say 50,000 and no other compensation.

can the 1120S make a ret plan contribution for that individual and can the individual make a 401-k salary deferral?

thanks ,

gary

My employer, the University of South Alabama, participates in the Alabama State Teacher's Retirement System (TRS) DB plan. We have a medical school and a medical faculty practice plan (FPP). The FPP is a separately incorporated 501©(3) corporation through which the medical doctor professors carry on their clinical practice, and from which the doctors receive a salary. The FPP does not sponsor a qualified retirement plan. So the medical doctors receive two salary checks - one from the university for their teaching duties and on which the doctors will receive a retirement annuity from the TRS, and one from the FPP for their clinical practice on which no retirement is provided.

Discussions are beginning about folding the FPP into the university for business reasons unrelated to retirement plan considerations. The doctors will continue their clinical practice, only through the university instead of the FPP.

We have discussed the fact that the day after the FPP is dissolved, the TRS DB plan will have a significant unfunded liability with respect to the doctors. In other words, due to the salary formerly paid through the FPP but now paid through the university, the doctors' state paychecks will approximately double overnight, with the same years of service, which will make the TRS annuity approximately double what had been assumed in all previous actuarial projections. Obviously, the TRS will look to the university and the doctors to make up the difference.

The university, like most state institutions, is in no financial position to make up any part of the difference, so the likely outcome is that the doctors themselves will have to fully fund the unfunded liability.

Now, finally to the question. Assuming the doctors do not want to use existing 403(B) or 457 funds to pay the liability. Is there any possible way for the doctors to fund this liability with pre-tax dollars? For example, it seems to me that if Alabama law either currently allows, or could be changed to allow, this buy-in to be "picked up" by the university, pre-tax treatment should be allowed.

I was able to find a couple of letter rulings that were somewhat on point. The first, PLR 20002051, allowed 414(h)(2) treatment for the purchase of service credits for prior employment as a private school teacher and for any employment which the plan's board of trustees deem to enhance the participant's ability to teach in the public school system. The second, PLR 200229051, actually ruled on a retired employee issue, but also described a plan under which existing employees made an irrevocable election to purchase, in exchange for an increased mandatory contribution, an enhanced retirement benefit equal to 2% for each year of creditable service, up to 80% of three-year average salary. The taxpayer didn't request a ruling on the 414(h)(2) impact on existing employees, so if anyone has any insights on such impact I would appreciate hearing them.

Thanks in advance for any thoughts.

Ken Davis

Univ. of South Alabama

Four months into the plan year, my client stopped the matching contributions to their plan. They notified the participants, but failed to contact us so no amendment was drafted or executed. I notified the client that they would still have to make the contribution (matching formula in document). What is concerning me is that after the client notified the participants that there would not be a match, several participants stopped their deferral contributions. Notwithstanding the employee relations nightmare, what possible issues/problems can arise?

Thanx!

I work for a small company (three employees total as of now; up until last May there were four). The owner pays for the health insuance coverage of everyone except me; he deducts the full cost of my coverage from my paycheck. I am a full-time employee, and have worked here for almost five years. The only difference that I can tell between me and the covered employees is that I'm female and they're male.

I'm in the state of Michigan; anyone know if it's legal for an employer to pay for some employee's coverage, and not others? Does there have to be a specific criteria for excluding some employees (i.e. part-timers, clerical staff, etc)?

Thanks for any input.

An IRA holder is in payout status, and the primary beneficiary on the account is his wife, who is 10 years younger than him. His wife dies in 2002, and he names his daughter primary beneficiary. When calculating his 2002 IRA RMD, am I correct to use his daughters age when doing the calculation? By doing this, his RMD will be greater.

Or, am I required to leave the calculation based upon his deceased wife’s age? Thanks for any guidance on this. Sincerely, Anthony Milano

I have two controlled group members (A and b) who each have a plan, both subject to a 6-year graded vesting schedule. There are frequent transfers of employees between members. If an employee works for member A for three years, then transfers to member B, I would assume that employee is considered to have 3 years of service (for vesting and participation) upon commencement of service with member B. And, over the next three years, that employee would be 100% vested in member B’s plan. However, I would also assume that, since the employee became only 40% vested in member A’s plan as of the date of transfer, that employee would normally not continue to earn vested years of service with A’s plan and, therefore, would forfeit 60% of the employer’s contribution to A’s plan.

Am I correct in this assumption? Is there any way around this, other than having the employee transfer back to member A and earn the requisite years of service? What if member A’s plan covered both member A and B employees, but did not include member B compensation for purposes of benefits? In other words, after the transfer, the employee would be a participant in both the plan of A and B. However, contributions to the A plan would not be made on compensation earned as an employee of B, although vested years of service would continue to be earned. Would this work?

A TPA just told me that; "DATAIR prototypes AND volume submitter documents have until late next year to complete their GUST amendment and restatements!!"

This person also stated; "turns out the due date for the GUST amendment and restatements does not start being calculated until the Document Sponsor (DATAIR in this case) has received ALL their letters from the IRS. So, we have until 12 months after they get their last letter to get the GUSTs done.

I need confirmation/opinions on this. Is this true?

We have a pre-tax transportation program for commuting and parking costs. We use an outside vendor to reimburse employees by check when they submit a claim form. We pay an administrative fee to the vendor for each employee.

At one of our locations, the building offers parking to employees through the employer. The employer pays for the number of spots and then pays the building.

Rather than put these employees in our transit program through our vendor, can we just deduct the money pre-tax and pay the building directly for each employee's parking spot?

Question -

Plan purchased an investment in an LLC during the course of the plan year. As of the end of the plan year, the investment advisor said that this investment had not changed, same as what they bought in for?

What are the rules for reporting an investment that is not valued on the market? I.E., would I just check question 4g on the 5500 and then list the amount on question 3?

Thanks,

Keeping up with the board, I've seen a lot of discussion about whether Rollovers (Trad to Roth) affect AGI as AGI relates to Contribution eligibility. But what about AGI for Saver's Credit purposes?

Specifically, since a Trad to Roth conversion is taxable income, would the conversion amount be included in AGI for determination of Saver's Credit eligibility and Credit Rate? And if included, is the entire amount included, or just the Base, or just the Total-Base? Form 8606 (2001) puts (Total-Base) on 1040a line 15b.

Thanks!

An ESOP has, by its terms, satisfied the 401(a)(28)(B) diversification requirement by distributing the portion of the participant's account subject to the diversification election. The sponsor now proposes to amend the ESOP to satisfy the diversification requirement by allowing actual diversification under the ESOP through 3 or more investment options. Is there a 411(d)(6) problem with this change?

I have a client with a 403(B) plan. I really don't know much about 403(B) plans. The client has less than 100 employees. I was told that a Form 5500 was not required to be filed. While i don't know much, i see from other threads that Form 5500s are filed for these plans. Are there any circumstances where a Form 5500 would not be required for an active 403(B) plan?? Thanks.

Can an employee and his spouse (employed by another company) both take advantage of a DCFSA? Are there any tax implications? Thank you!

I have a plan which an employee was an owner in the year 2000. He sold his ownership in year 2000 and also terminated in that year as well. He also has a wife that still works with the company, but did not make over 85K in the year 2000. I am trying to complete testing for the 1/1/01 - 12/31/01 period. My questions are:

1. Is he still considered a Key EE, since he still has a balance in the plan?

2. Should his wife still be considered a HCE due to her relationship to an owner, or what was a former owner?

I have a client that fits the split DB/DC criteria. Young and Old Owners, and a similar mix of employees. They currently have a 401k plan. Can the DB participants continue to defer in the 401k (without getting a PS contribution) without the plans being subject to the combined plan 404 limits?? Thanks.

We've got a takeover Plan that uses one vesting schedule for employees hired before 01/01/00 (6 year grade) and another vesting schedule for employees hired after 01/01/00 (4 year grade). Is this permissable? I've never seen something like that before.

Hi there,

I am 28 yrs old and i wanted to start a ira roth. I am not sure who i should do this through or how i go about doing it can someone please help me?

Co A sponsors a 401k plan- all employees participate. The plan provides an employer match also.

That company wants to give a discretionary PS contribution to only HCEs and

interns, using new comparability to pass. If they did this within the

Plan,

would it require the min contribution (under th new comparability rules)

to

be given to all NHCEs, not just interns. In other words, are all the NHCEs considered "benefitting" under the final new comp regs since they are able to defer and get a match.

If they set up a separate plan just for the PS contribution, could they

just

give the minimum to interns? The rest of the NHCEs would get a 0% allocation.

Is a non-5% owner employee who retired at NRA (65) & took a 100% lump sum distribution at that time entitled to continue to receive employer QNEC contributions annually? The employee was re-hired within a month of the retirement and is now age 70.

The plan is a 401k profit sharing plan. The employer has never used the 401k feature, and since plan inception has only made 10% of comp QNEC contributions annually. The plan's eligibility requirements are: 6 mos of svc & no age requirement. What are the ramifications under 401(a)(9), if any?

A traditional 401(k) PSP of a publically traded company has 15 investment options for self-direction. One of those options is "company stock." The company would like to amend the plan to take advantage of the Section 404(k) dividend deduction provision that was amended by EGTRRA.

The company is NOT going to make an employer contribution that is set aside in a newly created ESOP account. Instead, they want to take the position that the Company Stock Account in the self direction investment menu is the ESOP portion of the plan.

Apparantly, the recordkeeper has seen this done on several occasions, and has even shown me an amendment.

I don't see how you can take the position that an investment option is a plan designed to invest primarily in employer securities, even if you throw in all kinds of 409 and 4975(e)(7) that applies to that investment option. We are talking about 401(k) deferrals and matching money that one day might be in a bond fund and the next day in company stock. How is that a plan or provision designed to invest primarily in employer securities.