We have a plan that terminated the plan effective 7/31/01. Some of the employees spun off into a new plan that we also administer and that was effective on 8/1/01. I have a couple of questions regarding how we should complete the testing for ADP and ACP.

1. Would we test the original plan for the short plan year of 1/1/01 - 7/31/01?

2. Would we test the spin-off plan for the period 8/1/01-12/31/01? If this is the case, would we look at the employee's comp for the original plan to make a determination of who the HCE's are in the spin-off plan?

What are the requirements for FICA withholdings on SAR-SEP contributions? The salary reduction portion? The employer contribution portion?

If this is required and has not been done, what correction program would you recommend?

Thanks!

We have a potential client (DEF) that wants to max. fund a DB plan over 4 to 5 years but wants to take as little comp. as possible. The corp. will be new - effective 1/1/2003. The 415(B) limit (reduced for participation less than 10 years) at the retirement age of the participant is about $64,000. I would like to recommend that he pay himself a salary of $64,000 for 3 years to generate this benefit. However, there is the problem of the reduction in the 100% of pay limit for service less than 10 years.

My question is: Can the Plan credit service with ABC, a prior unrelated (somewhat) employer, so that he does not get slammed by the 415(B) service reduction? Or does predecessor service credit apply strictly to eligibility and vesting? I say they are somewhat unrelated because the participant used to be an officer and minority shareholder (about 5%) of ABC, and ABC will be paying the new company (DEF) for consulting services.

Major Insurance Company does the admin. and investments.

Participants take participant loans. However, the loan comes from the major insurance company and is collaterallized by the investment in the guaranteed interest account.

Therefore, the participant takes the loan from the insurance company and gives collateral rights to his/her interest in their 401(k) account.

This sounds to me like a PT, and an alienation/anti-assignment problem (i.e., grounds for disqualification).

Any recommendations would be greatly appreciated.

There is a company that offers the SHNEC 3% accross the board contribution. The company also offers a $1 for $1 match on the first 6% of deferrals. The match is subject to a 3 year cliff vesting schedule. My question is, does the match need to be tested? I know the SHNEC absolves you of ADP testing, and the 6% is within the confines of an enhanced matching formula, but do you still need to run the ACP test on the 6% match?

Thanks,

Kevin

Several years ago Gary Lesser mentioned that it is prohibited to make SIMPLE IRA eligibility more restrictive for the current year under tempory and final regulations. Can anyone tell me what code sections or regulation numbers cover this area?

A PARTICIPANT IN A PLAN NEEDS A HARDSHIP DISTRIBUTION TO AVOID FORCLOSURE ON HER HOUSE. THE PLAN HAS A LOAN PROVISION. DOES SHE HAVE TO TAKE A PLAN LOAN 1ST BEFORE SHE CAN TAKE THE HARDSHIP? WE KNOW SHE WILL NOT BE ABLE TO PAY THE LOAN. IS IT NECESSARY TO HAVE HER DEFAULT ON THE LOAN BEFORE SHE TAKES THE HARDSHIP? OR CAN SHE JUST TAKE THE HARDSHIP SINCE WE KNOW SHE CAN'T MAKE LOAN PAYMENTS?

We have a health plan that has medical, dental and vision tied up in one option. We have received a QMCSO which requests dependent coverage for purposes of dental benefits only. Can anyone give some ideas on how to handle this? Do we reject the QMSCO, or do we enroll the dependent in the health plan, even though medical and vision was not ordered? I don't see this issue addressed anywhere. Any help would be appreciated. Thank you.

A client has inquired as to whether municipal employees can make pre-tax contributions for future retiree health benefits. An insurance company tells them this is permitted under the Code, does anyone know the authority for such?

Person, age 71, requests $40,000 distribution from IRA account with $2,000 federal withholding. He is told that if he wants to have withholding, he must have at least 10% - or $4,000 - withheld. His projected tax liabililty is $2,000. He is not required to have any withholding but if he chooses to have withholding it must be at least 10%.

Can anyone address why there should be such a rule - or even if the above rule is true.

Folks - I am interested in getting some basic info on this plan and perhaps a good referral as well.

Q: I am independent contractor in IT and had income in 2001, 2002 and perhaps in 2003 - but not sure about future years, it could be zero in 2004.

1. In this situation, does a DB plan make sense/allowed (not surity of income in future years)?

2. What happens when the business is terminated, money rolls over to IRA?

3. What are the annual costs of administering such a plan (going with an admin is recommended? as oopsed to DIY - services of an actuaty needed, right?)

Thanks for any help

If a majority-ESOP owned company goes through a Type C reorg (exchanges its assets for stock in the acquiring company) does the ESOP exchange its "selling company stock" for that of the "acquiring company" like other shareholders and become "Acquiring Company ESOP" ? FR

This may seem like a silly question but what is the minimum age allowable for a child to contribute to a Roth IRA?

Has anyone run across "special pay" plans? They appear to be a simple cross-tested profit sharing plan (established by the employer, not by employee election) to which contributions are made by a governmental employer upon the employee's retirement.

The one-time contribution is equal to the lesser of the employee's conversion pay (accumulated benefits and leave not taken such as sick pay, vacation pay, etc) or the 415 limit.

The reason for undertaking such an arrangement is apparently to save on FICA, Medicare, FUTA, SUI, SDI and Workers' Compensation taxes and premiums. Employees still can receive the money anytime they wish since they are beyond their retirement date under the plan, but it saves the payroll taxes for both employer and employee.

I placed a subreport in the header of a report that had just the two tables Employer and RPTPlan. The subreport was a rough copy of an activity summary. The subreport was linked to the main report by the Employer table's key field. Everything appeared to work fine running two plans on the same report.

I'm just not sure if this isn't doing it the hard way, or if I'm re-inventing the wheel here. I seem to remember there being a two plan report passed around between user groups, but this was a while back.

Anyone been down this road before, or can fit the puzzle pieces together I'd be glad to send a copy? Ver 7.3 Relius Admin. It occured to me that the limits now are much easier to compute and report on, but again, not sure.

Thanks in advance,

Bill

A 401(k) permits immediate participation for elective deferrals and would like to add a profit-sharing component. To receive a profit sharing contribution, a participant would need to be age 21 and have completed 1 year (1,000 hours) of service. For purposes of determining eligibility for the profit sharing contribution, can the employer use two entry dates--the first day of the plan year and the first day of the seventh month--after meeting the eligibility requirements?

The "plan document" states that a "defaulted Loan" is a Distributible event, but it also states that there are no distributions prior to the participant's serparation of service.

A loan has defaulted and a 1099R has been issued.

Can this loan be off set from the participant's account?

I have a 401(k) plan with a custom plan document effective 1/1/2001 (signed 12/13/2000). It has not used the snap-on amendments for MRDs. What amendments (if any) are required for 2002 and 2003?

Are MERP's required to file 5500's? I don't think so (can't find anything in the instructions that indicate that they do), but I haven't worked with them enough to know for sure.

Thanks

Since most of my clients own doctor offices, manufacturing firms, and other small businesses, I'm a little unsure if anything is different for this new case I'm looking at.

A 6 member rock group want to start a 401(k) plan for the group, as well as for the record company that they own. In addition to the 6 band members, there are a few office people, as well as some truck drivers, roadies, ticket agents, and so on. I don't see a problem setting a plan up for this group, but as far as counting hours for eligibility, years of service for vesting, etc., is there a right way to do this? Would elapsed time work best in these situations? I also usually deal with W-2 wages for plan purposes, and I'm curious as to what gets reported as income in a situation like this.

Any thoughts or antedotes are appreciated. Thanks