I have a compliance client that is a S-Corp. Files returns on calendar year basis. They has a ps plan that has a 9/30/02 year end, which they never changed. I just found out that they started a 401(k) in April 02 (plan year 1/1/02 to 12/31/02). What can they contribute to the ps plan? The plan is updated for EGTRRA, but I'm not sure that it makes a difference. Thanks Karen

How is the deduction limit calculated for an asg? There is a reg. (proposed?) that says that if one member of the asg sponsors a plan that covers employees of another member,the 2nd member is deemed to sponsor the plan, which makes it a multiple employer plan. IRC 413©(6) says that each employer in a multiple employer plan calculates its deduction under 404 separately. But 414(m) doesn't mention anything about 404.Can I make the logical leap that the members of the asg each have separate 404 limits?

Where can I find statistics on payment options chosen by participants in DB plans - % opting for life only, life w/ period certain, js, lump sum, etc.

Also, % of plans offering lump sum payments.

Is it a correct to assume that the majority of db plans do not offer lump sum benefits unless the balance is under a certain benchmark?

Facts:

Plan Year 7/1/01 to 6/30/02

Limitation year is calendar

When doing the 2001 (1/1/01 to 12/31/01) 415 testing, there were excess annual additions...distributed from after tax source.

Do we account for these excess annual additions in the 7/1/01 to 6/30/02 ACP testing?

Section 3.6.2.(a) of ASOP 27 describes the building block method for determining a range of interest rate estimates and 3.6.2.(B) describes the cash flow matching method.

I remember reading something during 2001 that had numerical examples of these methods. Specifically I remember an example of constructing an interest rate range for a one employee DB plan.

The problem is, of course, I cannot remember where I saw this example.

Can anyone out there help me out?

Thanks.

I have a plan where the employer deposited the minimum required contribution for the plan year ending in 2001, however they did not make the appropriate required quarterly contributions. Because of this, there is a penalty of $300 being charged to the FSA. This was reported to the employer and he has since made the deposit of the additional $300 into the trust account to make the FSA balance =$0.

The problem is it was deposited on 9/19/2002 while the deadline for the contribution was 9/15/2002.

Is there an excise tax that must be levied on this $300?

Should question 5(a) on Schedule I, has a resolution to terminate the plan been adopted Y/N, be checked "Y" if you are merging your money purchase pension plan into your profit sharing plan? Technically, it's not a plan termination because we're not vesting everyone 100%. However, this will be the final 5500 for the plan, and we have checked the final box. It seems to me that since the final box is checked, the DOL probably expects the plan to be terminated. What are others doing?

Well, looks like I made a BIG mistake in 2000. I did a partial conversion from a Traditional IRA to a ROTH. I recieved the form 1099 that year for 33K. I ignored it since I rolled over the amount into the IRA. Now I've gotten a tax bill for $14k. Don't know what to do about it. I called the IRS and they said to get a copy of the 5493(?) and send it to them. That was all. From what I'm reading on this site, even though the amount I rolled over was after tax dollars, it still is a taxable event. I've come to the conclusion I may owe $14k. It was a stock rollover and not real dollars. Anyway, as it turns out, the Roth is worth about $14k. Ain't that crap! I'm going to get the rollover form and send to IRS, but, again, from what I'm reading hear and other places, there is nothing I can do except to pay the $14k. That's money I do not have! Wish I did. The rollover took place in 10/2000. If I could undo the rollover, it would be no problem, but tax on the amount that was already taxed really bugs me. I'm going to have to read a little closer next time.

Any ideas to get me out of this mess?

Thanks

Matt.

Effective January 1, 2003, does the DOL's new claim procedure rules that require shorter review of claims for "group health plans," apply to (a) pre-tax premium cafeteria plans, (B) dependent care FSAs, or © Health Care FSAs?

Or, are such plans subject to the old (albeit slightly modified) 90-day review periods?

Thanks in advance.

Small incorporated employer sets up a medical reimbursement plan with an annual reimbursement limit of $2,000 per eligible employee. This is NOT a cafeteria plan; it is funded with employer money.

The plan covers out-of-pocket expenses for medical care for the employee and his or her spouse and dependents.

The sole owner runs the business and works full time and the sole owner's wife is a legitimate employee of the corporation and also works full time. There are unrelated eligible employees as well. It seems to me the husband and wife, collectively, have a limit of $4,000 for expenses for themselves and their dependents, and there is nothing in 105(h) or the regulations under 105(h) to block this.

Anyone disagree?

Is becoming eligible for coverage or open enrollment at an employee's second job a qualifying event which would allow our employee to terminate coverage with us?

Can a family:husband, wife and 2 sons, both over age 21, have the so-called Individual 401(k)?

I'm thinking they can since under Section 318 attribution rules there are no age restrictions and the 2 sons would be considered owners. Provided they do not have any other employees, there would be no testing and no filing requirements, at least until assets exceed $100,000 then should file a 5500EZ.

I am getting confusing information from different brokers regarding the basis for recharacterizations and was hoping someone here might help.

Fidelity tells me that when I recharacterize assets, I do it 'in kind', so if I convert shares from a Roll Over IRA Brokerage account to a Roth brokerage acct early in the tax year, and later want to recharacterize all of my conversions for that year, I recharacterize the same number of shares, irrespective of dollar value.

Vanguard on the other hand says I need to recharacterize dollars, not shares, and that if the assest declines in value, I must recharacterize other Roth assests (if they exist) to 'undo' the tax liabilities of the earlier conversion.

Now Vanguard's position makes no sense to me (not that it or tax code has to make sense). I would have thought that the purpose of recharacterizing is to reverse an earlier transaction, in otherwords to go back to the original 'state', and that would require share conversion. Also, if Vanguard was right, then technically an investor could be left with a tax liability just for converting and then recharacterizing the same asset in the same tax year.

This is the scenario that confuses me. If a tax payer had only one asset, say 100 shares of a stock invested in a roll over IRA brokerage acct, and converted it early in the tax year, watched the asset decline in value, and then subsequently decides to recharacterise the same asset to avoid paying taxes on the conversion. Under Vanguard's logic, the asset would not be worth fewer dollars, and the investor would be unable to 'undo' or recharacterize the same dollar amount. So at tax filing time, the investor would be stuck paying extra taxes becuase the amount he converted was greater than the dollar amount he recharacterised.

Now I imagined that recharacterising in a down market was beneficial, ie result in fewer taxes not more.

I would love to hear from anyone who could shed some light on this. I have read the IRS pubs and can't recall anything which clarified this question, most of the explanations center around eligibility for conversions/contributions.

Thanks

Dan Shedd

Facts: DOB 1/1/1931; DOH 1/1/1990; DOP 1/1/2002; NRD 1/1/2007; 3-year highest consecutive compensations $30,000; $450,000; $200,000.

Question: Is the 415(B)(1)(B) limit $226,667 or $143,333 or $200,000? I have been challenged to produce evidence of the answer. The challenger states that either the $450,000 salary is reduced to $200,000 when calculating the average or the end result is limited to $200,000 (the current 401(a)(17) limit).

Can one easily take their clients from prototype SAR-SEP documents to Model gov't documents? We terminated our relationship with a previous document provider and no longer have them available. I noticed two issues one was a compensation definition and the other was a discretionery integrated contribution is allowed in this prototype. Can these issues be resolved easily and are there other issues ?

I was asked by a client if medical bracelets are considered a reimbursable expense through a medical reimbursement plan. Any thoughts?

Thanks in advance.

Any TPAs out there E-Filing 5500s willing to discuss pros and cons?

I'm just beginning to look into this. Thanks.

I have a client that sponsors a ps plan that allocates contributions by class of employees pro rata on compensation.The plan only requires 1000 hours to get the allocation,no "last day".The employee classes are currently Class A=Owners(=dr. and wife): and B=All Other Employees.The plan is a calendar year plan,so the 1000 threhold has been passed already for 2002.A preliminary allocation for the year shos that the 5% gateway to the Class Bs will be sufficient to support the maximum allocation to the Class As. Dr. wants to reward long service employees by creating Class C=Employees with 6 or more years of servce and allocating 10% to them, but still maintaining the 5% to the Class Bs,who are now the Employees with

It's my understanding that the IRS Interprets TAM 9735001 to say that any change in allocation basis after a participant has met the allocation is automatically a 411(d)(6) violation, even if the change expands coverage or gives additional allocations without reducing anyone's prior allocation. Is this correct? Is there a cite I can show my client,because he'll never believe it.

Isn't this analogous to a defined benefit plan where the benefit formula is being reduced, but accrued benefits are guaranteed on the old formula through the date of adoption of the amendment?

An employee has had custody of her nephew. The father is assuming custody in Sept, but will not be eligible for benefits in his job until January. Someone told her that the minor child may be eligible for COBRA. She offered to keep custody until January, but the father wants to take custody now. Her concern was with the child not having insurance for 3 months.

The father does not have previous employer healthcare to be able to add the child onto a policy due to the custody qualifying event. I do not believe in the situation of a custody qualifying event (unlike death, divorce or no longer eligible dependent status) allows us to offer COBRA coverage to this individual. I am confuse. Any input would be greatly appreciated. Thanks in advance!!

Client has referenced "Anti Manipulation" rule to state that they need to suspend all contributions for six months following an after-tax in-service withdrawal.

I cannot find anything to support this although I have seen plan documents which include A/T suspension following A/T wdr.

Any guidance?