Are esoteric types of plan investments (such as art work) specifically prohibited by law? If so, is that prohibition from ERISA or securities law?

Does the actual death during the plan year of a participant (HCE) affect the ability to cross test for nondiscrim under 401(a)(4) or is mortailty just considered under the table based on his age?

I have a CT plan, one HCE, doing plan year end 12/31/01. Based on usual calculation he can do 3% to NHCEs and get 20+ for himself. He died in December 2001. What does that do if anything to the cross testing? Do we still get to use actuarial factors considering his life expectancy based on his age at death or because he is dead does he have no life expectancy, therefore no ability to CT.

I may be reading more into this than I need to. It just does not seem logical to take into consideration his benefit stream for the next 20 years when I know he is already dead. Logic more often than not does not apply though! Cites appreciated.

403(B) match fails ratio/percentage (coverage test), now we're trying to test coverage under average benefits test.

Are 403(B) elective deferrals included in the test?

Maybe, more basically, do we have to test a match for 410(B)? I think so.

The employer of a SIMPLE plan sells his/her business, and the new owner would like to maintain the SIMPLE plan for the individual participants who are still employed with the new owner. Since it's a new business Name, Tax ID#, does the new employer have to establish a new SIMPLE plan or can they amend the existing SIMPLE plan. Any rulings?????? I'm assuming that all the New employer would need to do is Amend the SIMPLE plan document to reflect these changes???

This should be the easiest question all day – I just can’t seem to find the answer. I know that the final treasury regs clarify when a cafeteria plan may permit an employee to change his/her elections during the plan year. I have the cite & regs – no problem there - I am clear on the exception to the rule.

I also know that there is a law or reg that says you must make your elections prior to the start of the plan year, but for the life of me I can’t find the rule! Could anyone direct me to the proper cite? Thank you!

Plan failed ADP/ACP. Refunds for the ACP normally put in to the forfeiture account. I have looked through their document and what I find is 1 "Notwithstanding anything in the Plan to the contrary, all matching contributions which relate to distributions of Excess Deferred Compensation, Excess Contributions, and Excess Aggregate Contributions shall be Forfeited". That is from the Adoption Agreement.

In the trust document it states that "The distribution and/or Forfeiture of Excess Aggregate Contributions shall be made in the following order: 1 Employer matching contributios distributed and/or forfeited pursuant to Section 11.5a1." Section 11.5 goes over ADP refunds.

Employer insisting they get a check for the ACP refunds so the company can right that off as expense or something.

I have a client with an ERISA 403(B) that has no vesting schedule. The accounts are held in FBO accounts with a mutual fund family where the employer is the custodian. It is not on a 403b platform. Needless to say the admin is a nightmare.

Can the employer convert the 403b plan to a non-ERISA plan and funnel employer contributions into a SEP? This wold eliminate annual 5500 reporting and would transfer custodial responsiblities to the mutual fund family. The employer is comfortable with the SEP eligibility rules.

Any problems with this strategy? Any pitfalls that I should be aware of? Would this involve a termination of the prior plan or just a restatement? Any help regarding implementation issues?

Joe Potosky

A client owns a small C corporation and his wife is the corporate treasurer but does not draw a salary. She has authority to sign checks, provides advice similar to director duties, and does other miscellaneous activities for the business. The owner wants to install a SIMPLE IRA for the company. His wife does not meet the $5000 salary minimum, but her duties certainly qualify for salary. Does she need to start drawing a salary and be included in the SIMPLE or can she continue to work for nothing?

Recently, I met with a new client with a real problem. Several years ago, he went to work for a relatively new company. Being an accomplished professional, the company promised him a high hourly wage. In addition, disability insurance and a fully funded, integrated, SEP and money purchase plan.

When he received his first paycheck it was quite a bit less then expected. When he inquired about the missing pay, he was told that his salary was ‘net’ all of the benefits he was promised including the total social security expense.

Apparently, his employer had recently been required by their industry to convert all, until then, self-employed 1099 status employees to W2 status employees. Reviewing company handouts, he learned that he had to pay for all of the employer related conversion costs. To keep the corporate expenses at prior conversion levels, the company devised an annual, ‘sliding’, hourly pay rate based upon the exact phase-out levels of disability, social security and retirement costs. The company explained that this was to preserve his maximum retirement benefit and expenses at 1099 levels. He was to be an employee in theory only.

Since then, the company has deducting the SEP/IRA, MPP, disability premiums and social security costs from his income. They defend the practice by saying the employees agreed to the sliding rate. Because contracts are signed with the varying rates, the benefits are employer funded. However, if you ask the employees, they will tell you the costs are deducted from their income. In addition, new employees continue to be recruited at the ‘gross’ industry average rate.

My client wants to go to the DOL with this information. This employer has about 150 employees, most with six-figure incomes in this same situation. The liability could be very large. I do not see anything that could be done to correct this situation and I am concerned with the actions the DOL could take with them. I have not been able to find any court cases like this and would like direction in finding related cases. In addition, what do you think the DOL would do for my client?

R.Patterson

I hope to seek help for a friend she opened a Roth IRA last year, did not know that it was different than Traditional IRA she made a contribution and reported it on her tax reurn. Now she needs to ammend last years return.

Question is how to figure what the penalty is for this mistake and what steps do you adviseshe take?

Can she convert this ROTH to a traditonal and what is the ramifications of that??

Thank You

RT:confused:

What are the potential consequences for a plan that terminates without the plan sponsor having made some Match contributions that were accrued in prior years?

Specifically, the client accrued Match contributions for 2000 and 2001. The client is now bankrupt and the plan administrator will not fund those amounts.

Is the 2000 5500 considered incorrect, and if so should it be amended? Is there an issue with participants who were paid based on account balances that included the never-to-be deposited receivables? Multiple Use testing would change.

Any other problem areas to be aware of?

Thanks.

My client wanted its employees to become eligible to make 401k deferrals immediately upon date of hire; but only to be eligible to receive an allocation of the discretionary profit sharing contribution upon satisfying 1-year of service and reaching entry date. In other words, the plan provides for different eligibility and entry dates for the P/S and 401k features.

The plan became top-heavy for the 2002 plan year. Do those employees who entered the 401k portion of the plan, but not the P/S portion, have to be provided the top heavy minimum?

Are 401k catchup contributions taken into account in the cross-tested calculations?

It appears that many governmental plans permit an annuitant to withhold a flat dollar amount for income tax withholding from his or her annuity. However, Form W-4P and its instructions require that if the annuitant wants income tax to be withheld that he or she must designate withholding allowances on the W-4P and may have an additional flat amount withheld. The instructions say that "current law" does not permit you to only specify a flat amount.

Any theories as to why a flat withholding amount is apparently not permitted except as an additional amount? Are plan adminstrators familar with this provision and have they decided not to offer a flat dollar amount for withhholding?

I got a request for help from the former COO of a former client.

(The company was merged into another)

Are there any regs. to point to to fix this problem.

The Company switched carriers for Medical and Dental, which were both with the same carrier. The COBRA participant (who had both medical and dental) was never given the choice on the new Dental plan only on the Medical. He is getting no where with the benefit office of the employer to get him into the new dental plan any suggestions, short of an attorney

Thank You EJCII

I was wondering if anyone out there would mind sharing the spreadsheet they use for a plan's account summary/income statement. I don't care for the one I am currently using and I am hoping to save a little time this way. Thanks!

Client would like to establish a SEP for 2001, but......

Client had a calendar year DB plan that was terminated in 2000. There was a contribution due for 2000 that was not put into the plan until after September 15, 2001. That contribution is being taken as a deduction on the client's 2001 personal return.

The instructions to Form 5305-SEP say you may not use the 5305-SEP if you currently maintain any other qualified retirement plan.

Is the above client considered to be 'maintaining'

a qualified plan for 2001 and therefore unable to set up the SEP?

Thanks in advance.

It is my understanding that the substantial risk of forfeiture associated with NQDCP is tied to the Plan Sponsor even if that Plan Sponsor is a subsidiary of a larger parent.

1. So, does this mean that if the Sub goes bankrupt and the Parent remains solvent, that participants risk forfeiture?

2. If the Parent goes bankrupt, does this mean that the Sub has de facto gone bankrupt also and that participants risk forfeiture?

Anybody know anything about these? I briefly skimmed the 1099 instructions and nothing jumped out at me, but I could have easily zipped right by. Basically, I wanted to find out if these can be filed electronically by the payor, and if so, what documentation still has to be sent to the participant. Thanks!

In 1999 a participant terminated and defaulted on his loan. A 1999 1099-R was issued to him reporting the loan default. In 2000 the participant was paid out and two 1099's were issued to him. One for the Rollover and one for the loan default (again).

The participant filed their 2000 tax return based on this information. How is the incorrect 1099-R corrected for the loan default that got 1099ed twice?? Does he need to refile his 2000 tax return???