Hi All,

I have a 401K plan from my previous employer, which I want to rollover. I have been thinking of first a Traditional IRA and then convert it to Roth. The reason I wish to do this is so that I may have cash available when I need it (I know it is not a good option to tap retirement funds like this). I have been doing a lot of reading and honestly I am totally confused.

My question is will I be penalised (10%) if I withdraw from my converted Roth IRA say after 2 months of deposit.

I have been more inclined towards Roth as I figure when I retire I may end up in a higher tax bracket. Is this a good option (Roth IRA that is).

Thanks in Advance

Just wanted to clarify an earlier post (which may have been a little confusing).

I'm a little confused with the determination of the expected retirement age (XRA) for a participant under ERISA 4044.

4044.55 deals with the XRA when a participant must retire from his job to begin receiving an early retirement benefit. 4044.56 deals with the XRA when a participant need not retire from his job to begin receiving an early retirement benefit. This latter situation does not appear to make sense (and would never apply) as in-service distributions are not permitted prior to normal retirement age.

Under ERISA 4010, a PBGC filing is required for single-employer plans with aggregate (within control group) UVB of > $50M. With this filing the value of plan benefit liabilities must be disclosed, using methods and assumptions as outlined under ERISA 4044. 4044.55 through 4044.57 deal with the determination of the XRA (expected retirement age) for valuing deferred benefits.

4044.55 deals with the XRA when a participant must retire from his job to begin receiving an early retirement benefit. 4044.56 deals with the XRA when a participant need not retire from his job to begin receiving an early retirement benefit. This latter situation does not appear to make sense as in-service distributions are not permitted prior to normal retirement age.

Thoughts?

When a beneficiary inherits several IRA's from the same individual (a parent who died at 77 years of age), is there any prohibition against combining all the IRA's into one? Since remaining distributions can come out over the beneficiaries life expectancy all the IRA's should be using the same factor to calcualte the minimum distribution. Thus, the distribuion amount should be the same whether they are combined or not.

Also, does the rule that agreggates IRA's for calculating the minimum distribution amount, but lets you take the calculated distribution from one or any combination of the IRA's, apply to inherited IRA's the same as it applies to an original account owner over 70 1/2. Thus, if 12 IRA's were inhereted, and they were with different custodians, could the required minimum distribution be calculated, based upon the beneficiaries life expectancy, and then the distribution come from any of the IRA's?

Thanks in advance for any guidance.

One of our tax partners heard that something has been released regarding recalculation (reduction) of the payment amount in an established series of substantially equal payments.

The specifics involve a situation where the market value of an IRA was severely reduced and there wouldn't be enough to fund the payments until the person attains age 59.5. If the recalculation is not allowed, the IRA will be drawn down to zero, thus triggering retroactive penalties. Apparently a PLR was issued.

Has anyone out seen anything on this? Thanks. Maverick

If a Self Employed person has a 401k plan and earns net income of $15,000 for 2002 and defers $11,000, would a profit sharing contribution be based on the $15,000 comp or would it be based on $4,000 comp?? Since the salary deferrals are not part of the 25% of comp deductible limit do i have to consider them for the comp used to calculate the profit sharing contribution?? Thanks.

An employer sponsors a DB plan, and makes the section 404 maximum deductible contribution to the plan, but spreads it out over the year (i.e. 2001 contribution made over 2002). Some of the contribution will be made after the due date for the company's tax return (9/15) and therefore not be deductible. Let's say the company has cash flow reasons to do this, and the 412 minimum is timely deposited by 9/15. Does this escape the section 4972 excise tax, in that it is not more than the "allowable" amount for the year? (The company plans to deduct the "extra" amount for 2002.)

Almost every account we administer is participant-directed and valued daily. There are no "pooled" investment options from which we can deduct fees. Each is a publicly-traded fund. Thus, when a fee is to be charged against plan assets, there is an itemization against the participant's account for the fee deduction. Since the charge is pro-rated across each participant's holdings, there can be a dozen transactions recorded if, for instance, the participant owns 12 separate funds off the menu list.

We try to hold off a deduction until there is a contribution, taking fees from cash rather than the proceeds of sales. But this is not always possible (and can be tough on cashflow).

I'm all in favor of full disclosure and transparency, but I'd like to minimize the number of transactions that are of record.

Can anyone share any creative ideas to consider? Or is this the "nature of the beast?"

Can someone give a verbal acceptance to COBRA within the required timeframe and then followup with the paperwork?

A controlled group contains 2 employers, each of which sponsor separate DB plans. The owner of the controlled group is an employee in each of the plans, collecting a separate salary and supposedly earning service under each of the plans. My initial reaction is that if the owner is sharing his time between the 2 companies and therefore accruing benefits under each in accordance with the plans- the following tests would need to be done to see if there are any restrictions:

Need to aggregate the benefits under 415.

Need to aggregate plans and test as one under 401(a)(4)- nondiscrimination.

Can anyone think of any other pitfalls? Should I be checking 401(l) if the plans are integrated with Social Security? I don't know what the benefit formulas are under each plan, other than they are salaried plans and one plan's average pay is capped at 75,000. There is no cap in the other plan. The employee makes more than 200,000 in salary for each of the employers.

I took a look at RR99-51- which states that "on the basis of all relevant facts and circumstances, the manner in which employees' service is credited for all purposes under the plan must not discriminate in favor of HCEs."

Thanks

I have a plan that wants to exclude commissions and bonuses from the definition of compensation. There is a possibility that they will fail the compensation ratio test at the end of the year. What are the consequences if this test does fail? Is the employer responsible for contributing all deferrals and match that would have been based on commissions and bonuses?

I am thinking about going back to school for my Ph.D. I was wondering if anyone knew of any schools that actually offer a Ph.D. program in the employee benefits field. Any information would be appreciated.

Client sold his shares to his Company's ESOP in exchange for a note FROM the ESOP itself. Compay is doing poorly, so client decided to forgive one of the payments due from ESOP last year.

Any thoughts on the tax treatment to client or ESOP. ESOP trust is tax exempt - Can there be income to ESOP from forgiveness of debt by the former shareholder ?

Excerpt: "Having trouble staying awake in meetings or during long conference calls? Here’s a tool to help you revitalize your days. Simply keep this chart handy at the next meeting, mark off the words and phrases as used, and see how long it takes before you score a BS BINGO!"

(See attached PDF document.)

Just a quickie question today:

Does anyone know if FSA plans are restricted to just Full Time employees? I was under the impression that this was an area that was up to the employer much like the monetary cap.

Our SPD indicates "Full Time" but leaves the specific number of hours to qualify as FT open to each employer/member.

Thanks.

This is my first tax year at my new company. In prevoius companies, as HR Manager, my involvement in 5500's was merely as a "data collector"; our Finance Department would always delegate this to an accountant (usually with tax experience.) At my new company, the discussion has been raised as to which department 'owns' this responsibility. I am not comfortable taking this on due to my lack of experience, and the consequences for not filing accurate and timely reports. What do other companies do? Who is responsible? If HR, does your accounting/finance dept. assist? Do you have an outside service perform these? And, is it not true that 5500's must be included as part of the company's annual audit? Thanks for your help!

Have client who made excess SEP contribution. Can they recharacterize as Trad IRA contribution?

I thought they could as long as they notify ee (who also happens to be owner) of excess & include in W-2 wages. Then the ee elects to treat excess contribution as a Trad IRA contribution, then follow the deductibility rules of that contribution.

According to page 55 of IRS Publication 590, one cannot recharacterize employer contributions under a SEP as contributions into another IRA.

But if an ee has the amount included as W-2 wages, why wouldn't the IRS allow the ee to recharacterize?

Any ideas?

I'm searching for E & O insurance. Anyone have recommendations? I'd like a company name and phone # if possible. Thanks!

US employer sends some employees who are US citizens to United Kingdom for 3 year periods of overseas service. During their period of employment in the UK, these employees continue to make elective deferrals to US company's 401(k) plan. Plan just received notice from UK Dept. of Inland Revenue, requiring plan administrator to sign following statement:

"The Plan Administrator hereby confirms that the individuals listed below have not/will not use the in-service withdrawal or loan provisions of this Plan to withdraw or borrow any contributions which were paid into their accounts during their service in the United Kingdom."

The plan allows both loans and post age 59.5 in-service withdrawals. If they sign this statement, they'll have to track these amounts separately--not the end of the world, but a hassle.

Has anyone seen this before? Has the plan administrator signed? I reviewed the 2001 UK/US tax treaty and don't see where this is supported in the text of that treaty (but I'm definitely not an expert in treaties). Any ideas?

Can a 401(k) plan match NHCE deferrals at a higher rate than HCE deferrals? Do HCE deferrals need to be matched at all? Are there any negatives of doing this from a compliance testing perspective?