What is the income limitation for a single person to contribute to a ROTH IRA?

Thanks

I have a client that is subject to the variable rate premium. I have calculated this premium under the General Rule using assets as of 6/30/2001 and vested benefits valued at 4.82% (Premium Payment Year = 7/1/2001 - 6/30/2002) as of 6/30/2001. I have also calculated the premium using the ACM (for plans with > 500 participants) using vested benefits as of 7/1/2000 and assets as of 7/1/2000.

Both of these methods produce a significant premium. Do I have any other options?

If it not addressed in the plan description, can an election be made for parking after a person returns from disability if they were out during the open enrollment process?

We have heard there may be a special advantage to using Veba's in providing a dependent care assistance program. What we heard is that the annual $5,000 limitation to the employee does not apply if used with a VEBA.

Is this correct?

Thanks for any help.

I am looking for survey information or information from TPA's on where participants are spending their Medical Flex Spending Account dollars. For example - of an annual election, XX% is spent on dental expenses, XX% spent on medical expenses and XX% spent on vision expenses, etc. If there is anything out there that breaks it down further by co-pays/co-insurance vs uncovered items, supplies, etc - I would be interested in that as well? THANKS MUCH!

We have a client who anticipates issuing salary cuts to their employees. The Plan allows for modifications in salary deferral elections effective the first day of each calendar quarter. Would a reduction in salary be an exception that would allow participants to modify their elections prior to the next quarter?

My client in bankruptcy has COBRA obligations because of a terminated retiree medical plan sponsored by a now-defunct subsidiary within its controlled group. Another subsidiary within the controlled group is also in bankruptcy and under Section 363(f) of the Bankruptcy Code wishes to sell its assets, "free and clear" of interests. First, I want to understand if I have the right understanding of COBRA. Does the purchaser under COBRA, if the selling entity no longer maintains any plans take the retiree medical plan obligations under the new COBRA regs, meaning, are the retirees that have never worked for the selling entity but who worked for a member of the selling entity's controlled group M&A qualified beneficiaries for purposes of the asset sale? Second, has anyone found anything that says COBRA trumps Section 363 of the Bankruptcy Code so that the assets cannot be sold free and clear of COBRA obligations? Any help would be much appreciated.

In case the full text of my question is cut off in the header for this post, let me restate it here: Must a plan contain a written formula in order to make integrated allocations at less than 100% of the SSTWB?

Background: Our New Comparability plan document used to contain "Fail Safe Self-Correction" language. That is, the document specified how EBARs were to be calculated, and how an initial allocation would be adjusted if it failed the General Test for Non-Discrimination.

Following recent trends, our GUST document is now devoid of testing and self-correction language. (Our allocation provisions also now allow for contributions to be declared separately for each Category (or Tier), therby reducing the rigidity with which a contribuiton has to be allocated. We thought this would give us the freedom, in years when demographic changes made cross-testing unappealing, to declare in integrated allocation, and satisy non-discirmination requirements by using the (a)(4) Safe Harbor rules for DC plans.

The reason we'd like to use the Safe Harbor under (a)(4) (as opposed to the General Test) is that we'd like to be able to use an integration level lower than 100% of the SSTWB. This is permitted under the 401(l) rules referenced under the Safe Harbor rules, but appears not to be allowed when imputing disparity under the General Test.

Our question is this: Must the plan document be written as a 'design based safe harbor' in order to use the safe harbor rules? Our concern stems from the fact that the safe harbor regs, at 1.401(a)(4)-2(B)(ii) read: "Permitted disparity. If a plan satisfies section 401(l) in form...(it will) not cause the plan to fail to satisfy this paragraph (B)(2)." We're concerned that the term, "in form", means that the form of the document must specify the manner in which 401(l) will be satisfied. Since our document is silent in terms of how it handles 'permitted disparity' does that mean we can only impute disparity at 100% of the Wage Base under the rules in 1.401(a)(4)-7? If that is so, then plans that would have passed the Safe Harbor using 401(l), could end up flunking under the General Test.

Thank you in advance for any replies. Thanks also to Tom Poje for being a superb moderator. Does our concern leave you worried Tom?

It was stated in a 5500 seminar last week that if a pension (db, mpp, psp, k, etc.) plan includes Insurance, feature code 4B must be included on line 8b. Can anyone confirm this?

A DB plan terminated 15 years ago and assets were distributed within the required timeframe. The plan no longer exists. Annuities were purchased in conjunction with the plan termination.

The employer now discovers that a person who was not eligible under the DB plan, (a non US employee), was in fact included in the plan as well as the plan termination and consequently a benefit was purchased. No payments have begun for that individual. The individual has not completed the paper work for a tax treaty.

How does the employer correct this? Can the insurance company revoke the certificate provided to this individual as mistake of fact and return the money to the employer (reversion)?? Seems to me that if an irrevocable commitment was made to the individual- then may be difficult to retract.

Thanks

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: