Hi

I'm in a low income bracket but I keep reading that the Roth Ira is the best place for someone like me. Now here's my problem, I cannot possibly invest/deposit more than $1000 yearly into my Roth, can I still have a Roth or must I deposit $2000 yearly? Is $2000 yearly mandatory or is it just the maximum. Thanks for any info you can give me.

I know this has been answered before, but I need it applied to the following fact situation:

1. Taxpayer makes an excess Roth Contribution for 2000 during 2000.

2. Taxpayer makes an excess Roth Contribution for 2001 during 2001.

Excess is discovered for both years while preparing the 2001 return. Amounts for both years are removed before 4/15/2002.

Questions:

1. Does the 6% Form 5329 penalty equal $120 or $240 (assuming no losses in the Roth), since the excess 2000 contribution is removed in 2002? If there are earnings on the Roth, are the earnings taxable in 2002? How does the Form 5329 show the distribution of the excess contribution, so that no future excise taxes are owed?

2. Is there no Form 5329 penalty for the 2001 contribution, since it is removed by 4/15/2002? In addition, if there were earnings, are the earnings taxed in 2001?

Thanks for any assistance!

As Pension Administrator, the Plan Sponsor sent me a letter from their terminated participant who has a vested profit sharing plan balance less than $50.00. In the letter, the participant states she "does not want the money". Can the Plan Sponsor direct it as forfeitures, or do they force the distribution?

DB Plan with Unit Credit Funding Method hit FFL last year so all past bases are fully amortized. This year when using the previous assumptions and plan terms there is still no unfunded accrued liability therefore I do not create a gain/loss base. However, there was a plan amendment effective this year that does create an unfunded liability.

Is the base I establish for my amendment equal to the change in liability due to the amendment, or do I limit it to the unfunded liability so my equation of balance holds?

We have terminated our plan and are ready to distribute benefits. I want to take advantage of the 411(a)-11 reg that says we can pay out benefits without participant consent. The plan does not provide for annuities, it only provides for lump sums and we don't have any other plans. We have participants who have accounts over $5,000 and are not returning their election forms. It's been about 6 months since we sent out the election forms and the tax notice.

My question is, do we have to re-send the notice and wait 30 days before forcing them out, or is that not necessary because we are not asking for their consent. Since we are not asking for their consent, they don't need a notice of their rights.

We have terminated our plan and are ready to distribute benefits. I want to take advantage of the 411(a)-11 reg that says we can pay out benefits without participant consent. The plan does not provide for annuities, it only provides for lump sums and we don't have any other plans. We have participants who have accounts over $5,000 and are not returning their election forms. It's been about 6 months since we sent out the election forms and the tax notice.

My question is, do we have to re-send the notice and wait 30 days before forcing them out, or is that not necessary because we are not asking for their consent. Since we are not asking for their consent, they don't need a notice of their rights.

Is it permissible for a qualified plan loan to be refinanced, say at a lower interest rate?

We have a client who is an LLC owned by 2 entities. One of these entities (Entity A) is owned by approximately 10 individuals and 5 or fewer individuals do not own 80% of this entity. In determining if the LLC is part of a controlled group with another corporation, do we consider that Entity a is not owned by at least 5 or fewer persons so the LLC is not part of a controlled group since they fail the 80% test? Or do we only consider that the LLC is owned over 80% by only 2 corporations? In other words, do we look through the entities and compare the indivudal ownership and deem that they own the LLC?

My issue relates to whether spousal consent is required for a loan under the following circumstances:

A money purchase pension plan has been merged into a profit sharing plan (with or without a 401(k) feature). Separate accounts were established for the balances attributable to the money purchase pension plan; these accounts will be adjusted for earnings and losses. Assets attributable to the money purchase pension plan will not be used as security for a loan.

Section 401(a)(11)(B) and Q&A 5 of Section 1.401(a)-20 are clear that the J&S rules apply only to participants with the transferred assets and only to the transferred assets if there is separate accounting.

Section 417(a)(4) provides that "if section 401(a)(11) applies to a participant when part or all of the participant's accrued benefit is to be used as security for a loan, no portion of the participant's accrued benefit may be used as security for such loan unless" the spouse consents. Q&A-24 of Section 1.401(a)-20 contains similar language and also provides that "spousal consent is not required if the plan or the participant is not subject to section 401(a)(11) at the time the accrued benefit is used as security".

If a participant is obtaining a loan using only the non-money purchase plan assets as collateral for the loan, no spousal consent should be required because neither the plan nor the participant is subject to the J&S rules for the benefits being used as collateral.

I understand that Dick Wickersham has informally confirmed this approach.

Nonetheless, some persons are viewing the literal language of Section 417(a)(4) and Q&A-24 without the context of separate accounting approach for merged assets and concluding that no portion of the account can be used as security for a loan without spousal consent.

As a service provider, whichever interpretation is correct obviously has system implications as to whether loans can be processed in a "paperless" manner without spousal consent.

I am particularly interested in hearing the approach other service providers are taking, but all opinions are welcome!

Company sponsors DB plan with 45 employees covered, 8 of which are HCEs. I want to consider adding a profit sharing plan covering just 2 owners, and aggregating for 401(a)(4) and 410(B).

I've already determined that below a certain DC contribution level the general test will pass.

What other issues should be considered?

Seems to me this will not be subject to the DB/DC gateways since the combined plan is primarily db in nature (less than 1/2 of NHCEs benefit more from DC).

404 will not be a problem because the combined contribution will not approximate 25% of pay.

What about benefits, rights, and features? If the DC plan is self directed, and the only two participants are HCEs, is this a problem? Any other BRF issues?

Other issues?

This situation would be in lieu of a QSERP because I want the extra contribution to be completely discretionary.

The new tax credit for retirement plan contributions -- I have seen that they apply to IRA contributions and 401k's. I wonder if they also apply to 403b salary deferrals.

Thank you for the info!

Stephanie

USERRA requires employers to allow make-up contributions. I haven't seen any guidance on how these contributions are to be handled. I assume they must be made through salary deferral. Is that correct? I also know that they must be included on the W-2 box 13 with the year they are being made up for shown. So I also assume that the make-up deferrals would be excluded from the Box 1 wages on the same W-2. Is all this correct?

Is their a chance that the employee could be allowed to make up the deferral though a lump sum payment? If so how would this be handled with W-2 reporting?

I have a participant who is rolling over his balance to a traditional IRA. This participant is over 70 1/2. Can the RMD for 2002 (based on the 12/31 balance) be paid after it has been rolled over or does it have to be paid before the account is transfered?

When a plan sponsor amends their plan to freeze accruals, how much information do you have to provide the participants in the 204(h) notice under EGTRRA? I have heard three opinions from ERISA attorneys:

1. Don't need to show benefits, just describe the amendment;

2. Show the frozen accrued benefit only.

3. Show the projected benefit before the freeze AND the frozen accrued benefit.

I have a plan administration client whose attorney is advising them that they can pay employee bonuses and then have the individual employees turn around and cut checks to the plan for elective salary deferral purposes. This seems to be a viloation of Tres Reg 1.401(k) - 1(g) (3) which says the deferrals need to be made by the employer (on a payroll deduction basis) based on the employees' elections. Are there any circumstances where having the employees cut personal checks to the plan, or to the employer for deposit into the plan, would be an acceptable practice?

My client has never obtained a determination letter since the plan was established-- two decades ago. The client is now contemplating whether to submit a determination letter application. Has anyone ever requested an EP conference (under Rev. Proc. 2001-6 section 19.02)? If we request a conference, will the GUST clock stop, so that we don't need to file by 2/28/02? Has anyone obtained IRS approval to amend back two decades?

In order to use the disability exception to the 10% penalty for an early withdrawal from an annuity, must the individual "become" disabled after entering into the annuity contract? Restated, may an individual who has already been deemed disabled by the SSA enter into an annuity contract then take withdrawals and not be required to pay a 10% penalty?

Can anyone provide a cite for me that says that when the profit sharing contributions of a 401(k) plan are being tested for nondiscrimination under 401(a)(4), the Average Benefit Percentage test is done using elective deferrals and match? I know that the rate groups are determined using only profit sharing contributions and forfeitures, and the average beneft percentage test is done using those plus deferrals and match, but I cannot find where in the regs, Code or other guidance this is explained. Can anyone point me to the right place in the guidance?

A 401(k) plan has a five year graded vesting schedule and provides that a YOS is granted if the participant completes one hour of service.

Can the plan be amended to change the provision to 1000 hours?

(My concern is that 1.411(a)-8 applies.)

Any thoughts?

Thanks!

Our income was $150,090 (over by $90!!) so we have to recharacterize some of our Roth IRA, which I know how to do.

However, with the children's Education IRA's, I cannot find the formula for determining how much we'll have to withdraw. Does anyone know what that formula is?