I realize how a nonqualified deferred comp plan basically works. A business sets aside monies in an investment account with the intent of giving those monies to an employee someday. The business owns the investment until the day that it gives those invested funds to the employee ....at which time the business deducts the payment as salary and reports it to the employee as W-2 gross.

What about a partnership ???

Are partners allowed to participate in such a plan? A partner does not get a W-2.

Some more common questions. In general there seems an IRS philosophy against double dipping to get around contribution limits. For example I saw reference to a controlled group proposed reg that would prevent Fred from dividing his basket business into basket weaving and basket marketing and having two SEPs and maxing out on both.

So it seems likely one cannot have two of the same kind of plan.

Question One

What about George who is employed seasonally (teacher, snow plow operator in Buffalo NY) who participates in the employer's 401k or 403b plan during the winter and successfully guides canoe trips in the summer as a sole proprietor or sole owner of an LLC or Sub S ? Is there anything to prevent George from creating a SIMPLE or SEP for the conoe business and contributing the maximum under that plan for his summer work?

Question Two

Harriet the hard working realtor is an idependent contractor with a SIMPLE plan. Late in the year she lands the sale of a lifetime and decides to drop the SIMPLE as of Nov 1 and start a SEP to defer as much as possible from a year end $200,000 commission. Anything to prevent Harriet defering the SIMPLE maximum on her early in the year $50,000 of earnings PLUS the maximum SEP on the year end $200,000 earinings?

Does anyone know where I can find specific details on what life insurance can be run through a cafeteria plan? Thanks!:confused:

I administer a 457 Plan in which the employer contributes for certain executives. These employer contributions are in addition to these executives' base salaries. Should these contributions be considered in determining these executives' Final Averge Earnings in the defined benefit plan in which they also participate? FAE in the defined benefit plan is defined as the highest consecutive 36 months of earnings excluding bonuses and other allowances.

We're looking at implementing a plan for 2003. Any suggestions? Does the program have to be an ERISA program or can it be a payroll practice?

Can anyone suggest draft policies? Thanks

Kerryb@waushosp.org

I know that EGTRRA reduces the length of time that a participant is prohibited from making 401(k) salary deferrals after taking a hardship withdrawal, from 12 months to 6 months.

Did EGTRRA also remove the requirement that the 402(g) limit for the year in which the salary deferrals resume be reduced by the amount of salary deferrals made during the year in which the hardship withdrawal was taken? I can't seem to find mention of this in the EGTRRA information that I have at hand. Thanks!

I have a DB plan that terminated and distributed all assets by the end of 2001. Three people elected annuities, 2 will be getting monthly payments immediately and the 3rd will be deferred until age 65. Do I need to provide them with a 1099-R and put the value of the annuity contract in Box 8 or is this for another purpose?

Thanks to anyone for their help.

Sue

I have the following questions from a participant:

"Is my son's Bris (circumcision) covered under the cafeteria plan? It is performed by a Rabbi, and Virginia BC/BS will not cover it (even though they cover in hospital circumcisions). It is an operation, and some states (i.e. Maryland BC/BS) do cover it under ordinary insurance.

Also, I pay for a long term care policy for my mother (i.e. insurance to cover nursing home fees, home health care, etc.). Can I be reimbursed for this?"

My initial thought was that both these things could be reimbursed under the cafeteria plan but I am getting mixed responses from others in my office. Anyone have any thoughts on these questions?

:confused:

The ESOP Answer Book states that an employer must show profits/earnings in order to have dividends be deductible. However, there is no reference to guidance. Any help?

The company has a Simple IRA plan with only 10 employees. It elected non-matching 2% contributions. Two eligible employees had elected not to defer income. The only contribution is the 2% by the employer into their Simple accounts. Do you mark Box 13 "retirement plan" even if they do not participate since they receive a contribution from the employer? The instructions say to mark the checkbox if employee was an "active participant" but it does not define active. I can not find an answer. Does anyone know the answer? Thanks.

My son is 1 and has done some baby modeling and we'd like to set up a roth for him... I'm not finding age limits anywhere. Also, if he has a separate tax return, does he, as a minor, fall outside of my income limit if I'm over the max allowed for a Roth? thanks.

In some other message on this board I saw someone say that their firm had a nice list of the comparative advantages and disadvantages of daily valuation vs. quarterly valuation. I can't find the message now but does anyone have something like this? We of course can make our own, but want to make sure we haven't left anything out.

Thanks!

We have required that participants make an affirmative election to waive the 30-day waiting period by checking a box on the distribution form. If the waiver box is not checked, we hold the distribution for 30-days. I realize this is a conservative approach and that many distribution forms include the waiver in the final certifications.

Now the latest safe-harbor Special Tax Notice, in the "Your Right to Waive the 30-Day Notice Period" section says a participant may waive the notice period by "making an affirmative election indicating whether or not (he) wishes to make a direct rollover."

To me this seems to imply that a waiver of the 30-day notice (affirmative or in the certifications) is not necessary on any distribution form with an election of a form of payment. In other words the only time the 30-day notice period will come into play is in default payments under $5000.

Does any one interpret this differently? Any one have an opinion on the advisability of relying on the author of the notice for administrative direction?

Facts: Employer sponsors a 401(a) qualified retirement plan that is invested entirely in insurance contracts or policies (annuities, generally). Thus, the plan is exempt from ERISA's trust requirement.

My question is how to treat separated participants. The annuity provider / insurer is telling us we do not have to count former employees as participants for purposes of reporting on the 5500. But I'm not sure that tracks with the Tax Code's distribution requirements. For example, what about the Code's requirement that distributions over $5,000 can be made only with the participant's consent, and if the participant is said to have taken a distribution, do we have to issue them a 1099?

As an example of how this can come up, imagine the plan has an operational failure & wants to use EPCRS. Most of the fees under EPCRS are governed by how many participants the plan has, or what the plan assets are. Do we count separated participants?

Also, for purposes of simplified 5500 reporting, do we consider separated employees to be participants when deciding if we have less than 100 participants?

Any advice, comments and shared experiences welcome. Citations to authority are specifically appreciated!

Employees initiating rollovers into our plan have been required to provide a copy of the IRS determination letter from the sending plan and certification that the money is all pretax.

We are now amending our plan to permit rollovers of pretax money from all eligible employer plans and IRAs.

We are trying to determine if we should we still require confirmation of the sending plan's qualified status and how we should certify that the money is all pretax. Has anyone else revisited this issue in light of EGTRRA?

Anyone dealt with a "restorative payment issue" in the context of a participant directed defined contribution plan where the participants' investment directions were not followed?

IRA participant designated as his beneficiary “trust”

He is now deceased. As a custodian, how should we proceed since the ‘trust’ was not identified?

It could be any trust

When is the last day to fund a 2001 Roth IRA that was established two years ago?

Can a Company, who currently sponsors a SIMPLE-IRA Plan, terminate the SIMPLE Plan and put in a 401(K) in the same calendar year. (I am pretty sure you cannot put in a SIMPLE in a calendar year that you have a 401(a) type plan - BUT is the reverse also not allowed)

I have made excessive non-deductible contributions to a traditional IRA in the years 1997 ($4000), 1998 ($4000) and 1999 ($4000) [don't ask me why I was so stupid!]. I understand that I have to pay a 6% penalty for each year I did not correct these mistakes, but the following issues are not clear to me:

1. If I remove these contributions in January 2002, do I have to pay the 6% penalty for 2001 (I do not remove the excess contributions in the calendar year 2001, but I will remove it before the deadline for the tax year 2001 in April 2002) [it is clear that I have to pay penalties for the years 1997 --> $240, 1998 --> $480, 1999 -> $720, 2000 --> $720]?

2. As the excess contributions were higher than $2000, do I have to add the removed excess contributions (plus any gains) to my taxable income (they were not deducted from my income in the corresponding years), and if yes, in which year, i.e. the complete sum to the taxable income in the year 2001, or to the years I made the excess contributions?

3. Can I put forward some of these excess contributions and apply them as contributions for 2001 and 2002 (of course still paying the 6% penalty for the years 1997, 1998, 1999 and 2000, and depending on the answer to 1. for 2001)? Can I select these amounts so that I reduce the excessive amounts for two years [let's say 1997 and 1998] to $2000, so that the amount to be removed would be $2000 or less for these two years, and therefore not to be added to my taxable income? Could I even go further this way, leave the excess contribution for 1999 in the account, pay the penalty for 2002 and apply part of it in 2003 as a contribution for 2003, and so also reduce this excess contribution to $2000?