I am looking for the specific language in IRC Sec 408 regarding establishment of an IRA with a custodian. The IRS website's search engine is not very helpful. Can someone tell me where I can locate the it online? thank you

It was always my understanding that for partnerships and LLCs that did not use W-2s that the earned income would be the partners' net K-1 income. What i was recently made aware of is that net K-1 income is net of any Unreimbursed partnership expenses from the Schedule E (Form 1040). I was wondering if this is correct and if i should be requesting the Schedule E info in addtion to the K-1 income?? thanks.

On July 26, 2001, the president ( Bush) signed into law a measure that in effect changes the name of the Education IRA to "Coverdell Education Savings Accounts" . The new name is in honor of the late Paul Coverdell, who served as senator from Georgia from January, 1993 until his death in July, 2000.

Under EGTRRA, the contribution limit for Education was increased to $2,000, effective for tax years beginning 2002.

I seem to recall that there was a provision that did not make it into EGTRRA that would have provided for reduced PBGC premiums to certain plans.

Was it plans with 100 or less or 500 or less participants?

Does anyone remember what the reduced premium was?

Thanks.

Employee elects participation in his employer's Cafeteria Plan and contributes $260 per month in pre-tax dollars to cover the cost to insure his dependent spouse and children.

During the plan year the employee wants to revoke the election and delete dependent coverage because his spouse's employer changes insurance companies and she could insure herself and the dependent children for $130 per month through her employer's plan. The husband's contributions would then decrease from $260 per month to 0 because his employer pays 100% of the employee cost.

I'm thinking that this would be permitted as a family status change because the spouse has a new coverage option (because of the change in insurance companies) and the significant decrease in cost would fall under the cost and coverage rules.

Agree or disagree?

When the employer (Plan Sponsor) changes mid-year because of an acquisition and the plan is retained by the new employer, do you use the name, address and EIN of the new employer to file a 5558? Also, if answer is yes, I assume you file the 5558 with the IRS office based on the location of the new employer.

Can plan assets be used to pay for a fund search?

Can plan assets be used to pay for a recordkeeper search?

If the party that has been hired to do the searches is a fiduciary to the plan, how will this impact your answer?

Joel / Carolyn,

I have been told that if a person chose period certain rearding their retirement choices that there still would be the availability to rollover the balance to an IRA. This choice would include all current retirees thus there is a huge grapevine of possible clients. Hoever, if a person chose the life annuity choice then the funds would have been retitled in the name of the insurance company or annuity company and all future hopes of a rollover to an IRA are null and void.

I have been made aware of though that if a person has chosen a period certain payout that it is essentially a contract similar to the life annuity contract just with a definite ending point, thus the money is not available rollover.

If you have some insight or answers to the contrary please let me know, otherwise the only money we will have access to as compared to before, are the fresh rollovers from retirees as the older retirees it would all be a dead issue?

I look forward to your answers?

Shawn

800-628-5770

to protect the actual company involved, I will change the name to something similar.

This is a true story!

we process a plan for 'SUPER WOMEN of AMERICA'

its a 401k, self directed.

the plan is top heavy

the profit sharing portion is integrated.

and it was a prototype.

so on the old 5500 forms, we had to indicate this with the following codes:

CHIK

Truly, a CHIK plan.

Did EGTRRA (or anything else) change the requirements for eliminating optional forms that were spelled out in the final 411(d)(6) regs released about a year ago?

That is, is it still necessary that:

1) after the amendment takes effect for a participant, the alternative payment forms that are still available to the participant must include payment in a single-sum distribution form that is “otherwise identical” to the eliminated or restricted optional form of benefit, and

2) an amendment eliminating or restricting a participant's right to receive payment of accrued benefits under a particular optional form of benefit cannot apply to a participant for any distribution with an annuity starting date that's effective before the earlier of (1) the 90th day after the participant receives a summary that reflects the plan amendment and that satisfies DOL's requirements for an SMM, or (2) the first day of the second plan year following the plan year in which the amendment is adopted?

Our client ("Buyer") is purchasing a company maintaining a KSOP. The KSOP is to be terminated. Buyer, for a number of reasons, wants to terminate the KSOP shortly after closing, but wants the newly-acquired employees to begin participating in Buyer's 401(k) plan immediatley following closing. To avoid a deemed merger of the KSOP and the buyer's 401(k) plan and to avoid a one-year hold-out of the newly-acquired employees' participation in the Buyer's 401(k) plan, will it suffice to terminate only the (k) portion of the KSOP prior to closing and terminate the ESOP after closing?

Although the EGTRRA did not make any changes to the rules regarding the participant's exclusion of SEP and SARSEP contributions under Code Section 402(h), technical corrections are likely to be forthcoming. It is unclear to what extent Code Sections 402(h) will be changed, if at all. The practitioner will need to examine any change by taking into account the following:

1. Whether the "percentage limit" (currently 15 percent) on the exclusion of contributions from a participant's income, is increased (i.e., to 25 percent). [iRC § 402(h)(2)(A)]

2. Whether elective contributions (within appropriate limits) are excluded from a participant's income in addition to the percentage limit (up to the $40,000 aggregate limit under Code Section 415).

3. Whether elective contributions continue to be excluded for the purpose of applying the percentage limit, thus requiring that only "includible" (taxable) compensation be considered [iRC § 402(h)(2)(A)]

4. Whether the reduction to the $40,000 (for 2002) limit should continue to apply when the plan is integrated. [iRC § 402(h)(2)(B)] With a projected taxable wage base (TWB) of $84,900 for 2002, the maximum SEP contribution for 2002 would be $35,160.70 ($40,000 - ($84,900 x .057)) in a plan fully integrated at the projected TWB amount. The language of Code Section 402(h)(2)(B) would appear antiquated and inconsistent with current legislative intent.

5. Whether the compensation cap of $200,000 under Code Section 401(a)(17) for 2002 will apply for the purpose of the percentage limit, which in the authors opinion, it has never been subject to, although it does apply to Code Section 415.

6. Whether elective contributions (within appropriate limits) are deductible by the employer in addition to the 25 percent of aggregate compensation deduction limit (but not in excess of the $40,000 per participant limit under Code Section 415). [iRC § 404(n)].

I submitted a comment to Treasury and Senate officials on July 18, 2001, proposing the following changes be made to address these issues:

(a) Amend Code Section 402(h)(2) (dealing with the exclusion from income) as follows:

Limitations on Employer Contributions. - Contributions made by an employer (other than elective deferral contributions made pursuant to an arrangement under section 408(k)(6)) to a simplified employee pension with respect to an employee for any year shall be treated as distributed or made available to such employee and as contributions made by the employee to the extent such contributions exceed the lesser of -

(A) 25 percent of the compensation [Authors Note: Or "includible compensation," see item 3 above] (within the meaning of section 414(s)) from such employer for the year (determined without regard to the employer contributions to the simplified employee pension), or

(B) The limitation in effect under section 415©(1)(A).

(B) Strike the remainder of Code Section 402(h)(2)(B).

© Amend new Code Section 404(n) (dealing with the 100 percent deduction rules for elective deferrals) as follows:

Elective deferrals (as defined in section 402(g)(3)) shall not be subject to any limitation contained in paragraph (3), (7), or (9) of subsection (a), or subparagraph © of subsection (h)(1), and such elective deferrals shall not be taken into account in applying any such limitation to any other contributions.

Our client ("Buyer") is purchasing a company maintaining a KSOP. The KSOP is to be terminated. Buyer, for a number of reasons, wants to terminate the KSOP shortly after closing, but wants the newly-acquired employees to begin participating in Buyer's 401(k) plan immediatley following closing. To avoid a deemed merger of the KSOP and the buyer's 401(k) plan and to avoid a one-year hold-out of the newly-acquired employees' participation in the Buyer's 401(k) plan, will it suffice to terminate only the (k) portion of the KSOP prior to closing and terminate the ESOP after closing?

Hello, I am running into a brick wall on this one. A participant takes a hardship from his deferral source. He has the right to elective federal withholding. If he elects to have nothing withheld for federal taxes, how does any mandatory state withholding follow.

I have found that in Massachusetts for instance, they follow the federal statute, therefore it looks like if a participant elects 0% federal withholding there would be no state withholding as well.

What about all the other manadatory withholding states; how should a withholding agent handle those withholdings? Waivable or not?

Thanks in advance for any insight you are able to provide.

andmik

Wish I could take credit for this one. This appeared in the May 16, 2001 Washington Times as unsourced.

What rules the world in simple two cow terms.

Socialism: you have two cows. You keep one and give one to your neighbor.

Communism: you have two cows. The government takes them both and provides you with milk.

Fascism: you have two cows. The government takes them and sells you the milk.

Bureaucracy: you have two cows. The government takes them both, shoots one, milks the other, pays you for the milk, and then pours it down the drain.

Capitalism: you have two cows. You sell one and buy a bull.

Corporate: you have two cows. You sell one, force the other to produce the milk of four cows then act surprised when it drops dead.

Democracy: you have two cows. The government taxes you to the point that you must sell them both in order to support a man in a foreign country who only has one cow which was a gift from your government.

Realizing that Salary Deferrals will no longer be considered employer contributions for purposes of Section 404 deduction limits (starting 2002) will they still be considered toward a participant's 415 limit?

An HCE terminates in '94. Balance is distributed in '98. My understanding of the top heavy rules is that an employee's account balance is excluded from the top heavy test if that employee has not performed services at any time during the 5 year ending on the determination date. I am running a 12/31/00 test, Quantech is including the distrib. in the top heavy test. How do I get it out of the the test (or should it be in the test and I just don't know the top heavy rules as well as I should)?

It seems an actuary was retained by a major airline to do a study on the statistical chances of a bomb being on an airplane. Before the study, this particular actuary never flew on planes due to his personal fear of a bombing.

After the study, his associates noticed he now flew everywhere. One of his colleagues asked about this marked change in behavior.

The actuary replied that he had determined in his research that the statistical chance of a bomb being on an airplane was very small, though not small enough to relieve his anxiety. But then, he said, he determined that the probability of TWO bombs being on the same airplane was infinitesimal.

Hence he's now quite comfortable flying on airplanes, because he makes it a point to always carry along one bomb!

The answer to the eternal question: "Is it better to be a jock or a nerd?"

Michael Jordan having "retired," with $40 million in endorsements, he makes $178,100 a day, working or not.

If he sleeps 7 hours a night, he makes $52,000 every night while visions of sugarplums dance in his head.

If he goes to see a movie, it'll cost him $7.00, but he'll make $18,550 while he's there.

If he decides to have a 5-minute egg, he'll make $618 while boiling it.

He makes $7,415/hour more than minimum wage.

He'll make $3,710 while watching each episode of Friends.

If he wanted to save up for a new Acura NSX ($90,000) it would take him a whole 12 hours.

If someone were to hand him his salary and endorsement money, they would have to do it at the rate of $2.00 every second.

He'll probably pay around $200 for a nice round of golf, but will be reimbursed $33,390 for that round.

Assuming he puts the federal maximum of 15% of his income into a tax deferred account (401k), his contributions will hit the federal cap of $10,500 at 8:45am on January 1st.

If you were given a penny for every 10 dollars he made, you'd be living comfortably at $65,000 a year.

He'll make about $19.60 while watching the 100-meter dash in the Olympics, and about $15,600 during the Boston Marathon.

While the common person is spending about $20 for a meal in his trendy Chicago restaurant, he'll pull in about $5600.

This year, he'll make more than twice as much as all U.S. past presidents for all of their terms combined.

Amazing isn't it?

However...

If Jordan saves 100% of his income for the next 500 years, he'll still have less than Bill Gates has at this very moment.

Game over. Nerd wins.

We have a plan that offers 3 group medical choices, one self-funded plan and 2 fully insured plans, self-funded dental, vision, flexible spending account, group life, supplemental life, dependent life and supplemental dependent life, and group legal. The employee is given the choice of cash if opting out of the plan. Pre-tax payroll deductions are taken for the benefit choices made and the employer funds the remaining premium and funds the claims. As claims are incurred funds are provided from the employer's general assets to a separate account that the claims are written on so it is more of a fund as we go plan. Question is, can we file one 5500 and just a Schedule F and is an audit required. There were more than 100 participants at the beginning of the plan year. Calendar year 2000 was the first year of the plan and we have filed an extension. There is one plan document describing the coverages, benefits, and provisions of the plan. Help!