Our company is in the process of changing 401k providers. They have given us a list of mutual funds into which we can make our investments. They have identified those new funds that they believe are most like the funds of the "old" provider. They have even given us the option to let them know where to invest our "new money"! So far - so good! However, with regard to "old money", i.e., our funds that are with the "old" provider, we have no choice. The company refuses to: 1) allow us to make a direct transfer (rollover)to an IRA; 2) allow us a choice as to where we can transfer our funds with the new provider. The only choice is that the company will decide on the specific mutual fund where they will invest our money - even when they have been instructed by the individual participant that the participant does not want to be invested in that fund!

To me this seems to be unethical at the least and perhaps illegal at worst. However, I'm not a 401k expert. It just seems wrong for a fiduciary to take a client's money and invest it against his/her wishes.

Any advice from someone more knowledgeable than I?

Wondering what you use to do batch MEA (Maximum Exclusion Allowance) calculations on 403(B) plans?

Does anyone have an onsite employee gym? I am looking for relative information related to costs to run facility, type of equipment, staffing level, useage.

Below is my take on the effect of EGTRRA on "Flip flop" plan design. I would appreciate any comments or suggestions. Thanks to the Mike & Kevin show over on PIX...

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Summary: EGTRRA takes away the override where 412 trumps 404 and originally made the Flip Flop work (Sec. 616). However, because of the increase in comp limits, 25% of 200K makes a DC [deduction] limit of $50K, so, if you design your DC at 25K annual contribution, you can still get 2 years worth of DC deductions in one year.

EGTRRA doesn't impact the ability to deduct more than one year of DB contribution in a single tax year, AND because of the ability to ALWAYS have a deferral-only 401(k), you can add $11,000 per year in deferrals to help make up for the reduction in DC contributions because of the 25% limit.

So....to do a flip-flop post-EGTRRA, you need to design your MP plan at 50% of maximum so you can fit 2 years of contribution into a single year's deduction limit (you need 2 years to make the flip-flop come out)

BUT - IN THE END, YOU'RE NOT THAT FAR AHEAD, SO THE COMPLICATION DOESN'T SEEM TO BE JUSTIFIED. SEE BELOW:

Let's look at old (start in 2001, pre-EGTRRA) vs. new (start in 2001, post-EGTRRA)

Old way: $100K DB, 35K MP

Yr 1 Deduction = $100K DB

Yr 2 Deduction = $70K MP

Yr 3 Deduction = $200K DB

Yr 4 Deduction = $70K MP

Yr 5 Deduction = $200K DB

Yr 6 Deduction = $70K MP

Total > 6yrs = $710K - OR $110K better than just 6 years of a simple $100K DB.

New way: $100K DB, $25K MP, $11K 401(k) - NOTE this is 3 plans to make it work, it used to be 2!

Yr 1 Deduction = $100K DB + $11K 401(k) = $111K Total

Yr 2 Deduction = $50K MP + $11K 401(k) = $61K Total

Yr 3 Deduction = $200K DB + $11K 401(k) = $211K Total

Yr 4 Deduction = $50K MP + $11K 401(k) = $61K Total

Yr 5 Deduction = $200K DB + $11K 401(k) = $211K Total

Yr 6 Deduction = $50K MP + $11K 401(k) = $61K Total

Total > 6 yrs = $716K, or $116K better than 6 yrs of a simple $100K DB, and $6K better than before EGTRRA. Because of the extra plan required, I don't think this justifies the extra administrative cost and complexity. The chances of screwing it up in some fashion over the lifetime of the plan has got to be better than even!

Note, without the 401(k) addon, the total is $650K or only $50K better than a simple DB, and $60K worse than before EGTRRA.

==============

Thanks!

What are conditions imposed on a NQ deferred comp. plan if the sale of the sponsor's business is an event triggering distribution?

An Employer Sponsors a MPPP & 401(k) P/S Plan. Annual valuations @9/30. Participant terminated 1/01/99 choose not to take our his distribution after the 9/30/99 valuation was prepared. On June 6 2001 9/30/00 valuation results were provided to the terminated participant. With the statement was a letter from the Trustee sarting that effective 3/31/01 the plan is switch to quarterly valuations and that to request a distribtuion you must notify the trustee 6 days prior to end of quarter.

Does the employee who terminated on 1/01/99 have any protected benefits under the plans? He was waiting for the 9/30/01 valuation to commence distribtuion. I think that the distribtuion rules as of the last valuation date should controll and he is eligible to get his distribution based on 9/30/00 value

Company A and Company B are members of a controlled group. Company A sponsors a calendar year 401(k) plan, and Company B is a participating employer.

On April 30, stock ownership changes and Company B is no longer part of the controlled group. Company B wants to start its own plan effective May 1 and spin out of A's plan.

How is company A's plan tested? May we use 1563(B) -- since B was in the controlled group for fewer days that it was out of the controlled group, A and B are tested separately for the entire year when the 12/31 testing is done.

Any practical solutions? Thanks.

what is a fica alternative plan? My friend is a substitute teacher for a school board and she has a fica alternative plan. If she is unhappy with the results can she use a 90-24 transfer to another 403b?

Need a copy of a survey. What organizations are doing with regards to negative elections (for 401(k) and 403(b)plans). Number adopting, considering, typical provisions,...

1. Provide or considering this option?

2. type of organization?

3. Approximate number of eligible employees?

4. Age and Service requirements?

Thanks for your assistance.

I am a small business owner (S-corp) w/ only myself & my wife as employees. I'm looking into SIMPLE IRA, SEP IRA, and 401(k) options. The first two are easy to administer & book. The 401(k) takes more time, and can be expensive, but I've learned of a fairly cheap option (401keasy -- $500 setup + $495/yr). So is the 401k worth it? I'm not sure.

Assume that my S-corp offers my wife and I a compensation package worth $40,000, comprising the base salary plus retirement benefits. Assume that we want to see $14,000 of that go into retirement accounts (IRA or 401(k)). The corp. can accomplish this with either the SIMPLE IRA or, starting 2002, with a 401(k) plan.

SIMPLE IRA option (assume self and wife each get $20K pkgs):

$19,420 base salary

Take home pay = $13K - income taxes - FICA on base salary

Elective deferral = $6,420 (max is $6500 in 2001).

Employer matches = $580 (~3% of $19,400)

2002 401(k) plan:

$16K base salary

Take home pay = $13K - income taxes - FICA on base salary

Elective deferral = $3K (new limit is 100% of base salary)

Employer matches & non-elective contributions = $4000 (because employer can match more than dollar for dollar (right?) and, starting 2002, can deduct contributions up to 25% of the employees' compensation)

In both cases, we end up with $14K in retirement savings. But because there are no FICA/employment taxes on employer matches and contributions (correct me if I am wrong), choosing the 2002 401(k) plan would result in the combined FICA/employment tax savings of 2*($19.42K-$16K)*0.153, or $1046.52.

If so, then the benefits of a 2002+ 401k plan may exceed the dollar costs of administering it. However, administering a 401k will probably take a lot more time (even w/ 401keasy, so it prob. still isn't worth it).

Any thoughts?

Eric

I am a small business owner (S-corp) w/ only myself & my wife as employees. I'm looking into SIMPLE IRA, SEP IRA, and 401(k) options. The first two are easy to administer & book. The 401(k) takes more time, and can be expensive, but I've learned of a fairly cheap option (401keasy -- $500 setup + $495/yr). So is the 401k worth it? I'm not sure.

Assume that my S-corp offers my wife and I a compensation package worth $40,000, comprising the base salary plus retirement benefits. Assume that we want to see $14,000 of that go into retirement accounts (IRA or 401(k)). The corp. can accomplish this with either the SIMPLE IRA or, starting 2002, with a 401(k) plan.

SIMPLE IRA option (assume self and wife each get $20K pkgs):

$19,420 base salary

Take home pay = $13K - income taxes - FICA on base salary

Elective deferral = $6,420 (max is $6500 in 2001).

Employer matches = $580 (~3% of $19,400)

2002 401(k) plan:

$16K base salary

Take home pay = $13K - income taxes - FICA on base salary

Elective deferral = $3K (new limit is 100% of base salary)

Employer matches & non-elective contributions = $4000 (because employer can match more than dollar for dollar (right?) and, starting 2002, can deduct contributions up to 25% of the employees' compensation)

In both cases, we end up with $14K in retirement savings. But because there are no FICA/employment taxes on employer matches and contributions (correct me if I am wrong), choosing the 2002 401(k) plan would result in the combined FICA/employment tax savings of 2*($19.42K-$16K)*0.153, or $1046.52.

If so, then the benefits of a 2002+ 401k plan may exceed the dollar costs of administering it. However, administering a 401k will probably take a lot more time (even w/ 401keasy, so it prob. still isn't worth it).

Any thoughts?

Eric

I am a small business owner (S-corp) w/ only myself & my wife as employees. I'm looking into SIMPLE IRA, SEP IRA, and 401(k) options. The first two are easy to administer & book. The 401(k) takes more time, and can be expensive, but I've learned of a fairly cheap option (401keasy -- $500 setup + $495/yr). So is the 401k worth it? I'm not sure.

Assume that my S-corp offers my wife and I a compensation package worth $40,000, comprising the base salary plus retirement benefits. Assume that we want to see $14,000 of that go into retirement accounts (IRA or 401(k)). The corp. can accomplish this with either the SIMPLE IRA or, starting 2002, with a 401(k) plan.

SIMPLE IRA option (assume self and wife each get $20K pkgs):

$19,420 base salary

Take home pay = $13K - income taxes - FICA on base salary

Elective deferral = $6,420 (max is $6500 in 2001).

Employer matches = $580 (~3% of $19,400)

2002 401(k) plan:

$16K base salary

Take home pay = $13K - income taxes - FICA on base salary

Elective deferral = $3K (new limit is 100% of base salary)

Employer matches & non-elective contributions = $4000 (because employer can match more than dollar for dollar (right?) and, starting 2002, can deduct contributions up to 25% of the employees' compensation)

In both cases, we end up with $14K in retirement savings. But because there are no FICA/employment taxes on employer matches and contributions (correct me if I am wrong), choosing the 2002 401(k) plan would result in the combined FICA/employment tax savings of 2*($19.42K-$16K)*0.153, or $1046.52.

If so, then the benefits of a 2002+ 401k plan may exceed the dollar costs of administering it. However, administering a 401k will probably take a lot more time (even w/ 401keasy, so it prob. still isn't worth it).

Any thoughts?

Eric

I am a small business owner (S-corp) w/ only myself & my wife as employees. I'm looking into SIMPLE IRA, SEP IRA, and 401(k) options. The first two are easy to administer & book. The 401(k) takes more time, and can be expensive, but I've learned of a fairly cheap option (401keasy -- $500 setup + $495/yr). So is the 401k worth it? I'm not sure.

Assume that my S-corp offers my wife and I a compensation package worth $40,000, comprising the base salary plus retirement benefits. Assume that we want to see $14,000 of that go into retirement accounts (IRA or 401(k)). The corp. can accomplish this with either the SIMPLE IRA or, starting 2002, with a 401(k) plan.

SIMPLE IRA option (assume self and wife each get $20K pkgs):

$19,420 base salary

Take home pay = $13K - income taxes - FICA on base salary

Elective deferral = $6,420 (max is $6500 in 2001).

Employer matches = $580 (~3% of $19,400)

2002 401(k) plan:

$16K base salary

Take home pay = $13K - income taxes - FICA on base salary

Elective deferral = $3K (new limit is 100% of base salary)

Employer matches & non-elective contributions = $4000 (because employer can match more than dollar for dollar (right?) and, starting 2002, can deduct contributions up to 25% of the employees' compensation)

In both cases, we end up with $14K in retirement savings. But because there are no FICA/employment taxes on employer matches and contributions (correct me if I am wrong), choosing the 2002 401(k) plan would result in the combined FICA/employment tax savings of 2*($19.42K-$16K)*0.153, or $1046.52.

If so, then the benefits of a 2002+ 401k plan may exceed the dollar costs of administering it. However, administering a 401k will probably take a lot more time (even w/ 401keasy, so it prob. still isn't worth it).

Any thoughts?

Eric

Under HIPAA's later-acquired dependent rules, a plan must offer a special enrollment period if the plan offers dependent coverage and a participant "gains" a dependent. Anyone have any thoughts/experience where a multiemployer plan "used to" restrict retiree's dependent's coverage to spouses who were married to the retiree for at least one year prior to retirement (much like a pension J&S rule). I don't think that the plan can continue this practice, and if it offers retiree dependent coverage, must eliminate the "one year of marriage prior to retirement" rule. Any contrary thoughts? Thanks!

Does anyone have or know of a report that splits realized and unrealized g/l?

I have a client who wants to merge his mppp into his 401(k) p/s plan without 100% vesting of the mppp account balances. With the new 415 limits, many more clients will probably want to do the same. I'm sure that the mppp can be merged without 100% vesting of account balances vs. termination then merger which requires 100% vesting, but can't find a citation. Can anyone help?

If an employer promises to pay a termining employee $5,000 per month for the lesser of 20 years or the lifetime of the terminating employee. Assume it is now non-forfeitable.

Is there any guidance regarding the interest rates or mortality tables to be used to determine the present value for FICA tax purposes?

If an employer promises to pay a termining employee $5,000 per month for the lesser of 20 years or the lifetime of the terminating employee. Assume it is now non-forfeitable. Is there any guidance regarding the interest rates or mortality tables to be used to determine the present value for FICA tax purposes?

We have a client (an S Corporation) who has adopted a 401(k) plan and is considering sharing employees with a related partnership, of which the S Corp owns 20% and the remainder is owned by unrelated individuals. These two companies would not be considered a controlled group or an affiliated service group. The partnership does not have a 401(k) plan. Is the partnership required to adopt a 401(k) plan to cover these individuals if they pay them directly?

Employer offers signing bonuses to new employees but bonuses are not paid until after employee completes 90 day introduction period. For an employee hired in November, 2001, who completes her introductory period in February, 2002, would the signing bonus be included in her 2002 income, or the year prior?