What is the remedy for an overcontribution of a match in a SIMPLE IRA?

Is Social Security and Medicare tax required to be withheld from disability benefits paid by an insurance company? The disabled person is a partner in a partnership (not an employee) and has not deducted the premiums for income tax purposes. I understand that the withholding will be only for 6 months after becomming disabled but I'm thinking that because the benefits are non-taxable, they are not subject to any SS or Medicare tax.

I am reviewing a stock pledge agreement for a leveraged ESOP transaction. The employer is the lender. The agreement states that on default, the Pledgor's (ESOP) voting rights to the stock that is held as collateral for the loan will cease and the Company will then be able to vote the shares. Obviously, the ESOP does not say this. Other than simply smelling bad, does this violate 54.4975-7(B)(6) (or any other section that you can think of?) The stock pledge agreement also provides that the loan is secured by "cash and non-cash proceeds and products of the stock"...I know that this is bad. Thanks.

Is there any information on the standards the DOL uses to determine whether to waive the penalties associated with the late filing of form 5500s? The DOL did not appear to be concerned with the late filings of form 5500s. Can anyone explain why the activity? The DOL is assessing a client a penalty of $50 a day or $15,000. Can this be negotiated and how do I go about doing so?

I'm having a hard time finding clear answers to the following two questions:

1. In first year of CY 401(k) Plan, is the look-back year for HCE determination the last calendar year even though there was no Plan?

2. I know if Money Purchase contribution is made 30 days after scheduled tax return date it is an annual addition for the next Plan Year,but is that "next year annual addition rule" the same for all DC Plans or just unique to Money Purchase plans?

Thanks.

I now know answer to #1 is yes, you do use prior year's comp even if there was no plan-any help on #2?

Is it safe to assume that all 945 witholding can now be remitted on a quarterly basis based on the IRS release on 11/27/00 provided the plan does not go over the $2500 limit? I spoke with an IRS official who told that it was reasonable but that I should speak to a person in Public Affairs. The number she gave me was out of service. Anybody know anybody out there with a good phone number so as not to have to spend all day on the phone?

Take this for what it is worth. On the front page of the Wall Street Journal (Wednesday, November 29, 2000) and I quote "Now being sought: Private letter rulings for people who failed to recharacterize their Roth IRAs on time and now face huge fines or penalties."

Anyone heard about any recent private letter ruling actually being issued on this topic? If the IRS does abate the penalties, that would be a huge break for taxpayers and show a kinder and more gentle IRS.

Is it a Prohibited Transaction for the owner of a company to make a loan with proceeds from his participant directed account (401(k)) to an employee who happens to be an officer of the company and an HCE?

I feel a bit silly asking this, but is the distribution election form required to indicate the dollar amount of the account balance available for distribution? I've always thought that informed consent would certainly include knowing the dollar amount, but more and more I see boiler-plate forms with no amount.

Is there any authority that does or does not require the amount to be on the form?

Thanks.

We do very little with church plans? It is my understanding that the requirements of a church are as follows:

1. The church or association of churches tax exempt under 501©.

2. Substantially all persons included in the plan must be clergy, or employees of the church.

3. The plan can't be established primarily for the benefit of church employees who are employed in connection with an unrelated trade or business as described in 513.

Is there any requirements besides these?

One man (CPA) Defined Benefit plan with $800,000, no contributions since 1990 (no W-2 income, since he joined larger firm in 1990), non amender (1986 document), filed 5500EZ w/o Sch B but began checking "money purchase" box in 1997, now deceased (8/99) leaving 4 children (spouse predeceased) without beneficiary form. Children want to do nothing to correct everything, and just take 100% cash equally in 2000. Seems the cost and effort to correct may be outweighed by the practical solution, take the money and pay the tax today, agree or disagree?

Other than a 457 plan, can a local (city) government offer a plan where the city matches the employee's contribution and the employee not be taxed in the current year for this matched portion? Also, is there any "loop-hole" out there where a governmental employee can exceed the $8000 limit, keeping in mind that the city also wants to contribute? I saw something on the fact that the matched portion can be pre-taxed and the ee contribution is after-tax but deferred.

Is it more common to calculate an employer matching contribution on a payroll by payroll basis, or on an annual basis?

For example, assume employee A's compensation is $200,000, and she contributes 10% pre-tax. The employer matches contributions up to 6% of pay, on a dollar for dollar basis.

If the match is calculated on a payroll by payroll basis, the employee will hit the 402(g) limit after receiving pay of $105,000. So pre-tax contributions at that point will be $10,500, and the match (applied to 6% of pay each payroll period) will be $6,300.

If the match is calculated at year end, then the employee would have contributed just over 6% (10,500/170,000). The matching contribution would be $10,200 ($170,000 times 6%).

Which is more common?

r.

Company A acquires Company B. A maintains Plan X and B maintains Plan Y, both 401(k) plans. Company A would like to merge Plan Y into Plan X. However, Plan Y never received a determination letter, and Company A is cautious. So Company A decides to allow Company B employees to participate in Plan A, and further decides to freeze Plan Y pending it's decision as to whether or not to seek a determination letter for Plan Y, and whether or not to merge the plans.

While this is pending, Company B dismisses a large number of employees. The number of employees released would be significant with respect to Plan B but not Plan A.

The questions are:

1. Must Plan B participants be vested because there has been a discontinuance of contributions to Plan B?

2. If the answer to (1) is no (because either there is an intent to merge the plans, or because the pre-ERISA concept of substituting a comparable plan applies), then does the dismissal of employees require a partial termination analysis? With respect to which plan?

3. Should I change professions?

thanks-

rob

Within a cafeteria plan, is a stand-alone dental plan (not bundled with medical) considered a "group health plan"? What about a vision plan? LTD? AD&D? Do the special enrollment rights of HIPAA apply to these plans?

Two plans. A 401k which covers only owners and a cross tested plan which covers owners and all employees, the non-owners are all from a leasing company which sponsors it's own 401k. For average benefits testing should the non-owner employees' 401k contributions to the leasing company plan be included in the sponsoring employer's cross-tested plan??

Can a company merge an underfunded DB plan with a related (same sponsor) overfunded plan to eliminate the underfunding? The underfunded plan has already been granted a waiver of the minimum funding standard.

If a plan uses a cash basis to determine a Required Minimum Distribution (and there is an accrued contribution), is there a plan defect? The proposed regulation clearly states that an accrual basis should be used, but the regulation is neither temporary nor final, only proposed - so would the fact that the regulation is only proposed be enough to prevent using a cash basis from being a plan defect?

If a plan sponsored by a sole proprietor terminates 10/31 and Schedule C earnings for the year is $150,000, can pension comp be treated as 10/12 of $150,000, or must it be treated as made available 12/31, with no "comp" through 10/31?

Assume there are no large deductions ocurring after 10/31 such as a pension contribution, if that matters.

Tess was a precocious eight year old when she heard her Mom and Dad talking about her little brother, Andrew. All she knew was that he was very sick and they were completely out of money. They were moving to an apartment complex next month because Daddy didn't have the money for the doctor bills and our house.

Only a very costly surgery could save him now and it was looking like there was no-one to loan them the money.

She heard Daddy say to her tearful Mother with whispered desperation, "Only a miracle can save him now."

Tess went to her bedroom and pulled a glass jelly jar from its hiding place in the closet. She poured all the change out on the floor and counted carefully.

Three times, even. The total had to be exactly perfect. No chance here for mistakes. Carefully placing the coins back in the jar and twisting on the cap, she slipped out the back door and made her way 6 blocks to Rexall's Drug Store with the big red Indian Chief sign above the door. She waited patiently for the pharmacist to give her some attention but he was too busy at this moment. Tess twisted her feet to make a scuffing noise.

Nothing.

She cleared her throat with the most disgusting sound she could muster. No good.

Finally she took a quarter from her jar and banged it on the glass counter. That did it!

"And what do you want?" the pharmacist asked in an annoyed tone of voice. "I'm talking to my brother from Chicago whom I haven't seen in ages," he said without waiting for a reply to his question.

"Well, I want to talk to you about my brother," Tess answered back in the same annoyed tone. "He's really, really sick... and I want to buy a miracle."

"I beg your pardon?" said the pharmacist.

"His name is Andrew and he has something bad growing inside his head and my Daddy says only a miracle can save him now. So how much does a miracle cost?"

"We don't sell miracles here, little girl. I'm sorry but I can't help you," the pharmacist said, softening a little.

"Listen, I have the money to pay for it. If it isn't enough, I will get the rest. Just tell me how much it costs."

The pharmacist's brother was a well dressed man. He stooped down and asked the little girl, "What kind of a miracle does you brother need?"

"I don't know," Tess replied with her eyes welling up. "I just know he's really sick and Mommy says he needs an operation. But my Daddy can't pay for it, so I want to use my money.

"How much do you have?" asked the man from Chicago.

"One dollar and eleven cents," Tess answered barely audibly. "And it's all the money I have, but I can get some more if I need to.

"Well, what a coincidence," smiled the man. "A dollar and eleven cents-- the exact price of a miracle for little brothers." He took her money in one hand and with the other hand he grasped her mitten and said "Take me to where you live. I want to see your brother and meet your parents.

Let's see if I have the kind of miracle you need."

That well dressed man was Dr. Carlton Armstrong, a surgeon, specializing in neuro-surgery. The operation was completed without charge and it wasn't long until Andrew was home again and doing well. Mom and Dad were happily talking about the chain of events that had led them to this place.

"That surgery," her Mom whispered. "was a real miracle. I wonder how much it would have cost?"

Tess smiled. She knew exactly how much a miracle cost... one dollar and eleven cents... plus the faith of a little child.

A miracle is not the suspension of natural law, but the operation of a higher law.

(Author unknown; thanks to Cindy L. Lambert for this contribution!)