My son is 17 and we are in the midst of applying for colleges. We have filled out the CSS Profile, and find that our Adjusted Gross Income (AGI) is increased by $25,000 because of a Roth IRA rollover. Does anyone know how to get the rollover off the front page of the income tax return. If not, how does one complain to the IRS about this inequity? Any help would really be appreciated!

For information on the financial aid consequences of a Roth, go to www.rothira.com/finaid.htm.

I have a client who is coming up against the 404(a)(3) limits on deductible contributions to his 401(k) Plan. The "problem" is the NHCs really like the Plan, and all want to defer 15% of pay or more.

As I understand it, "compensation" is net of 401(k) deferrals.

In addition, though you are "benefiting" under the Plan for 410(b)if you are eligible to defer, 404(a)(3) requires you to be a beneficiary under the Plan to include your comp in the 15% calculation.

Stop me if I'm wrong anywhere so far.

We have one new employee who's eligible to defer, but doesn't want to.

The Plan is to have her agree to defer $1.00. This would allow us to consider her compensation for 404. It doesn't foul up the ADP test too much.

I guess the question I have is, next year, she'll still be a beneficiary of $1.01, so I would think, even if he/she makes no more deferrals, I can include the compensation in the 404 calculation.

As for the excise tax on non-deductible contributions, assuming 415 limits are OK, if you make the deferrals required by an employee's election and the match required by the terms of the Plan, does anyone think they might the excess over the 404 limits could be deductible under 162? Just a thought...

I knew it had to happen eventually; I'm dealing with my first case where the Employer withheld deferrals and did not deposit them-period. No grey area,he admits he didn't do it, and does not have the money. QUESTION: Who is liable for money? Obviously the Owners,but does liability extend to non-owner Trustees? How about employee responsible for bookkeeping? Anyone else? Any cites would help. Thanks for any info.

PLR 199930015 recently held that LTD coverage provided by a VEBA and obtained either through purchase of new coverage or by modification of existing plans is attributable to employee contributions for purposes of Code Section 104(a)(3), even when the employer acts a conduit for the purchase of coverage or the payment of premiums, such that benefits received under such plans are excluded from employees' gross income. Specifically, employer either purchased coverage and reimbursed itself through after tax payroll deductions, or paid for premiums and include premiums in employees gross income, with additional payment to employees to compensate for cost of coverage & additional income tax burden. Am wondering if the result was directly related to use of a VEBA or if it would also apply to the same practice (employer as conduit), without a VEBA. I have also posted on VEBA board.

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PLR 199930015 recently held that LTD coverage provided by a VEBA and obtained either through purchase of new coverage or by modification of existing plans is attributable to employee contributions for purposes of Code Section 104(a)(3), even when the employer acts a conduit for the purchase of coverage or the payment of premiums, such that benefits received under such plans are excluded from employees' gross income. Specifically, employer either purchased coverage and reimbursed itself through after tax payroll deductions, or paid for premiums and include premiums in employees gross income, with additional payment to employees to compensate for cost of coverage & additional income tax burden. Am wondering if the result was directly related to use of a VEBA or if it would also apply to the same practice (employer as conduit), without a VEBA.

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Situation: an employee meets the hours and age requirement for eligibility but terminates employment prior to an entry date. The employee then has a break-in-service under the plan's break-in-service rules. When this employee is rehired, may the prior year of service be disregarded entirely, or only until the employee completes a year of service after rehire date? Would the entry date be the date of rehire, the first entry date after date of rehire, or the first entry date treating the employee as if the employee was a new hire on the date of rehire?

I am confused by the seeming difference between IRS Regs 1.410(a)-4(b) and 1.410(a)-5.

1.410(a)-4(b)says:

(b) Time of participation:

(1) General rule.

A plan is not a qualified plan (and a trust forming a part of such plan is not a qualified trust) unless under the plan any employee who has satisfied the applicable minimum age and service requirements specified in § 1.410(a)-3, and who is otherwise entitled to participate in the plan, commences participation in the plan no later than the earlier of:

(i) The first day of the first plan year beginning after the date on which such employee first satisfied such requirements, or

(ii) The date 6 months after the date on which he first satisfied such requirements, unless such employee was separated from service and has not returned before the date referred to in subdivision (i) or (ii), whichever is applicable. If such separated employee returns to service after either of such dates without incurring a 1-year break in service, the employee must commence participation immediately upon his return. In the case of a plan using the elapsed time method described in § 1.410(a)-7, such an employee who has a period of absence commencing before the date referred to in subdivision (i) or (ii) (whichever is applicable) must commence participation as of such applicable date no later than the date such absence ended. However, if an employee's prior service is disregarded on account of the plan's break-in-service rules then, for purposes of this subparagraph, such service is also disregarded for purposes of determining the date on which such employee first satisfied the minimum age and service requirements.

In the situation presented by Sara H, it would appear that whether or not the 10/1/96 to 9/30/97 period of employment is used in determinining participation depends on the plan's break-in-service rules. If the plan does not have break-in-service rules, I would believe the employee would enter immediately upon rehire. On the other hand, if the plan's break-in-service rules allow for disregarding service prior to a break-in-service, the employee would be treated as a new employee. Does anyone disagree with this? Can anyone else add anything helpful for determining entry dates for rehires that had met the plan's eligibility requirements but terminated employment prior to an entry date?

1.410(a)-5 says:

IRS Reg 1.410(a)-5 says the following:

1.410(a)-5 Year of service; break in service.

(a) Year of service.

For the rules relating to years of service under subparagraphs (A), ©, and (D) of section 410(a)(3), see regulations prescribed by the Secretary of Labor under 29 CFR Part 2530, relating to minimum standards for employee pension benefit plans.

...

© Breaks in service:

(1) General rule.

This paragraph provides rules with respect to breaks in service under section 410(a)(5). Except as provided in subparagraphs (2), (3), (4), and (5) of this paragraph, all of an employee's years of service with the employer or employers maintaining a plan are taken into account in computing his period of service under the plan for purposes of section 410(a)(1) and § 1.410(a)-3.

...

(3) One-year break in service:

(i) In general.

In computing the period of service of an employee who has incurred a 1-year break in service, for purposes of section 410(a)(1) and § 1.410(a)-3, a plan may disregard the employee's service before the break until the employee completes a year of service after such break in service.

(ii) Examples.

The rules provided by this subparagraph are illustrated by the following examples.

Example (1). Employee A completes a year of service under a plan computing service by the actual counting of hours for the 12-month period ending December 31, 1980, and incurs a 1-year break in service for the 12-month period ending December 31, 1981. The plan does not contain the provisions permitted by section 410(a)(5)(b) (relating to 3-year 100 percent vesting) and section 410(a)(5)(D) (relating to nonvested participants). Thereafter, he does not complete a year of service. As of January 1, 1982, in computing his period of service under the plan his service prior to December 31, 1981, is not required to be taken into account for purposes of section 410(a)(1) and § 1.410 (a)-3.

Example (2). The employee in example (1) completes a year of service for the 12-month period ending December 31, 1982. Prior to December 31, 1982, in computing the employee's period of service as of any date occurring in 1982, the employee's service before December 31, 1981, is not required to be taken into account for purposes of section 410(a)(1) and § 11.410(a)-3. Because the employee completed a year of service for the 12-month period ending December 31, 1982, however, his period of service is redetermined as of January 1, 1982. Upon completion of a year of service for 1982, the employee's period of service, determined as of any date occurring in 1982, includes service prior to December 31, 1981.

Would someone better than I am at interpreting the regs (or who has heard this issue addressed and answered) clear this up for me? Thanks!

At the very beginning of the year I contributed the maximum allowable to a ROTH IRA acount, $2000 (two idexes, $1000 each).

I have now realized that I will be over the

maximum AGI for a single person. Do I have to pay a penalty or are there other options. How are the penalties assessed? What if the penalty fees are more than the net gain/loss in the account? thanks.

May a municipality adopt a SIMPLE IRA for its employees if it meets the other requirements, e.g. number of employees?

Participant in plan has annual accrued benefit of $140,000 as of 1/1/99. Because of 415 limit max is $130,000. Participant terminates due to retirement in 1999. Plan purchases annuity to fully provide the benefit of $130,000. Assuming plan provided for the 415 COLA increase each year, can annuity provide for such increases, too. That is , can annuity in 2000 be increased to reflect the new $135,000 limit and any future increases up to $140,000?

Can I set my initial eligibility requirement at 32 hours per week, but once the person is enrolled only require 28 hours per week to maintain coverage?

My company will be moving our SPDs to an intranet WEB site and wanted to get in touch with companies that have placed their SPDs or benefits communications on the WEB.

If you have some contacts who would be willing to speak with me for a few minutes it would be greatly appreciated.

Thanks.

Tracey

We are exploring whether we should incorporate ancillary benefits (e.g. car insurance, homeowners & renters insurance, etc.) in our benefits program and would like to get in touch with a few companies that have incorporated these programs into their programs? I'm looking for some feedback on the popularity on this type of program and what vendors are currently being used and satisfication ratings.

If you can provide me with some information, it would be greatly appreciated.

Thanks.

Tracey

Any suggestions as to how a 3rd party administrator can protect it's interest in the event of client's bankruptcy? My thought is to secure administration fees and adequate funding in advance of 90 days. Not sure if we want to alienate client in this manner.

Can a governmental entity establish a 457 plan to which only employee deferrals are made and have the employer contribution go to the profit sharing plan in an effort to raise the annual additions to the participants account above $8,000? Example; Employee earning $130,000 per year defers $8,000 in a 457 plan and the employer makes a contribution at 7.5% of salary under a separate profit sharing plan in the amount of $9,750. The 25% of compensation limit is not exceeding nor the $30,000 ceiling. Is this permitted?

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Does anyone have language for enrollments for Negative Elections?

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Rena K. Breeding, CEBS CEO

§Benefits Integrity

the non-elective contribution requires >500 hours for ALL participants, even those employed on last day. no amendments or additional language has been included in document to allocate contributions to all participants employed on last day for post 1990 plan years. i believe this is a plan document failure?

though yesterday, during the live satellite broadcast of the ALI-ABA seminar, J. Kahn, the chief of the EPCRS, stated that there would be a plan doc failure only if the requirement of 1000 hours.

i am totally confused as to what exactly the requirements are for a standardized doc. or perhaps JK was incorrect or did not understand the question?

thanks

if you modify or amend the adoption to a provision that is not provided in the plan document, i believe the document then becomes an individually designed document. thus, you will need to apply for your own determination letter. that is the answer given to me by one of the more well known document providers when i asked them about allocating match contributions to employees that had terminated but worked less than 500 hours. their plan document did not provide for this option.

An employee turns 65 on 1/1/91 w/ a pension of 20 * 25 = 500/mo. The person retires on 1/1/94 w/ an accd ben of 23 * 28 =644/mo. The rate per month increased from 20 to 23 per month for each yr of svc. The person gets greater of age 65 benefit act increased or 644. My question is should the age 65 benefit be recomputed due to increase in benefit rate and thus be a pension of 23 * 25 =575 and have that amount act. increased?

I need to know if a Section 127 Ed. Assistance Plan requires a 5500 filing.

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Brenda JM Luce

[moved to this new topic by Dave Baker for Brenda Luce]

Can anyone shed some light on a subject that was recently introduced to me? I have a client that is interested in providing an investment/savings plan for the benefit of the employee's children, a savings plan for college tuition.

I've studied the new 529 State sponsored investment plans and that plan doesn't provide for the employer to make contributions on behalf of the employee.

My client has heard of this through BNA, who is BNA? Is there such a plan where employees and employers can save for the costs of secondary education?

[relayed to this message board by Dave Baker for DonnyD]