A small business has a 401(k) plan with match. Last year the owners maxed out deferral and got match. However, they made a 5% profit sharing contribution just for rank and file ees. They did not sign any kind of waiver. Do they have a problem for 1998 if they participate in profit sharing portion?

Can anyone comment on the reporting of cash balance plans in the Wall Street Journal (12/4/98 and 12/18/98). The articles seem to have caused some uproars by employees who have read them.

I have a rep who has heard of the housing allowance under 403(B)(9) for ministers. What type of document(s) are needed for establishment? What type of information is needed to be included?

Any help will be greatly appreciated

Happy New Year!!!

A Law firm maintains a profit sharing plan that covers all its employees. The plan currently requires participants to be employed on last day of the plan year to receive an allocation. During the year, certain partners have left the firm. The firm wants these partners to receive an allocation. May the firm amend its plan to provide that allocations will be made to individuals who were employed on ... say September 1, provided this change would not discriminate in favor of highly compensated employees.

A 401k plan provides for 100% match up to 7% deferral. Sponsored by a service partnership. "Earned income" of a partner is:

Self-employment income 100,000

SE tax deduction (5,580)

Employer base contr. (1,000)

Ptnr deferral (5,000)

Match (5,000)

83,420

What is 414(s) income? Is it 83,420 or is it 88,420 (earned income plus deferral)? When the partner elects a percentage deferral (eg, 5%), what income is the 5% applied to?

Our firm has recently taken over a plan where the company has excluded all Collectively Bargained Employees. Several of the owners are themselves collectively bargained employees who receive compensation both as Union Employees and as Shareholders in the Corporation. According to regs

1.410(B)-6(d)(2) hours of service performed while a collectively bargained employee should be treated as such and those hours worked as non-collectively bargained should be treated as such. My question is what does this mean. It is easily said that the Shareholders work over 1000hrs for the company as Nonunion workers and therefore would be considered eligible for the 401(k) plan. That being the case, what compensation do I use for purposes of the plan? the document states 3401(a) wages. Does that mean since the employees W-2 wages include the Union wages I can count them? or should I exclude the Union wages as ineligible compensation? Please advise.

I believe $10,000 is the 1998 deferred compensation limit.

Where can this be found in IRS technical releases?

Has the 1999 deferred compensation been announced? If so, in what IRS source can it be found?

When a benefit accrual rate is reduced prospectively or frozen, DoL regulations require a 15-day (or is it 14 day) notice.

Is this notice required when a 401(k) plan changes the employer match from 25% to a match that is at the complete discretion of the employer? Here, the guaranteed match is decreasing from 25% to 0%, but the employer may decide to match at the end of the year.

If this were not a profit sharing plan, the answer would clearly be yes. But since 401k plans are profit sharing plans, is the DoL notice required?

In March, 1998, a company declares a p/s contribution for the plan year ending 12/31/97. This is accrued and reported on participant statements. The contribution is not made by the time the 1997 tax return is filed, but is not deducted on the tax return. To date, the company still has not made the contribution.

Can the company make the deposit now and deduct it on its 1998 corporate tax return even though it was allocated in a plan year covered by another return? Deducting on the 1998 return would not create a 404 problem.

can anyone please tell me if mandatory federal withholding applies to an ERD from a qualified retirement plan for less than $200, or does the de minimis rule still apply? is there somewhere on the web where i could find the treas. reg(s) to support this? thanks in advance for any and all help.

If an IRA investor wants to request a PLR from the IRS to get their blessing on substantially equal, periodic payments over their life expectancy from one of their many IRA accounts to avoid the 10% premature distribution additional tax, what is the user fee? Where do I find this information for 1999?

If employer wants to make the 3% nonelective

safe harbor contribution for NHCEs, can it make the same contribution for HCEs or would the HCEs' contribution (without another 3% for the NHCEs)cause plan to flunk 401(a)(4)? If this is OK, can employer also contribute 3% of participants' excess comp (ie, comp in excess of TWB) if plan is integrated?

Has anyone gotten any sense from the IRS lately about whether a cash balance plan with a low, but not variable, interest rate accrual (4%, in my case) can assert that the cash balance account balance is the present value of the accrued benefit? I'm aware that this may not be permitted under the proposed rules of IRS Notice 96-8. However, I'm wondering how the IRS has been reacting to these kind of plans in practice over the last few years.

We all know that you can deduct NC and 10 year amortizations, because IRC 404 says so. There is one other part of 404, under

404(a)(1)(ii), which talks about spreading deductions out over at least 5 years. Has anyone seen this used in practice? Is this trying to say that you really should not set up a plan at age 64 (if NRA = 65) and take a big deduction right away? Any insights/experiences would be appreciated. Thanks!

Are there any alternative ways to do the ADP test in a plan's first year? Please advise.

Not only is there not a de minimus rule for minimum required distributions, but the IRS has rather specifically said that's there no de minimus amount. See the last sentence of Q&A A-5 in Prop. Treas. Reg. 1.401(a)(9)-1.

There may be other ways to resolve your dilemma. If the vested account balance never exceeded $5,000 as of the time of any prior distribution, the plan document may require a lump sum payment. Starting March 22, 1999, a plan may provide that the participant be cashed out unless the vested account balance exceeded $5,000 at the time of the first age 70-1/2 payment.

Another possibility is to make the 70-1/2 withdrawal permissive, not mandatory, for current employees who aren't 5% owners or to eliminate it altogether if the plan has a 59-1/2 withdrawal option that permits partial withdrawals at least annually.

Your message is a bit confusing. If you believe that an indivivdual who gets a 0% allocation is treated as a participating employee under 410(B) coverage testing, you are misinformed. See 1.410(B)-3(a)(1). The exceptions in 1.410(B)-3(a)(2) would not apply to a profit-sharing allocation.

If you are looking for proof that these employees are not considered covered (and therefore part of the denominator, but not the numerator, in the ratio percentage test), see the regs cited above.

Is it permissible to name a Roth IRA as a limited partner in a real estate limited partnership where no capital contribution is required?

Does anyone have an address for contacting the company that makes Quantech, and a contact in their sales dept? Just the address is really needed, sale rep would be helpful. Thank you!

What would you do if you had a plan sponsor who is knowingly failing to comply with the terms of the plan document? Three certified letters have been sent to no avail. Their response clearly reflects their inability to accept the potential liability.