Can an S-Corp discontinue a Simple IRA plan after one year? What steps are necessary ?

Can you delay the mandatory distribution (age 70.5) for an owner if he is not vested in his benefit?

Consider a business with a 5% owner who is an active employee and is over age 70.5. He must start his pension (or profit sharing plan) distribution by the April 1, etc. I don't see a problem with him making deductible contribution at the same time as him making a mandatory distribution.

Let's say he just started the pension plan (and has never had one in the past). If we use a vesting schedule, we could generally delay his mandatory distribution until he is vested (or at least partially vested), right?

However, participants automatically become fully vested upon attainment of normal retirement age. If normal retirement age in the plan is age 65, he would already be fully vested, therefore he would have to start his distribuition, right?

But, if the plan's normal retirement age is the later of age 65 and 5 years of participation (thus ignoring all prior service), the full vesting wouldn't automatically occur for 5 years.

So, would a age 65 / 5 years of participation together with a vesting schedule (let's say 5 year cliff vesting, assuming the plan is not top heavy) effectively delay his mandatory payout for roughtly 5 years?

In 1991, the IRS issued several private letter rulings pertaining to employer reimbursements of expenses that had been previously been paid from trust assets. In addition to reversing its previous position on the matter, the IRS ruled in PLR 91241034, 9124035, and 9124037 that reimbursement of brokerage fees and investment management fees would NOT be a deductible expense under Code Sec. 162 or Code Sec. 212. In addition, the expense reimbursements would be treated as "employer contributions" for purposes of calculating the 404 deductible contributions limit and they would also count as "employer contributions" for 415 testing.

I have two questions. First, the rulings seem to apply only to investment related expenses. Could the employer reimburse the trust for onging administrative expenses (not investment related expenses) without treating the amounts as employer contributions for IRC Sections 404 and 415?

Second, is anyone aware of any clarifications on this matter since these PLRs were issued back in 1991? Thanks for your help.

The "safe harbor" criteria for hardship withdrawals from 401(k) plans appear to require taking a loan from the 401(k) plan before a hardship withdrawal can be taken. I thought I had read that IRS had changed this rule, but can't seem to find any guidance. Any thoughts?

If you have a SARSEP and exceed the 25 employee limit, what must the employer do with the plan?

Does anyone have a citation for the taxation of VEBA's in Massachusetts?

Thanks-

rob

An outline on the employee benefits aspects of the Uniformed Services Employment and Reemployment Act ("USERRA"), which deals with benefit obligations to persons who take military leave, is available by clicking here.

[Note: This message was edited by CVCalhoun]

An outline on excess benefit plans (used by state and local governments to provide benefits in excess of the Internal Revenue Code section 415 limits) is available by clicking here.

[Note: This message was edited by CVCalhoun]

Is it legal to reamortize a loan from a 401(k)? what regulations cover this?

Can K-1 income be the basis for a pension plan. If not, can K-1 income be converted into W-2 income, and therefore be the basis for a pension plan?

Currently, an LLC exists (call it A"). It has two limited liability members, B and C, which are each S-Corporations. Individual X is the sole owner of Corporations B and C.

"A" makes money by buying things and either selling them or renting them out. Currently, the net profit of A is shown on K-1's for B and C. The K-1 amounts are then transferred to X's 1040. My understanding is that these amounts cannot be used for a pension plan for Individual X.

However, Individual X performs services for "A" that enables A to show a profit. (X knows the customers, arranges the deals, etc.) X is currently not drawing any income from A, except via the K-1 distribution through B and C.

If X becomes an employee of A, then couldn't A set up a pension plan and cover X based on X's W-2 income paid by A? Now, this income would be subject to FICA (and FUTA, etc.), but other than that, it would seem that all other moneys would be taxable in the same manner to X. So, a pension plan would make sense if the value of the pension benefit for X (based on his W-2 income from A) would significantly exceed the FICA taxes that A (as the employer) and X (as the employee) would have to pay.

Is this analysis correct? Have I missed something?

(I assume that X does perform legitimate services for A and that any W-2 income could be justified. Clearly, the accountant involved would have to be comfortable with this.)

Would there be any rationale (or advantage or disadvantage) for X to be the employee of either B or C, instead of A? (I don't think there would be any advantage or disadvantage. In this situation, X owns B and C.)

Looking for opinions on this topic. If a Plan Sponsor has adopted a master prototype using a non-standardized adoption agreement, must the plan have obtained its own determination letter to use VCR as the vehicle to handle the late correction of an ADP/ACP Test failure. Or, can it rely on the prototype's IRS Opinion Letter in this instance to file under VCR?

if an employee is on LTD, is an employer obligated by any law to contiue their health insurance? can we allow them to "just go on" medicare/medicaid.

What are the most recent COBRA law changes? COBRA has to be offered to employees on Medicare - what are the details? Are there any other changes? Where is there a good place to find these types of changes to the COBRA law?

When HIPAA took effect, did the "look-back" period that could extend up to 12 months, change to only 6 months? E.g. The plan that I am on looked back 1 year for pre-existing conditions. With HIPAA is the llok back limited to only 6 months?

Who is responsible for determining the qualified status of a domestic relations order when it pertains to a 403(B) plan that is not subject to ERISA. Is it the custodian, or the plan's responsiblity?

Need information on how(if)matching contributions can be applied toward topheavy 3% for NHCE. If ACP is passed using Zero for all NHCE can match be used toward 3%. Also, if first year plan, ACP is deemed to be 3% for NHCE.Is this a loophole for using match or too good to be true. Thanks

Is it the concensus that an affirmative election to decline an RMD is required for those who turn 70.5 in 1998? I know we can't refuse to give them a benefit, but can't we require that they affirmatively elect to get a benefit? Do you even have to notify them or can you wait for them to come forward?

Our plan is rather simple so this should be easy to figure out, but I just want to make sure that I am doing this correctly. Employees can defer up to 20% of their pay into our 401(k) plan. There is no employer match and we have no other pension plan. We do have a 125 Cafeteria Plan for medical and dependent care expenses.

To figure out the 415 Annual Additions Limit I can first throw out the $30,000 limit because no one can contribute more than $10,000 in 1998. So now I just take 25% of their W-2 taxable income. Is it really that simple?

For example, someone making $50,000 contributes 20% to the 401(k) plan.

W-2 taxable income is $40,000 X 25% = $10,000. This person has not exceeded the 415 limit.

BUT if this person also contributes $5,000 to the 125 plan, W-2 taxable income would be $50,000-10,000-5,000=35,000 X 25% = $8,750. So this person would exceed the 415 limit.

The most this person could contribute to their 401(k) plan would be $9,000. ($50,000-9,000-5,000 =$36,000 X 25% =9,000).

We have a catch-up clause which allows people to defer up to 100% of their pay in December. So I have to keep an eye on this 415 limit to make sure that no one exceeds it. I want to make sure that I am doing this correctly and that my logic makes sense.

Thanks in advance for your help.

When an employee becomes eligible for a SIMPLE IRA and enters on July 1, does the employer have to make their required matching contribution on compensation for the entire calendar year or just on the compensation while eligible? My understanding is that's it's on the calendar year compensation. Thank you.

Our firm is establishing a formal training program for employees hired that are new to 401(k)/Pensions. We currently are thinking of hiring trainees in groups of 3 or 4 and sending them through a "training school". Does anyone have a program that works at their firm that they would be willing to share ideas?