austin3515

From researching the 415 rules applicable to 403b's, I've looked at the regs and the IRS Pub 571. The regs seem to make it clear that the employer cannot provide a benefit in excess of the 415 limits (i.e., the test is an employer level test, based on the plan year). But in pub 571, it seems to indicate that in addition to a "plan year" review by the employer, the employee also needs to run their own test based on their own taxable year. Am I understanding this correctly? Woluld this mean that as a TPA we should be reviewing calendar year data (even for fiscal year plans) to ensure compliance? The test is actually quite complicated as I'm learning. It's complicated because of the definition of includible compensation, which could include comp from up to several years ago. It would seem to allow someone to go well over a qualified plan's normal 100% of comp limit, unless I'm missing something. Does everyone agree? Has anyone seen a practical user friendly write up of these rules?

Sounds like a conspiracy theory...

http://sungard.com/sitecore/content/campai...o403bplans.aspx Very very relevant article on mandatory contributionsby Steve Forbes... Some 403(b) plans provide for mandatory contributions. In this situation, making the contribution is a condition of employment. Such a condition may arise from a statute or contract, or may simply be the employer’s policy. Both of these types of contributions reduce the employee’s wages for tax purposes. The FICA rules count these contributions as wages. However, neither type of contribution is an elective deferral for purposes of a 403(b) plan under Treas. Reg. §31.3121(a)(5)-2, which the Treasury finalized in November 2007. Accordingly, these contributions are nonelective employer contributions as far as the plan is concerned. Except for church plans and governmental plans, these contributions are subject to nondiscrimination testing under Code §401(a)(4). They are not subject to the universal availability rule (and cannot be used to satisfy that rule) or the 402(g) limit. Unlike conventional elective deferrals, these contributions are not included in gross compensation for purposes of 415 or other Code provisions which reference the 415 definition of compensation.

Does anyone feel that they are getting an unusual number of 2007 Late 5500 Notices? Or is it just that the IRS has sent out a ton of them in the last couple of months?

Sieve, if these are common law employees, the leased employee rules don't even apply. What you're referring to (For example) would be if a company decided to outsource it's IT department to a company that provides that type of service (which is fairly common, from what I understand) where they transferred some of their former common law employees to the IT outsourcing company. The IT department at the recipient is staffed with the IT Consutling companies employees (who used to work directly for the recipient). The "Consultants" working on-site would be leased employees. Therefore, I don't think your analysis applies here - do you agree?

My understanding of how these arrangements usually work is that they are really just outsourcing the payroll/benefits function. Again, the ability to hire and fire remains with the doctor, and I have always been told that is a pretty darn good rule to apply when determining common law status. In the situaiton I am desparately trying to communicate, such is the case. The Doctor: Sets the pay rate Hires & Fires Tells you when to come in, what time you can go home, and how to do your job. I don't what other criteria anyone can point to that would suggest that these might not be the common law employees of the medical practice. To me, it is as obvious as 2+2 = 4. And this is my understanding of how a PEO arrangement usually works, which is why the IRS came out several years ago mandating the multiple employer approach.

The medical practice??? Am I the only person who thinks you can't pay someone to take over your role as the Employer for ERISA purposes? Hey, why not put just your employees in ADP total source, and that way the Doc can have his own plan, where he can max out and not give his employees a dime! That will pay for ADP's fees!! What a great design! But of course we all know if it sounds too good to be true it usually is...

I suppose I could more appropriately label it as a PEO. But they are definitely on the payroll tax returns of a 3rd party, which of course is an important distinction from a payroll provider.

Except that the leased employee rules do not apply to COMMON LAW EMPLOYEES. Not really yelling, I'm actually laughing out loud because I sound like a broken record

Small medical practice A has no patience, desire, time, etc. to worry about paryoll, employee benefits, etc. Plus, they are a small company so can't get good rates. Solution: Have your employees transfer over to a leasing company, like ADP total source. That doesn't mean that you have no employees for really any purpose I can think of, and certainly not ERISA. The Dr. can hire, fire at will. So they are the common law employees of the person they work for... Please someone else chime in here and make everyone agree with me!!!

It does involve deferrals.

"There doesn't appear to be any reason you can't terminate the plan and transfer assets to the leasing company's plan." So maybe wer're saying the same thing. I agree that if we do the nonelective transfers to the leasing plan, we can terminate the old plan. But people can't roll to IRA's or cash out, etc. - do you agree with that?

Because the employees are still the common law employees of the same company, so there is no "severance of employment."

1) All employees switch from payroll of the employer to the payroll of the leasing company. 2) They now participate in that employer's multiple employer plan 3) No break-in-service, so we can't pay people out 4) Can't terminate because of the existence of a replacement plan. So what do we do? 1) Merger to multiple employer plan (seems unlikely)? 2) Nonelective transfers to new plan and then plan termination of old plan. Have never really used nonelective transfers, but I'm pretty sure they would apply hear

I would say the LP is out (unless it's traded on an exchange, which I think some are?). I think personally, I would conclude that the life insurance policy qualifies. The FMV should be the Cash Surrender Value. Doesn't seem to be too much of a stretch to me...

Thanks Bird! Anything you can provide in the way support would be greatly appreciated. Was this part of a Q&A or something? Or is my interpretation of 1402(a)(13) on the money?

I THOUGHT it was pretty clear that the earned income for a limited partner was calculated solely by taking into account their Guaranteed Payments, based on 1402(a)(13). But the question I am now struggling with is that in spite of this exception, do I still need to reduce their comp by their own employer contribution (eg, ps contributions allocable to their own account)? 1402(a)(13) says they can disregard the distributive share of the income of the partnership, but their own contriubtions would not have been deducted on their anyway, so I'm not sure they fit into the exclusion?

just filing a DFVC application for a Form 5500 prepared by, yup a CPA!. Thankfully, the client did not file this ridiculous 2008 Form 5500 (plan has 8 participants): -They indicated that the Plan's funding arrangement was the general assets of the employer -They had the following Pension Feature Codes - 2K. That's it. Not even 2J. -Here's the kicker - they filed a Schedule H, and for some reason did not get an accountant's opinion!! I'm prepared to testify before Congress if they ask me!!

Discretionary authority fits the job description of every dc tech at a TPA. I mean I suppose when it really comes down to it, none of us use discretion when preparing these things, since theoretically, there is really only one right answer. It's either right, or it is wrong, without much gray area. There should only be one correct answer for total assets, total active participants, etc. I'm hard pressed to come up with a single item of discretion... Maybe sheudle C presentation?? The whole thing is insane. I couldn't believe it when I read it, and that was before I read that we would all need training in general tax principles. This is almost as ridiculous as top-heavy rules...

Right, I remember now that the original EPCRS only had that option (the huge QNEC for everyone), and we all rejoiced when they added the one to one...

Example from EPCRS (SECTION 2. CORRECTION METHODS AND EXAMPLES) On June 30, 2007, Employer A uses the one-to-one correction method to correct the failure to satisfy the ADP test for 2005. Accordingly, Employer A calculates the dollar amount of the excess contributions for the two highly compensated employees in the manner described in § 401(k)(8)(B). The amount of the excess contribution for Employee P is $4,000 (4% of $100,000) and the amount of the excess contribution for Employee Q is $2,375 (2% of $118,750), or a total of $6,375. In accordance with § 401(k)(8)©, $6,375, the excess contribution amount, is assigned $3,437.50 to Employee P and $2,937.50 to Employee Q. It is determined that the earnings on the assigned amounts through June 30, 2007 are $687 and $587 for Employees P and Q, respectively. The assigned amounts and the earnings are distributed to Employees P and Q. Therefore, Employee P receives $4,124.50 ($3,437.50 + $687) and Employee Q receives $3,524.50 ($2,937.50 + $587). In addition, on the same date, Employer A makes a corrective contribution to the § 401(k) plan equal to $7,649 (the sum of the $4,124.50 distributed to Employee P and the $3,524.50 distributed to Employee Q). The corrective contribution is allocated to the account balances of eligible nonhighly compensated employees for 2005, pro rata based on their compensation for 2005 (subject to § 415 for 2005).

Been a while, but I though the 1 to 1 was you do a QNEC in the same amount as the ADP refunds? I didn't think you were able to avoid the refunds? But it's definitely been a long time since I've had to look at this...

Does anyone have a sample notice they would share? I can't believe I can't find one. We are an open architecture shop with a few audited plans. The recordkeeper we're using is getting some revenue sharing so I'm trying to disclose this to the clients in compliance with EIC rules. Any help appreciated... Thanks,

http://www.401kplanning.org/top-401k-plann...on-a-401k-loan/ This article is interesting and referneces a study by the Federal Reserve (there's a link in this article)... I don't pretend to follow the logic, but it seems to be that while the interest IS double taxed, there are tax advantages that neutralize this, as long as the "discount rate and the loan interest are assumed to be the same" (as in masteff's example). I presume masteff's example is built on the same logic the fed was using, and is simply presented in an easier to understand format. So although regrettably, I would not be able to explain this phenomenon to a client, it appears that there is one less downside to borrowing from a plan. See section 3.2 of fed's write-up. I believe them, I'm just not sure I follow why the making after-tax payments over 5 years offsets the double taxation of the interest, but they're the fed, so I'll believe them! http://www.federalreserve.gov/pubs/feds/20...2/200842pap.pdf

Wow... So I guess what I must have missed in all of those financial articles is that the double taxation is only an issue if the alternative is NOT taking a loan at all. Would you agree that if you are deciding whether or not to take a loan in the first place, the double taxation still applies? Let's say for example option 1 is liquidating a personal savings account, and option 2 is the participant loan. Yet again, something I thought was clean cut is not