wsp

Is it plausible that previously approved 2007 claims but paid during January of 2008 can then be denied upon internal audit during August, 2008 and thus become 2008 taxable income to the employee?

401k plan with SHNEC and New Comp plan passes testing but only after limiting the ownership group to a contribution that is 10k-12k lower than maximum for each of 2 owners. There are additional employees recently hired that could change the results dramatically.... Can we amend the plan to make the eligibility for the profit sharing (and forfeitures) immediate while at same time leave eligibility for deferals and SH plan at 1 year with 6 month entry dates? At same time we would be removing the 1000 hour requirement but leaving in the employed at end of year requirement. Plan is not top heavy and won't be for another 5 years or so at current contribution levels. Doable?

Participant distribution request (via valid POA) was completed and mailed on Thursday. Participant passed away that following weekend. Check was not cut until 8 days later. Distribution was part cash and part rollover to IRA. Does that cash piece go to estate now? or can they both be refunded to trust?

So then do you assign them a position within the medical group? And one gets promoted or demoted if their benefit level changes? Thus the position remains the same but the person who fills that position might change. And to account for new hires due to expansion each group would have positions that are currently unfilled?

IMHO documentation of a 1 day delay in the investment of the assets is going overboard. Documentation of a 1 day delay in the segregation of the assets is not. Doubt you would find anyone to argue that a 1 day delay in investing of assets is not being a reasonably prudent fiduciary. Far different then segregating the assets within that "as soon as administratively possible" rule. Of course this is under the assumption that by "segregating the assets" you are saying that you transferred them out of the company accounts and into a plan account.

That's the point....and again, I'm merely posing the devils advocate point here. The dependent is going to need the care during the day so that the expense incurred during the day is an employment related expense. Seems to me that there is now a market to split the care between two different business entities. One provides and bills for only day time services and the other provides and bills for only nighttime services with only one of them being a deductible expense (depending on when the parent/guardian/supporter works). The mere fact that they occupy the same building/space would be irrelevent. or per our summer camp....The camp is no longer an overnight camp but a day camp. And they just happen to be able to provide transport (hey kids...anyone up for a little walk???) for the children to a facility that is an overnight facility. Does the day camp then become a deductible expense? Does it matter what each entity charges for their services?

Just playing devils advocate here, but wouldn't it be a question of who is providing the care. If the child goes to a daycare facility with the YMCA and those expenses are covered but the YMCA also has an overnight camp that the child attends in lieu of the daycare for a week why wouldn't the portion attributable to normal care during the day be a qualified expense? Note, I'm not saying that JPOD's position is wrong...just musing on if the IRS would allow such an exception. Personally I hope not as that leads to all sorts of "what if's"... But it just seems odd that the expense is allowable for little Johnny to color, paint, and play at the YMCA's city owned property but it's not ok the exact same thing occurs at the YMCA's country facility. It really can't be so simple as "only the wealthy send their kids to camp so we'll not allow that expense" Can it?

jpod, It's a current year issue so w-2's won't be effected. Quarterly deposits of taxes are an issue as well as modification of employee payrolls. As for plan document, Thought of that already...everything was based upon statements made by HR person who obviously didn't understand the questions being posed. According to the HR Rep they thought that a document wasn't needed because their insurance guy told them since they were under 100 people they could just start withholding on a pre-tax basis.

Employees were not aware of it unless they actually took the time to understand. They were not told that a plan was in place. Not sure if any noticed the deduction that was previously taken post-tax had changed to a pre-tax one. Obviously a putting a plan in place at this juncture is not an option...so what else are my options but to modify their checks over a reasonable period in time?

Now assume the situation is reversed. Turns out there is no plan document. The person doing the setup was told that there was a plan in place and deducted funds pre-tax when there obviously shouldn't have been given that there is no document. All within current plan year but not within current quarter (don't know if the latter matters). Can you just make adjustments on current payroll and submit taxes to various agencies?

And quite the entertaining and informative read it usually is. What exactly would the risk be in this instance? Realistically... Seems to me like this almost boils down to a facts and circumstances issue. I can't imagine that the IRS would come down too heavy handed on it given that it can be reasonably be argued the other way AND it could have been resolved leaving the example in the final regs or issuing comment on why it was pulled.

Can the terms of a participant loan to buy a residence be extended to longer than 5 years if the home that is being purchased is outside of the US? Proposed property purchase is in China. US citizen currently living overseas. edited to add location and citizenship.

So then you limit deferrals to 1% for everyone? Kind of a role reversal isn't it? Over age 50 HCE now benefits more than the NHCE's.

I agree with BXO. The 2% is not combined. They are separate elections. But other than that the logic is correct.

Thanks to the both of you. Was thinking that somehow there was favorable loophole treatment for non-spousal rollover after death from the QP. Didn't think it required the receiving IRA to be a decedent FBO the beneficiary if it came from a QP. Since it doesn't matter...out it goes!

Terminated participant has 200k account balance and is in latter stages of cancer treatment. Plan currently only allows for lump sum distributions but employer is willing to amend if it will benefit the participant. Participant needs a portion (1/4) of the account to pay for care which will likely take him through his passing. Beneficiary of account is participants daughter. Can anyone tell me the best way to go about this to make sure that the distribution works for all involved? Seems to me that the money is better served being left in the plan based on non-spousal rollover options; assuming that an amendment to allow for continuous right of withdrawals or installments could be made. But, perhaps I've interpreted that incorrectly. Thought that if it was rolled from a qualified plan into non-spousal IRA that it goes in the name of the beneficiary but if it's from an IRA then it remains in the name of the decedent FBO the beneficiary. That brings MRD into play far sooner... What are the pitfalls here? Not likely that anyone else will fall into this category as it's a small business and plan termination is likely within 5 years so precedence of allowing for partial withdrawals isn't a big deal. Participant is not an HCE either. Anything I'm missing to help get an answer?

Ok, thanks. Figured as much....not fun to be the bearer of this kind of news even if we had nothing to do with it. Fortunately for us we were just installing the payroll system and had nothing to do with the plans.

In 2006, company went to trouble to set up a cafeteria plan to deduct medical premiums on pre-tax basis. Made all proper notifications and elections but then failed to set it up on payroll system as a pre-tax deduction. Error is not found until 2nd quarter of 2007. What's the correction?

assuming his estate has no assets or income during the year who's on the hook for the tax bill? Is there anything that allows the IRS to go back at the beneficiaries? Granted, the tax liability is small but seems like reasonable tax planning for those who are diagnosed as terminal and whose assets can be gifted prior to passing away.

I'll take a stab at this.... If the election to defer wasn't in place prior to the end of the plan year then it's my understanding that you can't make an elective deferral regardless of when it's contributed and you're limited to the 10k in profit sharing (assuming that your plan doc provides for that). Source: Final 401k regs. If you do have an election in place prior to year end then for IRS and deductibility purposes you have until the end of the tax return due dates plus extensions. However, the DOL says that it should be deposited as soon as can reasonably be segregated which is the 15 day rule. But there are those who would argue that the date is impossible as it's not usually been calculated yet. Depending on the amount in the election, you may be able to prove your case there. If you elected a fixed number and knew you were going to make far in excess of that amount, your case may be more difficult to prove.

http://benefitslink.com/boards/index.php?s...c=35704&hl=

Company is a partnership. Currently offers Section 125 plan for medical premiums to be paid pre-tax. Company also offers a stand alone Section 129 DCAP plan. Previously only NHCE's participated in the plan. However, recently an HCE had a child HCE does not own 5% of company and is not considered a Key employee but is considered an HCE. Given that no current NHCE's are participating, I would imagine that it's impossible for the HCE to utilize this benefit....am I correct? If that's the case is the only real solution to gross up said HCE's compensation to account for the tax implications?

In my case the public school has a cost...however it's educational expense so not an eligible expense. correct? 1/2 day kindegarten is free..all day has expense of about $200 month.

No, final 401k regs say ACP test shall apply for years where the allocation requirements are required to be satisfied; even if 3% is being provided.

Would that be 3 loans? What does the plan say? Plan says 2 but was thinking that if it's refinanced over original period it wouldn't count as a new loan so I stay within that parameter. don't I? However, I'm not quite sure it falls within the "purchase" of a principal residence which would allow me to use that option either. We can always amend the plan to allow more loans but client only wants to do that as last resort.