goldtpa

Thanks for the advice. I start looking at those sections.

What is the penalty for not withholding the mandatory 20%. A client did not withhold the mandatory 20% for a distribution that occured in 2003. The accoutant is blaming me for not being more communicative. We just found out about it.

I have medical practice "A" as a client and "A" maintains a 401(k). Last year the doctors of "A" created their own separate practices. Each doctor receives $40,000 from "A" as well as receiving a K-1 for their own practice. They have not updated the plan docs to reflect the CG/ASG rules, and do not think they have any intention to. The attorney who drafted the plan says that I can't use the income from the K-1s since they have not updated thier plan to reflect the new entities. The doctors obviously want me to use their K-1s as part of their income so they can get a larger profit sharing contribution. I am leaning with the attorney since the new practices have not adpoted "A"s 401(k), eventhough they are a CG/ASG. All of the employees are in "A", the doctors are the only employees in their practices. In addition if I use both incomes, I would assume that I would have to reduce the K-1 income but not the W-2 income. Thanks

The instructions for the 5500 state that you should count securities of the same issue as a single security. The example in the instructions state that you should count CDs issued by the same bank as a single security, eventhough they have different maturity dates. I would then assume that a money market account issued by a bank or mutual fund would be a single security.

Client failed the ADP test. We calculated how much money needs to be returned to the HCEs. Unfortunately one of the HCEs left the company in 2003 and received a full distribution in February of 2004. He rolled the money to an IRA. We must return money to him to pass the ADP test. The financial institution holding the 401(k) money has said that they must issue a 1099 showing the rollover to his IRA. They have suggested that I contact the receiving institution and get them to disburse the the appropriate amount. What is the appropriate course of action? Thanks in advance.

No you only need one 1096 to report all of the distributions. If a person has a PS58 Cost and a normal distribution you will need two 1099s for the same person.

I am having a debate with a friend who is a CPA. He is now thinking about telling his client to forget about his DB plan and put the money away in a taxable account; due to the new 15% tax. Here is the scoop 48 year old Dr. looking to retire at 60. Contribution to a DB plan approx 100,000. Makes well over 200,000 in comp. Assuming the Dr takes the 100,000 he would have contributed to the DB. He pays 40% in tax and invests the 60,000 into an investment making 5%. In 13 years paying 22% in taxes (15% fed and 7% NY State) he would have approx 991,000. The CPAs argument is that the lump sum payment from the DB is not that much larger than the amount in the taxable account. His thought is that is goes against everything we have been taught to believe, which is you'll make more moeny in the retirement account than paying taxes each year. According to him the difference between the two is not a slam dunk as you would think it would be. I know that a few other CPAs I have talked to have been to seminars on this topic. Any thoughts?

I don't know how good this survey is. I hope is helps. Fidelity Stats

Thanks for the help. I think that he wants to be able to have a 401(k)profit sharing plan. I did not discuss that with him. As soon as I heard management company, I wanted to check the ASG rules. No sense in talking about a plan, if you can't implement. Thanks again.

check this out USERRA

A principal for a vocational not-for-profit school had a 401(k) which has been terminated and now the school wants to start a 403(b). The principal gets paid by the school and the principal also set up a management corp to manage some of the schools activities, for which the school pays his company. I think the management corp does sales, advertising, etc. He wants to set up a 401(k) in the management co. I think his management company is a B-Org, thus they would be an ASG.

WDIK Thanks for the input. However, how would I know if they elected to be covered under ERISA. They have no documentation. The only thing that they have is an AXA new account application. One other thought. If they are not required to file, are they still subject to anti-discrimination testing. It seems very fishy to me to allow, even a church organization, for a 1500 match to be applied to the medical plan or the 403(b) at the employees choice. One would think that you receive a match if you participate in the 403(b), regardless of whether you had medical coverage or not.

I have been talking to a school run by a church. They have a 403(b) which, allows for employee deferrals and according to them matches dollar for dollar up to $1500. They have no plan document and have never filed a 5500. They have some sort of summary of the 403(b) which is given to the employees. I have looked at the other posts and I believe that since they have matching contributions, they would be required to file a 5500. Is this correct and since they never filed, is this a matter that is resolved with the DFVC? Secondly to make matters worse, the $1500 match was not given to everyone. The employees had a choice. The school would contribute the match to the medical plan, Oxford, or they would put the 1500 into the 403(b). For example, an employee who used up the $1500 match in the 403(b) had to pay the Oxford premium out of their own pocket. Hence, an employee who used the $1500 to pay for Oxford did not get a 403(b) match. Any help would be greatly appreciated.

I agree with QDROphile. You have a prohibited transaction. One additional point. Since your plan does not have any NHCEs it is not subject to ERISAs prohibited transaction rules. However it is still subject to the prohibited transaction rules under the IRC.

A client of ours is a local government agency with a money purchase plan. Just brought them into the IRS correction program. They asked for everything. They paid a 750 fine for a minor error. But based on my experience with this local government, you must file and follow all of the rules just as you would with any other 401(k) client.

Do a search on the message boards for VFCP.

According to the 5500 instructions, if a Sched I was filed for the 2001 plan year, and the number of ee's entered on line 6 of the 2002 Form 5500 is between 100 to 120, then you may elect to complete the 2002 Form 5500 and file a schedule I. Thus I would look at the 2002 5500 and see if you show less than 120 on line 6. If not, then you would need an audit.

Rev. Proc. 2002-73 extends the GUST remedial amendment period only for pre-approved plans until the later of September 30, 2003, or the end of the 12th month beginning after the date on which IRS issues a GUST opinion or advisory letter for the pre-approved plan. This does not apply to indivdually design plans.

I have a similar problem. I prepared the 5500s for a client and they haven't paid. The corp is still in business. What if any recourse is there. This was before we used engagement letters Thanks

Thanks for the input. I will follow your advice and refer them to an attorney. I just think that there may be a cg/asg issue, since their share the employee. Who knows what else they share (space, expenses, etc)

A husband and wife are both doctors. Each has their own practice. The husband has a db and the wife has a psp. In addition they share an ee. The ee works part time for the husband and part time for the wife. I don't know if she is covered under either of the plans since she is part time. I am pretty sure that this is a control group since there is attribution between husband and wife. Not to mention that they share an ee.The doctors disagree with me stating that if it was a control group, their current tpa would have told them. Any help is appreciated.

There are only two ways. Transfer the policy to your name by filling out a change of owner form. Or surrender the policy for its cash surrender value. By taking possession of the policy you will pay taxes on the cash surrender plus 10% penalty if you are under age 59 1/2. If you surrender the policy you will obviously get a check and do whatever you want with it.

A SIMPLE Plan must be the only plan an employer maintains. A SIMPLE-401(k), may be amended, revoking the election to be considered a SIMPLE 401(k). The amendment can be executed at anytime during the year, however the amendment would not be effective until the start of the next plan year. I believe the same holds true for SIMPLE-IRAs, you can't terminate them in the middle of a year. Thus you would have to terminate the SIMPLE at the end of the year and start your 401(k) in 2004.

A brand new plan must have at least 3 months remaining in the year to immediately start a safe harbor. An exception to the 3 month rule exists for a brand new company. A brand new company may establish a safe harbor 401(k) plan if there is one month remaining in the plan year

Well now my head and chest hurts, just thinking about this. I believe its the same proposal, it just has been given new life. Hopefully ASPA is still hell bent on defeating this thing.