Lori H

a new plan with 3 doctors will be showing no earned income and a substantial loss according to their cpa. up until it was determined that there would be no income, the 3 doctors were deferring into the plan and receiving a match. the match can be transferred into a suspense/holding account to be used later, i believe, but can the deferrals "unwind" back to the pllc before plan year end 12/31 or will that amount be required to be refunded as income? either way im pretty sure the tax consequence will be roughly the same. i am just trying to minimize paperwork at this point.

a possible new client received hardship distribution checks this year on behalf of the participants. the checks were made payable to the plan and then the plan issued the check to the participant. the institution holding the funds did not withhold taxes so if a participant needed a $3000 hardship that was the amount removed from their account. can the trustee go back and request additional funds to be removed to cover taxes? also, in previous years when distributions occurred, taxes WERE withheld but the trustee has no record of the 1099 reporting being done. the company holding the funds does not prepare them, and nor does their current TPA. what sort of exposure or liability does this cause the trustee?

A former employee of a company that sponsored a 401(k) plan has about $25,000 in her account. Because she isn't active she can't take a loan from the plan. She would like to start her own business. Can she set up her own 401(k) plan, roll the funds from her previous employer into the plan and then make a loan of about $6,000? Thanks for the responses and if you have a better suggestion this, too, would be appreciated.

im pretty sure the short answer is no, but a 5% owner was wanting to transfer his rmd to a charity without paying taxes. can a portion of a rmd be transferred without the tax penalty?

1)a bank employee who will soon turn 65 is considering substantial equal payments into an ira(6 payments). is that allowed? 2)what if she retires and the following day takes a distribution of the stock in her account, would she only be taxed on the basis that the plan paid for the stock and not the unrealized gain/loss until she sells it? i believe its yes to number one and she would be taxed on all capital gains on number 2 even post distribution?

thank you. i have refered this case to a esop specialist.

a bank has maintained a psp since 1987 and it was updated in 2003. current assets are right at 1 million, annual contributions are appx. 100,000 and some new HCE's will become eligible this year. the bank is currently under a "cease and desist" order from the federal examiners and has been in work out mode for about one year. prior management has been released, new management is in place and progress has been made. a few questions: 1) could the bank make use of the current profit sharing plan to purchase bank stock as a plan asset? would there be any limits to manage these purchases? 2) they are also exploring as an option a leveraged ESOP or KSOP, would the "cease and desist" negatively impact the options under this type of plan, especially since it would be leveraged? basically the bank officers and the board want to establish a mechanism to issue and control voting rights for the controlling interest shares of the bank. the current number of shares outstanding is 200,000; 16,250 shares are currently owned by the board members; the current share value is $65; book value is $62.25; number of shares needed to maintain control of the bank by the board via the plan is 51% of the 200,000. thanks.

ok, an employer in 2003 was safe harbor, they amended the plan to rescind safe harbor provisions effective 1-1-04. this was due to the fact that the board of directors did not think the money would be there to fund the safe harbor match. the plan is at this time a trad. 401k with a dollar for dollar match up to the first one percent deferred. the board now feels that they will be able to make their numbers this year and they want to make the plan "whole" by funding the match as if it was a safe harbor plan for 2004. i know that even if this is ok, they would still be subject to non-discrimination requirements. my question is, is the safe harbor match outside a "safe harbor" plan discrimnatory? can they decide later in the year to give the additional funds to the participants? seems to me the government would not mind them increasing employee pensions. thanks

UPDATE: Company C has their own 401(k) and when it was acquired by Company D, D had to "downgrade" their plan to match what Company C has. Basically, they are hoping to consider Company C their own business line and broken off and Company D and B have similar plans.

Owner 1 has 98% of Company A which is a holding company with no employees. Company A owns 85% of Company B which has less than 50 employees and is a new business to Owner 1/Comp. A. Company B was ready to set up a Safe Harbor 401(k) until it was discovered it was part of a controlled group. Owner 1 owns 85% of Company C which manages apt. communities. It has 150-200 mostly lower paid employees. Owner 1 also owns 99% of Company D which provides investment and acctg. services. Company D is a "family office" that has about 20 employees some of which are HCEs. They also have the following 401(k): one year of service, two entry dates, match of 100% up to first 1.5% deferred, 3 year vesting. Company D wants to exclude Company C from the plan under QSLOB rules and improve the 401(k) it currently provides by possibly adding safe harbor provisions. Since Company C has at least 50 employees, I believe it may be able to be tested separately under Sec 414®, but i do not feel it can be excluded altogether. I am of the opinion and to make administration as easy as possible and avoid problems(minimum coverage, contribution limits, ADP/ACP), that if they incorporate individual plans, each plans provisions should mirror the other. Am i missing something? Company B who was ready to set up a Safe Harbor wanted shorter eligibility, quarterly entry, etc for its plan. now, that plan is on hold. Also, and i am not 100% sure, but I do not think Company D's 401(k) has been offered to Company C. Any opinions?

i'm pretty sure the answer is no. tsa is funded by both employee and employer.

hi thanks for the replies. the Management Company IS a partnership. The Dentist practice is a S-corp. I would imagine that if he acquires employees in the Management Comp. he would have to extend the SIMPLE plan now furnished to his practice to them.

thank you lame duck. i reviewed the reg and i agree. so any income attributed from the management company would have to go against the $205,000 comp limit in his dental practice's SIMPLE 401(k)? correct?

a dr with an S corp practice offers his employees a simple 401(k). the doctor also has a managment company. he is a 50/50 partner with his wife and in 2003 they drew income around 60k annuallly from it. his cpa wants to know if he could set up a plan outside the simple for him and his wife. the management company has no employees and he owns 100% of his practice. i think he would be able to do it separately of the simple 401(k) since i do not think it constitutes a controlled group, but i might be wrong due to his wife having some ownership. any suggestions?

How many times can a plan be amended before a restatement should be done. For instance, a traditional 401(k) plan was restated for GUST effective 1/1/02. The plan was amended, effective 1-1-03, to a SIMPLE 401(k). Now I need to add two participating employers, change the name of the plan and amend the plan for quarterly entry. This seems a lot of change for just a simple amendment. The three companies do not constitute a controlled group so it wouldn't be a multiple employer plan. Thanks to everyone who provides a response.

he is not an owner. a general manager of a hotel. i do not believe the standardized document has a top-paid group election. there were 2 hce's in the 2003 plan year. he was not the highest paid. this year there are 3 hce's. with the addition of the third non-participating hce, i would think this should help his cause some. the company will never match or make a profit sharing contribution. i'll see if he wants to reduce his income to reclassify him as an nhce thanks for your responses.

HSA????? i dont think i am familiar. what would typical eligibility be for one? so if he kept his comp under 90,000 in 2004 he would be go into NHCE status for 2005. or is the threshold for 2004 95,000? i will run the non qualified idea by the employer. thanks a lot.

a hotel management firm offers its thousands of employees a 401k with no match. its kind of a "its there if you want it" plan. of the 1400 plus eligible NHCEs only 96 are actually participating. so obviously the miserable participation rate forces the sole participating HCE refunds each year. last year he was only able to defer 3282.19 and that includes the 2000 catch up. his comp was 97000 and he receives a refund each year. obviously he is not real happy about it. his refund for 2003 was 2030. anyone have any suggestions for this poor guy. he is 64 years old this year and i am real sympathetic towards his situation, but im strapped by the Nondiscrimination rules. outside his IRA does he have any options? would a private letter ruling be a waste of time? could Portman-Cardin savers match legislation benefit him if it is passed? on behalf of this lonely HCE in a 401(k) filled with non participating NHCEs, i thank you.

the document makes no mention of top heavy contributions to key employees. it is a mass mutual(corbel) proto. if non keys work 500+ hours they receive full integrated contribution. this is strictly a profit sharing plan. if they work less than 500 and have met eligiblity they get the 3% regardless of employment on the last day. i would guess that if the document makes no mention of key employees pertaining to TH minimum, then no TH for that key ee who worked 400 hours.

is it correct to not provide a 3% TH cont to a key employee who is eligible, but who failed to work more than 500 hours during the plan year? plan is standardized protoype and requires 500 hours to receive contribution.

an employer who rescinded safe harbor effective 12/31/03 and for 2004 will be matching 100% up to the first 1 percent deferred is wanting to possibly put in a higher match at the end of the 2004 plan year(12/31) if finances allow for it. i do not believe that the plan can go back to a safe harbor during the plan year, but is it allowable to make an additional discretionary match at the end of the plan year if the plan was making the 1% match during the course of the year? the trustee's are only wanting to match those participants who are actively deferring so a profit sharing allocation at year end is not an option they want to explore. they have advised their employees of the safe harbor rescind, the 1% match for the current plan year and the fact that if finances allow for a greater match at years end, they will contribute.

from a trustee perspective for what reason would i want to NOT make monthly payments to a participant and provide a lump sum? is there any incentive? a participant is retiring this calendar play year, her monthly benefit has been calculated at $642 or $7704 a year, what would be the benefit of leaving her funds in the plan as opposed to just paying her in lump sum. the plan doc allows for both formats. finally, if they did make a lump sum payment, would there be any adjustments necessary on next years contribution? meaning is it possible the contribution would need to larger/smaller due to the lump sum dist.? i don't believe that would have any bearing, but would like a second opinion. the plan has 1.8 mil in assets and about 400,000 in cash.

a non leveraged esop's original intent was for the company to purchase the stock from term. participants so that the owner would be the sole stockholder. later this intent was changed without notification to the TPA. Now there are appx. 43 shares (40 from the 2001 calendar year valued at appx $170280 as of 12/31/01 and 3 from 2002 valued at appx $13745 at 12/31/02). These shares need to be put back into the plan. should the 2001/2002 plan years be amended and run the risk of possible audits(the plan currently has just over $600,000 in assets) or could they deposit the shares in the current plan year as a non-cash contribution? the president of the corp has been approached for a possible purchase of his share in the company and the purchaser is doing due dilligence.

i saw J. Geils on the "centerfold" tour. u2 opened up for them. i've been curious to know how musicians save for retirement since most are not "employed" by the record label. i thought for the most part, their retirement was left up to the individual musician. i know for years the grateful dead offered benefits to their crew, but its rare to hear of such activity in the music biz.

DESPITE TRYING TO CONVINCE THEM NOT TO(FOR NUMEROUS REASONS), A CLIENT, WHOSE ASSETS HAVE BEEN DISTRIBUTED SINCE DEC 2001, INSISTS ON FILING FOR DETERMINATION FOR TERMINATION. COULD THE FACT THAT THE PLAN IS LIQUIDATED PRESENT A REAL ISSUE FOR THE IRS/CLIENT? IT'S ALMOST BEEN TWO YEARS AND WE HAD A DELAY IN GETTING THE NEW 5310'S ON TOP OF GUST RESTATEMENTS. I ADVISED THE CLIENT THE FILING DOES NOT PREVENT THE IRS FROM POSSIBLE FUTURE EXAMS. ALSO, THE COST INVOLVED AND THE FACT THAT THE IRS JUST DOES NOT HAVE THE STAFF TO EXAM ALL THE PLANS THAT TERMINATE. STILL, THEY INSIST.