Lori H

im curious. who is the band? and did they go 401(k)?

IT APPEARS THE 401(K) WOULD OFFER THE MOST FLEXIBILITY AND WITHIN A COUPLE THOUSAND DOLLARS ANNUAL ADDITION OF THE DB. FINAL QUESTION IS WOULD HE BE ABLE TO DEDUCT BOTH THE P.S. CONTRIBUTION OF APPROX. $12,000 AS WELL AS THE $12,000 DEFERRAL ON HIS 1040? CATCH UP'S ARE NOT DEDUCTIBLE, CORRECT??? THANKS.

THANK YOU. MATCH IS SUBMITTED ON A PAYROLL BASIS.

Plan is currently a traditional 401(k) plan that matches 100% up to first 4% deferred. Participants are immediately vested. I want to convert the plan to a safe harbor since the current match would satisfy the safe harbor provisions. This would be considered an enhanced matching formula, correct?

Mr. Poje - thank you for your response. However, I've taken another look at this illustration and believe STEP 3 was calculated with 401(a)(17)comp plus comp excess of TWB(80,400). I will try to explain the steps better. The participant had $170,000 in comp. In Step 1 he received an allocation of $5,100. In Step 2 he received an allocation of $5,100. In Step 3 he received an allocation of $7,009.20 and in Step 4 an allocation of $9,314.91. If you add the allocations for Step 1-4 it totals $26,524.11 and this is what he received as a contribution. The total allocation to 6 participants was 84,086.40. Also, to clarify Step 2 and the 3% of Total Comp allocation. Step 2 was 3% of Total Comp to those in excess of the TWB. Any thoughts? Step 3 is what I question an allocation of 7009.20 was given based on 259,600 comp. and that is 89,600 in excess of 401(a)(17). And there were no 5500C/R in 2001. Probably unfortunate for this attorney.

Thanks for your replies. Probably the DB would be more costly from an administrative stand point i.e PBGC, Actuary. Could the 401(k) also accomodate a matching provision? Perhaps? Thanks again.

Prospective client who is age 72 and trains horses. His schedule c net income is $60,000. Accountant and myself are trying to determine best retirement vehicle for him. I understand he is limited to the TEFRA factor or 20%. Would that be his only available deduction($12,000)? Could he possibly put in more with a 401(k) which in this case i believe is called a Uni-K for 1 part. sole proprietor? What's to keep him from deferring $12,000 plus the $2000 catch up and then doing some sort of match/profit sharing? Could he do it and just not get a deduction? Also, he would be subject to the RMD's as well, correct? Did I provide enough information? Thanks

Thanks to everyone for their responses. AndyH, the reference to the Cumulative Disparity Limit was taken from the Basic Plan Document of a Defined Contribution Prototype. It is referenced in the formula for Minimum Allocations Required for Top-Heavy Plan Years. It's interesting that someone mentioned the allocation prepared by an attorney. This is one of the reasons I'm confused. I have a 2001 Plan Year allocation prepared by an attorney/actuary which uses the following formula: Step 1 is 3% of comp. In Step 2 there is a column which shows the excess comp, a column for the ratio each participant's excess bears to the total excess, the third column multiplies the remainder of the contribution by the excess ratio, the fourth column shows the lessor of 3% of comp or the total in column three. Step 3 is comp plus excess comp multiplied by 2.7%. The participant with $170,000 in comp received an allocation of $7,009.20 which is ((170,000 + 89,600 = 259,600) x 2.7%. Step 4 is the remainder of the contribution multiplied by comp %.

Is there an integrated allocation where the compensation used is in excess of the $200,000 limit? After looking at several allocations I've become confused. Some formulas indicate a percentage of comp as a base contribution plus 5.7% of comp in excess of the TWB. While another formula indicates a formula of allocating 5.7% of the sum of each participant's comp plus excess comp. However, if this allocation causes someone to exceed the Cumulative Permitted Disparity Limit the allocation shall be based on the participant's comp rather than comp plus excess comp. If someone could clarify what is comp, excess comp and total comp it would be appreciated.

Can a SEP invest in real estate?

i do not believe this would be considered a controlled group, however i would appreciate a second opinion. employer 1 sponsors a trad. 401(k) ownership% ownership% person or entity employer 1 employer 2 A 25% 24.4% B(family investment trust of owner A) 24% 24% C 15% 14.9% D 2% 2% E 2% 2% F 2% 2% G 20% 0% H 4% 3.96% I 6% 5.94% J(grandchildrens trust of owner H) 0% 19.8% K(employer 1) 0% 1% owners c,d,e are related. as are owners g and i. do i have enough information to determine controlled group status? many thanks.

thank you very much for your responses. the prospective client is an HCE and 100% owner of two companies(w-2earnings), one of which has the aforementioned 401(k) in my first post. With this info, am I correct in assuming this constitutes a controlled group, therefore, the availability of a 401(k) to his Schedule C company would be a "no-no"? His Schedule C company is unincorporated and it's net income consists of rental income received from affiliated companies on which he owns the property-approximately $50000 and consulting income charged for management of the properties-approximately $60000 paid by his company that maintains the 401(k) that he wants to opt out of. Doesn't sound like a viable option for the gentleman. Is there any alternative to a sole proprietor 401(k)? Something Nonqualified perhaps?

A client who is an HCE and member of a company that we recently assumed the responsibility for administering their 401(k) plan wants to discontinue participating in that plan and roll those funds into a plan for his unincorporated single proprietorship. This company solely consists of the HCE and his wife. The net income consists of rental income received from affiliated companies on which the HCE owns the property - approximately $50,000, as well as consulting income charged for management of the properties of approximately $60,000 which is paid by the sponsor of the plan that the HCE wants to quit participating in. I understand that an unincorporated business may use 401(k) plans as a benefit program and calculations are more involved since the HCE's income would be reduced by his wife's. However, are there any ramifications of establishing a plan for this Schedule C company due to the fact that the HCE is a member of the other company? If additional information needs to be obtained please let me know.

A husband and wife were participants in a 401(k) plan. The husband is now deceased. Can the wife, as beneficiary, roll his account into her account in the plan? Or, if she decides to roll the proceeds to an IRA can she roll it into an IRA which is already in existence? I see where a similar question was posted on the message board in 1999 but I didn't see any responses. So, I apologize, in advance, if this question has been asked and answered under another topic. Thank you for your responses.

Can a traditional IRA invest in real estate? If so, are there any penalties or special reporting requirements? I've read the IRS publication and know about the prohibited transactions but I wasn't sure if the property could be purchased from a third party. Thanks in advance for your responses.

Company A has three owners who each own 33 1/3%. Company A employees over 100 employees. A couple of years ago the company was to be sold but the deal did not go through. At that time one of the owners of Company A became the owner of a spinoff company which is an S Corporation. Company B has 7 employees and is considering a SIMPLE 401(k). The owner of Company B will eventually grant the other two owners of Company A 33 1/3% ownership each in Company B. This will make the ownership of the two entities the same. I think this constitutes a Brother-Sister Control Group but would appreciate any input.

Thank you for your responses. However, I have another question. Are there standardized prototype 457(B) documents available?

A client maintains a 403(B) plan. An HCE maxes out and and the client is looking to offer this HCE a means to shelter more of her income. Would a Top-Hat be the best route? The HCE is 54 years old and earns approximately $130,000 annually. The plan is exempt under 501©(3).

The 401(k) Safe Harbor is for another entity. As for the questions raised by Andy: There is no past salary history. The is not a cash flow need. and There will be no other employees.

Thanks again, for your responses. I understand the possible dynamic future of 412(i)'s and the need to CYA, but here are some more facts: 1. The business has two employees, the owner (age 45) and his wife. 2. The owner is the only one drawing income. For the next five years, he estimates that income to be as follows: Year #1 = $160,000 #2 = $350,000 #3 - #5 = $60,000 per year After year 5 he doesn't know what income, if any, will be generated. The agent wants to park the money in annuities only. The owner is also a participant in a 401(k) Safe Harbor. I'm leaning towards a traditional DB. However, the agent is not yet ready to rule out a 412(i).

Thank you for your responses. To answer your questions: 1. He is trying to shelter as much income as possible. 2. In five years the income will be $0.00. To add to the original question - If a 412(i) is not a good idea would a traditional DB plan work?

Would a 412(i) be a good option for an owner, age 45, who is currently earning $600,000 annually, but whose income level will be tapering off over the next five years?

A participant has made six months worth of payments on a 30 year mortgage loan and wishes to pay it off. Would the pay-off amount be the principal remaining or the remaining principal plus the all the interest that would have been due during the life of the loan?