No Name

OK. Acrrued benefits are one thing, but what about benefit calculations going forward? Average comp, pre-participation = $60k. Average since plan started = $20K (self-employed, after deduction for DB and SE rip-off). Seems to me High 3 is a permanant #, regardless of new regs. Been around too long to know what "seems to me" is often wrong. cbmmn, thanks. Drew that maybe 35 years ago. Full size is available for an email address.

Care to enlighten us?

Thanks for the reply. I have knowledge of many other plans set up based on pre-participation comp. (Kind of like catch-up contributions, except DB contributions taking comp down to low figures.)

Its always (to me) been an open question whether high-three-year-comp was "as an employee" vs "as a participant". The Code and Regs are at logger-heads. Now, the proposed new regs make it clear that its comp while a participant. I've got a plan where benefits are based on high 3 year employee comp vs participant comp (pre-effective date). Think there'll be a grandfather?

I was interested to see that the $10,000 minimum benefit may not be converted to a lump-sum benefit. I had heard opinions on this, but the new regs make it crystal clear.

Can I bid $2.00. Seriously, why turn long term capital gains into ordinary income? Lose deductions for property taxes? Lose tax-deferred growth of funds used to pay those taxes?

Anyone care to share a letter, to be sent to a HCE, explaining why they are getting a refund of deferrals because of a failed ADP test. Looking for something in layman's terms, but having a tough time because I'm too technical.

I'm afraid you'll need a custodian. Do a Web search on "Self-Directed IRAs". There's a company in San Francisco called Pensco that may be able to assist (no affiliation). I assume there's enough $ to invest in said Real Estate. If the fees seem high, wait 'til you see closing costs, etc.

Does anyone have a link to a table of non-blended qxs (Male and Female). I develop my own APR tables, but the actuary is saying he needs sex-specific aprs for RPA. Boy, I love acronyms! The only table I could find was a 50/50 blend.

Issues as I see them: 1) Possible PT 2) Plan gets no depreciation 3) Owners convert possible capital gains into ordinary income. Probably more

Mother in law dies and leaves house half too each daughter. One daughter would like to sell her interest. The other daughter would like to keep the house. Daughter 2 happens to be the wife of the owner of the Plan Sponsor. Sponsor would like to buy the house. Is sister of wife of trustee an underlated party. Would real estate in the Plan be a good idea?

Am I doing this right? Have a client failing the ADP. A few HCEs are catchup eligible. The method I'm using to fix the ADP test is: 1) Calc the ADP of the NHCEs (we use prior year). 2) Calc the ADP of the HCEs. Fail. 3) Find highest ADR of an HCE and solve for amount of reduction needed to equal the next highest HCE's ADR. 4) Calc the ADP. Fail. 5) Repeat 3) with both HCE's (now equal) ADRs to the next lower level. 6) Repeat 5) and 6) 'til passing. 7) Calc the total amount of the reductions. 8) Assign a refund amount to the HCEs with the biggest dollar amount of deferral until it equals the next lower dollar amount. Repeat as necessary until Step 7) amount is used up. Then, and only then, do catch-up considerations come into play. Catch-up eligible HCEs will receive smaller (or no) refunds. Seems counter-intuitive.

Double checking. Am working on a client that adopted a 401(k) with the 100% of first 4% match. Semi-annual entry dates. New participant comes in mid-year, defers 4% from entry date (until termination date) and gets matched 100%. Plan is Top-Heavy (except for the exception). Because of the Safe Harbor, I'm thinking I get the free ride from the Top-Heavy rules.

The Schedule I in front of me asks for the value of non-cash contributions on Line 2B. Would seem to imply that they're OK. Instructions only ask for the fair market value when contributed. Employer contributing said non-cash contributions would incur tax on the difference between its basis and the deduction taken. Just my two cents (and worth every penny).

Well said, Effen.

Modification of the standard Schedule C calc (I use an Excel version that does iteration) is fairly straight forward. I add a couple extra columns called AGE and POINTS. Allocation is my points over total points. Be careful that these extra columns don't interfere with the owner's compensation calc.

My client is an incorporated dental practice with a 10%! Safe Harbor NEC 401(k). The are two other dentists sharing office space, receptionists, billing clerk etc. All employees are paid W-2 from the corporation. The two other dentists (being treated as sole-properietors) reimburse the corp for a pro-rata share of rent, insurance and pension contribution. There is no written partnership agreement. One sole prop has a SEP and a part time employee he considers his (I guess he pays her directly). He wants to contribute for 2004. Any issues? I don't have all the details but can get as much as necessary.

Before the Code was written! For the first time in their 129 season openers, the Reds finished one off with a homer.

How is director compensation being reported? W-2 or 1099-Misc? Sometimes, someone else has already made your decisions for you.

Don't forget Lori and me!

I'm running some numbers on a sole-proprietor age-weighted profit-sharing contribution. The document is a prototype with a grafted-on amendment to the allocation formula (essentially individually-designed). (Have some dashes!) Owner is 70. When calculating "points", what does your software do? Use current age (no discount), premium (age 65 - current age, an increase)? I shouldn't have to ask, except that I wrote the software and spreadsheet. I can't double-check against myself. Document says discount from NRA to current age. Silent on what happens after NRA is attained.

I'm looking to put something in the file and feel cursed that Blinky is the first responder. Can someone add to the thread acknowledging the respect we have for him, despite the moniker? (I should talk - No Name!) I'm guessing that the deduction answer is $14,000. Anyone wanna bite on that one.

Hope this is a softball! Have a new client with a Solo 401(k) Plan. He deferred $16,000 before year end 2004. He's over 50. His net schedule came in at (round numbers) 15,000 and 1/2 SE tax is 1,000, so Plan Comp is $14,000. Am I correct in assuming that $2,000 (or $3,000 for that matter) can be classified as "catch-up" and therefor no excess contribution? Is the $16,000 deductible, or only the $14,000? Thanks all.

Thanks for the lively discussion, folks. I don't want to drop it quite yet, since there is considerable disagreement on the subject. I appreciate that posters I consider "High Caliber" have weighed in. (Wish there were an IRS lurker that would express an opinion.) (Also, where's that Fish?) I agree with everyone that "What does the document say?" rules the roost. Its new to me that a notice becomes an amendment to the Plan Document (but no argument). I like the idea of the "negative notice". "I'm not counting on safe harbor and no 3% for next year". I send out notices with a cover letter that says, to the effect, if you want to be a Safe Harbor Plan in 200X, distribute this by X date. I've always thought the document language referred to above gave the clients that discretion. On a happy note (rare and far between), I broached the subject with the client. If you read back, its only two people. HCE thought, WTF, I can handle 3% and if things brighten later this year, I'd rather have the flexibility to defer as much as I could. I wouldn't push this issue if this weren't a searchable archive, and much of what I read didn't go this deep. I thank you all for, not just this, but all topics that have been picked to the bone.

No. Its a personal limit.