amcorson

That is correct, 1256 contracts are specifically mentioned in IRC 1402.

BG5150: sorry to jump in and add another scenario, but our issues seem closely related and hopefully we can both get some guidance/conversation started on Investment Partnerships. My practice has always been to start with the number in Box 14A and that Capital gains (short or long term) cannot be used as earned income. Now I have come across this issue: Investment Company is a LP and the K-1 Box 1 = $500k+ (management fees), Box 4 Guaranteed Payments = $150k, Box 14A = $150k. I believe the firm/CPA are taking the stance that Limited Partners do not have Self Employment earnings other than the Guaranteed Pmts(current, but old IRS regs), even though the IRS recently stated in an OCC Memo that investment management income (not investment gains) should be Self Employment earnings (even for Limited Partners). I am thinking the $500k+ should not be used as Earned Income for plan purposes if they are not putting it in Box 14A and not paying SE tax. Unfortunately the CPA is not much help. As mbozek pointed out, Carried Interest can also come into play with these arrangements and complicate things further. Anyone have experience with Earned Income in Invesment/Hedge Fund partnerships? Thank you.

Company funds a SIMPLE IRA for 2014. Wants to move to a 401(k) plan. Company fiscal year ends 9/30/14. If they stop SIMPLE @ 12/31/14, can they adopt a 401(k) on 1/1/15 with a short plan year of 1/1/15 - 9/30/15? I have seen language that says a company cannot sponsor another plan in the same "plan" year as the SIMPLE and language that says a company cannot sponsor another plan in the same "fiscal" year. Which is correct? This is assuming they do not want to "void" the SIMPLE for 2014. Thank you for any clarification.

Agreed, it is better to exclude from the get go. I am trying to get clarity on excluding participants via amendment going forward after they have already entered the plan. Thanks.

Let's say you designed a CB plan and for the first 2 PYs you had an allocation group of "All Other Employees" getting $0. Then in year 3 before benefits are accrued you do an amendment to exclude those in the "All Other Employees" group by job category. All coverage, 401(a)(4) etc passes under both scenarios. Basically they are going from being a "participant" getting $0, to not being a "participant". A popular book shows an example of participants in a DB plan being excluded by category after they were participants and states that their participation in the plan is "discontinued". Of course there are no cutbacks, it is all in the future. Going forward are these "Excluded Participants" truly not "participants" now? I have the above example from a book and I have someone taking the other side. The other side is they cannot be excluded once they enter and have to continue to be considered a "participant" going forward due to anti-cutback rules. Any thoughts?

I need the help of the experts here. I recently came across a cash balance plan design as follows: 1st Plan Year - 12/31/2009 - 12/30/2010 2nd Plan Year - 12/31/2010 - 12/31/2011 Company Fiscal Year = Calendar The goal being to double up deductions for 2010. Example: 1st plan year $250,000 deposited after 2009 TR due date, so deducted on 2010 tax return. 2nd plan year $250,000 deposited by TR due date, also deducted on 2010 tax return. I know if you make a contribution after the tax return due date it can be deducted the following year, but the 12/31 start date just seems wrong. I also know for DB deductibility, you have to choose a method of which plan year to use and stick with it. The excuse here was the plan was not signed by the tax return due date so the ending year had to be used and it will normally be the beginning year and a resolution says as much. This may be the problem. So basically they are trying to use the fact that the PY starts in 2009, 2010, etc to claim a deduction for that year. Just seems off to me. Thanks

I have seen companies with a separate Premium Reimbursement account under a cafeteria plan allow Part B premiums to be reimbursed. As descibed elsewhere Medicare is the primary insurance for small companies (< 20 employees), so why could it not be reimbursed like regular individual helath premiums?

Thanks. There is one plan. I am still confused by the fact that only 50 employees are utilizing the premium conversion feature, and I read somewhere that an employee is not considered a participant until they "contribute" or use the feature. Let's say an Employer provides 100% of insurance for all employees. This is an employer expense and no plan is needed, correct? If this is correct, why would you count the 65 EEs that the ER pays 100% of premiums and don't uitilize the POP? If the above is incorrect, I guess I have my answer

Plan allows employees to pay their portion of health premiums pre-tax. The company pays 100% of health premiums for 65 out of 115 employees. The remaining 50 ees utilize the POP and pay their portion pre-tax. I have read that the participant count should be 50, and that makes sense, but I cannot find anything definitive. Also, I assume the 100/120 large plan rule would apply if the 115 count was used? Any insights would be appreciated, I am from the Pension side and the Welfare rules do not seem as straight forward. Thanks.

I am doing some research on the following scenario: Company sponsors self-directed 401(k) plan and wants to set up an LLC to hold land that would be leased by franchisees. 401(k) Participants would be given the option to invest in LLC through self directed 401k. The issues I am looking into: 1. Does the land meet the requirements of qualified employer real property as defined in ERISA 407? It meets the geographical dispersment requirement and no commissions would be charged on the transcations. Since it is in a participant directed account, it is exempt from the "10% of assets" rule. Does the fact that it is held in an LLC come into play? 2. Company wants to impose a $15,000 minimum investement in LLC option. My understanding of the nondiscrimination rules require the plan to test the number of participants with $15,000 or more, based on the first part of the average benefits test. If it passes this, the option is nondiscriminatory. Any other issues I need to research further? Thanks.

In recently was asked the following what if scenario: Doctor owns a corporation and has a current profit sharing plan with one other employee. Doctor also owns real estate in a living trust, has his real estate license and manages the properties. Cash flow from properties is $150-200 k annually. Generally real estate income is not considered earned income and therefore no contributions to a qualified plan are allowed. Can a plan be set up as a sole propreitor to shelter some of the real estate income? I know there are a number of issues here, but the two I am having trouble with are: the real estate being held in a trust (but income and taxes go to individual), and the earned income issue. Any insights would be appreciated. Thanks.

A 5500 is required for a welfare plan with over 100 participants. How is a voluntary life (or vision) insurance option under a cafeteria plan classified? If 100 or more employees elected the insurance through the cafetria plan (all ee pre-tax $, no employer $) would this be considered a welfare benefit that would need a 5500 filing? Or would this fall under an exemption from filing with the 125 plan? I have been told by an isurance company that "voluntary" benefits under a 125 are exempt. Thank you.

Are the assumptions below correct? I have seen conflicting information regarding the Safe Harbor. 2 companies, 1 owner owns 90% of both = controlled group Looking to set up safe harbor (basic match) for company A and no plan for company B Coverage - need to include all employees of A & B for coverage testing ADP/ACP - only plan is Safe Harbor, all employees of company B are not eligible and thus excluded Any clarification would be appreciated. Thanks.

Thanks!

Working on a 5330 for late deposits and not getting any help from IRS rep. Scenario: Deposit 1 - considered late on 10/24/05, deposited 12/16/2005. Per DOL calculator lost earnings are $520.29 assuming final payment date (lost earnings restored) is now. Deposit 2 - considered late on 11/16/05, deposited 12/16/2005. Per DOL calculator lost earnings are $271.07 assuming final payment date is now. This is my understanding of the 5330: 2005 5330 (which is late) - For both deposits - report interest from 10/24/05 - 12/31/05, which is $490.36 and $255.47. For 2006 5330 - report the $490.36,$255.47 AND report the interest from 1/1/06 - current ($29.93 & $15.60). This is basically the interest on the interest. I guess my question has to do with the 12/16/05 date that the contributions were deposited, and thus corrected. It sounds like the prohibited trans continues until the lost earnings are restored, which is reflected in the example above, and does not end when the contributions are deposited? Any help would be appreciated. Thanks.