E as in ERISA

Are you doing prior year testing for ADP? I can't remember how the special rule for "first year" of a 401(k) plan would apply here. Would it apply only to 2003? And then for 2004, would you have to use 0% as your prior year NCE ADP?

I.e., the $12,000 only applies to those amounts that considered pretax employee contributions -- he can make an employer contribution with respect to the self-employment income and it doesn't have to be subject to the 402(g) limit.

I think that guidance leaves the issue of spousal consent unanswered at this time. (I don't think that they've resolved the issue of how to get PIN/password information to the spouse).

In regard to election as to form of benefit (e.g., direct rollover), see IRS Notice 99-1 at http://www.unclefed.com/Tax-Bulls/1999/not99-01.pdf In regard to special tax notice and participant's consent to distributions over $5,000, see 2000 Treasury Regulations Section on 402(f), 411(a), etc. at http://www.benefitslink.com/taxregs/electr...min_final.shtml (also see preamble of proposed regulations at http://www.benefitslink.com/taxregs/paperless.shtml)

Since the accounts aren't properly titled right now, make sure that the individual participants aren't going to be getting tax reporting in their SSNs for 2003.

Yes. I'm not saying what the answer is for the FSA. But more than "comfort" is involved and New Balance are designed with feet problems like this in mind....

I think it's like getting Al Capone on tax fraud. Non diversification in itself is generally not going to cause an IRS or DOL examination (and not a participant lawsuit). E.g., if I want to invest all of a small IRA in an unrelated company, they're not going to come after the IRA. But if the IRS or DOL thinks that the IRA is primarily being use for other purposes, then it can use this rule to take away the IRA status for the account. E.g., if I'm using the IRA to purchase stock or land from a quasi-related party, it may become suspicious. What's the answer when asked: Why this investment? Because...it's a great investment and I'll be able to RETIRE early on it? or a "Because" that has nothing to do with the IRA?

The "reasonably equivlent basis" rule in DOL regulations 2550.408b-1(a)(4) says that creditworthiness may be a factor in making loans.

http://www.newbalancecatalog.com/FeetHurt/...arFasciitis.htm

What is the diagnosis? Plantar fasciitis? I think that the shoes are a little more than "comfy." The condition can last a year. Wearing regular shoes without adequate arch support can exacerbate the condition -- causing tears in the ligament -- which can cause excrutiating pain -- like a knife going through the person's foot -- every time the person steps down. The stress from this condition (not being able to walk) can cause potentially cause additional symptoms (headaches, etc.) When the case is extreme, surgery may be necessary. The condition is most common among athletes. Wearing good tennis shoes can significantly improve the condition and eliminate the pain. So "good tennis shoes" is a very common "prescription."

The language creates the trust. You can get a TIN pretty by filing an SS-4. The next questions are who is named as the trustee and is that person/persons involved in the fiduciary decisions? Are the assets held under the name of the trust? Whose EIN is associated with the account?

If you get a notice -- which may even be doubtful -- write a description of the facts here (how the form was timely completed and signed, etc....) and describe what procedures have been implemented to make sure that it won't happen again. In all likelihood, any penalties would be abated.

My gut reaction is that the travel expenses of the second parent would generally not be considered "required" or "necessary" for the medical purposes. They would probably be assumed to be personal -- unless there are extenuating circumstances. Like the others, I would suggest that the IRS be asked the question, especially if the $$$ are significant enough.

Although the full Senate has not passed a bill yet, the Senate Finance Committee approved NESTEG with similar provisions in September.

I think that answering Q. 2 will allow you one-way correspondence -- the IRS can send the other person copies. I think that using the Form 2848 will get you two-way correspondence -- the IRS can send that person copies AND that person can speak to the IRS on the taxpayer's behalf. The IRS frequently won't talk to you if you don't have a POA.

On issue one: Be careful that plan accruals are not being affected by aggressive individual tax strategies. Just because they're deducting it on their individual returns doesn't mean it's really "an expense of the partnership" that should be considered for plan purposes. According to the Schedule E instructions, the partner may only deduct "unreimbursed ordinary and necessary expenses" paid on behalf of the partnership if the partner was "required to pay these expenses under the partnership agreement." Some partners are a little aggressive in claiming unreimbursed expenses on their returns. They may throw any expenses remotely associated to the partnership on their return just to reduce their taxes (e.g., automobile expenses, equipment, entertainment, etc. that the partnership doesn't require the partners to actually incur). You could ask the client to verify with its tax counsel which expenses should be considered as partnership expenses for purposes of the plan accruals.....

You might try and find an ADA forum. This one deals more with ERISA and IRC.

How would you prove that the other employees didn't have the option and just turned it down? Once one employee has been given the option, it creates the suggestion that others might be able to do it, too.

Are you asking whether the amortization schedules should assume bi-monthly or monthly payments? I.e., whether interest should accrue monthly or bi-monthly? If the payments are withheld bi-monthly, then I believe that is how the interest should be calculated.

The Form 5500 is not based on the recordkeeping reports. It is generally based on the audited financials, which are prepared based on the trust reports with proper adjustments for the accrual basis of accounting if necessary. If the plan is audited and the financial statements are prepared on the accrual basis, then the client will have to add a footnote to the financial statements explaining why they do not agree with the Form 5500 (if you prepare it based on the recordkeeping reports).

In the situation I'm talking about the 419 rules would not apply, because contributions would not be made to a fund. The employer would simply accrue the deduction for a liability that had been incurred by year end. If you can meet the "all events" test of 461, then you don't need to use a fund and 419 in order to increase your deduction for expenses that have been incurred but not yet reported to the plan at year end.

If you allow catch-ups in your plan and you have a 50% limit, then you have to allow catch-up eligible participants to defer above the 50% limit. If you have a 75% or higher limit, then you don't have to allow catch-up eligible participants to defer above that limit. I haven't seen anyone that is doing both limits at the current time. There would be few persons who would hit the 75% limit without hitting the 402(g) and catch-up limits.

If you allow catch-ups in your plan and you have a 50% limit, then you have to allow catch-up eligible participants to defer above the 50% limit. If you have a 75% or higher limit, then you don't have to allow catch-up eligible participants to defer above that limit. I haven't seen anyone that is doing both limits at the current time.

The issue is generally the deduction for claims incurred but not reported (IBNR) at year end. My understanding is that in the past it was difficult to take a an accrual basis deduction for IBNR for a self-insured medical plan. There was no obligation on the part of the plan -- and the "all events" test would generally not have been met -- unless and until the participant actually reported the claim. As a result, many employers used VEBAs to accelerate their deductions. They could use the 419/A rules to take a deduction for any cash contributed to the VEBA by year end -- provided it was within the 419/A limits. I believe that it is now possible, in some cases, to take the deduction for claims IBNR without a VEBA. The contractual arrangements with HMOs and other service providers often create a legal obligation that satisfies the "all events" test before the claim is reported. I believe that the change from the VEBA to accrual basis method is sometimes considered a change from the cash to the accrual basis and requires that the appropriate forms be filed.

The 401(k) is also a continuation of the MPP, based on the merger.