John Feldt ERPA CPC QPA

Generally, it's majority owners (50% or more ownership).

In January 2008, at the Los Angeles Benefits Conference, it was noted that while there may be ways to legally accomplish such a design, the arrangements are also showing up on the IRS radar as possible abusive tax avoidance schemes. The IRS has not officially declared them to be abusive tax avoidance transactions at this time, however. http://benefitslink.com/boards/index.php?s...24&hl=ERSOP They should get competent counsel to do the transaction right. The plan should probably have some employer contributions in order to really be considered a plan and not just a conduit for rollovers. The end-game distribution aspects should be considered before the plan is set up: ordinary income tax instead of capital gains tax (the basis was zero). That's just a start.

If the non-profit wants to provide benefits primarily to upper management and HCEs, then a 457(b) plan could work. If they file a letter with the DOL when the plan is established, notifying the DOL of the existence of the plan, then no 5500 filing would be required (unless the laws/rules get changed). Be careful - a 457(b) plan document for a non-profit company should have much different provisions than what you would see in a document for a 457(b) of a government employer. I can't speak as to the 457(f) side of your question.

It depends on his ownership percentage of his practice. If he owns more than 50%, he is a majority owner, and the 415 limit is aggregated. If he has a business partner, thus owning only 50% or less of his practice, then the 415 limits are separate. The employee controls his own 403(b), so he's the 100% owner of that piece of the pie, making the control occur when more than 50% ownership exists in another practice.

Thanks Tom, that is extremely valuable info to know.

... he said foolishly...

Hmmmm. If the result you provide is truly correct, then with a contribution of $11,400, then the entire account should now have lost $12,255 and it's overall balance must be about -$855. Is the calculator an HP 128c with Reverse Polish Notation (RPN)? edit: typo!

Ignore the other $11,000 and it's earnings, it's not getting refunded. You're saying that the $400 excess amount, all by itself, has gone down by $430; the earnings/losses on just the $400 excess has turned it into -$30? ??? edit: for a typo

http://www.icmarc.org/xp/rc/about/news/200...330roth457.html I think the Bill still will need to be reconciled in conference committee before it can go up the hill.

It looks they they still apply. I just did a review and it did not appear to have an expiration date. Maybe hat size is better.

Not official code/regs, but under section III: http://library.findlaw.com/1996/Nov/1/127234.html Also, about the 7th or so paragraph down in this artcle: http://www.thefreelibrary.com/401(k)+plans...gain-a019224823 "Unfortunately, after the enactment of the Tax Reform Act of 1986, most associations and other private nonprofit organizations were precluded from offering 401(k) plans to employees. Only tax-exempt organizations that offered these plans before July 2, 1986, could continue to sponsor them. Now that's all changed. After a 10-year battle by ASAE and its partners in the nonprofit community, 401(k) plans are once again available to associations, other private nonprofit organizations, and their employees. Provisions in the Small Business Job Protection Act of 1996, enacted August 20, 1996, allow associations and other nonprofit organizations to offer 401(k) plans beginning generally on or after January 1, 1997."

Do those temporary regs still apply? If so, thanks!

True. You cannot have a 403(b) plan, but a 401(k) plan is good to go. This did change a while back. Before January 1, 1997, you would not have been able to adopt either a 401(k) plan nor a 403(b) plan, but after 1996, the doors were open for you for a 401(k). I think this was in the Small Business Job Protection Act of 1996.

All.

Here's how the IRS might answer: You define the 2 1/2 months by measuring it from the day the participant severs to a date that is 2 1/2 months later. I'm doubting that helped. This is only important for employees that terminate less than 2 1/2 months before the end of the plan year, because the regulations allow you to go to the later of the end of the plan year or 2 1/2 months after severance. I'd argue that a half month is 15 days: Terminates November 20, 2007: 2 1/2 months = February 4, 2008? Terminates December 20, 2007: 2 1/2 months = March 6, 2008? Perhaps if the final 1/2 month is entirely in February during a non-leap year, the IRS might argue that it's only 14 days. Only the oracle knows.

I agree that just having access to it is not enough. I said I would post the cite for the profile, but the Fiduciary Guidance Counsel member found it for us while I was out. The plan must provide the participant with a copy of the most recent prospectus under DOL Reg. §2550.404c-1(b)(2)(i)(B)(1)(viii). However, I believe that a copy of a “profile” would suffice in lieu of a prospectus unless the participant specifically requests the prospectus itself, per DOL Advisory Opinion 2003-11A. Just my opinion. Also, IMHO, just because the court need not defer to it, that does not mean the court can easily ignore it. Maybe someday we'll see if a court case is found that hinges on this item, and where the court decides to ignore DOL Advisory Opinion 2003-11A. edit: typo

The way the code or regulations are written, the adoption of a qualified plan invalidates the simple plan.

Basically, the 401(a)(31)(B) amendment (a.k.a. automatic rollover amendment, or mandatory distributon amendment) was generally required to be adopted at the end of 2005, or the due date of the company tax return including any extension that contained the plan year containing March 28, 2005 (something like that). However, if your plan did not have any language that forced out distributions, then you would not need such an amendment (we had a couple of DB plans that did not pay any small lump sums, for example). If that is not your situation and if the amendment has just now been executed (signed), then it is late, and you can file under EPCRS for a mere IRS fee of $375.

I've not found any, so I'll say no.

Is the hospital plan a 403(b) and the PC plan a normal DC type PS/401(k) or money purchase? If so, then: Since the PC owner owns 50% or less of the PC, then the 415 limit is not aggregated with the hospital 403(b) plan. However, if the owner of the PC owned more than 50% of the PC, then their PC plan and the hospital 403(b) plan must be aggregated for 415 purposes. The 402(g) limit for deferrals is an individual limit, aggregating all 403(b) and 401(k) deferrals together (without regard to 457(b) deferrals).

I'm pretty sure the "prospectus" can be a summary instead of the whole booklet prospectus, just an fyi. If I remember, I'll find the cite when I return to the office and try to post it here.

AFTAP: "adjusted funding target attainment percentage” http://www.irs.gov/pub/irs-tege/epnf_0807.pdf Except zero divided by zero is anything you want (indeterminate), not undefined. I want 0 / 0 = 100% - so, uh, well, to prove that we multiply both sides of the equation by zero and we get 0 = 100% x 0 not buying that one I suppose? Alright, - the IRS didn't buy that idea for ADP testing when someone has zero comp.

If I remember right, somewhere near the end of the PBGC Form 1 instructions, it indicates what the PBGC regs also say: Majority owners are determined as of the date of plan termination, and therefore will need to forego receipt of benefits on or before the date of plan termination. If I find the cite, I'll come back and add it later. added later on edit: I was not quite right in memory, see page 21 of the pdf file, left column, after explaining the election to forego receipt of benefits, it says: "Note: Majority owner status is determined at the time of the election." I believe that means the election to forego receipt. http://www.pbgc.gov/docs/500_instructions.pdf

You are probably aware, but just in case this helps: under 404(a)(7), you can ignore the first 6% contributed to the DC plan (of course deferrals are also ignored). So it's really more like a 31% limit (for 2007).

I believe you are correct. If your plan doesn't have any other employer contributions, then you meet the top heavy exemption - no TH contributions needed. Tough noogies to the HCEs who are not key. I don't know why they didn't put that phrase in IRC 416(g)(4)(H)....