SteveH

Takeover plan. Plan document allowed everyone hired as of 12/31/2003 to enter the plan. There is a NHCE (hired prior to 12/31/2003) that typically works 9 hours a week. I have been told the employee will never work 1000 hours so will never actually accrue a benefit. He has never worked over 500 hours during a plan year either. In my opinion this person is a participant in the plan because of the eligiblity language above. Once a participant - always a participant, right? This means I must include him in my general testing as eligible but not benefiting. Basically he gets a big fat ZERO and brings down my NHCE averages. BUT I was reading the plan document and in the 1-Year Break in Service definition it specifically says, "An Employee or Former Employee that works less than 500 hours in a plan year..." It rambles on some more, but the fact that it says an Employee is throwing me off. Does this mean that my NHCE has a break in service? Is he not included in the testing? Now maybe I am reading this too literally. Maybe a person is considered an Employee the year that he terminates and can incur a break in service, and a former Employee is someone that terminated in a previous year that has no hours and incurs a break in service. So there is no way for an active employee to incur a break in service unless they terminate. There isn't such a thing as a "deemed termination" because the employee isn't working very much is there? Tell me that I am over analyzing. Tell me that he is a participant and has to be included in the test forever until he is terminated. Tell me I can go back to surfing the internet!! The MLB playoffs have started. The NBA has started training camp. Not to mention all of the bad stuff happening in schoolsThere is a lot of news to be read.

Personally I wouldn't sweat it. Just be consistent.

Just give them this and tell them they should be happy they aren't paying all of these too. 06_dol_fee_tool.pdf

You aren't going to be able to exclude them by class unless you can pass discrimination testing. These H2B workers are living in the U.S. and being paid in U.S. dollar wages. I had a client once that owned a manufacturing plant in China or something. 100% of his employees were Chinese citizens living in China. They were non-resident aliens, a statutory excludable class. It sounds like your client's employees are resident aliens. Americans working abroad are covered, foreigners working in the U.S. are covered. Foreigners living and working in a foreign country are not covered. You will have to exclude because of minimum service or else test them as eligible but not benefiting. Just cover them and put a 3 year cliff vesting schedule on the plan.

I use the benefitslink.com message boards.

It's worse than that, this is a college reunion. So we are talking 10 years after college.

The ASPPA webcast slide says that you lose the entire deduction if you go over 6%. It is hard to see, but I think it says slide 18. The slide reads: "For 2006/2007 combined plan deduction limit 404(a)(7) does not apply if DC contributions do not exceed 6% of compensation. - 150% of CL deduction limit available." "However, if contribution exceeds 6%, combined plan deduction limit does apply without regard to DC contributions. - Both plans then limited to DB minimum required contribution." I don't see how that can be interpreted any other way. Now maybe the slide was wrong, but it sounds like someone is contradicting themselves.

Just make it safe harbor for 2007 with the matching formula. If the employees know that they are getting fired in weeks they won't participate anyway.

I know, I know. Safe Harbor seems out of the questions because the company is just so large. They would get destroyed if all of a sudden 600 people started deferring, there would be potential for 1 million in matching dollars due. There is only 1 HCE participating and there really aren't that many HCEs, maybe 10 total. The owner isn't even using the plan. It was only adopted because his management was bugging him to have something. But the company must have something to offer because I have never seen so many employees with hire dates in the 1980s. At this point the HCEs that think they can't participate aren't even doing their catch ups, so at least I have that I can offer them. They really aren't a candidate for any type of plan that I can think of. It's too bad too, really nice people. Isn't it page 908 of the Pension Protection Act talks about the new 2 year eligiblity for 401(k) deferrals?

I am trying to figure out how to price this client, and also figure out a strategy for the future. Client currently has: A 401(k) plan with no employer matching or profit sharing. 1,500 people employed at some point throughout the year. 700 eligible participants 60 currently participating. "Free" daily val administration Client Wants: Still wants online access. Personal Service. Now my dilemna. To keep fees as low as possible, are we allowed to put a 2 year wait on deferrals? This would help lower his eligible employees and benefit his longer term employees the same as they are right now anyway. I know that you can do 2 year and make everything 100% vested, but in the back of my mind I am thinking that even with a 2 year eligibility that you have to allow deferrals after 1 year. Since he doens't have any match or profit sharing right now, the plan wouldn't operate any differently except cut down on all these employees popping up with zeros on the plan. I don't think I can do this, but maybe...I always have hope.

Ouch! Perfect example of taking a quote out of context

Well I did call ASU on it. I think this would make more sense if I was a graduate from the class of 1976 or something. Oriecat is right, the intention was to have people dressed in the types of clothes people wore during that generation and telling them to not bring those to the reunion. So bellbottom pants and flower shirts from the 1976 picture would probably have been more obvious. Although I have to say I don't think I ever dressed anything like that. It looks like stuff kids wear today not 10 years ago. Not sure why they included the gang signs. I am still chuckling. I spent all my time on the West Campus which was only 3rd and 4th year students. Most were returning students. I graduated at 21 and i am pretty confident I was the youngest ever from that campus. A quick, funny side note. I was taking sumer school before my final semester of college so that I would graduate after the December semester. I don't remember the name of the class I was taking, but the teacher had us go watch that Susan Sarandon movie, Dead Man Walking, at the movie theater. Then he wanted to have the class meet at Padre Murphy's which was right across the street to discuss the movie. I had to raise my hand and explain that I wasn't old enough to get into Padre Murphy's. I guess since this was a 400 level course and the campus was almost all returning students that it was just assumed everyone would be over 21. I was about a month short. It was kind of embarassing and the instructor was a little caught off guard. So because of me we had to just loiter outside the movie theater and discuss the movie.

So this year is my ten year reunion from Arizona State University. I received an email from the alumni association inviting me to the home coming football game, some mixers, tours, yadda yadda yadda. The email was normal except for the picture they used in the email. It is the most bizzare thing I have ever seen. I actually called the alumni association and asked if their server had been broken into and my email address had been stolen. Not only does the caption seem to imply that the festivities at the reunion are clothing optional, but the people in the picture are ridiculous. This is my ten year reunion so the email went out to people in their early to mid thirties. The "kids" on the picture look like they are maybe 20 and I swear it looks like they are all flashing gang signs. Even the guy that looks like his arms are crossed has his ring finger down in an inconspicuous gang sign. Maybe when we were 21 a naked reunion might have been fun, now though, no thanks. I had to share this somewhere, I am still in shock over it. Don't worry though, the alumni association explained to me that the picture was sent on purpose and that my personal infomration had not been stolen.

The answer is could be. I'm not sure if you are new in the pension world, and don't get mad when i say this. Read the document, it will tell you. I absolutely hated hearing that, but for the first 10 months I worked on retirement plans I think I heard that every day. Like Tom said you would have to clarify your comment that the plan "went effective in September 2006." There is an adoption date, which is when the document was signed. There is also a plan effective date, which is usually the beginning of the calendar year or the beginning of the companies fiscal year. It is not uncommon for a company to adopt a plan right before the end of the yaer and have it be effective for the entire year. If the company was just started in September then it may have an effective date of September, but most likely it is a full 12 month plan year. To find out which compnesation to use, look in the definitions section of the document. It will say something like Compensation earned during the Plan Year. Then you will need to go read the definition of the Plan Year. This will tell you if the Plan Year is October 1 through September 30, or January 1 through December 30. I put the fiscal year in there because I made that mistake before. I assumed since the definition of comp said 'earned during the Plan Year" that it was during the calendar year, but the plan was run with a fiscal year end and I didn't catch it. So I asked the client for the employee's W-2 for the calendar year and that ended up being incorrect. Another hint mgiht be the fact that you said it is a safe harbor plan. I think you ahve to use a full 12 month's salary for a safe harbor plan, but I could be wrong on that. I have never looked into that before.

Wow I really don't think I would be comfortable setting the interest credit at whatever the employee earned in their self directed account. Then again I didn't think that "each participant is their own group" in a new comp profit sharing plan would ever fly either. I still don't use it, but I think I am in the minority on that one. Maybe it is a similar concept, it's a tiered interest crediting cash balance plan. If it can be done, who rolls it out first? Can I get internet access and a VRU with that?

Ok so plan design gurus out there, how will you be using this new feature? I sort of think what Carol was mentioning that the 6% was INTENDED to allow matching contributions so that a plan sponsor with employees that has a DB plan can also contribute to a 401(k) plan. The past 6 or 7 years the Adminstration and Congress has really been pushing for people to be more responsible for their own retirement and they have been pushing that with changes to 401(k) plans. Catch up contributions, deferrals not counting towards the deduction limit, safe harbor 401(k) plans, etc. I think this 6% provision is another example of trying to increase participation in 401(k) plans. But... I'm not sure if that is how it will be used. For instance I don't think it says how the 6% would need to be allocated. It doesn't say that you would have to allocate 6% to each participant. It doesn't say that you could not allocate it like a new comp formula. I think this will make DB/DC combo plan designs work very well. Design a max funded DB plan for an owner. Cover the employees at 0.5% unit credit formula. Then allocate the entire 6% of compensation to the employees in the DC plan with none for the owner. Let's say that ends up giving them a 7.5% of pay allocation in the DC portion. Test the plans together and you pass gateway, 410(b), 401(a)(4) and 401(a)(26). So you will see 55+ owners running around receiving DB allocations of $170,000+ and then employees getting somewhere between 7-10% of pay. This could cause a deductible contribution between both plans that is 50% of pay, and the owner is getting a huge proportion of it. The DC plan contribution will be right at 6% of eligible payroll so that we don't cause the 25% deduciton limit to kick in. Anyone agree or think that this can not be done with PPA'06?

With a self directed cash balance plan isn't the plan sponsor running the risk of participants going for broke with their investments trying to earn as much as possible because in the end the plan is going to have to pay them their guaranteed account balance plus the interest credits? Then on the flip side if the employee self directs his account very well, there is no financial pay off for the employee because the employee will only get paid his guaranteed account balance plus the interest credits? I just don't see the point of self directing a cash balance plan. If an employee makes $50,000, the plan has a 10% of pay formula with an interest credit of 5% and the employee quits 1 year later aren't we looking at a distirbution of $5,250? Regardless of what the underlying investment has done? So what is the point of self directing? Just to make the participant feel like they are in control? The kicker on this type of plan is that you assume the investments are going to earn more than 5% so the $5,000 that you allocated for the participant is going to cost less than $5,000. There is no market risk for the participant, the plan bears all of the market risk and therefore they bear all of the market reward. I dunno, maybe I am confused, but I just don't see the point of self direction.

At the end of the plan year is fine. This is going to act just like a discretionary profit sharing contribution, but the money is only allocated to individuals that deferred.

yes it is a qualified plan.

Yeah I know he has a prohibited transaction. Since this could be a takeover I don't mind jumping into a problem since I am not responsible for the past. In my mind I thought UBIT was an accountant issue not really a TPA issue. Is that not typical? Also now I am not so sure that UBIT is an issue. I was forwarded a seminar outline from a local attorney and his position is that rents are excluded from UBIT. I did a little more digging and have found that position supported in other places as long as the income derived not more than 50% from the rent of personal property in conjunction with the real estate. So maybe we only have a prohibited transaction at this point.

Pension in paradise - yeah, one is a neurologist does work at a hospital and the other does some work at a clinic. They are considering purchasing 50% of a company that does have employees so that could change everything, but i think the purchase is more of a hobby and coud be avoided if it makes more sense not to. I wondered the same thing about the no employee deal. About half the time I hear that it ends up being that they are leasing their employees or something worse. Of course I will make them certify again that they really have no employees if they want the plan. Peanut butter man - honestly I had never even heard of that cite. I thought your spouse always owned whatever you owned. My spouse sure seems to act like it at least. Only reason it came ot light was my company had this little spreadsheet that someone put together that mentioned it. I think maybe TAGDATA provided the spreadsheet, but don't quote me on that. The minor child always seems to throw this stuff off, but it doesn't make sense that it does. I mean, I have heard of the "marriage penalty" when it came to taxes, but come to find out there is a "parental penalty" too?! I know everyone says you can't count on laws making logical sense, but this just seems ridiculous. This means that a couple can be married for ten years, and run two fabulous retirement plans without a controlled group for all that time. Then BAM they have a baby and the whole thing stops?! Lord knows tons of things stop the moment you have a kid, why your pension plan too? It's just not fair.

Andy, you can't answer questions like that. You don't have a big quesiton mark avatar under your name!

Husband and Wife, 2 companies, both want a plan. Wife is a pediatrician owns 100% of her practice. Husband is a neurologist owns 100% of his practice. Based on controlled group rules at first look I figured controlled group, but now not so sure because they are competely seperate businesses and neither is employed, manages, or has any decision making capabilities in the other's business. Maybe that is irrelevant though. Regardles. we have 2 companies with no other employees and it seems silly for them to have two plan documents, and pay for two completely seperate administrations. I know that one company could sponsor the plan and then the other company could adopt the plan as an affiliated entity. My confusion comes up in how many 5500s are required? One person in my office says that she has this same situation for one of her clients and they only file one 5500. Another person in my office says she would file two 5500s. I am trying to quote a price and of course it depends on how much work is involved here. So... 1) 1 document or two? 2) 1 adminstration package or two? 3) 1 5500 or two?

Prospective client has called my firm asking for help. His current administrator just told him that they feel its best they part ways. I get the impression because his plan is a little screwed up and the administrator wanted to wash his hands of the problem. The client has no employees and his business is real estate. he is a realtor. Supposedly he didn't know that you couldn't have a mortgage (which is guaranteed by him individually) on a piece of property inside the plan. Apparently his current administrator told him (after the fact) that the mortgage would have to be in the name of the plan, not his personally. Also the property is being rented. The plan is collecting rents and paying the mortgage. The client is not claiming any income or deducting any expenses on his personal return. So now I am also thinking he has UBTI. My thought is that he needs to sell the property with the mortgage immediately. He also needs to talk to his CPA about UBTI and possibly amending some tax returns. Honestly I don't know anything about UBTI but the plan acting as a landlord really makes me feel that he is running a business inside of his plan. I could just tell the client that I'm not interested and he needs to find someone else, but that is not in my nature. I would like to help if I can. Any suggestions?

With the PPA now signed, I would like to be able to provide education on the topic and provide CPE credit for CPAs. Do I need to begin with the state board of accountancy? I am guessing I would need to provide the seminar materials to be approved that sort of thing. Anyone know the process?