pbarrett

We are looking at a takeover plan401(k) plan. It has a match formula that is tied to the medical insurance program. The document simply says the match is discretionary (no details). Here are the facts- small business owner is short on cash for all benefits. He decides to match the deferrals based on how much he pays for the employees' insurance premiums. If the participant's monthly premium is less than $100 per month, he matches $1 to $ up to 8% of comp. If the premium is over $100 per month, he matches $1 to $1 up to 5% of comp. Is there a problem with this? There are no highlys in the plan. Do the document need to spell the formula out? Appreciate any help here. Pat

We have a small new comp plan (1 owner/ 3 partricipants). The demographics changed whereby the owner is the youngest. To get it to pass, I have to give the nonowners 21% and the owner gets about 10%. Is it possible to forget the new comp allocation due to failure and just run the allocation using a "traditional" profit sharing allocation (contribution/wage)??? We're using a Corbel doc and it appears to be silent.

We have a 401(k) plan that is being sold 4/30/05. It is is stock purchase. The new owner is purchasing 100% of the stock. On April 20, 2005 the plan will be terminated. On April 30th, the two trustees will be fired. (One bank is buying another and terminating the President and CEO.) Questions: 1.) There are about 5 participants who have been terminated for years but will not elect to take their distributions. Their balances are all well over $10,000. Any way to force them out without an election? 2.) I assume there has to be a sponsor until the plan zeros out. Would one of the current Trustees need to sign a corp resolution appointing the new bank as sponsor or can it be assumed the new bank will act?? I appreciate any help on this. Pat PS: The buying bank has a 401(k) plan and they will allow continuing employees to roll their balances in.

We have several dc plans with fewer than 10 lower paid participants and one key/highly paid owner. The owners (mostly doctors) have rollovers within the plan with non-qualified assets requiring plan bonds and/or audits. Due to the type of non-qual assets (jewelery, artwork), we have found that the bonds are quite expensive. Here is my question- what would be the problem with having each owner simply "tranfer/roll out" their rollover account into a separate qualified plan? I assume they could easily transfer the rollover accounts to an IRA but what about another qualified plan whereby we could just do an EZ for them. The only issue I can think of at this point is that there would be no "recurring deposits" (if the rollover was tranferred to a new ps plan). Any thoughts or ideas would be appreciated.

We have a client who would like to terminate their 401(k) plan and establish either a simple IRA or simple 401(k) this year. Is there any waiting rule (successor plan rule)? Do the participant funds have to be transferred to the Simple?

We have a 501© Not for Profit Organization that wants to establish a 401(k)/PS plan. They have about 80 employees. We have been told that they pay all 80 employees are paid by the organization via check check (reported on W2); however, appx 10 employees fall under the Title V category and their compensation is reimbursed by the government. I am not familar with Title V rules. Any problem allowing these employees to participate in the plan if they meet the eligibility requirements? Any info would be appreciated.

If a new 401(k) plan is established 7/1/04, can you still use the first year plan adp non-highly compensated 3% deferral rate for testing? Would it need to be pro-rated down to 1.5%?? Would we need to make the plan effective 1/1/04 to use the 3% rule? Any thoughts would be appreciated.

Tom, I wasn't concerned about the testing- I was only giving the details. My concern is linking the match to the amount payment of the insurance premium paid. Also, would you suggest a fixed match based on group or just call it a discretionary match and state the amount that will be paid at the beginning of the year???? I'm probably just making a simple issue complicated. Thanks, Pat

We are taking over a 401(K) plan that has appx 500 lower paid participants. There are no highlys or keys participating in the plan. Presently, the doc has a discretionary match. The employer contributes contributes 8% of pay per pay period as a match if the participant defers the minimum. (The minimum is $5.) Needless to say, a lot of participants are deferring $5 per pay. The employer would now like to change the match formula and contribute by groupings. Question #1 In general, assuming you can pass coverage and acp/adp testing etc., can a match be allocated by group similar to a new comp ps plan? Question #2 This employer would like to give group A - 12% of comp and group - B 6% of comp. The only deciding factor on which group you are in is whether or not the employer pays for your spouse's health insurance. If you have single premium ins. you would get 12% if you have spousal coverage you would get 6% (we're not up to addressing children yet). Question #3 If it can't fly as a match, how about as a new comp contribution? It would pass the gateway and other tests. Appreciate any help here.

They are trying to achieve a reduction in taxes by funding a retirement plan. The CPA wants to set up a 401(k)/New comp combo. He stated the owners' income is $150,000 (K-1). At first I thought the entity was a Sub-S and I said the $150,000 profit was not treated as plan comp- it was more of a "pass thru" income. He stated they were not a Sub S, but rather an LLC. The real question is: Can the K-l income be used as plan comp for computing contributions etc.

We have a LLC wanting to set up a 401(k) plan. Employees have W2 income, owners K1. I know k1 income cannot be considered in a partnership, but what about an LLC? What type of plan would be best for a profitable llc? Any thoughts would be appreciated. Thanks.

If a client sets up a Safe Harbor 401(k) using the 4% match formula for 2005, both the acp/adp tests are passed, correct? Example- 2 owners 10 particpants. Owners defer and one participant defers. If the 4% match is given, auto passage of both the adp and acp test, right?

An X-spouse of a participant in a 401(k) is about to get her QDRO distribution... question, can she roll it into her Simple IRA where she works???

We have a safe harbor 3% 401(k) plan in place for 2004. Proper notices and such have been given and the doc is in order. The client would like to now switch to the safe harbor match for 2005 and give the 4%, which will save him quite a bit of money. His projected income for 2005 is going to be much lower (or so he thinks). I assume with proper notices and amendments, we can flip from one type of safe harbor to another without any problem? Is there such a thing as a discretionary ps/match safe harbor doc whereby each year (assume election is made timely and before the beginning of the year) they can opt as to which way they want to go???? Anyone run into this? Appreciate any help here.

Is the deferral limit still on a participant basis versus a plan basis? Example- Participant works for 2 different corporations. He/She makes $25,000 at each corportation. The individual is age 40. Is the limit $13,000 or $26,000? (Assume 2004 year).