Gary Lesser

IRC 415(e) limit was repealed several years ago. Ignore the DB plan. Can contribute 415 limit (but excludible portion under 402(h)may be lower if SARSEP). Must use prototype or individually designed SEP/SARSEP document for document reliance. $200,000 x .25% is allowable (up to $49,000*), excludible, and deductible if SEP + required DB amount. If SARSEP, $200,000 x 25% is allowable (up to $49,000* and depending on definition of compensation used in document), but only 25% of includible compensation (including catch-up contributions, but excluding basic elective) is excludible from participant's income. The deductible limit is 25% of compensation (but not all is necessarily excludible from income). Generally, employers limit contributions (by design) to the excludible amount under 402(h). * Note. $49,000 limit is reduced if integrated. Assumes that other plan is a "pure" defined benefit plan.

IRC 415(e) limit was repealed several years ago. Ignore the DB plan. Can contribute 415 limit (but excludible portion under 402(h) may be lower if SARSEP). Must use prototype or individually designed SEP/SARSEP document for document reliance. $200,000 x .25% is allowable (up to $49,000*), excludible, and deductible if SEP + required DB amount. If SARSEP, $200,000 x 25% is allowable (up to $49,000* and depending on definition of compensation used in document), but only 25% of includible compensation (including catch-up contributions, but excluding basic elective) is excludible from participant's income. The deductible limit is 25% of compensation (but not all is necessarily excludible from income). Generally, employers limit contributions (by design) to the excludible amount under 402(h). * Note. $49,000 limit is reduced if integrated. Assumes that other plan is a "pure" defined benefit plan.

No. A simple 401(k) can not be rolled over to a SIMPLE-IRA. No rollover to a SIMPLE IRA is permitted from a qualified plan of any type.

My annual COLA & Rollover chart is attached in pdf format. It may be freely distributed within your organization. For additional permissions please contact me. Laminated versions of this and other helpful retirement related charts are available at Reference Guides Note. This chart includes the correct 2010 HSA limits. COLA_RO_2010.pdf

Not at all; this seems doable (.35 x HCE contribution = exceise tax). Presumably, the employer will still get its deduction under IRC 162. It might be more advantageous, in this situation, to just make a personal contribution to an HSA and claim deduction on Form 1040

This has been answered in other posts. All SIMPLE contributions are exccess contributions. Generally reported in box 1 of Form W-2.

It is not a law, but rather a condition of using the model and having reliance on the plan's qualification as to form (e.g., the model doesn not have any IRC section 415 language/coordination). Taken as a whole the two plans may not satisfy all of the requirements for qualification (whereas with a prototype plan they likely would) or might become discriminatory in operation. Other issues could arise (e.g., use of the model disclosure). Have any plan, employer, or individual limits been exceeded or conflicts arisen? Thus, the model form can be used but there is no assurance of qualification. Note. Some trustees/custodians do not offer/have IRS approved prototype documents and rarely accept another institution's pototype forms (but may accept an IRS approved individually designed SEP). Hope this helps.

Treasury, IRS Issue 2010 Indexed Amounts for Health Savings Accounts These amounts have been indexed for cost-of-living adjustments for 2010 and are included in Revenue Procedure 2009-29, which announces changes in several indexed amounts for purposes of the federal income tax. The attached chart shows the limits for 2004 through 2010. HSA_NewCola_2010_R0509.pdf HSA_NewCola_2010_R0509_LandscapeView.pdf

In general, a partner's compensation is deemed currently available on the last day of the partnership taxable year and a sole proprietor's compensation is deemed currently available on the last day of the individual's taxable year. 1.401(k)-1(a)(6) (6) Rules applicable to cash or deferred arrangements of self-employed individuals (i) Application of general rules. Generally, a partnership or sole proprietorship is permitted to maintain a cash or deferred arrangement, and individual partners or owners are permitted to make cash or deferred elections with respect to compensation attributable to services rendered to the entity, under the same rules that apply to other cash or deferred arrangements. For example, any contributions made on behalf of an individual partner or owner pursuant to a cash or deferred arrangement of a partnership or sole proprietorship are elective contributions unless they are designated or treated as after-tax employee contributions. In the case of a partnership, a cash or deferred arrangement includes any arrangement that directly or indirectly permits individual partners to vary the amount of contributions made on their behalf. Consistent with §1.402(a)- 1(d), the elective contributions under such an arrangement are includible in income and are not deductible under section 404(a) unless the arrangement is a qualified cash or deferred arrangement (i.e., the requirements of section 401(k) and this section are satisfied). Also, even if the arrangement is a qualified cash or deferred arrangement, the elective contributions are includible in gross income and are not deductible under section 404(a) to the extent they exceed the applicable limit under section 402(g). See also §1.401(a)-30. (ii) Treatment of matching contributions made on behalf of self-employed individuals. Under section 402(g)(8), matching contributions made on behalf of a self-employed individual are not treated as elective contributions made pursuant to a cash or deferred election, without regard to whether such matching contributions indirectly permit individual partners to vary the amount of contributions made on their behalf. (iii) Timing of self-employed individual's cash or deferred election. For purposes of paragraph (a)(3)(iv) of this section, a partner's compensation is deemed currently available on the last day of the partnership taxable year and a sole proprietor's compensation is deemed currently available on the last day of the individual's taxable year. Accordingly, a self-employed individual may not make a cash or deferred election with respect to compensation for a partnership or sole proprietorship taxable year after the last day of that year. See §1.401(k)-2(a)(4)(ii) for the rules regarding when these contributions are treated as allocated. (iv) Special rule for certain payments to self-employed individuals. For purposes of sections 401(k) and 401(m), the earned income of a self-employed individual for a taxable year constitutes payment for services during that year. Thus, for example, if a partnership provides for cash advance payments during the taxable year to be made to a partner based on the value of the partner's services prior to the date of payment (and which do not exceed a reasonable estimate of the partner's earned income for the taxable year), a contribution of a portion of these payments to a profit sharing plan in accordance with an election to defer the portion of the advance payments does not fail to be made pursuant to a cash or deferred election within the meaning of paragraph (a)(3)(iii) of this section merely because the contribution is made before the amount of the partner's earned income is finally determined and reported. However, see §1.401(k)-2(a)(4)(ii) for rules on when earned income is treated as received. Treas. Reg. Section 1.401(k)-2(a)(4)-- (4) Elective contributions taken into account under the ADP test (i) General rule. An elective contribution is taken into account in determining the ADR for an eligible employee for a plan year or applicable year only if each of the following requirements is satisfied -- (A) The elective contribution is allocated to the eligible employee's account under the plan as of a date within that year. For purposes of this rule, an elective contribution is considered allocated as of a date within a year only if -- (1) The allocation is not contingent on the employee's participation in the plan or performance of services on any date subsequent to that date; and (2) The elective contribution is actually paid to the trust no later than the end of the 12-month period immediately following the year to which the contribution relates. (B) The elective contribution relates to compensation that either -- (1) Would have been received by the employee in the year but for the employee's election to defer under the arrangement; or (2) Is attributable to services performed by the employee in the year and, but for the employee's election to defer, would have been received by the employee within 2 1/2 months after the close of the year, but only if the plan provides for elective contributions that relate to compensation that would have been received after the close of a year to be allocated to such prior year rather than the year in which the compensation would have been received. (ii) Elective contributions for partners and self-employed individuals. For purposes of this paragraph (a)(4), a partner's distributive share of partnership income is treated as received on the last day of the partnership taxable year and a sole proprietor's compensation is treated as received on the last day of the individual's taxable year. Thus, an elective contribution made on behalf of a partner or sole proprietor is treated as allocated to the partner's account for the plan year that includes the last day of the partnership taxable year, provided the requirements of paragraph (a)(4)(i) of this section are met.

Assuming the entities are not controlled, related, or affilliated, you are correct. However, when calulating the 1/2 of SE tax deduction for calculating earned income (for the sole proprietorship), the net SE gain (or loss) from unrelated entities has to be taken into account. If there is a net gain, the 1/2 of SE tax amount then has to be prorated (on some reasonable basis) between the two entities. I've posted versions of QP-SEP Illustrator Software in this forum; it may be usefull in crunching these numbers for you. Link to QP-SEP Illustrator Post Hope this helps.

I do not disagree with you. I belive the ACAs have always ben allowed, but that we have never had any guidance to rely on that covers the issues. Actually, I was trying to goad you into doing more research, as I knew you would . Thanks for being a valuable member on this board. Do you agree that parts of the "eligible automatic contribution arrangements" (EACAs) and/or "qualified automatic contribution arrangements" (QACAa) might be appropriate in SEP land -- to resolve such things as top-heavy contributions, requiring a minimum percentage, and so on? Needless to say, not much can be done at this time for a SS or Simple-IRA plan. I will try to find out more.

This is not entirely true. I kind of agree with you, but not necessarily for the same reasons Just because we can't find any authority, does not mean an authority does't exits. The fact that some authority may not exist, does not mean that any is needed. Most SEP-IRA and SIMPLE-IRA accounts, when established, have a default investment (e.g., money market fund). The account is part of the employer's SARSEP or SIMPLE-IRA plan--and it is not prohibited. We may not find anything, or conclude that 414(w) is a sufficient grant of authority (assuming any is needed). Perhaps all that is needed is for the ACA not violate any of the existing rules and comply with DOL plan description regulations. I imagine, the IRS will provide some guidance, perhaps a new LRM. The IRS can be restrictive in both model and prototype documents. Hopefully, the IRS will not require an individually designed plan to provide an ACA. Do we have or need any authority? [MCPI (my current position is), 414(w) provisions would be needed (and now allowed), but 414(w) is not "the" grant of authority, it already existed (or wasn't needed). IOW, an individually designed SARSEP or SIMPLE IRA plan could have provided for ACAs and the PLR would have been (with some negotiation) approved. Whether the plan descriptions and notices would comply with DOL requirements would still be an issue.] What would any IRS or DOL issued ACA rules probably provide?

Are you suggesting that Announcement 2000-60 is the guiding light in SARSEP and SIMPLE-IRA land? Surely something more would be needed to go out an establish an ACA with a QDI in a SARSEP or SIMPLE IRA. What are we to hang our hats on (the Sieve)?

Would you both agree that-- 1. A SEP is an IRA that must meet some additional rules? 2. If SEP and IRA contributions are made into same account, boxes 1 and 8 (Form 5498) would both be completed? 3. If SEP and IRA contributions are made into same account, seperate 5498's are not required?

$13,000. The entire contribution is matched; thus the maximum is $26,000.

If a SEP plan is established, the SEP-IRA trustee or custodian may (but is not required to) redesignate the IRA account as a SEP-IRA account.

Generally, No. However, there are two exceptions to amendment and a death punch. 1. A SIMPLE IRA plan can be amended during the election period (generally November 1 to December 31, 2008). 2. A SIMPLE IRA plan can be amended to coincide with the annual notice (the "promise") . E.g. plan states 3% match, annual notice stated 1%, plan can be amended to 1% to coincide with the annual notice. 3. Of couse, making a minimum contributions (say $100) under a non-top-heavy SEP (although a hassle) would invalidate the SIMPLE IRA plan for the year. If this is done, all contributions to the SIMPLE plan become excess contributions (and potentially subject to the 10% nondeductible contribution penalty and 6% excess contribution penalty) unless corrected. The SIMPLE plan could be reestablished when the employer is next eligible. See IRS.gov - http://www.irs.gov/retirement/article/0,,i...tml#termination According to the IRS-- Example: If in 2008 an employer decides to terminate its SIMPLE IRA plan as soon as possible, the employer must inform employees within a reasonable period of time before the 60-day election period ending on December 31, 2008, that there will be no SIMPLE IRA plan for 2009. For 2009 the employer may establish and maintain another kind of qualified plan for its employees and, if this other qualified plan is not operative in 2010, re-establish a SIMPLE IRA plan for 2010. Hope this helps.

If X and Y existed at same time they would likely be a controlled group. Yes, a successor too. [see PLR 9336046 "facts and circumstances" and IRC 414)b) and ©]. I assume that X (the former entity) ceases to exist. The IRS has not issued much guidance on the two terms.

So, the first business was sold. The stock is all owned by the new purchasers. Sellers took the money and formed a new corporation which is not a legal sucessor to the one that was sold. Assuming this to be true--it seems like there were no employees in the prior year to worry about. The 2-year rule mentioned by the Sieve would only apply had there been a valid SIMPLE for a year that then went bad (over the 100 limit) in a subsequent year. All employees that were employed at any time during the prior year are counted (regardless of age, union, wages, aliens, and so on). Hope this helps.

Are you aware of any states that offer creditor protection to an HSA? Please give as much detail as possible. Thanks--GSL

All employees, employed at any time during the prior year (including ineligible and unionized employees), are taken into account under the 100-employee limit rule. [iRC 401©(1), 408(p)(4)(A), 408(p)(4)(B)] More details may be needed regarding your second question. Is this really a new entity or the continuation of the old. What's being sold. The devil is in the details. Are the employers related in any fashion. If truly a new employer (not a sucessor entity), the enity wd appear to be SIMPLE eligible. Elective deferrals wd have to be aggregated by employees to adhere to annual limits. Are there any related or controlled group issues?

No. Different rules apply. Specifically, what limits were exceeded? With details.

All eligible employees must participate in a SEP, including owners. It is the business entity (the partnership) that established the plan. An owner can not opt out. If over age 59-1/2, amounts could be withdrawn shortly after being made. A "partner," as such, can not have his or her own plan. Even if the individual had another business, a SEP of such organization would have to cover eligible employees, and the controlled group rules would have to be applied. Hope this helps.

No, not under federal law.

The 60-day notice and the termination notice are different notices. The 60-day notice is not needed (or should be undone if issued) because the plan will not be a QSRA for 2009 under the exclusive plan rule. The Simple plan does not have to be terminated. It just won't be effective for 2009 (and later years if the 401(k) is active). The 60-day notices (if given) is being trumped by the new plan. If the new plan is ever terminated, the SIMPLE can be used the following year provided the 60-day notices are timely provided. Does this help?