actuarysmith

My understanding is that the tax credit is allowed for costs incurred after December 31, 2001. This could mean that you could set up a profit sharing plan late in 2001 (effective 1-1-2001) and possibly bill your client for the set up work early in January of 2002 and have the employer take the tax credit for paying your bill in 2002. They would also be eligible to receive the tax credit for 2003 and 2004 for administration fees.

If what you say is true, the union should have a copy of the piece of paper. Until you see it first hand and know what it says - how can you make any kind of decision about anything. My guess (a big one) is that your Father applied for his benefits and selected a "life only" option. This means that the benefit is paid for the duration of his life and then stops - period. There is no survivor benefit payable to a beneficiary. The advantage to this form of payment, is that it paid a higher monthly retirement benefit than any other form of payout (because it stopped payments upon his death). Retirement plans are required to pay out benefits in the form of a joint and survivor annuity - under this format, the surviving spouse would continue to receive a monthly pension after the death of the primary paricipant. Under these options (depending upon the level of benefit that continues to the spouse) the monthly pension starts out less than it would under the life only option. If a participant selects a life only option, the plan sponsor is required to obtain the spouse consent (waiver) in writing and have it notorized. My guess is that your mother signed the spousal waiver of the Joint and Survivor Annuity Rights. If this is true, and the form is properly signed and notorized, then there is probably little that you can do at this point. However, I would obtain a copy of the form. It is possible that is was filled out incorrectly, or never witnessed or notorized. If this turns out to be the case, you may have some possible recourse. Good Luck! - hopefully this information is useful to you.........

It is likely that the plan requires that you wait until the anniversary date following your termination of employment. If the plan is set up on a 1/1-12/31 plan year basis, then this would mean that you would not be able to take a distribution from the plan until after the December 31 following your termination. In addition, you might have to wait a couple of months for the plan administration and recordkeeping firm to finish up with the 12/31/xx year end allocation reports and determine your vesting percentage. If after reading the plans Summary Plan Description (SPD) as recommended in the earlier posts, you still feel as though the employer is remiss in making a timely distribution, you canl call the Department of Labor. (Do not do this unless it appears that the employer is violating the terms in the SPD). The DOL takes these complaints very seriously and will contact your previous employer immediately. Trust me, your previous employer will get on it quick!

If I were you I would perfect my best Arnold Schwarznegger accent and march into the office and loudly exclaim Hasta la Vista, Baby! Honestly, as I read your message I really cannot understand why people don't bolt for the door......................

I would think that there should be no problem with this - it's just that they are converting these forfeitures into 100% vested safe-harbor contributions.

Our firm has the participant sign and date a form certifying that the financial need cannot be reasonably met with other means and that it meets one of the safe harbor 401(k) hardhip definitions. In addition, we have a line for the plan sponsor to sign as well. The form asks the participant to provide some form of documenation (statements, invoices, eviction notices, etc.) If YOU are making the determination, then you risk becoming a plan fiduciary.

You've read it correctly.

It sounds like it is a choice of two benefit packages - one package includes a retirement plan, and the other does not. I read the original quesion correctly and have the same concern voiced in my previous post.

I am somewhat unclear on the exact meaning of your question - are you saying that they are offering you choices of different benefit packages? (one package that includes the 401(k) plan, and another package that does not) If so, the employer may be in violation of Code Section 401(k)(4) which states- "Benefits (other than matching contributions) must not be contingent on election to defer. A cash or deferred arrangement (the fancy phrase for 401(k)) shall not be treated as a qualified CODA if any other benefit is conditioned (directly or indirectly) on the employee electing to have the employer make or not make contributions under the arrangement in lieu of receiving cash." In other words, unless I'm missing something, your choice of benefits should not be dependent upon whether you are included in the 401(k) plan or not.

I'm no attorney, but there are other things that I know get looked at when determining whether or not someone is an independent contractor. For example, the "worker" should have total automony with regard to work hours and work location. If the employer dicatates the time or place that the work is done, provides office supplies, computers, desk, etc - that worker could possibly be determined not to be an independent contractor. In other words, a worker is not an indepencent contractor based solely upon being paid through 1099. There are also some facts and circumstances issues. I would consult with a CPA or attorney knowledgable on the subject. In fact, if the magnitude of people or dollars involved are large enough, I would contact an ERISA attorney to get a formal legal opinion.

Another possible scenario where using a MP plan may still be desireable is to cover union employees. The collective bargaining units normally negotiate for mandatory levels of employer contributions.

If it did not cost money to "follow the regs" all of us TPA's would be out of business................

I agree with the last response. We have NO clue what you are asking.............. Please provide more specific information - For example- Retirement Age Plan Design Investments DP Systems GUST Restatements What the he-- are you asking man!

Our firm has used the same approach as rcline46. We ask the client to answer that question for the 5500 and let the chips fall. (We do provide a summary of the requirements for them to review before answering the question)

Are the managers (or most of them) actually HCE's? If they are not, you can set up a plan that just covers managers.

I concur with the previous response. Neither can you "roll out" a balance from a Key employee to water-down the top heavy ratio. Maybe you should consider not having any Key employees defer this year (may be too late), or maybe you should look at a QNEC. Have you considered a safe harbor 401(k)?

I concur with the previous response - in order to take a distribution from a qualified plan, you have to have a "distributable event". Normally this means termination of employment, retirement, death, or disability. It can also include hardship withdrawal or an in-service withdrawal after the attainement of age 59-1/2 (if the document allows). Unfortunately, being dissatisfied with the plan (for whatever reason) is not an allowable reason to take a distribution from the plan. Please be advised that if the fees are too high on the plan (I must ask what you are comparing it to?), or if the employer is taking too long to deposit funds, you may have a reason to contact the Department of Labor and complain. They take complaints such as these seriously, and would likely follow up pretty fast. Good Luck !!

Our firm has always taken the "high" road and only allowed for a 1-2% differential in the amount of compensation excluded by applying a custom definition of compensation. Usually the only time that an alternate definition has worked for one of our clients is if all HCE's can control substantially how their comp is based (i.e. bonus, commission, etc.) Normally, this only works when there are 1 or 2 owners and they can set their comp in any fashion they want.

A participant becomes fully vested upon reaching early retirement age as defined by the document. The reason for termination is irrelevant.

We have a client that has a 12/31 EOY valuation date. We performed the 12/31/2000 valuation according to normal schedule. This was to determine the contribution for the 2000 PYE. On 3/31/2001, the client froze accruals and terminated the plan. (Single participant - not subject to PBGC). How do calculate 404/412 costs? would we use a 12/31/2001 valuation date and prorate charges and credits? Or should we use a 3/31/2001 valuation date (which is now technically the last day of the plan year). Do we calculate interest on the charges and credits to 3/31 or 12/31?

Assuming that you amended the existing plan to add 401(k), and did not add a second plan - applying for a seperate TIN is not necessary. You have one plan and one trust. I have no idea why anyone would ever suggest getting another id, it would be under the same name as the plan that already has the id.

I am not sure that the last response answers the question. It is always true that the 50% loan limit is only an issue at the time the loan is taken out. If the market tanks after that date and the account balance in the plan declines sharply, there is no problem. The collateral is only required to be sufficient at the time the loan is made. What if a participant asked the HR dept for a loan on Jan 5th, was given the loan app package on Jan 10th, returned the loan app on Jan 15th, was forwarded to the administrator on Jan 18th, promissory note and amort schedule created and mailed back to participant Jan 23rd, signed by participant on Jan 25th, distribution request sent to financial institution on Jan 27th, check cut and mailed on Jan 30th? Let's also assume that between Jan 5th and Jan 30th the market took a dump and dropped 30%. (I know this is extreme, we're in hypothetical land now). How would you determine which value to use for the 50% collateral rule? (It was probably determined at the time the amort schedule was made up. There was ample time for the market to decline significantly after that date, and before the check was cut). Forget whether or not the loan processing schedule was reasonable or not - the fact that the question is even being asked implies that it took quite some time to get the loan processed...........

To be "safe" how about using the date on the promissory note? This date would be used to drive the amortization schedule also. Are you asking this question because there was considerable lag time between the request for the loan and the actual processing of the loan? (Did the account balance change dramatically between these dates?) More information might be helpful.

I agree with the last response. The $30,000 limit refers to all annual additions (deferrals, match, and/or profit sharing). This discussion can get complicated and confusing when you are talking to the sole owner of a small business. It is hard for them to distinguish between deferral, match, and profit sharing conceptually because it all comes from the same pocket - theirs! Since frequently the owners paycheck is a function of whatever is left on table after all other expenses and contributions, ALL contributions to a plan, whatever source, are viewed as "salary reduction". Anyway, I hope I didn't muddy this up more than I clarified. I just wanted to share the experience that I have run accross frequently when dealing with owners of small businesses. Choose your words very carefully.

I now understand your question to be slightly different that I originally perceived. If the plan & trust still exist, because you are awaiting the IRS to issue a detemination letter, I see no reason why the plan could not continue to accept loan payments. I was answering the question originally assuming that the plan had been terminated and the assets had been distributed.