bzorc

Just for my clarification: I have a client (a sole-proprietor, with no employees)whose Schedule C income is $218,000. What is the maximum SEP contribution that can be made for 2000? Is it $25,500 (15% of 170,000) or $22,174 (13.0435% of 170,000)? Thanks for any replies.

I have a client who is interested in setting up a multiple employer 401(k) plan (not a multiemployer!). In essence, what they want to do is have one very standardized document that any number of small companies could adopt if they were interested in maintaining a qualified plan for their employees (most of the companies that might adopt this plan would only have in the range of 5-10 employees). If the employer could not agree to the terms of the document (very basis, such as a stated matching formula, standard eligiblity and vesting, no loans, no hardships), they would not be allowed to adopt the plan. The investments would be done on an individual participant level through a mutual fund or annuity company. Has anybody ever encountered one of these? I read a thread dated back in November of 1999, but would like more information. How would this be administered? I have filed 5500's for multiple employer plans in the past, so that is not the concern, but how to administer and test the individual companies is. Thanks for any responses.

In reading the proposed regs, I see the phrase "Under the new proposed regulations, for the majority of other employees, required minimum distributions would be reduced as a result of the changes". In my opinion, then, it seems as if, for 2001 distributions, the MDIB table can be used for the people already in pay status. Not bad!

Wow, I administered plans where there were 9 loans outstanding (the limit our recordkeeping system allowed, the participants would have taken more if our system had been accomodating)at once!!! What would happen to these guys if you were only allowed 2?

Fact situation: Plan at 4/30/98 has 92 employees at the end of the year. At 4/30/99 the count goes to 109 (i.e., 17 new entrants at 5/1/98, as this is an MP plan) at 4/30/00 the count goes to 118 (i.e., 9 new entrants at 5/1/99) Question: Does the 80-120 rule allow me to get out of the audit requirements for the 4/30/00 plan year? Reading previous threads indicates that you can, but I want to be doubly sure. Thanks for any advice.

It depends. Some plans call for the loan to be paid off on termination, or it becomes a distributable event. I had a client where, when a participant terminated, their loan converted from payroll deductions to a monthly personal check. It was the participant's responsibility to send the check in on a timely basis, to an address provided by the client (which was our office). If the payment was more than 5 days late, our office sent out a reminder. If payment was not received in 30 days, another reminder was sent. If not received in 60 days, the loan was defaulted. I would have preferred a payment booklet, but that was not a service that we provided. If the client is willing to pay for a payment "book", I would go that way. This is assuming the client wants to allow terminated employees to continue making loan repayments, and wants the burden of chasing someone down when they go into default. The best thing to do, in my opinion, is to make the participant pay the loan off upon their termination, thus eliminating future headaches.

I have a client who maintains a self-funded insurance plan. The plan year is a June 1 to May 31. The corporations taxable year is the calendar year. The partner that I work for has, for other clients, had the client prepay 30-35% of the next year's premium during the current year, and treat that payment as an expense on the current year corporate tax return. However, he is unsure as to whether or not this practice would work if the corporate year and plan year do not coincide. I have no idea if this question makes any sense, but if it does to someone, your comments would be appreicated. Thanks.

I agree, quarterly is open to interpretation.

I usually saw the repayments started on a calendar year (March 31, June 30, September 30, December 31) schedule, even if the loan was made mid-quarter. However, nothing wrong with going on even 3 month intervals. Just more administrative work for the employer/recordkeeper.

I agree with Jon. In my dealings, I never was allowed (by the client) to take money away from a participant, but was always required to make participant's whole if they were shorted by an error. A lose/lose situation for the TPA.

Thanks, Barry. That is what I thought the answer was. What threw me was that this bank was adamant that the "least as rapidly" rule applied to this situation. Guess it goes to show you trust your instincts!

I need a clarification on an MRD issue I have recently encountered: Husband and wife are both over 70 1/2. Distributions have been taken using Joint Life Expectancy with recalculation. The husband dies, and the wife elects to treat the IRA as her own. Question: Can she elect new beneficiaries and set up a new payment scheme? Everything I have read (both in books and here on the message boards) seem to indicate that this is allowable. However, one of the largest banks in the US indicated that the distributions must continue "as least as rapidly" as they were before, thus having the wife continue the distributions on a Single life expenctancy, as the husbands expectancy dropped to zero in the year after death. Who is right? Any cites on the boards or from the regs would be appreciated.

I have worked on plans where up to 9 loans were allowed to be outstanding at one time. The advantage is to the participant, who does not have to pay off an outstanding loan in order to get a new loan. The disadvantage is to the company and the TPA. The payroll system would have to be adjusted to handle multiple loan payments. The TPA would have to record all loan payments, make sure they get posted to the right loan, and would have to keep a running 12 month "highest outstanding loan balance" in order to calculate future loanable amounts. However, an advantage to the TPA would be able to charge additional loan set-up and maintenance fees. Multiple loans, in my opinion, are a pain. One instance I can relate is to the participant, who had 9 outstanding loans at once (with after-tax payroll deductions, I wonder what the take-home pay looked like..), calling to see what loan was the smallest, so it could be paid off, so that another loan could be taken. What a mess....

That's what I initially thought, but there is no formal leasing agreement in place. Could it be made into one?

Interesting question: A company (for this example, Company A)has 3 employees, but offers no benefits such as a 401(k) plan. However, Company A, to accomodate the employees,has an arrangement where the employees wages are paid by a totally unrelated company (Company b). There is no controlled group issue between A and B. The Company A employees perform no services at all for B; the only reason they are carried on Company B's books is to be able to contribute to the Company B 401(k) plan. They receive their W-2's from Company B. Company B is reimbursed by Company A for the wages, taxes, etc. Is this a proper set-up? I have never encountered this, so I was curious as to whether anyone else had heard of this situation. Thanks for any answers.

I would start with requesting a Summary Plan Description (SPD) from the employer, which should outline the parameters for getting your distribution out of the plan. Depending on how the plan is valued, 30 days could not be an unreasonable period of time to have to wait to get your distribution. If that is unsuccessful, you could then go to the Department of Labor and request that they look into the matter for you. That usually gets the employer to move on your request. Good luck.

My opinion would be to see if the employees could pay back the loans before the plan liquidates. If they can, fine, if not, I think the loan becomes a distributable event to the employee.

I am working with a company that set up a Premium-only plan for 2000. The plan is "semi-self insured", in that the insurance company charges a fixed premium per month, and then a variable portion, which is attributable to individuals within the plan. In terms of administering the 25% Key Employee concentration test for the year, what premiums are counted towards the total which is then used to calculate the 25%? Is it fixed premiums, or the total premiums? Doesn't this make testing diffucult, as the number is a moving target? What happens in a year when the variable portion is attributable mainly to one of the key employees? (My company has 6 brothers who each own 16.67% of a C-corp) Any ideas would be appreciated. Thanks!

IRS Tele-Tin Number is 816-926-5999 Fax Number: 816-926-7988 If you fax an SS-4, you usually get your EIN in a day or so.

You could also send the money to the state that the employer is in and call it "unclaimed property". Let the state worry about it!

We have a situation where the balance in a non-qualified plan is being paid to the beneficiary of a deceased participant. Question is whether the payment is subject to federal tax withholding. Has anyone encountered this? Thanks for any replies.

A defined benefit plan that I work on is considering an investment in parking spaces (this is in Chicago, where parking is at a premium, don't ya know...). They will charge rent and the rental income will go to the plan. There is no relationship between the plan and the parking spaces, so from this aspect it doesn't fall into Prohibited Transaction territory. Would you allow the plan to have this investment? I am wavering.... Thanks.

The way I have been doing it is as follows: For the 3 benefit structures, I do one full set of numbers (total ee's, out for service, etc.), usually the profit sharing. Then in the next set of lines, I list the 401(k) and match, and show the percentage as 100%. For one structure, I follow the beginning procedure, marking that the plan passes by using the ratio percentage test. Hope this helps.

I have seen many enrollment meetings where the plan sponsor provides beverages and little "trinkets" to encourage attendance (some of my clients said if it were not for the treats, there would be no one there at all!) As to a cite as to whether or not this is a PT, I have no idea.

My understanding is that it has to be out by the end of the plan year following the year of excess addition; therefore for a calendar year 1999 plan the Section 415 excess has to be out by 12/31/00.