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I am encountering something I have never dealt with before, so if anybody could provide some insight, I would appreciate it! Our CPA firm prepares financial statements for a Joint Apprentice Training Committee for a Local Union of the IBEW. In December, 2003, the local received a memo from the national union regarding the preparation of a LM-2 report and a T-1 form. However, the T-1 form can be avoided if the training committee files an ERISA Form 5500 with the DOL. My question is what information would be reported on the Form 5500? I see a code 4J for an apprenticeship program, but what would go on the Form. Financial information? For the 5500 itself, who would be considered a participant in terms of reporting? If there are over 100 participants, does the committee need a certified audit of its financial statements? Again, any information that anyone could provide would be appreciated.

The only benefit from a CPA view is that a high income earner who is in an AMT situation may benefit from having the additional income to report on his/her personal tax return, thus lowering AMT exposure. From a TPA standpoint, the new DATAIR WINDOWS based version of their recordkeeping software has a Roth 401(k) "bucket". Therefore, if we have a client interested (and none are so far), we would have the ability to recordkeep it. Costs TBD.

Can a participant withdraw funds from an IRA account to pay fees related to divorce proceedings and avoid the 10% excise tax, since the IRA owner is not age 59 1/2? I have not heard of this, but some people in the office that I work at say they have read articles that indicate that this is an allowable distribution to avoid the excise tax. Thanks for any replies.

Sole Proprietor has a handful of W-2 employees. Has a PS plan to where he makes a contribution each year, split between his employees (Schedule C expense) and himself (Page 1 Form 1040 above the line deduction). Starting in 2004, he began to pay his spouse on a basis such that she is reporting the income from her husband as her own Schedule C income. Question is can this Schedule C income for her be considered for a PS plan contribution? My belief is that she would need to be paid on a W-2 basis in order to (after meeting the eligibility requirements) become eligible to participate in the plan. Anyone have any thoughts? Thanks for any help.

I believe that an individual participant may "buy out" the insurance policy from the plan by paying in the CSV. I have done it before, but not since the mid 90-s. I'm not sure if there has been any regulations since then stopping this.

My confusion came into play when reading IRS Announcement 92-16, which indicates that the premiums are exempt from FICA taxation for the 2% owner if the payments are made under a "plan" for the S Corporation employees and their dependents. What is a "plan"? A Section 125 "plan"? A health insurance "plan"? Indeed, very confusing.

In reading instructions to Form W-2, and knowing what I know of Section 125 plans, it is agreed that a 2% S-Corporation owner could not participate in a POP plan, or any Section 125, for that matter. However, a question that has come up is in regard to the actual reporting of wages. In looking at the Form W-2 instructions, it indicates that the payment of insurance premiums on behalf of 2% owners is added back to Box 1, 3 and 5 of Form W-2, thus meaning the payments are subject to FICA. However, a client has presented me with a memo that seems to indicate that if there is a "plan" in place for the S corporation employees and their dependents, that the amount of premiums would only be subject to Federal Income Tax Withholding, and would not be subject to FICA. Is this true? We have been under the impression that the premiums are subject to FICA, but the S Corporation owner gets the 100% "above-the-line" deduction for the premiums paid on their behalf. Thanks for any replies.

Jevd, if the plan allows an employed participant to delay distributions until they actually terminate employment, can this participant delay, per the definition shown in the reply? They were not a 5% owner in the calendar year in which they turned age 70 1/2.

Here is an unusual fact situation: Participant in 401(k) Plan is a 5% owner through 12/31/03, when he is bought out and his ownership goes to 0%. The participant turns age 70 1/2 in November of 2004, and continues to be employed. Question is whether the participant is required to receive a 2004 MRD by 4/1/05, due to his being a 5% owner on 12/31/03, which is the determination date as to whether an employee is considered a "key employee" for 2004, or can he defer his distribution until he actually terminates employment. In addition, if he does take a 2004 MRD by 4/1/05, does he need a 2005 MRD by 12/31/05, or can he start to defer it due to the fact that he is no longer a 5% owner? Any replies would be helpful. Thanks.

No other limits were violated. The custodian knows how to code this, as the participant received an $8 refund last year. Maybe next year I can get it to -0-!

As we get close to the end of the year, I have a couple of GUST prototype plans that adopted the 3% non-elective ADP safe-harbor contribution. This provision is coded into the adoption agreement. However, the clients, who are top-heavy, for 2005, are interested in changing to the matching (100% of the first 3% and then 50% of the next 2%, or possibly the enhanced 100% up to 4% formula) ADP safe-harbor in order to only award those employees who defer to the plan (they are aware that no other contributions, including forfeitures, can be allocated). What is the amendment procedure? Thanks for any replies.

The instructions to Form 5500-EZ indicate that you have to file a return in the year in which the plan liquidates. Therefore, even if you haven't filed before, you should in the final year.

I agree. Now suppose the medical practice, consisting solely of the doctor, has adopted a profit sharing plan. I would think that the non-medical company would have to adopt the plan as well, and cover the employees that meet the eligibility requirements. Is that a correct assumption? Thanks again.

A doctor owns 100% of his own medical practice. He also owns 100% of a business in a non-medical field. Does this constitute a controlled group? Thanks for any responses.

I currently do testing for an old SARSEP. In performing the 1.25 test, the wife of the owner has an excess contribution in the amount of $4.50. Are there diminimis amounts as it relates to this excess? I advised the client to remove the excess, with earnings, in a conservative application. Thanks for any thoughts.

To Katherine's post, the statement of net assets available is comparitive. For the year that the plan was a small plan, we provide the information, mark it "unaudited", and include a paragraph in our opinion letter that says the assets for the year in which the plan was a small plan were compiled.

How would you include it in the 501 plan? The Schedule A already filed for the 501 plan covers the insurance premiums. Is that sufficient? What would you file to record the non-reimbursed medical expense portion? What if the plan had the dependent care feature as well? Thanks for the replies, they confirm my beliefs.

I hate to pound this issue, but here goes: Company has over 100 participants, and has properly filed their Form 5500 (Plan Number 501, for arguement sake) for the Welfare Benefit Plan, reporting Health, Life, Dental and AD&D Insurance information. Company also has a Flexible Spending Account plan, which allows employees to pay health insurance premiums on a pre-tax basis, and also allows employees to utilize reimbursement accounts for unreimbursed medical expenses. The Flexible Spending Account plan is administered by a payroll provider and has a plan number of 502. The payroll provider states that no Form 5500 is needed for the 502 plan. I tend to disagree and would like to see a Form 5500 filed, since the Flexible Spending plan is paying for a Welfare Benefit. I went through past posts on this topic, and cannot get what I feel is a comfortable answer. Can anybody help? Thanks for any replies.

I had a divorce situation (but no QDRO) where both ex-spouses left their account balances in the plan, and filed the 5500 instead of the 5500-EZ. Went with the "better safe than sorry" method.

If you have access to Superforms (www.superforms.com) you can print blank prior-year 5500's and schedules (hand-print version) for filing purposes.

FWIW, in doing our certified audits, we look to the Schedule P. If ING were the trustee, we consider them a "party-in-interest" and asterik all of column (a), as well as inserting a footnote that describes the party-in-interest" relationship (ING is the trustee, makes investment transactions, therefore they are a party-in-interest). If an owner of the company is the trustee, we consider ING to be the custodian of plan assets, and not a party-in-interest.

A mother inherits the IRA of her deceased son, who was age 50 or so (the mother is in her 70's). Can the mother treat this as an inherited IRA and spread the distributions out? The broker says that since it's going from son to mother, the entire distribution is taxable in 2004, the year the brokerage account was "liquidated". The mother would like to put the money back in the IRA and spread the distributions, if possible. Any replies would be appreciated.

In 17 years of doing this, I have never had a late Form 5500-EZ filing rejected by the IRS. I have also taken over one-person plans who had the $15,000 bill in front of them and got that abated with the "tear-stained letter". Seeing Gregory's post is somewhat scary though... In any event, the one lesson learned over the years is if you have a mass filing of 5500-EZ's, do them all at the same time. I looked at a case where another TPA had a client file each year separately with the "tear-stained letter", going back to 1996. Client got 6 $15,000 bills for late filing, an the other TPA had to abate each year individually. Unless you need the billing dollars, the mass filing is the way to go!

I have a client, a 100% S-Corporation owner. In 2002 he and his wife, an employee of the S-Corp, set up a 401(k)/Profit Sharing plan, and both made elective deferrals as well as receiving a profit sharing contribution. No Form 5500-EZ was filed, as assets were less than $100,000. In 2003, husband and wife divorce, and as of 12/31/03, both of their account balances remain in the plan, and the amount of assets is still less than $100,000. Question: Is a Form 5500 (not 5500-EZ) required for 2003? I think it is, as the instructions to Form 5500-EZ do not address this issue. Thanks for any replies.

Has anyone heard of something that raised the maximum Fidelity Bond from $500,000 to $525,000? I've looked at ERISA 412 and see no mention of a change. Thanks for any replies.