Earl

http://www.irs.gov/businesses/small/articl...=102765,00.html should take you there.

are you talking about the line that says, "do not enter your Social Security number"?

I would think the employee can "direct" the deposit of his deferral. To the available investment options. Loan repayment is not an investment option. A recordkeeper could be given incorrect information and he would never know. Until the census report reflects a deferral (pre-tax) and all the record keeper saw was loan repayments (after-tax).

and I was going to take a loan to buy my groceries. drat!

But if it were easy, everyone would be doing it.

I'm not a tax return preparer but I looked at the Schedule E instructions. The bold of the "not" at the bottom is bold in the instructions, I didn't add it. Instructions for Schedule E (Form 1040) If you are a shareholder in an S corporation, your share of the corporation’s aggregate losses and deductions (combined income, losses, and deductions) is limited to the ad-justed basis of your corporate stock and any debt the corporation owes you. Any loss or deduction not allowed this year because of the basis limitation may be carried forward and deducted in a later year subject to the basis limitation for that year. If you are claiming a deduction for your share of an aggregate loss, attach to your return a computation of the adjusted basis of your corporate stock and of any debt the corporation owes you. See the Schedule K-1 instructions for details. After applying the basis limitation, the deductible amount of your aggregate losses and deductions may be further reduced by the at-risk rules and the passive activity loss rules. See page E-1. Distributions of prior year accumulated earnings and profits of S corporations are dividends and are reported on Form 1040, line 9a. Interest expense relating to the acquisition of shares in an S corporation may be fully deductible on Schedule E. For details, see Pub. 535. Your share of the net income of an S corporation is not subject to self-employment tax.

1120 K-1 does not have earned income. 1065 K-1 has earned income. From Sub-S you can use W-2 only.

If the employer is deciding an amount to contribute to the plan it doesn't sound like a deferral issue. Sounds like a non-elective rather than elective contribution. I would say the problem lies with how the allocation of the Non-Elective contribution will be done. Sounds like you need a lot of Allocation Groups in a Cross Tested design.

My experience with this is: 1. Are they supposed to get a market valuation? Yes, I know of no exception for Single participant plans or for segregated accounts. 2. Does anyone do it? No 3. Do all LPs have an ERISA valuation prepared? No (Some larger ones do) 4. What does the IRS look at in an audit? K-1, closing capital account value. 5. Does that make any sense? No 6. When is it a real issue? Multi-Participant Plan: Every valuation (since used for distribution amounts in a pooled Trust.) Single Participant Plans/Segregated Accounts: At plan termination, hard to rollover and (rolled or not) value to put on 1099. 7. Another real issue: UBTI 8. Anyone I know deal with that? No I just tell people what the requirements are, tell them I have to put a number on it, tell them there may be taxes due on the income, it is their responsibility to give me the number and then I use whatever they give me. Seems to me that if the IRS cared they could create a list of requirements (ERISA valuation and UBTI reporting of income distributions) for investments to allow them to take Qualified Plan investors. Thats my long & short on it.

Belgarath - I think Muslims would say the same thing about earning interest in a savings account. So I guess it is a matter of perspective. Besides, the guy might actually enjoy the money... as opposed to paying it all in terminal medical bills. Now that would be distasteful.

I asked the carrier about that and was told that "insurable interest" is in question when the policy is issued. Subsequently, it can be sold and the carrier "doesn't care". And the insured is not an employee. The person is totally unrelated to the employer or any employees of the employer.

Thanks. Seeing that this is a single person DC plan I think most of the issues go away and it could be a good investment..... As long as the person actually cooperates and dies in a timely manner.

For example, as a viatical settlement. When the insured dies would the money just go into the Trust and then be investment gain, taxed as ordinary income when distributed?

not if they quit and there is a plan/need to replace them.

Dude - For all the effort you put into these boards and the good info/ideas that I have gotten, I'll share whatever you ask. Some of the highlights of the provisions: POST-EGTRRA: Exclusion of Rollovers in Application of Involuntary Cash-out Provisions Catch-up contributions permitted effective for calendar years beginning after December 31, 2001 Amendment for Section 401(a)(9) Final and Temporary Treasury Regulations Deemed 125 Compensation INVOLUNTARY CASH-OUTS HARDSHIP DISTRIBUTIONS

My approved document says: Attempt to Locate. The Plan Administrator will use one or more of the following methods to attempt to locate a lost Participant: (1) provide a distribution notice to the lost Participant at his/her last known address by certified or registered mail; (2) use of the IRS letter forwarding program under Rev. Proc. 94-22; (3) use of a commercial locator service, the internet or other general search method; or (4) use of the Social Security Administration search program. I figure doing 1 and 2 is more than one and the IRS said ok to one or more.

I use Corbel and they have an EGTRRA and Post EGTRRA amendment that I would adopt.

It would really be some special circumstances for me to not recommend that the person start taking a RMD. How much could it be? Compared to the downside, I think it is an easy choice.

I think there is a rule I couldn't find in 2 mins that says you need an hour of service under the new vesting to get the new vesting. But if your new document has full vesting on all money types, what would it say to do with forfs?

Copying from the Pension Answer Book, I see that, from the denominator, you can exclude union employees only if 90% of all employees are covered by the CBA. My question is, "How do you determine the total # of employees?" Would it be all individuals that performed an hour of service during the plan year? 6. Employees who are covered by a collective bargaining agreement. This exclusion applies, however, only if 90 percent or more of the employees are covered under collective bargaining agreements and the plan does not benefit employees covered under such agreements. Thanks

because he doesn't know what the heck he is doing.

I would solve for the min to keep him over the $200k limit. "Based upon Schedule C income of $275,000 or more...."

it sounds like it is the first deferral in a new plan. I would agrue just start next payperiod. I wouldn't think the start date of deferrals in a new plan would be guaranteed. my def election says "as soon as admin. feasible start withholding..."

although you have 300 NHCEs that define separate rate groups, if they all get 5% of pay they are effectively one group in the allocation model in the software. Similarly the partners can be agregated in to groups in the software if they have the same allocation in any one particular year. maybe that will work, maybe not. i guess it could blow up the software if you had 15 partners all of diff ages and thus diff benefit rates. my software handles 100 rate groups so i haven't had the issue.

(I think g8r missed the joke)