Earl

IRAs have a max, the funding is discretionary in amount with a cap.

a minimum distribution is required and can not be rolled over. The distribution of his full account balance would have two parts, the required amount (not rollable) and the balance (rollable). If a minimum distribution is required in any year all amounts distributed during that calendar year are treated as required minimum distributions and not eligible rollover distributions, until the required minimum distribution has been made [Treas Reg § 1.402©-2, Q&A 7]

does the two year participation rule still apply to SIMPLE plans requiring that two years from date of first deposit pass before any distribution (rollover or otherwise) to avoid the excise tax? thanks....

what mutual fund company? do you have a contact? do they have a minimum? ($500/$1000) do they have a policy on how to deposit/invest the money? thanks!

You would at least have a 5500 coding issue.

Doesn't really bleong here... but: is it true SEPs remain 15% in 2002?

i don't do naming for the reasons you list. I would look for anything to distinguish them. Dates of birth, Dates of hire, type of doctor or particular service performed (you do ankles, I do backs), any corporate function or office, locations, work at the office, work at the office and the hospital etc. sure you have to create rate groups but say you create 4 groups and one of the drs. gets $0 and the other three get what they would have gotten, should still pass. I suppose it could happen that the four at $30K passes but 3 @ $30k and 1 @ $0 fails, but I am not sure how.... and back to the original q, i would say 2000 is locked in to whatever was in place at that time and if you did this for 2001 he is still in the test (which is good).

divide the drs into individual rate groups..... seems like it would solve the problem to me.

There are a lot of issues in your post that are confusing, however it seems that you have employed a discretionary Institutional Trustee of some kind. As such it is their duty to invest prudently, yadda, yadda, yadda. Your request to invest the money a certain way would not be binding or controling. In fact it would be their duty to decide how the money should be invested. If you wanted to control the investment of the money, you should have fired them and appointed yourself as Trustee.

I think you can do it either way, however... who out there takes Actual W-2 wages, backs out first payroll and adds on first payroll of following year..... no one that I know, although I think you can do it. Obvious easy way is to follow the timing of constructive receipt, which requires enrolling January entrants at the beginning of December. Related to that is the agrument I have heard about when to terminate counting compensation and to stop deferrals. There is some arguement about when the employer/empoyee relationship is severed and being able to not count wages paid after that date. Again no one i know really does that except in the case of doctors that continue to receive accounts receivable payments that flow into the next year. Or commissions that take 6 months to receive and payout....

thats hard to say really, depends upon the work load of your local office. I know someone in texas that said virtually all her plans had been audited. Maybe 10% of mine have been. And she worked in the same plan size market as I do. Here, I would think no... But in Mass... I can't say.

My take is that you could do whichever you wanted if always consistent, but that you would be well advised to firm up the class definitions as soon as possible. My favorite was a document I took over that said group 1 was "doctors" (not physicians). Well, guess what? The office manager had a PhD and wanted $30,000! She got it, too... I have done your fact pattern with 2 groups, stating group 1 is only direct ownership without regard to attribution rules (assuming you don't want to favor the daughter). It might also be to your advantage to have the kid in a separate, third, group and give her an allocation lower than the NHCEs, if she is young. Could do wonderful things for Mom and Dad's allocation testing. I also took over a plan that had a group titled "children of owner". As I recall that was a direct quote and the plan had a DL. I thought that was kind of vague.

That is a good point. I always tell them it is my job to recommend that they file as that is the conservative approach. I tell them it is a not a guarantee against future audit and that I also recommend that they ask their CPA as I charge for this optional service and I don't want them to think that I am working them over for fees. Usually the CPA defers to me anyway and the client makes his own determination based upon his experience and comfort level in dealing with the IRS.

In my experience with terminations the total amount of the plan termination distributions is the determining factor on being audited. I have never seen any evidence that an amount on a 1099 was involved, rather the total amount of the Trust was targeted. In fact I have evidence to the contrary. Several times I have had plans audited upon termination distribution that WERE filed and the auditor had no knowledge if they were filed (for termination DL) or not. At that point they reduced the scope of the audit to post DL transactions. Very simple audit. Show the Distribution Notices and elections, 1099s and investment statements and that was that. My opinion is that a quiet termination is done by filing for a DL. That review is very easy to control and is very predictable as to what they want to see. The DL review is almost exclusively form rather than operation. The field audit is much more operation than form. I would wager that you could produce plan documents all day for a DL submission..... A review of some of the operational issues seems to be more scary for you. If you have a plan that is squeeky clean, why bother filing. Let them audit it. If it is dirty, file and be in control. That's my take anyway.

thank you - another discussion that I had with a friend tied me into what i was thinking of (I think). They are no longer required to cover all employees of all business but rather are just subject to the normal coverage laws: PAB Q 5:33 Does any special coverage requirement apply if an owner-employee controls another business? Yes, but only for years beginning before 1997. If an individual was an owner-employee (see Q 5:32) of more than one business and participated in a qualified retirement plan maintained by one of the individual’s businesses (Plan X), all employees of any other business controlled by the owner-employee had to be covered by a plan that gave them benefits at least as favorable as those provided for the owner-employee under Plan X. This rule also applied if two or more owner-employees together controlled another business as owner-employees. [iRC §§ 401(d)(1), 401(d)(2) (prior to amendment by SBA ’96 § 1441); Treas Reg § 1.401-12(l); see also IRC § 414©] Control meant (1) ownership of the entire interest in an unincorporated trade or business or (2) ownership of more than 50 percent of either the capital interest or the profits interest in a partnership. Example. In 1996, Debi was the sole owner of a record store and was also a 51 percent partner in a hardware store. The hardware store maintained a qualified retirement plan. No contributions to the hardware store’s qualified retirement plan could have been made on Debi’s behalf unless her record store gave its employees equal benefits under a qualified retirement plan. This special coverage requirement was one of the few restrictions that applied to qualified retirement plans that covered owner-employees but not to corporate retirement plans. For years beginning after 1996, Debi can participate in the hardware store’s plan because the record store and the hardware store are not trades or businesses under common control (see Qs 5:29–5:31). However, the qualified retirement plan must provide that contributions on behalf of the owner-employee may be made only with respect to the owner-employee’s earned income (see Q 6:41) derived from the trade or business adopting the plan. [iRC § 401(d) (as amended by SBA ’96 § 1441)]

Am I dreaming or was there some law that passed that somehow excludes Sole Props from Control Group regs.? 401(d) was the closest I could find and thats not it... anyone know what i am talking about? thank you

How about this... 403(B) aspect may be off target, but interesting stuff.... 403b Q 11:19 What is a principal-residence loan? The determination of what is a principal residence follows the rules in Code Section 121. [Treas Reg § 1.72(p)-1, Q&A 5] If an individual has multiple residences, the determination of which one is the principal residence is a facts and circumstances test. Whether loan proceeds are used to acquire a principal residence can depend on whether the proceeds are disbursed directly to a third party for the purchase of the residence or paid to the participant. If the loan proceeds are disbursed directly to a third party for the purchase of the residence, they are considered to have been used to acquire that residence. [Temp Treas Reg § 1.163-8T©(3)] If the loan proceeds are distributed to the participant in cash or deposited into the participant’s account, then the loan is treated as incurred to acquire the residence if expenditures to acquire the residence are made within 90 days before or after the date the loan proceeds are disbursed. [iRS Notice 88-74, 1988-2 CB 385] The refinancing of a principal-residence loan can sometimes be treated as a principal-residence loan if certain tracing requirements are met. Also, debt incurred to acquire the interest of a spouse or former spouse in a residence, when incident to divorce or legal separation, can be treated as debt for the acquisition of the principal residence.

(ii) Exception for home loans. Clause (i) shall not apply to any loan used to acquire any dwelling unit which within a reasonable time is to be used (determined at the time the loan is made) as the principal residence of the participant. even less help. couldn't find what i thought i saw. sorry, should have been quiet.

I kinda mispoke there.... I would be agreeing to a compensation package of $x in W-2 and a Pension Plan contribution of .25x annually. I don't see this as a election to reduce. Might be a problem if i am already an employee, but in my scenario (admittedly diff than original question but nevertheless an actual situation) I negotiated it with an employee upon hiring her.

how about creating a job catagory for that person. Then establish a Mony Purchase Plan with the desired % formula excluding all but that person. If the person becomes HCE, no problem... terminate the plan. There was never an election, irrevocable or otherwise. Would solve the vesting problem also... (If i agree to reduce my compensation to fund my own contribution, I would expect that I would be 100% vested.)

isn't there a UBTI issue with life ins loans?

not sure where and i will give it some thought, but i swear to god i saw "within 12 months" once as the required move in time. not much help, i know....

I have been wondering these same things. This is my take on your questions: 1. You have to update the plan for all laws in effect as of the plan's termination. So for GUST, yes. But I think the series of model amendments is fine. 2. I don't know why the plan cannot have a receivable asset. I have seen people talking about making the deposit by 12/31/00. I can't think of any reason for this. Plan benefits are equal before and after the transfer. Timing of the contribution is a separate issue, seems to me (412). 3. A Profit Sharing prototype I used to use had a provision under the effective date section that stated, "this is a subsitituiton of a Money purchase Plan originally est.:_____". Seems like it got approved once.... Never saw it questioned, have shown it to a couple IRS auditors, seems fine to me. And I have continued with the same plan number (001) after changing name to abc, co., inc., PS Plan from abc, co., inc., MP Plan. What do you say?

does the presence of a receiveable contribution prevent the merger of PS and MP plans? I am wondering if you can merge on 12/31/01 and have the contribution, once determined, be dumped into the surviving PS in 2002. or... does the deposit need to be made.

Money Purchase Plan lives!!! Read all about it!!!! I am continuing to maintain a Money Purchase Plan for select NHCEs that want a 25% (actually max contrib.) contribution. It provides immed. elig and 100% vesting, unlike my Profit Sharing/401(k) plan. Since I reduced their salary by 20% I actually saved... taxes and PS contrib. Interestingly, it seems that that group can now participate in the 401(k) as well next year as they will not be at their 415 limit any longer. Seems I must take action to exclude their job title from the PS plan, if I don't want to fund for them additional amounts. Could I make eligible for 401(k) and inelig for PS? Answer is probably not in a prototype document. Any thoughts on this?