jkharvey

Client wants to pay administration expenses out of plan assets. We use Corbel prototype. I've been reading the base document to be sure that it allows for expenses to be paid out of the trust. Does anyone have prior experience w/ this issue? I'm waiting to hear from Corbel w/ their comments. I see some specific expenses addressed in the document, but not really anything about general admin. expenses. What am I missing?

It is discretionary based on objectives. There is no last day or year of service requirement to receive the contribution. It is not integrated. The ER wants to do more than contribute monthly, he wants to actually determine the amount and allocate based on monthly amounts. I really appreciate all of your comments.

Employer wants to allocate discretionary p/s contributions monthly. I want to know what problems this could present. Seems to me we may have to use the general test to determine if contributions are discriminatory on annual basis. Any thoughts?

Ineligible employee is allowed to make elective deferrals. I know this has been addressed before, but I'd like to know the most recent position. I saw postings that said the IRS would not consider this to be a "distributable event" and the money should be returned to the employee outside of the plan and then the deferrals forfeited. The Q&A portion of this site, Question 141-143, seems to indicate that these deferrals can in fact be distributed from the plan to the participant. What is the IRS' current position?

Money Purchase Pension Plan wants to amend to reduce the contribution from 15% to 10% of compensation. The employer, however, wants this reduced percentage to only apply to new employees (hired in 2001). Is there a problem here? This is a governmental entity, by the way.

Hmmm. I hadn't looked at it that way. In your definition then am I correct with the following example? Employer date of hire is 2/2/2000. Employee works 1000 hours by 9/5/2000. The plan provides for monthly entry dates. This employee would be eligible to enter the plan and begin making elective deferrals on 10/1/2000. Using the more conventional defintion of a year of service, however, this EE would not be eligible until 3/1/2001, if entry dates are monthly. Is this correct?

Thanks for your help. My question now is this. Using the definition of year of service as 12 month period from date of hire, doesn't the EE have to wait the 12 months before becoming eligible even in the 1000 hours have been completed in only 6 months or so?

Employer wants participants to enter the plan (make elective deferrals) as soon as they have completed 1000 hours. The employer doesn't want the employees to have to wait for a 12 month period to pass. At the same time, the employer doesn't want those who work less than 1000 hours to become eligible. Can this be done? If so, how do we define the eligibility and entry date requirements?

I posted this once before and didn't get a response. Does anyone have a suggestion or comment about this? I plan to submit to IRS for FDL, but would like to know what my chances are. The employer wants to base profit sharing plan contributions on the following: $150/month for each employee with perfect attendance, $150/month for each employee with no accidents, $200/month for each employee based on some production goal for the company as a whole. No HCEs will benefit under this plan. I haven't worked out all of the language yet, but wanted to know if anyone saw anything wrong with the basic concept of this just on the surface. I'm concerned as to whether or not this meets the definition of definitely determinable allocation formula. Also, the ER wants to base these incentives on monthly goals (perfect attendance for the month, etc), but still wants a last day/1000 hr rule. My concern is that if the plan specifically allocates on a monthly basis, how can we have last day/1000 hr requirements?

Would this mean then that we could amend the plan retroactively to reduce the contribution percentage of one employee from 15% to 10%? This would be provided that the plan document does not specifically prohibit such an amendment.

Does 411(d)(6) apply to a governmental plan? The MPPP wants to amend the contribution percentage for one employee. The amendment, however, would need to be made retroactive. What problem will this cause?

I think I've got it now. The 401(k) portion is disaggregated into two plans, union employees and nonunion employees. Each portion runs a separate ADP test. If the nonunion portion does not pass ADP, regular 401(k) corrections must be made. If the union portion does not pass, no corrections need be made, but if not corrected, the elective deferrals of the union participants are includible in income. 1.401(k)-1(f)(7)(iv). This would mean that the safe harbor notice (and plan when amended to provide safe harbor language) would have to address the union employees separate from nonunion employees in terms of which group will receive the safe harbor 3%. If the union participants do not receive 3% safe harbor, the regular rule outlined above would apply with regards to ADP test. Do I have this right?

OK. Now, I'm a bit confused. If the plan provides that the union employees may make elective deferrals (in other words, the plan does not specifically exclude the union employees), then they must receive the safe harbor 3%. If the plan does not allow the union ees to defer, they do not have to receive the 3%. Am I correct here? The ADP test to which your refer, is that for the part of the plan not using the safe harbor 3%?

No, I'm not sure. That's just the way it has been done in the past. Thanks for your response.

The plan provides that union employees are eligible to make elective deferrals, but are not eligible to receive a matching contribution. For purposes of the 3% 401(k) safe harbor contributions, it seems to me that since they are eligible to defer, the union employees should receive the 3%. Is this correct? The fact that they are excluded from the regular 401(k) testing, however, causes me to reconsider the requirement for them to receive the 3%.

Does anyone have a "maybe" 401(k) safe harbor notice that they would be willing to share with me. I have sample notice we use when the employer does not want to utilize the "maybe" option of Notice 2000-3.

The employer wants to base profit sharing plan contributions on the following: $150/month for each employee with perfect attendance, $150/month for each employee with no accidents, $200/month for each employee based on some production goal for the company as a whole. No HCEs will benefit under this plan. I haven't worked out all of the language yet, but wanted to know if anyone saw anything wrong with the basic concept of this just on the surface. Also, the ER wants to base these incentives on monthly goals (perfect attendance for the month, etc), but still wants a last day/1000 hr rule. My concern is that if the plan specifically allocates on a monthly basis, how can we have last day/1000 hr requirements?

Client wants to rollover/transfer assets from a SEP into a 401(a) qualified plan. I'm getting the impression from research that this can't be done, but I can't get an exact cite that says "no" or "yes". Can it be done? If so or if not, please provide me with the cite.

Plan has purchased rental property in Hilton Head, SC. The property is in the segregated account of the HCE. The property is rented out at FMV. The HCE wants to use the property 2 weeks out of the year and pay fair rental value. It seems to me that this would still constitute a prohibited transaction? Any comments or thoughts? Also, how does the HCE get the rental property out of the plan later when he has retired and wants it entirely for his own personal/rental use? Regular distribution? Seems dangerous to me.

A participant dies and his beneficiary (55 years ol) takes a direct rollover of the account balance into her own IRA. She wants to be able to take distributions from the IRA each year (about $3600 or so for living expenses) without incurring the 72(t) excise tax. Any suggestions on how this can be done? The payout over life expectancy option provided for in 72(t) is not going to work because the distribution amount is not going to be high enough. Is there something about a 5 year payout that approximates or exceeds a life only annuity payment that would avoid the 10% excise tax?

Is it a partial termination if 3 out of 4 participants voluntarily terminate employment? In this particular case, after the mass exodus the employer now has no employees and has not had any compensation for the last 2 years. This is a MPPP and now we have considerable "forfeitures" that can't be allocated because we have no compensation. Seems to me that this may qualify as a partial termination.

Actually, they are treated as a controlled group. For example, an employee earns $10,000 working at the hotel. She receives a SEP contribution and MPPP contribution. Both contributions are based on her salary from the hotel only. My biggest question is how to compute the Earned Income for both MPPP and SEP purposes for the owner. Any suggestions?

Client has two sole proprietorships. One, a medical practice, has a MPPP. The other, a hotel, has a SEP. The medical practice has Net Schedule C income in excess of $200,000. The motel, however, has a Net Schedule C loss. How is compensation computed for each of the plans, the SEP and MPPP? Does the client get a contribution from each plan based on comp of $160,000?

DOL Regulations provide that the fidelity bond need not exceed $500,000 unless such greater amount is "prescribed by the Secretary". Does anyone know under what circumstances a bond should exceed this limit and actually reflect 10% of plan assets?

What if the plan makes a PS contribution in addition to the 401k and 401m amounts and all eligible NHCEs are still receiving a benefit? Can Line 3 cover all of this and still allow the filer to skip line 4?