DP

austin3515 - did you ever get the .pdf forms? If not, I have Relius and can do this for you.

Thanks. Good point about the 401k. We're trying to get the SEP in place for 2005, but will establish a 401k early in 2006.

Doctor owns 50% of a C-corp and maxes out his PS contribution each year. This doctor also receives self-employment income unrelated to his medical practice. Can he establish and fully fund a SEP based on his self-employment income?

I have a PS that terminated 5/31/05. All participants have been paid out except for one new doctor who has a balance of around $42,000. He's going through a nasty divorce and doesn't want to send in his paperwork now. The owner of the practice wants to pay out this doctor and close the plan. This new doctor only has PS money in his account - no merged MPP money. There is no J&S on the PS money. Can he be paid out without his wife's signature? If he still refuses to send in his paperwork, is our only option to roll his balance to an IRA? Help!

Thanks, Tom.

I'm setting up a new calendar year Cross-Tested PS plan effective 3/1/05. This is the date the company incorporated and started business. For this first year, will the $42,000 max contribution and the $210,000 max compensation limits be prorated for 10/12 of the maximum? My mind is drawing a blank. Thanks!

We set up a SH PS 401k plan for a solo medical practice effective 1/1/05. The practice is going to incorporate 12/1/05 having a short year of one month. How will this affect his PS/401k? Do we combine his income from the solo and PA to get his total compensation before calculating the contribution? The doctor is the only participant for 2005.

I am in a discussion with my client's financial advisor who says you can have a "last day rule" in a Cross Tested 401k plan with a 3% non-elective SH. This plan has age 21, one year of service for eligibility. No early entrants. I have explained to him that all terminated participants must receive the Gateway Allocation since they are receiving the 3% SH contribution. In the case of this plan the terminees would need to receive an additional 2% PS contribution to reach the Gateway. This financial advisor says that out of all the TPA firms he works with, our company is the only one requiring this. I know I'm not crazy, but can anyone give me a cite to show him? I've searched several times, but haven't had any luck finding what I need to prove my point. Thanks.

Thanks, Tom. I thought it should be effective 1/1/06, but the plan's financial advisor says it can be started in 2005. He was beginning to make me doubt myself.

I have a calendar year PS/401k with a 3% non-elective SH. Eligibility to receive contribution is employed at end of year or work 501 hours if terminated. Currently the employer contribution is integrated at 100% of the TWB. Can we change to a cross-tested formula for the 2005 plan year? Thanks.

Dr. X was one of the Trustees of the plan. So he could sign the check as Trustee and then endorse it over to himself? Thanks.

I have a PS plan terminating on 8/15/05. All of the HCE's have individual self-directed accounts. Dr. X has an old stock in his account that is worth about $10. The issuing company was going to charge $100 to $150 to change the registration on the stock from PS to IRA, so Dr. X decided to take a taxable distribution on this stock. However, the stock is still registered to the plan. Dr. X is now asking - what if this stock miraculously goes up in value over the next few years and a dividend check would be issued. The check would go to the name of the PS Plan which doesn't exist. Also the corporation adopting the plan no longer exists. How should a situation like this be handled? Thanks.

Here we are at the end of the 7/31/05 plan year. The HCE has an Excess Annual Addition of $1,940. The plan states the Elective Deferrals will be distributed to reduce the excess amount. Since this is a fiscal year plan, do we have to actually refund the $1940 and give him a 1099-R or can we carry the $1940 over to the new fiscal year of 7/31/06 as a 401k deferral? The HCE has exceeded no calendar year limits. I'm confused. Thanks.

No, the document does not limit deferrals. Let's suppose the corporation decides to give the HCE a total of $28,000 in PS/SH contributions for the 7/31/05 plan year. This contribution, along with his 401k deferral, will put the HCE over the $42,000 contribution limit. Would we need to refund part of the 401k deferrals to the HCE, or lower his PS contribution? They have an integrated PS contribution formula. Thanks.

I have a SH PS 401k plan with a 7/31/05 year end. The 401k was implemented as of 8/1/04. One of the HCE's (under age 50) contributed $13,000 in 401k deferrals from 8/1/04 - 12/31/04. From 1/1/05 - 7/31/05 he contributed another $7,000 in 401k deferrals, giving him a total deferral of $20,000 for the plan year. He did not violate the individual 401k limit based on a calendar year. Has he violated any other 401k limits based on the plan year? Thanks.

I have a medical practice who has a Profit Sharing plan with a 5/31 year end. On 5/16/05 the president and sole shareholder decided the company was insolvent and decided to close the practice. He terminated the two other doctors on 5/31/05 who are only partially vested in the plan. The president is keeping the corporation open for a few more months and allowing three office girls to continue working to finish filing insurance claims and collect any receivables. The PS plan has not officially been terminated and probably won't be terminated until the corporation dissolves. Considering what has happened, should the two other doctors (HCE's) become 100% vested? If not, there will be approximately $30,000 - $40,000 in forfeitures to be shared among three office girls. What would happen to the forfeitures that couldn't be used? Does it revert back to the corporation? Thanks.

Yes, the entry dates would be 6/1 and 12/1. Thanks for your response R Butler. That is what I was wanting to hear.

Sorry to be so long in responding. The amendment would be Age 21, 1 YOS with dual entry dates. Thanks for all the responses.

I have a client with a PS Plan with a 5/31 year end. Currently the plan's eligibility is Age 21 and six months of service. Entry date is on 6/1 after meeting eligibility. Employee A, over age 21, was employeed 8/23/04 and should enter the plan on 6/1/05. Client is wanting to amend his plan's eligibility to Age 21 and One Year of Service with the amendment effective 6/1/04. Will this keep Employee A from entering the plan on 6/1/05? Or since she has not entered the plan yet, will she fall under the new eligibility rules? Thanks.

The accountant was giving him a SEP contribution of 20% of his adjusted net profit. The $3,000 catch up was in addition to this 20% contribution. I found out that the accountant went ahead and used the $3,000 catch-up in addition to the 20% SEP contribution on his 2004 return. Without the taxpayer undergoing an audit, how would the IRS ever catch the fact that he should not have received the $3,000 SEP catch-up?

I'm sure this is only a SEP because I was instrumental in getting it set up last year. This is a very aggressive accountant who likes to act on impulse and seek forgiveness later. By the way, I do have one SAR-SEP that I administer for another of my older clients, and we do utilize the catch up contribution feature in this plan.

One of my clients over age 50 made a 401k deferral of $16,000 for 2004 in his employer's plan ($13,000 plus $3,000 catchup). The client also has a SEP plan from unrelated self-employment income. The client thinks he can receive another $3,000 catchup contribution from his SEP for 2004. I say no, but his accountant says yes. Am I wrong? Thanks.

I have a medical practice that is owned equally by 11 doctors. These same 11 doctors own another side business operated in conjunction with the medical practice. The medical practice has a PS 401k plan and already maxes out the doctors' PS/401k contribution each year. The doctors are now asking if they get get a $42,000 contribution in 2005 from each of their companies. My opinion is that they cannot do this since both businesses have the same owners. Am I correct? If not, please let me know.

Thanks, Pensions in Paradise, for understanding the nightmare I was speaking of. Getting the employer to provide each employee's hours based on his/her anniversary date would be like pulling eyeteeth. The owner likes the option of excluding HCE 2 from the plan. Thanks for the suggestion.

I have a calendar year PS 401k with a Basic Safe Harbor Match. The plan was effective 1/1/02. They have a 6 year graded vesting schedule. Up through 2003, the Safe Harbor Match was the only employer contribution deposited. They plan to have an Discretionary Employer Contribution for 2004 which will make the plan top heavy for the 2005 plan year. The owner is trying to do what she can to keep the vesting % down on HCE 2. HCE 2 was employed 7/1/03. Vesting is measured over the plan year, so at the end of 2004 HCE 2 will have 2 years of vesting service (20% vested). The owner's financial planner is telling her she should go on a 5-year cliff vesting schedule. That would not work for 2005 when the plan becomes top heavy. If they implement a 3-year cliff effective 2005, HCE 2 will have 3 years of vesting service at the end of 2005 (100% vested) compared to 40% if they stay on the same vesting schedule. The owner thinks that since she has never made an Employer Discretionary contribution that she can retroactively change the vesting schedule. Am I correct that the vesting schedule cannot be amended back to the beginning of 2004? Also the financial planner is telling the owner that she should start measuring service for vesting based on the 12-month period ending on each employee's anniversary date instead of using the plan year. This is an option in the plan document. I think this would be a nightmare to keep up with. And how in the world would you change midstream? Would you have an overlapping vesting period? I'm about ready to jerk a knot in this financial planner's tail!