rcline46

I got lost in regulations. A sole prop/partner can deduct 20% of income (25% of net) for a contribution to a plan. Can the partner ALSO deduct the $15,500 401(k) contribution in addition to the 20%? If so, is there a direct or indirect cite to this? I am 'discussing' this with an accountant who says no.

Our counsel agrees with Janet. Constructive receipt is what counts and nothing else. Pay dates and not pay periods governs W-2 and all compensation definitions. I would challenge the document and SPD that says 'first pay period after becoming a participant'. If you are paid monthly, you would be out a full month, and I believe that would violate maximum eligibility rules.

This still falls under prior year testing and they had to choose either 3% or current year before the end of the year. Under prior year testing you can deposit a QNEC before the end of the current year which can be used to be added to the ACTUAL prior number, which is -0-. If you chose the current year, then you get a QNEC to add to the current deferral rate, which again is -0-. The 3% number is useless if you are using a QNEC - read the QNEC rules. I would like to see the enrollment form for the NCE where they elected not to defer. CHances are high there is no form and the employee was never given an option. Limit the HCE to 5% if he choose that option and let it go.

Her 'challenge' is just a bluff. In order to file a DRO against your pension plan, she has to identify where she is, and then a warrant can be issued. I would also file for the child support and add that to the warrant. Judges do not like anyone skipping on child support.

If there were assets on the 2003 Form 5500, then a Final 5500 for 2004 is needed. The 2003 cannot be a final. The firm that administered the plan for 2003 should be able to tell you what happened to the assets.

Call the document provider and ask them what the entry date is under the provisions cited.

I think you got VERY confused on a process. Prior to 2008, you could roll a distribution into an IRA, then CONVERT the IRA to a ROTH IRA and pay the taxes as if (because it was) the IRA was distributed. Starting in 2008, due to PPA, that can be done in one step - ie a direct rollover (taxable) into a ROTH IRA. However, you cannot then roll the ROTH IRA into a ROTH 401(k)/403(b). YOu can only roll a regular IRA into a non-ROTH rollover account in a qualifed plan.

If the participant takes a distribution into a personal account and pays taxes, that is not an IRA account and not a ROTH account, it is clearly not eligible to rolled into a qualified plan. This is the situation you originally posited. In the sources that are acceptable to be rolled into a qualified plan, an IRA may be rolled in, and under PPA, non-deductible IRA contributions may be included in the roll in. However, the rules also clearly state that you may roll an ROTH account from one plan to another, but that you cannot roll a ROTH IRA into a qualified plan, even if it originally came from a qualified plan.

No can do. Cannot roll an ROTH IRA into a Qualified plan even if it has a ROTH feature.

The rules for purchasing life insurance in a Qualified Plan can be complex depending on your corporate structure (sole proprietor, Sub S, C Corp, partnership, LLC,...) , the type of insurance purchased, and the contribution to the plan. A firm which has had experience with life insurance in a Defined Benefit Plan is best suited to answer these questions. An insurance agent today is probably the person with the least knowledge. The sole advantage of buying insurance in a plan is to pay premiums with pre-tax money (but you will have at least PS 58 income), and when you take it out, you get the insurance at the interpolated cash reserve (IRS value of the insurance). You also get a cost basis of the accumulated PS 58 costs. If you are being sold a Defined Benefit 412(i) plan, no actuary needed! be forewarned that the IRS views many of these plans as 'listed transactions' which means an illegal tax shelter. ASPPA (www.asppa.org) might give you a list of Enrolled Actuaries in your area. Other actuarial firms might also do so. If your tell us where you are some of the EAs on this board may contact you.

Don't forget the 60 day rollover rule. If not beyond 60 days, the participant can deposit the check into their IRA as a rollover, and the taxes withheld from personal assets. There would be no taxes due and no penalty for under 59 1/2. If they cannot come up with the funds to cover the taxes withheld, then they owe tax and penalties on the 20% withholding only, not the full amount.

Or better yet, I cannot figure out how to 'convert' a FAS 87 report to the new FAS 158 report. Problem is I cannot understand 'accountant'. I have to know where prepaid/accrued costs, unamortized initial liability, current G/L - where do all of these values go and still be in balance ON THE REPORT? And I am NOT going to pay the outrageous AICPA fees to purchase the new books. I might just have to let the CPA figure out how to adjust the report! Ha, that's a good one!

I keep trying to follow, and I STILL have a fundamental problem. 402(g) Says I can defer $15,000 in 2006, and catchup says if over 50, I can put another $5,000 away. So I put away $20,000 in 2006. I cannot believe in any way that a 'problem' in the 401(k) plan (failed ADP test reclassified as catch up) can in ANY WAY stop my deferral amount. I might have to have some deferrals returned on a 1099 from a failed test, but I cannot see how you can limit my deferrals. Suppose YOU say I am limited to $17,000 and I do $20,000. What do you do with the extra $3,000? Under what rule can you return the money?

Suggest she contact the DOL for advice on how to proceed when she won't use the forms provided.

Under 12.5©(2) I don't see any hours requirement, so there is no hours requirement. Don't forget the Final 401(k) Amendment for 2006 which modifies these rules!

You need to check the Basic Document under corrections to ADP testing. The Corbel doc has 7 different QNEC options. Of course, these are modified by the Final 401(k) Amendment which had to be signed in 2006, so you need the amendment also.

This reply costs my clients - component plans.

IOMA provides compensation information as do other firms. Many advertise on the main page for benefitslink.com.

The Cash Balance software on Relius works fine. However, since this is the first year we have been doing CB plans, and they are EOY vals, and we have not actually done the real vals yet.... And the true test is in the 2nd or 3rd year, I can only say it seems to work as advertised.

It is true that the law prevents hardships from a Money Purchase Plan. Most Profit Sharing/401(k) only permit hardship withdrawals from money contributed by the employee, which you have not done. You said you already have a loan which you cannot continue to repay. If you stop paying on the loan and do the default, the law requires that you be taxed (in 2008 - the year in which you default) on the remaining balance of the loan. If you should take the drastic step of terminating to get to your money, the speed of the distribution is actually spelled out in the Summary Plan Description for each plan. If it says 'as soon as administratively feasible' then you should have a distribution in 2-3 months at the latest - EXCEPT the company may hold distribution until they have contributed for the year ending 12/31/2007. This could be as late as September 15, 2008.

This is a document issue. Corbel documents generally state 'up to the vested account balance' under the in service item.

Why limit the NHCEs to 5%? They can get higher. Or do you mean you failed the 25% deduction limit? You did not indicate how they failed. Did you use 401(a)(4)-11(g) amendment to fix enough NHCEs already eligible to pass testing? I assume you are testing on an accrual basis. Do the HCEs have enough age spread to make it work? Lots of questions. Do you have sufficient HCE groups to do component plan testing - using -11(g) to make it work?

Oh No - This is bad - Tom and I disagree. He probably will never speak to me again. However, the IRS has not seen fit to give us rules on the SH non-elective. Therefore amend it out. One may say it is 'like' a money purchase under 412, but it is not a money purchase plan. If you are too dissatisfied with the direct solution, start a new 401k, merge the SH into the new one on January 1. That ought to kill the Safe Harbor! The plan no longer exists.

Rescind the notice, amend the plan prior to 1/1/08. 'Reasonable' notice requirements are in the eye of the beholder and just because 30 days is necessary for match recission does not give rise to the same for the non-elective because it should not affect deferral decisions. I love run-on sentences.

The document probably is checked off to pay as soon as administratively feasible. I would take the position that for an HCE, it is not administratively feasible to pay until the adp test is done.