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The IRS website currently posts the 5307 dated September of 2001. Does anyone know of a more recent version? I remember reading that this version would only be valid up until March 31, 2002 and that the IRS is going to release a new reversion in November of 2001.

PS plan set up for small business owner by investment firm that never drafts a document or adoption agreement for it. Unsuspecting client never had TPA as he was led to believe investment firm will do it all. Contributions were made annually and deducted. 5500's have never been filed. Accounting is apparently OK as the sole employee has always had proper amts allocated to him. Total plan assets are only about $50,000. How can the plan now become qualified? Can the plan undergo voluntary compliance with the IRS w/o an FDL or an opinion letter? If so, how much of a sanction/fee would the IRS charge and how much would the client expect to pay a TPA to handle this (or would they need an atty.?)? Also, if this is done, would 5500's for all past years have to be submitted? What other options can be considered? All help appreciated.

I believe that they refer to one-man 401(k) plans. You probably won't find these names in any regs as they were created for marketing purposes by investment or admin firms. The plans are a result of EGTRRA legislation that permits elective deferrals to be excluded from the 25% of comp limitation effective in 2002 resulting in larger overall contributions. As they work more or less like a traditional 401(k) plan, additional info can be obtained from EGTRRA and how it relates to historical 401(k) legislation such as Treas. Reg. 1.401(k) and IRS sec. 401(k), and of course, from the cos. that set up such plans.

A new comparability PS plan fails 410(B) for calendar 2001 due to several participants terminating employment. The terminated participants all had over 1,000 hrs. and were all terminated on the same day. Plan has last day requirement for allocation. The document does not contain any failsafe provisions. Only a portion of the terminated participants would have to get an allocation for the plan to pass 410(B). Since they were all terminated the same day, with presumably the same number of hrs., is there a way to avoid giving allocations to all of them? Also, for new participants entering mid-year, the doc's definition of compensation says to only recognize comp from DOP. I'm pretty sure it's OK to also use partial comps for cross-testing but would appreciate verificiation of this. Are there any regs that require the use of total comp for the year in such a situation? Thanks in advance for all help.

The smaller plan will need a final return. As for the surviving plan's 5500, showing the transfer occuring during the year on the appropriate Financial Information schedule would seem the better way to go instead of showing the other plan's assets already being there on 1/1. If the plan has an EOY val date, I would expect all figures on the B to take into account both plans' benefits, including the RPA CL discounted to the BOY. The opposite would then be true if the val date was BOY, i.e., only the surviving plan's benefits would be reflected throughout the B.

I'm not sure why, but a company has adopted 2 profit sharing plans. For good measure, the eligibility requirements are different for each plan. This results in plan 1 covering 9 ees (including the 2 HCEs) while Plan 2 allows 8 of these 9 ees (including the HCEs) to participate plus an additional ee not eligible for plan 1. At least the plans are not top heavy and their limitation years coincide. If the er contributes 7.5% of pay to each plan would there be a discrimination issue for that one NHCE in each plan who receives 7.5% from that one plan while the other 8 participants get 15% total from the two plans? Also, since total eligible compensation is different in each plan, how would the 15% of pay maximum between the two plans be calculated?

We use the participant's current age since annuitizing a benefit in a cross tested plan is procedurally similar to the calculations performed in a DB plan and would produce a more "factual" representation of the participant's benefit.

Employer has an existing integrated profit sharing plan that is top heavy for calendar 2000. A non-integrated ESOP plan is added for 2000. The 2 only key employees benefit under both plans making both plans a required aggregation group and entitling all participants to a top-heavy allocation for 2000. The plans have different eligibility requirements allowing 3 employees who are not eligible for the profit sharing plan to be eligible for the ESOP. The ESOP's first year contribution was only $1,000 while approximately 4% of comp. was contributed to the profit sharing for 2000. Everyone will receive at least 3% of comp. in the PSP. The $1,000 ESOP contribution is less than 3% of comp. for the 3 ESOP participants who are not eligible for the PSP. Would it be acceptable to allocate the $1,000 entirely among these 3 employees since the other ESOP participants are receiving a top-heavy minimum allocation under the PSP? Also, since these 3 employees would be receiving less than 3% of pay in the ESOP, should a portion of the PSP contribution be allocated to them for the difference, i.e., allow them to prematurely participate in the PSP so they can get 3% of pay between the two plans? All help will be very much appreciated.

Pax, you're correct re "affected taxpayers". However, for people who are affected taxpayers only due to mail service disruption, the only relief available is item (5) under the Grant of Relief section. This would allow "payments required" between 9/11 and 10/31 to be made until November 15th. I'm hoping "payments required" also refers to minimum funding (after all, those contributions are required) since this potential relief would apply to taxpayers all over the country.

A company currently sponsors a non-safe harbor 401k plan where very few NHCEs defer, limiting the owner to very small deferrals and matching contributions for himself. Present match is 100% up to 3% of comp with a 2/20 vesting schedule. It would appear amending the plan to a safe harbor design where the match would be 100% vested and be increased for an additional 50% match on the deferrals between 3 and 5% of comp. would be worthwhile so that the owner could defer $11,000 next year and receive the full match. Since the owner stands to significantly benefit while contributing a match to a very small portion of the employees, would the plan have to be cross-tested for 401(a)(4), or does the safe harbor design eliminate this concern? The plan has about 20 employees and is currently not top-heavy, but if the owner will be making maximum deferrals and receiving full matches, he will have to provide all participants a min. TH benefit of 3% of comp. in an estimated eight years.

We have found that TPAs have differing interpretations regarding which divisor to use under the new 401(a)(9) regs. Some say you use the divisor from the MDIB table based only on the participant's age if the beneficiary is not more than 10 years younger (beneficiary in this case is three years older). Some others say you should take the divisor from the Sec. 72 joint annuity tables based on the beneficiary's age and the participant's age less 10 years. Who is right? Any clarification on this would be greatly appreciated.

I've seen documents that have a provision allowing a contribution that was made as a result of a "mistake of fact" to be returned to the Employer within 12 months of the date of the deposit. Perhaps adding such a provision can help if it's not too late? However, I'm not sure whether the excise tax for nondeductible contributions would still apply in such a situation.

If a non-U.S. citizen owns a U.S. corporation that sponsors a qualified plan it appears that he cannot be the plan's trustee. It seems that he should either get a U.S. financial institution/TPA that offers trustee services or appoint a U.S. citizen (or group of) to be trustees. Are there any other options? It's been suggested that the U.S. corporation be a trustee, but with the sole owner not being a U.S. citizen it appears to cause the same original problem.

I agree that not filing a 5310 is a legal option that usually doesn't warrant IRS suspicion. However, it's a good idea to take into consideration the amount of the resulting distributions. Since 1099-R forms must be filed when distributions occur, the IRS will (or should) see if someone received a large payout. If they see that one participant received, e.g., several hundred thousand dollars or more, they may be interested in proof that it was all legit, especially if it was ROed and no taxes were paid. Also to be taken into consideration is the client's risk tolerance and whether they can wait to receive the distribution until the IRS has approved the formal termination. You can tell the client the pros and cons for filing and not filing the 5310, but ultimately it should be their decision. Sometimes, of course, a client may imprudently insist on not filing a 5310 to save on admin fees, even though they're due to receive a 7 digit distribution.

Pax - the benefits do vest upon death which may make things interesting should the unfortunate occur. By the way, they're currently considering my request for adoption - I'll let you know if it falls through. Thanks for your help.

We have a client who, in his late seventies, started a business that is now sponsoring a DB plan. There are no other employees. His NRA is 83. Will putting 83 on line 6b of the Schedule B practically guarantee an audit? The doc defines NRA as 65 and 5P, but it's my understanding that you have to put the actual average age on line 6b. Does anyone have a different interpretation?

Can a Roth IRA be rolled over into a PS/401k plan? If so, can it still be rolled over even if the Roth was a conversion from a contributory IRA, i.e., not a conduit IRA?

I believe Schedule R is meant for the reporting of all types of distributions including those for hardships.

A mortgage broker would like to start a qualified retirement plan and invest a portion of the plan's assets in mortgages that his firm puts together. Is this allowed? If it is allowed, how acceptable would it be for him (or his firm) to receive the commission from the resulting transaction?

As for whether 401(K) rules are different than IRA rules, the exception to the 10% penalty when a distribution is received from a qualified plan after the employee separated from service during or after the calendar year in which they attained 55 does not apply to distributions from IRAs (Internal Revenue Code Section 72(t)(3)(A)).

From my experience, free parking seems to mostly be a thing of the past. Parking can cost an employer $150+/mo. per employee in major downtown areas - eliminating this when you have as few as 25 or 30 employees will save over $50K/yr. That may be enough to hire an additional experienced professional. There are quite a few companies who have toned down things such as Christmas parties. Where previously they were held in, e.g., first-class hotels, lately more firms are opting for lower-priced rental halls, modest restaurants or just having food catered to the office. Although most employees take free coffee for granted, having them pay for coffee is lame. The morale problem it could create would far outweigh the few bucks you would save. Besides, you wouldn't want them falling asleep at their desks, would you (seriously - it's an addiction)?

I'm under the impression that if a 401(K) plan is top heavy, one must contribute the top heavy minimum amount in addition to the matching contribution, i.e., matching contributions cannot be counted as any part of the required top heavy minimum contributions. Also, I believe even discretionary matches can be used in the ACP test for NHCEs.

Thank you for your reply, Mr. X. You're correct that certain GUST provisions could/should be made effective up to several years ago. In the mentioned case, a Corbel volume submitter doc was used and the HCE definition specifies that the GUST definition applies for PYs after 1996. Also, the doc allows you to indicate whether the GUST rules pertaining to items such as automatic cash-outs and the elimination of family aggregation are effective as early as possible, currently, or some time inbetween. The flexibility of the doc used will dictate when to enact the GUST provisions that allow you a choice. As for the provisions where no choice of effective date is allowed, I believe using the GUST provisions in the operation of the plan from their mandated effective date, even though the actual doc may not have the matching language until maybe a few years afterward, is OK. That is, as long as the doc is restated for all of GUST during the remedial amendment period. I suppose a well drafted doc would show the effective dates for all the GUST provisions, whether chosen by the sponsor or mandated by the gov't.

A profit sharing plan covering both HCEs and NHCEs is being restated for GUST. The Corporate Resolution and the signature page of the new document were signed December 28, 2000. The effective date of the restatement was set as January 1, 2001 because the employer wanted to add a 401(K) feature for the whole of 2001. Are there regulations mandating that a certain amount of time elapse between the adoption of an amendment and its effective date in such a circumstance, i.e., will the timing of the above execution allow the new document to be valid as of 1/1/2001?

Does anybody know of an investment broker, bank, mutual fund family, etc. who is willing to be the trustee of a qualified plan that's partially invested in trust deeds?