Bill Berke

I don't think so. The IRS has been firm in that the 60-day period is absolute. I remember a PLR where the 60-day rule was clearly created and violated by the bank trustee's poor processing and the IRS still said too bad. The 60-day rule applies even if the problem created was beyond the control of the individual. You may want to look at the cases and PLRs on point.

To Lynn Campbell -I'm curious who does the integrated calculations for the employer?

I agree completely. With no type or amount of contributions during 2000 to the SIMPLE you can have a profit sharing plan. And run from the SIMPLE plan. Although you could suggest hiring a lawyer to discuss employer liabilties.

I think the lawyers will go crazy with this answer, but when I have a situation like this, I take a liberal view of return due to "mistake in fact" and return the contribution to the employer. But I would suggest that you "true up" the match to make sure you don't need any of this money to fix match error.I gather that defrrals and match are the only contributions to this plan. The problem is that unless you are exceeding 415, you must allocate all contributions. So, I use mistake of fact and I have never had a problem on audit whenever this type of mistake has happened provided employees got everything they were supposed to. And you should make sure that employer puts in double check procedure to avoid repeat of error.

Please give details.

We need lots more details.

RCK asks the key question - is this purchase through a brokerage account of a type that is available to all participants and allows real estate? Or can each employee direct his/her assets in any way they choose? And purchasing real estate can be very tricky under IRC UBTI rules. Also you must deal with the valuation requirements. I don't want to be the fiduciary or trustee. I agree that this is generally not a good idea, but it is not forbidden provided document permits this. You also must plan for possible current income taxation and prohibited tax issues.

Assuming this is a fully insured plan then I think you must contact an attorney because you raise all kinds of issues that are controlled by your state's laws.

I think - yes. But only once in any 12 months

I think the way to terminate is to announce cessation of match and employee deferrals. But you must match for deferrals made until cessation. SIMPLE plans require an employer contribution. The employees could enforce this requirement along with the IRS. And who has made no contributions for past two or three years - employer or employee? If there are no employee contributions during 2000 then I think you do not have a SIMPLE plan and you could have a profit-sharing plan. But, I believe, all issues are controlled by whether or not employees deferred and when.

I have never seen an integrated SEP protoptype. You could have an individually designed/drafted SEP document if it makes financial sense to employer. And it would not make sense for someone to sponsor such a prototype document because few employers (if any) would ever do the integration calulation correctly and then we get into all kinds of legal/tax issues to employer and prototype sponsor. A non-integrated plan is easy for the employer to operate and understand. And even then there are, frequently, eligibility mistakes - accidently excluding eligible employees.

I agree completely with Appleby. And to further prove his point (and mine) look at the trustee and employer requirements - SEP vs. Simple. I strongly believe that the accounts cannot be comingled while one of the plans is active.

The DOL's VFC program covers this exact problem and tells you (the fiduciary) how to fix.

I don't remember the details in the reg's specifically but you have to revalue each 12/31 or 1/1 to determine that year's payments. The amount of minimums may vary according to investment results and the anuity table. So, in my experience, you are not dealing with a fixed amount each year.

I think you are okay. If you converted the loan to monthly, the first payment would be due 2/24/01 and the last payment would be due 2/24/06 - after your planned final payment. While I don't remember anything specifically in the reg's, there is a common sense that the payments begin after the loan proceeds are received by the borrower. Rarely is the first payment discounted from the proceeds of a loan of this type. And loans are still governed by fiduciary rules which use a commercial banking standard and everything you have descibed certainly complies with that standard. And watch some lawyer show how I'm all wet.

I agree with rcline46. You can look up Attardo v. Commissioner, a tax court case where poor Mr. Attardo signed the document but forgot to sign the trust and his plan was disqualified. The investment house lawyers are far more sensitive and aware of the ramifications than any local office.

Because we bill only once per client, after the annual admin is done, we don't have the problem of managing so many outstanding invoices - you bill four times (in quantity) what we bill. There is the slight risk that we'll get stuck for one whole year's fees, but I felt the hassle of monthly or quarterly billing was not worth the effort. Thus, because this style has worked for us, I believe it to be the best method. And, I said, we don't have a collection problem. In fact 80% of our clients pay within 30 days and a large number pay within a week. But, with our system, we don't do the next year's work until we get paid for the prior year and then, if we had to chase, the client goes on o year's fee advance billing. Right now (today) we have only three clients on advanced billing.

IRC Section 219 and the reg's define Active Participant for IRA purposes which is the same definition for W-2 purposes

Yes that seems high to me also, but over how long a period? I would call to collect and, perhaps, at the same time maybe find out about a problem. We do not sell any products, nor are we hooked up with any product people, our sole source of income is our fees. As a result, our clients know that we are their objective advisor. We also do not bill until we finish the work - the admin bill goes with finished admin if we are delivering in person or the bill is mailed two days after we mail the admin package. We have been in business 20 years and we have never had a rec'ble problem (except for the rare deadbeat/bankruptcy) We charge on a fixed fee basis and we go over the fees with the client up front. We tell our clients that we are "high average" and we will lose if they are fee shopping.

RCK All the unreasonable comp issues I have seen revolve around too much compensation (and I have not seen any lately). This is an S-corp and I have never seen an unreasonable comp case for an S-corp (there are no dividends for the IRS to impute and separately tax). Moreover we are talking about apprx $120,000 which in today's world is not unreasonable for a CEO to earn. If the spouse voluntarily works at the office, this is between the family members. And if I'm missing something, please let me know, I haven't stopped learning. In fact the older I get the less I know.

It is most likely (95%) that with one of you earning salary, you would get a much greater proportion of the total contribution especially if you use an integrated, cross-tested or age-weighted formula. I cannot tell you which formula would be best for you, that would have to be calculated by your TPA. Also, I wonder why your CPA did not bring up paying only one of you to minimize payroll taxes. From the facts, your employee is a participant (assuming he/she meets the eligibility requirements). With a vesting schedule, you should recoup most of your contribution for the employee if the he/she leaves your employ soon. If you are just starting a new plan, I recommend that you start vesting from the effective date of the plan so that your employee has to be employed at least 1 1/2 years from the plan's effective date before accruing any vested benefits. This option is not allowed in some prototype plans so if you want this option check the document - which you should read in detail in all cases. Vendors are trying to sell you something; you are responsible for the final document that you sign - caveat emptor. I do agree with your conclusion to stick with a DC plan for now (3-5 years).

Sampat, I am late to this, but I wonder why you (or your wife) don't take all the income. Your w-2 wages are less than 120,000 so if one of you takes all the income, the various formulas (e.g. integration) will enable you to skew the plan more towards "the family" and at the same time you would save payroll taxes on the duplicated income below social security wage base.

The short answer is no. We have all this in three programs which are tied together and these programs are operated by our clerical staff, but these were programs were built explicitly for us - at great initial cost,and resulting effeciency and satisfaction. At one time FDP had a management program, but I never reviewed it and now that Corbel owns FDP, I guess it's gone. Some firms use a legal case managment software package, but, again, I am not familiar with any of them. Ultimately, my guess is that you are stuck doing something internally. Good luck.

What do you mean by "automate annual data collection process"? Some details are needed regarding your definition/concept.

ASPA has two insuers that will issue E&O policies. You may want to contact them in Wash. D.C. As far as having a subcontractor do the admin, you may want to have a warranty in your agreement where the TPA ghost represents that the ghost will always maintain an E&O policy (and ask for proof of policy). At least you will be able to claim against it if something bad happens. Unless you know the TPA very well, I would get a written contract.