wmyer

You can also go to http://www.selectaretirementplan.org/select.htm which will ask you some basic questions and help you choose a retirement plan that's right for your business. Or you can call some vendors or visit some vendor websites. A lot will depend not only on how much you want to put in, but also how much responsibility you're willing to take...for example, a SEP doesn't require a 5500 form. There are plans out there that can create a large disparity between your contributions and your employees...for example a DB plan, a cross-tested profit sharing plan, a Safe Harbor 401(k). But a lot will depend upon the census data.

BPicker, why do you say that the IRA custodian will always put the total distribution in the taxable box (box 2a), since the 2004 instructions for box 2a speicifcally say: Roth IRA. For a distribution from a Roth IRA, report the total distribution in box 1 and leave box 2a blank except in the case of an IRA revocation and a recharacterization.

The distribution should not be taxable. Line 15a of your 1040 should have the amount of the distribution, and line 15b should have $0 (taxable amount). Your 1099-R should have 2a blank and 2b should be checked (taxable amount not determined). See the instructions for lines 15a and 15b of the federal income tax, and also see the instructions for form 8606.

DBTech, bear in mind that this is a non-profit, as Pax carefully indicated. There are different reporting considerations for non-profits (FASB 116 and FASB 117). What is called a "balance sheet" in a for-profit corporation is generally called a "statement of financial position" in a non-profit. What is called an "income statement" in a for-profit corporation is generally called a "statement of activities" in a non-profit (or alternatively a "statement of revenue, expenses and changes in net assets" or a "statement of changes in net assets").

The next day, his HOB is 50K, not 40K, because he has just taken out an additional 10K. So his amount available to borrow would be $0. Why do you say his HOB is still 40K the next day?

You are correct -- you currently can't roll over a ROTH IRA into a 401(k). You also cannot roll nondeductible Traditional IRA contributions into a 401(k).

Yes, the employee is constrained by the 415 limit (the lesser of 100% of compensation or $41,000 for 2004). The 415 limit includes not only after-tax contributions, but also employer contributions and salary deferrals. Also, if the employee is an HCE, there is the ACP test to worry about.

No, there's no 402(g) excess. 402(g) limit is calendar-year limit. So, $10,320 in calendar year 2003 -- no 402(g) excess there. $16,000 in calendar year 2004 -- no 402(g) excess there, since participant is age 50 or older.

You'll want to look at examples 5 & 6 in the Final 414(v) regulations: http://www.mhco.com/PDF%20Files/PDFs%20200...gs%207-7-03.pdf As long as the HCE doesn't go over 16,000 in 2004, there is no 402(g) violation. We would need to know the amount deferred during plan year 2003 to be able to tell you whether anything can be recharacterized as catch-up.

You are correct; you MUST use prior year compensations -- there is no authority for using current year compensation.

Does the plan use a Master or Prototype Plan Document? Most of the plans I have seen that use prototype documents don't permit an hour requirement if less than one year of service is required.

You are correct. There is no mandatory 20% withholding for SEP-IRAs.

Well, the text that I quoted from Notice 2000-3 is only referring to the Maybe Notice, so I don't know if I would go that far, austin3515. But of course you could issue a Maybe Notice followed immediately by a Supplement Notice. By the way, notice that the 401(k) proposed regulations retain the language of "prior" when referring to the Maybe Notice, rather than using the phrase "a reasonable time period prior to."

If you withdraw money from an IRA as a first-time homebuyer, there is an exception to the 10% penalty. This exception does not apply to 401(k) plans. However, if your plan permits hardship withdrawals, you should be able to take out a hardship withdrawal for purchase of primary residence (whether first-time homebuyer or not). There would be a 10% IRS penalty unless you qualify for an exception (e.g. age 59 1/2, disability).

pmacduff, If you take a look at 2000-3, you'll see that the precise wording for the timing of the maybe notice is simply "prior to the beginning of the plan year." See the text below. I think you can interpret this to be as late as 12/31. Q-1. By what date must the sponsor of a 401(k) plan adopt the 401(k) safe harbor nonelective contribution method for a plan year? A-1. Generally, a plan that is intended to satisfy the 401(k) safe harbor requirements for a plan year must, prior to the beginning of the plan year, contain language to that effect and must specify the 401(k) safe harbor method that will be used. (However, see section XI.B. of Notice 98-52 and Rev. Proc. 99-23, 1999-16 I.R.B. 5, for the remedial amendment period applicable to plan changes incorporating the 401(k) safe harbor provisions.)

The plan can't be amended now to make the safe harbor effective 3/1/2005 since there's already an existing 401(k) feature in place. The plan can still use the "maybe notice" until 12/31/2004 to be a safe harbor for 2005, if the plan uses the nonelective and otherwise satisfies the requirements (e.g. supplemental notice).

If the plan benefits ONLY hces, you don't need to worry about ACP, ADP, 410(b) etc. Legitimate children are owners by attribution, and therefore they will be HCEs in this case.

I don't think it matters much -- here's the answer from the Panel Publishers 5500 book-- "As a practical matter, many plan administrators report the value of the vested account as of the last day of the plan year for which the Form 5500 report is being filed...." Although I agree with WDIK that it is not technically correct, you could use the 6/30/2004 valuation for this participant. Just be consistent from year to year in what you do.

Some questions out of interest -- Are you using prior year testing or current year testing? Is the NHCE ADP really zero? Is this a first year plan?

You are correct...ADP testing for 2004 cannot be based on compensation in excess of $205,000.

To determine HCE status, always use the compensation from the lookback year, not the current year. Based on what you write, A&B are not HCEs for 2004, but will be for 2005. C is an HCE for 2004, but not for 2005. Of course, if A, B, or C are owners or owners by attribution, the answer will change. Safe Harbor plans are deemed current year testers, so I assume you made a plan amendment to change to prior year testing.

No, the plan document does not need to state the interest rate used, the actuarial assumptions, whether permitted disparity is imputed, whether the One-Third Gateway or 5% Gateway is used, etc....

If the only participant is a 100% owner, the plan is not covered by ERISA and does not need an SPD. What do you mean "submit" the SPD...the requirement to submit an SPD to the DOL was removed six years or so ago.

No--gateway doesn't apply to age-weighted plans. Applies to cross-tested plans for years beginning on or after 1/1/2002.

No, it's not an issue, doesn't violate any rules.