MR

does anyone know of any tax regs that would permit a direct rollover from a US 401(k) to a Canadian "Qualified" plan?

could someone with a small income fund for the $160,000 415 limit? for example, could someone start a plan in their 50's who earns $20,000 per year and fund for a $160,000 benefit at retirement (ie a deduction that greatly exceeds their income? the new literature seem to indicate yes. any thoughts?

the loans are not being made to participants.

lets say a construction company has a profit sharing plan. lets also say that this plan loans money to the clients of the construction company. the company insists that its clients COULD borrow from banks, but lending from the plan saves the client money by cutting out the middle man. i don't think the clients are parties in interest, but i am concerned that these transactions are prohibited anyway. any thoughts or suggestions?

If I have a plan that invests in a hedge fund that is an LLC, do I have to report the management fees on a sch. c? The fund provides a k-1, which does identify the management fees, but i am not sure i need to bother with the schedule c.

A plan which has Joint & Survivor Annuities as the normal form of benefit - is there any good language to provide to a layman on the reason they are required (especially unmarried) to complete the J&S Beneficiary Form. Any suggestions would be appreciated.

Is anyone out there advising their clients with weekly payroll to make weekly 401(k) deposits?

ervin, we've had the same "catch 22" at our office a couple times. we determined the plan to be top heavy in year 1 and not in year 2. pretty hard to argue that its not top heavy in first year.

as long as the plan passes coverage taking into account the employees of both, it should be ok for only one to adopt. they have to pass coverage every year, so i'd be careful suggesting this as a permanent solution.

I think it does matter that 35% plus 46% exceeds 70%. Suppose, for example, all six (or7) HCE's benefit in my disaggregated plans. Suppose further that 40% of the total NHCE's benefit from each plan. In other words, 80% of the total NHCE's benefit. If I use your logic, the plan with 4 HCE's does not pass coverage, since 40% is less than 47%. To me, this doesn't seem fair, but perhaps that's not the point.

Bravely going where no man has gone before... We're not aggregating the plans, which is the source of my problem. If I use 4/6 and 3/6, then the percentage of NHCE's benefitting would have to be 70% of these percentages in order to test separately. 70% of 4/6, plus 70% of 3/6 is more than 70%. This seems wrong (again mathematically)

Tom, I agree with your logic, but what about the fact that the sum of the numerators exceeds the denominator? Strictly from a math standpoint, I guess I have a problem with this. If all HCE's are covered, the combined coverage percentage exceeds 100. This would seem to require an unneccessarily high level of coverage among the NHCE's in order to pass, no?

OK, got a controlled group question. Two companies, two plans. Each must pass coverage in order to be tested separately. Company 1 has 3 HCE's plus the owner and Company 2 has 2 HCE's plus the same owner. The owner is an employee of both companies and lets say he makes $50K at each. Both companies make a profit sharing contribution, but the percentages of pay are different. My question is this - what is my percentage of HCE's benefitting under each plan? I have 4 HCE's getting a contribution in plan 1 and 3 HCE's getting a contribution in plan 2. Bearing in mind that one of the HCE's is the same person, is my coverage in plan 1 equal to 4/7 and 3/7 for plan 2? Or, because the same HCE benefits in both, are the coverages 4/6 and 3/6, respectively? Any references would be greatly appreciated. Thank you.

This one's been discussed before, but I don't see a definitive answer. The regs seem to indicate that receivable 401(k) contributions do not count in a top heavy test. In a prior string, Tom Poje referenced an ASPA conference in 1998 (workshop 44) in which Michael Pruett indicated that certain obligations were to be included. He references a footnote, but the number was blank. Does anyone know what Rev Ruling he was referring to?

ok, lets use an example. If there's a 5% of pay contribution for both plans, the owner would receive $8,500 in one and $3,750 in the other. In effect, he'd be getting a total of $12,250, or 7.2% of the maximum allowable pay, while everyone else gets 5%. If the 2 companies were in the same plan, you'd limit the guy to 170k, so why would it be different with 2 plans?

Richard, how could you use more than $170,000 when its a controlled group? I think, using either our method or Bill's, you have to prorate to a total of 170.

Here's what I think is an easy one, but I want to make sure. You have an owner of two car dealerships, each with its own plan. They pass coverage. They are a controlled group. The owner has pay of about $600K in one and about $75K in the other (both LLC's). I think we must prorate the $170,000 pay limit between the two plans. I further think we would prorate it based on the total pay from both companies. In other words, 600/675 X 170,000 = pay in company 1 and 75/675 X 170,000 = pay in company 2. Agree? Disagree?

Yes. In fact, I contacted the client to readdress this issue and, with no prodding from me, was informed that they do consider the employees terminated as of year-end.

Rcline's assumptions regarding the 1000 hour and deemed payout provisions are correct for this Plan. Our golf course operates in the same way, terminating its employees and then offering them the job back again in the spring. We have elected not to consider these folks participants on December 31st. We've also decided to change the eligibility requirements. Thanks for all your input.

I agree with John Sample. We follow the same procedure with our balance forward plans and refer to the subsequent transfers as "true-ups".

Lets say you have a client that is a golf course, which employs about 200 part-time staff throughout each year. They have a 3-month eligibility requirement, so most of these employees are eligible. Very few participate. The course considers them still employed on 12-31, since most will be coming back to work in the spring. Question is - what is my number of participants at the end of the year? You could make an argument that I have over 100, since there are that many that are eligible. In the whole plan, there are about 30 who make contributions. I'm looking for a way to keep the number under 100, to avoid an audit. Any thoughts?

Could you not have an eligibility of 12 months with entry on the first day of the sixth month following completion? Sal Tripodi's book, which I usually use as gospel seems to draw too strict a conclusion with regard to entry dates for statutory exclusions in method #1. If you must enter no later than the later of the first day of the plan year or six months after completion of 12 months, then entry dates of 1-1 and 7-1 are not necessarily required.

Thanks, guys. The issue is whether or not I can exclude him for testing. I should have made that clearer. My conclusion is the same as Richard's. Any others?

OK - statutory exclusion question. Lets say an employee is hired april 1, 1999 and terminates august 1, 2000. I think you can exclude this person. Statutory entry dates can be the earlier of the first day of the plan year or six months after meeting the statutory 1-year requirements. This person was not employed six months after completing 12 months. Any thoughts?

If a plan is amended to incorporate a short plan year, must the amendment be signed before the end of the short year?