JanetM

yes it does. you have to continue to file 5500 until assets are zero. Not an issue unless plan needs audit. participant count and assets are zero, only numbers are distributions and earnings. Use the date the assets went to zero to figure the due date of short year filing.

Am a bit confused. Our control group tests US plans on QSOB basis. Since we test that way we wouldn't include the foreign employees when figuring out the top 50 - right? This is too much for my brain today. Can someone help? We are UK company with about 80% of employees in US.

Harry O, you you have a cite for me on that? You said we consider all employees, regardless of location, in the control group when determining top 50. Can you point me where it says that?

Yes you can amend the vesting schedule for actives only. The terminated folks would not become vested and since they are terminated they would not have any chance of additional vesting.

could be me maybe not, That is good advice, but not too helpful if the big stick gets a pink slip. Am guessing employer has financial difficulties or they are not money savvy enough to run a growing busisness. If the employer is just small business and goes bankrupt, the participants may never collect their plan balances that weren't deposited. (they get to stand in line with other creditors). I would try the honey method first, find out if the employer is "using" the cash to run the business or if they just don't have a clue what they are doing. (years ago when I was TPA - guy came in to see about getting 5500 filed. He went to the bank and checked the boxes on the prototype doc and got a trust account set up. Once a month he send check to the bank. The put it in the money market thinking it was single participant and he would get investments set up. They reminded him he needed 5500 since assets were over $100K. He comes to me and I find out this is three year old 401(k) with profit sharing. There were 6 participants in addition to the owner. Spent a month redoing this to find out what balances for each person should be. The guy was honest but not to money savvy.

You are correct. The limits apply to every plan and every participant. To get around this problem we added flat dollar contributions. For example an HEC can do $583 per pay. This amount for 24 pays gets them to $13,992. Of course most get a bonus or two. So they just figure the number of pays they have and then do the math.

Just add the 401(k) feature to your existing plan. Plan would have to be amended prior to 1/1/05 for K feature to be available for 2005. Why go to extra time and expense of new plan. Just expand the one you have.

If you have last day rule then no one accrues a benefit until last day. Since you would not be reducing something they have already accrued you can amend anytime up to 12/31/04 and be effective as of 1/1/04.

Tom you are lucky not being familiar with CBAs. CBA - collectively bargained agreement aka union contract.

That is what I meant LOL, you must segregate CBA, you may segregate under 21 and 1 year.

What is a DP plan?

Yes, but remember that when testing you can disaggrate the union CBA folks into separtate group. The two plans that cover non union are tested as one. The union is tested as one - ususally a free pass unless you have union HCEs.

Not sure I understand your question. The Tefra election they signed 20+ years ago must have spelled out the event that triggered the distribution as well as the formula. There was some discrection as to the formula.

None. If client opted for and notified the employees that there would be 3% contribution he has not choice.

It doesn't sound like distributable event. There are only certain situations where participant is allowed to remove funds from a plan. Termination, disability, death........ You need to get the summary plan description to see what the options are. What you should do it you are worried is sell the stock and put the funds in another investment option inside the plan.

Sure this employee is excudable for ADP and ACP and they come in in 2005. But guess what, you now have a top heavy plan in 2005 since only owners have account balance. Your owners will be limited in what they can defer in 2005. Why not spend a few pennies to ensure the owners can contribute to max. Since your plan is top heavy and you will have to satify this contribution, why not make the 3% non elective contribution and save yourself the testing, cover the top heavy and make the client happy.

Sounds like severance plan to me.

Right, I just finished reading the Federal Register. Time to stop listening others and go straight to the regs.

The rules changed few years back to allow you to disregard the rollover balance in a plan when deciding if balance was less than $5,000. The new automatic rollover cap is $5,000. Can someone confirm my understanding that if person has 3,000 in current company funds and 3,000 in funds rolled from previous employer a mandatory distribution can not be made. Guess my problem is that the "safe harbor" applies to only distributions of 5,000 or less.

Lesson number one - everyone has an agenda. Good luck finding neutral unbiased paper on either one of their views. Am not cynical, just realistic.

I have to present to the Board a suggestion on how our plans should handle the new involuntary cash out rules. Does anyone have any sites that give pros and cons of amending the plan to only cash out if under $1,000 or the benefit of cashing out under $5,000 to IRA. Am looking for different points of views. thanks in advance

You have it right. If you exceed the limit during the year you are HCE in next year.

Tax Cuts Explained from David R. Kamerschen, Ph.D. Professor of Economics 536 Brooks Hall University of Georgia Let's put tax cuts in terms that everyone can understand. Suppose that every day, ten men go out for dinner. The bill for all ten comes to $100. If they paid their bill the way we pay our taxes, it would go something like this: € The first four men (the poorest) would pay nothing. € The fifth would pay $1. € The sixth would pay $3. € The seventh $7. € The eighth $12. € The ninth $18. € The tenth man (the richest) would pay $59. So, that's what they decided to do. The ten men ate dinner in the restaurant every day and seemed quite happy with the arrangement, until one day, the owner threw them a curve. "Since you are all such good customers," he said, "I'm going to reduce the cost of your daily meal by $20." Now, the dinner for the ten only cost $80. The group still wanted to pay their bill the way we pay our taxes. So, the first four men were unaffected. They would still eat for free. But what about the other six, the paying customers? How could they divvy up the $20 windfall so that everyone would get his 'fair share'? The six men realized that $20 divided by six is $3.33. But if they subtracted that from everybody's share, then the fifth man and the sixth man would each end up being 'PAID' to eat their meal. So, the restaurant owner suggested that it would be fair to reduce each man's bill by roughly the same amount, and he proceeded to work out the amounts each should pay. And so: € The fifth man, like the first four, now paid nothing (100% savings). € The sixth now paid $2 instead of $3 (33% savings). € The seventh now paid $5 instead of $7 (29% savings). € The eighth now paid $9 instead of $12 (25% savings). € The ninth now paid $14 instead of $18 (22% savings) € The tenth now paid $50 instead of $59 (15% savings). Each of the six was better off than before. And the first four continued to eat for free. But once outside the restaurant, the men began to compare their savings. "I only got a dollar out of the $20," declared the sixth man. He pointed to the tenth man "but he got $9!" "Yeah, that's right," exclaimed the fifth man. "I only saved a dollar too. It's unfair that he got nine times more than me!" "That's true!!" shouted the seventh man. "Why should he get $9 back when I got only $2? The wealthy get all the breaks!" "Wait a minute," yelled the first four men in unison. "We didn't get anything at all. The system exploits the poor!" The nine men surrounded the tenth and beat him up. The next night the tenth man didn't show up for dinner, so the nine sat down and ate without him. But when it came time to pay the bill, they discovered something important. They didn't have enough money between all of them for even half of the bill! And that, boys and girls, journalists and college professors, is how our tax system works. The people who pay the highest taxes get the most benefit from a tax reduction. Tax them too much, attack them for being wealthy, and they just may not show up at the table anymore. There are other places offshore with nice restaurants and good business opportunities. DEFEAT SOCIALISM – VOTE ACCORDINGLY

Prime example of what happens when you run spell check and hit accept for every word. Thanks Tom, I needed the chuckle.

We understated assets in DB plan due to demutualization proceeds coming at same time we changed trustees. Now, the week the 5500 is due, they want to delay the entire filing in order to restate and reaudit 2002 and 2003. We want to just note it in footnotes. That way we don't have to redo vals or schedule Bs.