Jim Norman

In hindsight, that was probably a question better left unasked.

Well, that's a switch. My work here is finished.

Perhaps the accountant is recalling the old proposed regs, now withdrawn, that deemed professional services to be management services, under this definition there were all sorts of potential ASGs in the medical field. Having this go away probably eliminates the managements services ASG but doesn't change the application of the A-org rules. Is the surgicenter incorporated? If so, is it a professional corp? Maybe not. If incorporated and not a professional corp, it can't be an FSO to an A-org [see Derrin's Whose the Employer Q 13:7]. Of course it could work the other way around, where the medical practice is the FSO and the surgicenter is the A-org and they are regularly associated. Have to look at the ownership attribution rules.

Read the plan document, if it is properly done consistent with annual valuations, it should provide that earnings are posted only on the valuation date, the last day of the year.

Thanks Effen, good to know this. Of course this is not what their own RR 92-76 says. It states "property having a fair market value equal to at least 125 percent of the restricted amount." Seems to me if the author of the RR thought it had to be cash it would state such. The terms "property" and "fair market value" certainly imply something other than cash. And if it were cash, why 125%? If it were cash, why not just 100% like the bond and the letter of credit options?

The plan provides for any of the three options, property in escrow for 125%, letter of credit or a bond. This person has a fair amount of unencumbered real property, so is interested in pursuing the option of using it to secure the payment of the restricted amount.

Former HCE wants to get his lump sum and is willing to pledge real property as collateral. Anyone here ever work with someone who can provide the escrow arrangement? Could this be done where a lien is recorded on the property in favor of the escrow co? Thanks.

Published guidance - you mention some are ASPPA members. ASPPA's code of conduct, page 331 of the 2007 yearbook, under Qualification Standards states that a member shall render advice only when qualified to do so. Notwithstanding your designations, if no one on staff has experience in analyzing CG/ASG situations, then doing so could violate this code. You mention a CPA on staff, certainly CPA code of professional conduct would include similar language. Beyond published guidance, it should be pointed out to the powers-that-be that such a determination is rarely a do-it-once-and-you-are-done analysis. Things change. Children under age 21 become 21. Ownership percentages change. Service relationships change, trust beneficiaries change. Stock options are granted and/or expire, etc. We make the determination when we feel it is clear-cut and within our ability to do so. Some are straightforward, ASGs such as a professional firm that is a partnership of PCs, entities with clearly 80%+ common ownership. Getting into multiple layers of ownership, attribution, trusts and beneficiaries, etc., they need legal counsel. You do the client no favor by saving them a legal fee in the short run and getting an incorrect answer that leads to bad stuff in the long run.

Did you try freeerisa.com?

What JanetM said. A match has to be communicated up front to be effective. Also, a match declared after the end of the year can create hard feelings. An employee finds out after the fact that his deferral would have been matched, but he did not defer and now has no ability to go back and change this. I recommend match be looked at as an employee benefit and an incentive to defer. Communicate it up front and contribute it per pay period. If the situation changes and the employer can no longer afford the match, stop it on a go forward basis only and communicate this to employees.

How can the documents be up to date? AFAIK IRS has not issued EGTRRA opinions on any prototypes, even Fidelity's. Presumably Fidelity amended their protos with good faith amendments for the various post-GUST requirements, but even so, they are not model amendments on which IRS gives reliance. Also, there are no model amendments for PPA.

That depends on what they are assessing sanctions for. If the plan is operated in accordance with its document, the adoption agreement is properly filled out and the plan has an opinion letter, then the sponsor should have reliance on the document and not be penalized to the extent the operations follow the document. However, aren't most of the IRS issues with 412(i) unrelated to the document? Purchasing policies with death benefits greater than the plan death benefits, purchasing policies with different features for the HCEs, selling policies out of plans as below market value, etc. I don't see that these sorts of things would be covered by the document's opinion letter.

Are there any firms with SEP prototypes that can be used by an employer in addition to their defined benefit plan? thanks, Jim

Assuming the document language works, I think it is OK if they are fully vested. See 410(a), 2 YOS substitutes for 1 YOS. So just like you can have a plan with a 6 month wait because it does not exceed 1 YOS, with full vesting you can have 18 months because it does not exceed 2 YOS. I have not done this, so haven't looked at the regs for this issue to see if they create a problem, just commenting based on what 410(a) say.

I had the popcorn all ready to go for the dustup between FLMaster & Mike Preston in the "Illegal 412(i) Plans" thread after FL sent MP the opinion letters. So I guess this one had the best potential but then fizzled. http://benefitslink.com/boards/index.php?s...=31741&st=0

If there are no wages paid, there are no contributions available. Deductible limit is zero, 415 limit is zero. Contributions cannot be based on s-corp pass-thru K-1 income, only wages. For reference, court case directly on point is "Durando", you can find it by googling.

Amend the PS to add 401(k). Defer $15,000, contribute PS of $29,000. Add a DB plan, design for a contribution of $23,500. Total DC annual additions = $15K + $29K = $44K. Total 404 deduction is DB + PS = $23,500 + $29K = $52,500

Hi Gary, Yes, we've done this a few times, small employers where we are putting in DB or cross-tested, so the owners definitely felt it was worth it. But still a hassle to correct the payroll and explain to the employees, seems the contributions could remain as personal IRA contributions subject to IRA limits and may or may not be deductible.

If you put in the other plans effective in 2006, then the SIMPLE is invalid for all of 2006. See IRC 408(p)(2)(D) & 408(p)(6)©. It can be done, but it is a hassle.

Abandon all hope, ye who enter here. You cannot have eligibility greater than 1 year. With just 9% of eligibles deferring, what exactly is the employer accomplishing with this plan? Certainly the HCEs can't defer much. Without a match, it is what it is. Not all employers are a good fit for a 401(k).

We started Penchecks specifically to address this problem. They will do fed withholding and state withholding in all states where it is applicable, and 1099-R. Had the same issue, distributions made and withholding not remitted, or errors, etc.

Nothing wrong with making a 20% PS contribution. Watch out for accelerated vesting required in DC plans effective next year by the PPA, must follow top heavy requirements, so 5 year cliff out the window.

NO ONE? Law firm - tiered allocation. Partners get $44K. HCE Associates (some of whom are >40) get 3% TH minimum, NHCE Associates and non-attorney staff (some of whom are <40) get 5% gateway. So because a 40+ associate got 3% and a 20-something staff person got 5% it is age discriminatory?

Kirk hits on the biggest problem with standardized prototypes, the mandatory coverage of CG/ASG members. I've had calls on several situations in just the last few months. Most recent example. Husband goes to local office of financial services firm back in 1999, sets up a money purchase on a standardized prototype for his business (corporation, he is sole employee.) But Wife also owns a business and employs 6 people. Community property state, no separate property agreement, they have a child under age 21 - IOW no way to avoid this is a CG. Naturally the MP plan was set at 25%. Problems are numerous - no 5500 filings, contributions missed in some years, GUST non-amender, will fail discrimination and coverage tests. But the biggest problem is 7 years of contribution liability for wife's employees, it is over $250K - twice the assets of the plan. Arguably the ees could come after them for it. There is really no way to resolve this. Of course SEPs are supposed to cover ASG/CG members as well, but IRS has so far declined to implement any enforcement activities in this area.

Hi Dave, I've got no problem with this, users don't pay for the message board, so ad revenue is certainly a reasonable concept. Customer demand for additional ad space - sounds like things are going well for BenefitsLink. Congratulations. JIM