jaemmons

yes they are counted in determining account balances for top heavy concentration and may be used toward satisfying the top heavy mins for the year, should the plan be top heavy for the current plan year.

The participant exceeded the 402(g) limit for the calendar year 2002, which is a reason to allow for the catchup. Therefore, as long as the plan has been amended to allow for catchup contributions, the $1k catchup should be excluded from ADP testing for the 6/30/03 plan year test.

Unless the admin charges are reflected on the Schedule A, you must report it on the Schedule C. The insurance company is providing contracted administrative services to the plan, so they are not exempt from being reported on this schedule. Keep in mind that the Schedule C is only required for large plan filers.

If the mother was a dependent (as defined in IRC 152) of the participant, then would meet the safe harbor requirement to take a hardship for medical purposes, assuming the plan allows for hardship distributions. I don't see any reason why Medicaid expenses wouldn't qualify as a legit medical expense under IRC 213.

As long as the plan's definition of compensation includes all wages reported on the W-2, I would agree that deferrals should be taken out of the car allowance payments, along with applying the safe harbor NE 3% to these wages.

Are each of the adopting "employers" actual members of the LLC?

Yes, I would include SEP's and SIMPLE IRA's.

IRC section 3121 deals with exclusion of non-cash related payments to or for an employee and/or dependents, as well as payments made to an employee which they could be expected to deduct on their 1040. Determining whether or not to include the per diem depends upon whether or not the employer has an "accountable" or "non-accountable" reimbursement plan. If the employer only reimburses what the employee can justify on an expense report, then it can be excluded from wages, since the expenses would have been deductible to the employee. However, if the employer advances the money and doesn't ask for an expense report or receipts, then there is no justification as to whether or not the employee incurred deductible expenses, and as such, the employer MUST count the "per diem" as wages. edited -

Not really. It is more or less a decision made by the court during the marital asset division. Unless the ex-spouse waives rights to the assets accumulated prior to the marriage, I am going to have to lean on the side of her attorney. Sorry. As a side note, just because a court issues a domestic relations order for division of qualified retirment assets, doesn't make it "qualified" until the plan administrator has done so.

I hate to say it but the attorney may be correct. Although there are court cases which have ruled that benefits accrued prior to marriage are excluded, many have ruled in favor of her attorney's statement. In most states these assets are included as part of "community property" and would be included in any marital asset division.

The requirement for permissive aggregation is that both plans have the same plan year end. However, in a controlled group situation the plans are mandatorily aggregated anyway for coverage and 401(a)(4) testing. Generally, you would use the the data which coincide together for a respective plan year. For company A's plan you would use the data from company B's 12/31/2001 PYE and 10/31/2002 data from company A's Plan for 2001 testing. For the 12/31/2001 PYE for company B you would use the 10/31/2001 PYE data from company A's plan for 2001 testing. If any of the plan's can stand on their own for coverage purposes, then you don't have to worry about overlapping plan years. However, if they cannot then test to see if the plan's pass the average benefits test. If they can, then you can keep them separate.

Are you referring to plan valuation reporting or 5500? Plan valuation reflects the underlying CSV as the "retirement" benefit from the policy. The underlying death benefit is not reported as an asset or benefit to the plan. For 5500 purposes, life insurance is viewed as a welfare benefit by the DOL, and as such category "4B" needs to be reflected on page 2 to the 5500. Also, Section III to the Schedule A now is where the premium payments are reported on these policies. Since they are nonexperience-rated contracts, complete question 9.

I was reading a letter from John Canary to Richard Steinberg of the AICPA, dated May 17, 2002 (the address is http://www.aicpa.org/belt/ltdscope1_dol.htm) Although the gist of the letter deals with limited scope audit, there is mention that if there is any question as to the validity of fair market value of the assets at any point during the plan year, it may be imprudent for the accountant to not perform a full scope audit and issue and opinion thereon. Given the fact the plan's assets were at one point during the plan year, held by an institution which did not meet the requirements of 29 CFR 2520.103-8(B), you cannot perform a limited scope audit. I err on the conservative side, which may be prudent given the current standing of the auditing profession.

There shouldn't be any permanence issue since the decision to terminate the PEO business contract, outside of the plan, due to a legit business decision. #2 - There is not need to submit a 5310 unless the PEO were terminating the entire plan. A simple term resolution should be sufficient.

Since the CO does not want to maintain its own plan, I would have them sign a termination resolution, which should effectively terminate their "sub-plan" and allow for distribution of their employee account balances. Since the employer/employee relationship is between the CO and its ee's and NOT between the PEO and the CO's ee's, the CO can decide to stop it's co-sponsorship of the plan at any time. Also, you don't have any successor plan problems, since the CO will not be sponsoring another plan (either through another PEO or by themselves) outside the current PEO's plan. Therefore, in my opinion, I would send the termination resolution and distribute account balances. The termination of co-sponsorship is your triggering event under 401(k)(10).

318 attribution applies to unincorporated businesses also. In any event, after doing a little more research, I am reading that 318 stock attribution does not apply when evaluating eligible employees for 105 purposes, as long as the employer can prove that the spouse is a common law employee. After a second read, I noticed that the child is not a dependent of the sole proprietor, which would allow them to participate anyway.

Was the plan issued a DL for TRA '86? If so, the agent should not be requesting any pre-TRA '86 document verification. This was in the EP Determinations Quality Assurance Bulletin dated July 18, 2001. You may want to review this and have whomever is listed as having Power of Attorney on the 5310 submission discuss with the review agent.

I don't see any problem with a participating employer under a multiple employer plan to "terminate" their co-sponsorship of the plan. This shouldn't impact the qualification of the multiple ER arrangement, so long as their "portion" of the plan was compliant with all applicable IRC sections prior to the "withdrawal" of sponsorship. This is going to happen more with PEO's, since there are contracts involved. I would think that the decision to terminate sponsorship and have the assets withdrawn may be a legit business decision, especially if they have terminated their PEO contract. Many PEO documents I have seen contain language in the supplemental participation agreements related to contract terminations and what happens to participant accounts, as a result.

You are absolutely correct. I misread the 54 for a 55. Sorry for the miscommunication.

Amounts arising from pre-EGTRRA 415 excess, needed to be exhausted before any more contributions could be deposited into the plan. I am not exactly sure how you still have amounts in suspense due to pre-2002 limitation year violations.

I suppose you can demonstrate that the allocations of the match and PS satsify rate group testing, adding back the per diem allowances to the testing compensation, but the rate of match is not going to pass 401(a)(4) because this is calculated using allocation rates not EBARs. Since the plan is including more comp for the HCE's than NHCE's, the chances of passing this test are very slim. Therefore, they are going to need to make additional contributions anyway.

I don't know of any "rate group" testing for compensation definitions. The Treasury Regulations outline a specific way to determine the avg %'s, including alternatives (i.e.-individual, aggregate or a combination of the two (with certain restrictions)). The only groups that are tested are the entire HCE group and the entire NHCE group. You cannot disaggregate and test subgroups. You may want to take a look at Treas Reg 1.414(s)-1(d)(3)(iv)

I stand corrected. In any event, the code for #1 should be changed to "2" since the exception does apply.

You can "roll" the plans into one plan, but you would have a prevailing wage formula for each subs respective Davis Bacon employees. As long as the formulas pass non-discrimination (401(a)(4)), I don't see a problem with putting them into the same document. You could also submit the document, after the plans are combined, for an IRS determ letter which could at least provide some assurance on the qualification on the document language and if opted the plans operation (Schedule Q to form 5307).

In my opinion, #2 and #3 are correct. However #1 is inaccurate. A distribution made to a former employee after they terminate service and during the current or any subsequent calendar year in which he/she attains age 55 meets the exception rule. IRS Notice 87-13 addresses this issue.