MarZDoates

Is it possible to set up a safe harbor 401(k) for a sole-prop with no employees? His income is $130,000. He wants to be able to get a $40,000 contribution. He can't get there with a SEP or Profit Sharing because of the 25% limit on employer contribution. But if he had a safe harbor 401(k), he could defer $12,000, match 3% ( or 4% if using basic match) of $130,000 ...$3,900 then contribute $24,100 as a profit sharing contribution. Can this be done??? Would it be practical? Or am I way off course? Any input is greatly appreciated.

Is there a maximum salary reduction amount in a cafeteria plan, other than the $5,000 maximum for child care? I have an employee who wants to run $10,000 through health care reimbursement. Do cafeteria plan salary reductions tie into salary reductions for 401(k)?s Do we have to aggregate cafe plan reductions w/ 401(k) to make sure we don't exceed 402(g) limits or 415 limits? Thanks.

I know that an employer has until the DUE DATE of his tax return to fund his SEP contributions (including extensions). However, do we have to HOLD (not file) the tax return until the SEP is funded?

Is it possible to roll a traditional IRA into employee's SEP IRA?

Employer has been funding their SIMPLE IRA match throughout the year. However, they have contributed more than 3% of pay for some of the participants. How can this be corrected? I am not having much luck finding anything that talks about what happens when the employer contributes too much in the SIMPLE IRA. Any input is greatly appreciated. Thanks.

Can a SEP that currently has a 2 year service requirement be amended to 3 years?

Employer has a 401(k) plan with calendar year plan year. Their fiscal year end is November 30, 2002. They make their matching contribution at the end of the plan year. For deduction purposes, what amount is deductible for fiscal year ending November 30, 2002. Matching contributions attributable to comp/deferrals for: January 1, 2002 through November 30, 2002? December 1, 2001 through November 30, 2002? Or January 1, 2002 through December 31, 2002? Any of the above??? Any cites to support the answer? Thanks in advance for any input.

Does anyone know where I might find a simple checklist or questionnaire that I can send out with my census requests for an employer to complete to determine if they may be considered a controlled group or ASG? Thank you.

Can someone point me to some cites that say you can now eliminate joint and survivor annuities as a form of distribution in a Profit Sharing Plan? Thanks.

Gary, I think I understand your first paragraph. But not sure I'm clear on the second. The plan is top heavy, but no minimum contributions have been made yet. Do we need to make the minimum contribution even though it is "terminated". If so do we use compensation to determine minimum contribution from the beginning of the plan year to time the plan is terminated? I guess you could say that the plan was no longer available after August. Thanks.

I know absolutely nothing about ESOPs but was asked a question about income tax withholding on a distribution from an ESOP: Plan distributed (lump sum) shares to terminated participant. Corportion purchased the shares back from the participant. Is this subject to 20% income tax withholding? :confused: Thanks.

Does the new minimum (5% or 1/3 of highest er rate for HCE) top heavy contribution pertain to Age-Weighted (Points and Comp) Profit Sharing Plans or just the Cross Tested Plans?? Thanks.

Client maintained a SAR-SEP into which they were making a discretionary employer integrated profit sharing contribution after the end of the plan year. They "terminated" the SAR-SEP in August, 2002. Is employer permitted to fund a discretionary profit sharing contribution even though the plan is terminated. If so, would you count compensation from January to August...or for the whole year to determine amount of contribution? Same client adopted a Safe Harbor 401(k) in September, 2002. This plan also contains a discretionary integrated profit sharing contribution. HCE #1 wants to get $40,000 into his account during 2002. I guess my bottom line question is how do we get there with the scenario listed above. Or do we just forget about the SAR-SEP and only fund the new 401k plan? Sorry if this question is not clear....I've just confused myself!

WOW! Thanks for all the great feedback. Sounds like I will be able to accomplish my goal as long as my document is properly structured. Thanks again!!!

Is it conceivable that the following could be done: 1) amend the current calendar year profit sharing plan to add 401(k) feature effective December 1, 2002. 2) enroll eligible participants and offer them the option of deferring beginning December 1, 2002. (Does it matter what the NHCEs defer?) Let’s say HCE has wages of $10,000 in December. Could he defer all of it and contribute to the plan. His compensation for the entire year is $200,000 (5% of $200,000 = $10,000), which satisfies the ADP test for the first year. Is it permissible to count compensation for testing purposes for the entire plan/calendar year, even though we don’t add the 401(k) feature until December? Then amend the plan to add a safe harbor 401(k) feature beginning in January 1, 2003? (Can we do that in the same plan amendment?) I think you see where we are trying to go with this, maximize the HCE’s contribution at this very late date without disqualifying the plan. Thanks to any or all who care to reply.

Brian, I assume what Maverick was referring to is that HCE can defer 5% of $200,000 ($10,000) in 2002 without the safe harbor? But at this point, I'm not sure about annnnyyyything! And I certainly do NOT know which way I'm going...left, right, wrong or otherwise.

At present we have a Profit Sharing Plan with no cash or deferred option. The original effective date was July 1, 1980. We have to restate for GUST and wanted to add safe harbor 401(k) at the same time. We also wanted to be able to allow for deferrals in 2002. The plan year ends December 31, 2002. Thanks for your help.

Is it too late to install a safe harbor 401(k) plan and still make deferrals in 2002? If we provide notice to participants November 15, can we have deferrals begin December 15? Assuming document is signed before December 31, 2002?

Thank you SOOOO much!!

Let's say that we amortize the replacement loan within the original time period. Do I then take the $3,400 difference out of the investment account and rerun the amortization schedule at $11,600? Sorry if I seem dense. Participant loans drive me nuts!

Good point. The vested balance excludes outstanding loan balance.

I've read and re-read the research on this and I'm still confused. If anyone can shed some light, I would certainly appreciate it. Client borrowed $11,500 in January, 2000 at 10% to be repaid in five years. June, 2002 outstanding loan balance is $8,200. Vested account balance as of June, 2002 is $15,000. He wants to refinance at a lower interest rate. 1. I calculate the maximum additional amount to borrow to be $1,800: (>$15,000 x 50% or $10,000). Maximum is $10,000 less $8,200 outstanding = $1,800. Does this appear to be correct? 2. How do I account for this on paper? Here's how I think it should work: Submit request to investment company for $1,800 and rerun the amortization schedule at $10,000 at new interest rate from this point forward for five more years. Does this sound right? Thanks in advance for the help.

I realize this is probably a stupid question, but are plan sponsors still permitted to exclude Section 125 (etc.) deferrals from compensation? Thanks.

Thanks, Gary.

Client, was a sole proprietor from 01-01- through 10-10-01 then PSC for the remainder of the year. Both have profits, both with same employees. How do we allocate the SEP. Does it get a prorata allocation between both entities during the year. Or do we allocate the SEP contribution based upon actual earnings until the wage base is used up from the beginnning of the year. I dont believe we had SE income to the extent of 170,000 and I know that he didn't pay himself wages in the PSC during the remainder of the year. He will need to fund either by 09-15-02 or 10-15-02. Thank you