Mike Preston

David, are you referencing 1402(a)(5)(A)? (As an aside, it is so politically incorrect that clients have a hard time believing it.) That section says that, if the income is subject to community property laws, you treat it all as being attributable to the husband, unless the wife "exercises substantially all of themanagement and control of such trade or business". In that case, you attribute it all to the wife. Note, however, that the section in question appears to apply only in states which are community property states. Flosfur appears to be in such a state. I agree that this whole issue seems to go away if there is only one Schedule C. Which leaves open the original issue, if not for the original poster.

AP is entitled to her monies. Assume A and B are unrelated participants in your plan. What would you do to participant B's benefit entitlement if you overpaid participant A? What would you do to get it back?

What is the "applicable non-discrimination testing" you are referring to?

May?

I don't disagree with you, MGB. I might not use the word "unavailable", but then again, I might.

What does the plan document say? If it is silent, T-21 of the regs certainly allows you to use compensation for all of 2002.

No diff. Any type of employee. The k deferral would have had to be a deferral. Taken out of payroll and all that. Yes 404a7 will apply in 2003, too.

Don't have time to do a complete search this morning, but there are lots and lots of plans out there that have QNEC provisions which would have their 410(b) testing modified if what you imply were in fact true. Something tells me the IRS has addressed this point at some time in the past. Anybody else have it at their fingertips?

Normally, a QNEC is taken into account as if it were an elective contribution. 1.401(k)-1(b)(5). If so, then it isn't a non-elective contribution for purposes of 410(b). Hence, those people who get the QNEC are not treated as benefitting under your non-401(k)/non-401(m) plan. Since they aren't benefitting, they are excludable. If the QNEC isn't taken into account as an elective contribution, then they would be benefitting and therefore not excludable.

I don't think you are going to like this reply. As stated in my prior message, the maximum that you can exclude from income in 2002 is 12000. The fact that you put 13000 into the plan doesn't matter. You are automatically being taxed on that extra 1000 dollars. Yes, the full 1000 dollars. Now,you received a check in 2003. That check came about from the following: 1) Cash (that's good), which you were already taxed on in 2002 (that's bad) 2) Some withholding (seems weird to withhold money from something that is not taxable to you in the year of the withholding, but I think there is some support for this). 3) The investment loss. Not too much recourse here. Probably can be treated as an investment loss, but it probably doesn't get you a dollar for dollar deduction. You'd have to get a more definitive answer on this point from an accountant. Maybe Mary Kay will see this. As far as the withholding goes, when you get the 1099 for 2003 it will show that you had some money sent to the IRS in 2003 and you get credit for that on your 2003 return. Seems like you have made an interest free loan to the government. It doesn't seem like a big enough amount to make trouble over, however.

I think so. We haven't even addressed what the plan/fiscal years are here. Hopefully, it isn't a 2002 calendar year that is being addressed!

'Tis my day for being confused. Wouldn't the use of 105% always result in a higher 404 limit than if you used 120%? Since 120% usually gets us to a point these days where the maximum deductible far outstrips the ability to contribute to the plan, it doesn't seem to have much applicability. Of course, in that one plan where the client wants the absolute limit, this sounds like good news.

If they each own it equally, I agree. Of course, that is the situation in this case. Note that there may be a transition under 410(b)(6)© when they do the deed.

If $39,291 is the required minimum contribution to the DB plan, $39,291. 404a7 applies.

Ouch.

Dave, changed back to tubey and it was much, much faster than the other day. Thanks for all your efforts tweaking this. I'm going to reset back to the default, though, so I can wear out my scroll mouse.

What is the loan balance? What is the account balance (exclusive of the loan balance)? What is the total vested interest, counting the loan balance? Something tells me that you will just end up defaulting the loan if the participant doesn't pay it back, or rolling it to a new plan. There is no need for the loan to be secured by anything other than the vested balance, in accordance with 72(p), at the time of the loan. After that, there is no particular requirement for the plan to maintain adequate security. I suppose it is possible that the interest on the loan before it is defaulted would exceed the remaining account balance, but lets just say I'm skeptical.

Not enough information. Take a look at your W-2 from each employer. Do either of them check the box "Pension Plan" in Box 13? If so, if you are single then you can have a fully deductible IRA if your adjusted gross income is less than $34,000. If you are married filing jointly, the adjusted gross income limitation is $54,000 for a fully deductible IRA. If you are married filing separately, you can't. In both these cases, if your adjusted gross income is between the amount indicated and $10,000 above the amount indicated, you can have a deductible IRA, but it is phased out (but not below $200). For example, if you are single and have AGI of $39,000 you could have a deductible IRA of $1,500. If neither of your W-2's have the box checked, then you can have a deductible IRA of up to $3,000. Note that I'm assuming your employers have properly filled out your W-2 (not always a correct assumption when looking at the pension plan indicator in Box 13). Were you born on 12/31/1952 or before? If so, the $3,000 is increased to $3,500.

I called an attorney I work with who is somewhat familiar with transactional analysis. His opinition is that the existence, or lack thereof, of 401(k) plans with identical provisions is not going to matter one whit as far as liability goes. Imagine the situation where the companies do not set up any 401(k) plans. To the extent they are successful in establishing liability walls between the entities is something that stands on its own. Now, assuming those walls are standing, the adoption of identical 401(k) plans (and combined testing under 410(b), if necessary, to the extent the entities are required to be aggregated) won't do anything to break down those walls. That is, to the extent the entities are controlled, they are controlled whether or not they have the plans. To the extent they are controlled, should that fact work against the walls, those walls are being attacked whether the plans exist or not. Of course, this is a question for the folks who are advising the client on establishing those walls in the first place. If they can't answer the question, they need to find a lawyer who can.

M. Weddell, there are two ways to accomplish what you want to do. First, look in the upper right hand corner of the webpage when you first access the message boards. If you're logged in (either manually or automatically via cookies), you'll see a direct link to "View New Posts". That should do what you want. (If your screen says "Welcome, Guest!" you won't see the "View New Posts" link; it doesn't work for guests-- you have to log in as a registered user in order for the software to know which messages are "new" for you.) Another option is the "My Assistant" link, which is immediately to the right of "View New Posts" (again, assuming you're logged in). One of the options you get with "My Assistant" is to view new posts (in fact, it appears at the top of the box that opens). Probably not helping my cause of returning to the old format, am I?

The boards seem to be reformatting cites, so I'll try a non-standard representation and see if it too gets mangled: 1.401(k)-1[d][2][[iii][[4]

R. Butler, that is only if you wish to deduct the contributions retroactively per 404(a)(6). If you don't, then you get an additional 30 days before the contribution is considered an annual addition in the current (not prior) year.

Huh? Component plan language is never in the plan. However, sometimes documents demand that certain non-discrimination tests be satisfied. If use of those tests is inconsisent with component plan testing, then they are essentially frozen out.

There is no line. Deal with this immediately. Either delay the distributions "officially", or pay them out. In the same timeframe as others have been paid. If the client won't, resign. Or, at least, refer it to a lawyer to get yourself off the hook. There are only two ways to officially deal with this that I can think of (maybe others can think of more) that might delay distributions. 1) Submit for a partial termination determination, along with your suggested amounts of distribution, based on the Plan Administrator's interpretation of "to the extent vested." Certainly it is not administratively practical to pay the benefits before an LOD, is it? 2) Make an amendment eliminating lump sums and submit the amendment to the Secretary of Labor. If the Secretary doesn't respond within 90 days I think it is, the cutback can take place. Don't try this one alone.

well, let's see. Is it possible that the plan was amended such that the formula is the accrued benefit at the effective date of change plus an additional benefit based on the modified definition of compensation? If so, and if nobody has accrued a benefit under the new formula, you can just change the definition back. If not, and the modification of compensation is retroactive, the only choice you have, I think, is to go into EPCRS and ask for a retroactive modification based on a scrivener's error. I have no idea whether you would be successful or not. You might want to hire an attorney familiar with EPCRS filings to give the plan a better chance.