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Yes, social security benefits are considered part of your adjusted gross income. A worksheet to help you out regarding this can be found in IRS Publication 590.

Yes, social security wages are considered income. Capital gains are not considered income for purposes if the IRA deduction. Basically, anything that can be reported as Adjusted Gross Income on your 1040 is considered compensation. This would include alimony, w-2 wages, social security wages, etc.

If she is under 70 1/2 she can. Any contributions after that age are considered excess contributions subject to a 6% excise tax.

It doesn't look like it is part of the controlled group but it is possible it might be an affiliated service group. What is the capacity of company X to company Y?

This is an opinion letter for an individually designed plan that is updating for GUST. I have done some research and in my opinion this is an expense that is necessary for continued tax qualified status. Therefore, it can be deducted from plan assets. I would like to hear any opinions that are contrary to my interpretation.

Can IRS user fees for determination letters be deducted from plan assets?

Yes, you will have to give the participants a 204(h) notice. You must amend the plan to a 0% contribution before anyone works the required amount of hours to receive a contribution. You will need to get a signed board resolution that states they wish to have the plan amended to a 0% contribution and merge the plan into the existing profit sharing plan. All participants will have to keep their j/s annuity benefits so the MPP assets will have to be accounted for separately unless your PSP assets have j/s rules also.

How can the match be used for your top heavy minimum? I know you can do that for plan years beginning after 12/31/2001 but how does that apply here?

I have a participant who is rolling over his balance to a traditional IRA. This participant is over 70 1/2. Can the RMD for 2002 (based on the 12/31 balance) be paid after it has been rolled over or does it have to be paid before the account is transfered?

That is not true. If a married couples' modified AGI is above $54,000 for 2002, then limitations set in concerning the amount you can deduct. This is addressed in IRC 219(g).

Yes, you may contribute to a Roth IRA. Being active in a qualified plan does not keep you from contributing to a Roth IRA but could for a traditional IRA. Your income is currently under the limit of phaseout which starts at $150,000.

The custodian is completely wrong. There is no 25% penalty. I would find the code and give it to the custodian. Unfortunately I do not know what the reg number is or I would give it to you. If they still do not address this correctly, then I do not know what to tell you. Maybe threaten to report them to the DOL or something like that. [There may be a 25% penalty if 2-year rule violated. See below - GSL]

I recommend limiting the deferral percentage to somewhere around 70%. This will keep someone from deferring 100%. The reason you do not want to do this is because of payroll taxes. Social security and medicare taxes have to be deducted. It also gives the participant the opportunity to deduct other pretax programs such as cafeteria plans.

If it is for the 2001 plan year ending 12/31, you have until 3-15-2002 to correct your excess contributions without incurring a 10% excise tax. If you do not correct it by 12-31-2002, the plan will be disqualified for the 2001 plan year. You will be subject to applicable income taxes for the amounts of contributions that are in excess.

Yes, I have used it and it is wonderful. It also helps to ensure you receive the correct amount of money for their contributions.

Robin, I would require the client to furnish the information. If they still cannot furnish the information, I would require them to write a signed letter to you saying what method was used for each year. If they will not furnish that, then I would decline the business.

I stand corrected. Thanks for the link and setting me straight.

2001 would actually be your last year unless you updated the docs for GUST in 2001. Since all docs have to be amended this year, it will be hardcoded for 2002.

No, they cannot get rid of it. That is a protected benefit. The ER is stuck with it for current monies in the plan.

You do not have to maintain the MPP. You can just put the MPP contribution into the profit sharing plan for the 2001 plan year.

Can you not exclude a class of employees (i.e. leased employees) as long as you pass 410(B) coverage testing? You can setup the plan to waive eligibility requirements if you are hired by a date that you can pre-determine for the plan. You can also setup the plan so that everyone hired by the effective date of the plan is fully vested.

You can set your plan up with all of those features. You can also exclude leased employees but I think you might have to bring them back in if you fail coverage testing. I am not 100% sure about this so someone else please comment on the lease employee situation.

No, it is not. Your actual financial statements (most likely prepared by the client's accounting firm) and 5500 financial information are on the accrual basis. The actual valuation/allocation is done on a cash basis.

You would also perform your ADP/ACP test on an accrual basis. The only part that is on a cash basis is your actual allocation report and participant statements. Everything else will be done using the accrual method. That is my recommended method.

You would treat all the participants in both plans just as if they were in one plan and you would use all deferrals.