ITEM SET 6: QUALIFIED PLAN RULES

Bubbles LLC is a web design company that operates out of Boulder, Colorado. Jesse and Skyler started Bubbles twenty years ago and it has grown to be one of the more sizable web development firms in Colorado. Bubbles offers a 401(k) /profit sharing plan with a Roth account option.

The plan has the following characteristics:

Eligibility: age 21 and one-year of service

Match: dollar for dollar match

Vesting: 20% per year (years 1 through 5)

Highly compensated definition uses top 20% election

Profit-sharing contribution: Bubbles generally makes a sizeable contribution, but the percentage varies.

The plan has been amended to permit in-plan Roth rollovers.

The plan permits rollovers from other qualified plans and IRAs.

7. Assume the company decided to make a profit-sharing contribution that was integrated with Social Security, with an integration level equal to the Social Security wage base. If the base percentage was 10 percent with a maximum excess percentage, how much would be contributed to the plan on behalf of Jesse (disregard the salary deferral)?

9. Jesse has $702,000 accumulated in the 401(k) plan. The balance consists of deferrals, employer matching contributions, earnings, and profit-sharing contributions. Jesse also has an NOL carryover on his personal return from another business investment. Discuss whether Jesse can execute an in-plan Roth rollover and the tax implications.

Please ONLY provide solutions to the questions above, thank you!

EE# 1 2 3 4 5 6 7 8 9 N uw Employee Ownership Age Tenure Salary Jesse 60% 48 20 Years $200,000 Skyler 30% 49 20 Years $150,000 Walter 6% 33 15 Years $75,000 Marie 4% 42 10 Years $85,000 Hank 0% 58 8 Years $60,000 Lydia 0% 29 6 Years $75,000 Jane 0% 53 4 Years $50,000 Hector 0% 19 2 Years $60,000 Gale 0% 25 8 Months $24,000 Gus 0% 19 6 Months $18,000 Note: Lydia is Skyler's daughter. She graduated from the art institute five years ago. Deferral $10,000 $15,000 $5,250 $5,100 $0 $4,500 $0 $0 $0 $0 10 EE# 1 2 3 4 5 6 7 8 9 N uw Employee Ownership Age Tenure Salary Jesse 60% 48 20 Years $200,000 Skyler 30% 49 20 Years $150,000 Walter 6% 33 15 Years $75,000 Marie 4% 42 10 Years $85,000 Hank 0% 58 8 Years $60,000 Lydia 0% 29 6 Years $75,000 Jane 0% 53 4 Years $50,000 Hector 0% 19 2 Years $60,000 Gale 0% 25 8 Months $24,000 Gus 0% 19 6 Months $18,000 Note: Lydia is Skyler's daughter. She graduated from the art institute five years ago. Deferral $10,000 $15,000 $5,250 $5,100 $0 $4,500 $0 $0 $0 $0 10