A participant took out a loan for a principal residence and was amortized over 30 years. Due to unforeseen circumstances the property was never used as the principal residence.

IRC 72(p)(2)(B)(ii) states -- Clause (i) shall not apply to any loan used to acquire any dwelling unit which within a reasonable time is to be used (determined at the time the loan is made) as the principal residence of the participant.

I interpret this as meaning since the intent at the time the loan was made was truly to purchase a principal residence, this loan is valid and no correction is needed. Anyone else have a different opinion?

Does anyone know where I can find a list of state tax withholding information for distributions broken down by state?

Right now I specifically need information for the state of California.

At my job one of my coworkers was telling me that if your index funds go down in your 401k plan don't worry about it, becuase you are young and you will bounce back and when it goes back up you'll make more money, because you bought the shares when the price was low. I'm in my mid 20's so he told me that you should hope that it does bad, becuase you'll buy a lot of shares of it, so when it goes up you'll do so much better.

Now I talked to another coworker and he says that's not exaclty correct. He says for instance if you have 100k say in an index fun and it goes down 10%, well now it's at 90k. If it goes back up 10% you are still hurting, because 10% of 90 will bring you to 99k. So he says that buying when it's doing bad isn't a good idea.

Who's right?

I received a call from a client regarding a welfare plan that has never filed a 5500. The effective date of the plan is approx 12-15 years ago. The plan has approx 300 participants, and it offers group life and STD. It is fully insured with the premiums being paid 100% by the employee with after tax dollars.

First, any recommendations as to what to do about the years not filed? Second, what are the filing requirements? A 5500 with what schedules? and an audit report?

Any help is much appreciated.

We have an employee that went on active duty in 1986 and returned to employment in 1990, both before USERRA was enacted. He has only now brought it to our attention that he wants credit for his time on leave. The individual that he gave his notice of leave to is now deceased. The documentation we have makes it appear as though he resigned from his job and then enlisted in the military a month later. When he finished his tour of duty, documentation indicates that he was re-hired a month after he returned.

What is the proper way to treat military leave situations prior to when USERRA was in force?

We have an employee that went on active duty in 1986 and returned to employment in 1990, both before USERRA was enacted. He has only now brought it to our attention that he wants credit for his time on leave. The individual that he gave his notice of leave to is now deceased. The documentation we have makes it appear as though he resigned from his job and then enlisted in the military a month later. When he finished his tour of duty, documentation indicates that he was re-hired a month after he returned.

What is the proper way to treat military leave situations prior to when USERRA was in force?

We have an employee that went on active duty in 1986 and returned to employment in 1990, both before USERRA was enacted. He has only now brought it to our attention that he wants credit for his time on leave. The individual that he gave his notice of leave to is now deceased. The documentation we have makes it appear as though he resigned from his job and then enlisted in the military a month later. When he finished his tour of duty, documentation indicates that he was re-hired a month after he returned.

What is the proper way to treat military leave situations prior to when USERRA was in force?

We are contemplating adding a SERP for one of our outstanding sales people - does anyone know if we need him to sign the election by June 30, 2005 for this type of arrangement (not set up as a bonus arrangement)?

I have a situation whereas the participant elected to have his distribution made to his new ee's plan. However, he did not do his homework and his new ee does not accept rollovers. This transpired in Feb,05. He said he would set up an IRA. It is now June and my plan sponsor has not heard back from him regarding this IRA. She wants to re-deposit the distribution back with the plan's investment(he was not 100% vested, his account was not forfeited, therefore still has an account balance) and wait until he contact her again with distribution instructions. Any problem in doing this? The distribution amount is $445! Thanks.

Has anyone run accross anything (or have any thoughts) addressing whether a 409A Separation from Service will occur if one moves from being a common law employee to an independent contractor/consultant.

I'm involved in a situation where key employee of a publicly traded company is stepping down but will remain as a consultant. The key employee will no longer have his current title (i.e., the employer will hire a replacement). He will not have the same duties as before. Will this be considered a separation from service so as to permit the executive to start receiving, in 6 months, his benefits under the nonqualified plan.

I have a 401k plan at work and I wanted to get into mutual funds and have a roth IRA. I just recently purchased a mutual funds book so I can start learning. I wanted to have a Roth IRA account that I wouldn't have to worry that much about it and then other mutual funds that are outside of the Roth IRA.

I was thinking about at least starting out with this Vanguard Target Retirement 2035 Fund (VTTHX). Is this a good idea or am I better off pickig another mutual fund?

I was thinking about going with this one for my Roth and then having another mutual fund (wellington). Any suggestions?

An exisiting POP amends their document to allow employees to pay for individual health insurance policies on a pre-tax basis. Is an employee that has an individual health plan that he/she is currently paying with after-tax dollars permitted to elect pre-tax payment mid year (effective with the plan document change) or does the employee have to wait until the next plan year?

Looking at the 125 regs more closely, does anyone think that 1.125-4(f)(3)(iii) would apply? "If a plan adds a new benefit package option or other coverage option..., the cafeteria plan may permit eligible employees to revoke their election under the cafeteria plan and , in lieu thereof, to make an election on a prospective basis under the new or improved benefit package option."

Calendar year plan. On January 1 they began to use a 3 months of service requriement from 6 months. Due to a back log and late notice we are now getting the amendment out. Any issues?

Our document person feels the amendment can not be effective until 7/1. I think since it is increasing benefits you can make it effective 1/1.

I work for a non-profit company that currently has a 403(b) plan and wants to add an additional benefit for certain members of management. We have considered adding a 457(b) plan, but the $15,000 contribution limitation could be less than the amount that the company wants to contribute to the management staff. I have read the code on 457(f) plans and the 409(a) issues, as well as almost every post I could find on this site regarding 457 plans.

My questions are as follows: If you could develop your own plan, which direction would you head, what would you want written in the plan for Substantial risk of forfeiture and how would you want the distributions to be paid. I'm looking to develop the ideal plan and am looking for ideas. Basically...what's your dream plan?

Thanks in advance for your input.

Gretchen

An employer maintains a non-safe harbor DB & a safe harbor DC plan with no common participants. Both plans separately pass the 401(a)(26) and 410(b).

DB plan is a non-safe harbor plan and is to be tested for non-discrimination without aggregating with the DC plan.

In computing the rate groups's ratio percentages and the average benefit %, are the non-excludable employees who are not in the DB plan taken into account with zero accruals? S1.401(a)(4)(2)©(3)(i) says they must.

I am being told they don't need to because:

"Since the MPP is a safe-harbor plan (and passes testing) and the DBP passes non-discrimination testing, then the 2 plans are broadly available separate plans."

The DB passes the 401(a)(4) if only DB participants were taken into account.

A DB plan maintained by a nonprofit was converted to a cash balance plan in 1997, while its TRA-86 remedial amendment period was still open. A determination letter application was filed before the TRA-86 RAP closed, but the plan was one of the first referred to the National Office under the mandatory tech advice for cash balance conversions.

The TRA-86 determination letter application is still pending, so the TRA-86 remedial amendment period is still open under Treas. Reg. 1.401(b)-1.

Now the question: Is the plan's GUST remedial amendment period also still open? The extension in Treas. Reg. 1.401(b)-1(e)(3) is expressed in a general way, suggesting that it is.

Thoughts on this?

Employee enter the plan on Jan 1 and July on or after the eligiblity is met.

Some employees will enter on 07/01/05, which is a Friday and happens to coincide with the pay period ending 07/01/05. Paychecks will be cut on 06/30/05.

Are the new entrants eligible to make deferrals from the 07/01/05 paychecks?

The problem is that the plan provides a matching contribution and 3% safe harbor contribution.

I have 2 companies on with 401k plan on Relius (ver 8.0). companies are now merging.

Any ideas on how we can merge the data easily? One company has around 500 partic. and the other 70 or so.

Thanks

My employer is a non-governmental tax-exempt with a 457(b) Plan. The employer recently terminated their 457(b) Plan administration contract with Administrator A. They have engaged Administrator B to handle the 457(b) Plan. The employer moved all of the participant accounts and investments to B without consent of employees/participants. Was this permissible? What if I had wanted to keep my money with A? Can anyone direct me to the rules on this?

Thanks.

I'm hoping that someone more knowledgable about cafeteria plans than I (which means everyone else) is able to explain something to me.

Prop. Regs. 1.125-2(b)(4) is truly puzzling to me. I think the middle sentence means an FSA of an employer may only cover premiums for health plans offered by that employer, and not the employer of the employee's spouse or dependents. But what the heck does the last sentence ("This paragraph (b)(4) does not prevent premiums for current health plan coverage (including coverage under a health FSA) from being paid on a salary reduction basis throught the ordinary operation of the cafeteria plan.") mean?

One commentator (in a Tax Management portfolio) stated "However, this rule is not intended to prevent pre-tax payment under a cafeteria plan of premiums under a health plan of the same employer, where the premiums are paid directly by salary reduction instead of from a reimbursement account. While not entirely clear, this prohibition seems to apply to payment of premiums for other health coverage available through the employer maintaining the health FSA plan, as well as another employer of the participant or his spouse." This isn't very clear to me, either. Is he saying that premiums for voluntary dental insurance offered by the employer (the employer also offers medical insurance) may not be reimbursed from a FSA? If the medical insurance premiums are paid through a Premium Only Plan, may the voluntary dental premiums also be paid through the POP?

I hope my questions are clear, but if they aren't you know why!

Help! (from the regulatory language challenged)

Ken Davis

Univ. of South Alabama