Situation: Standardized plan is top-heavy. It requires 1 year of eligibility service for 401(k) participation, but also requires 2 years of eligibility service for employer nondiscretionary contributions.

Questions: If an employee is a participant for 401(k) purposes but not yet eligible for employer contributions, is a minimum contribution required for that person?

Decedent, unaware of the Section 691© deduction available to her beneficiaries, withdrew her entire IRA just before she died, to remove the income tax from her estate. The issue is whether her executors or the beneficiaries of her IRA can put the money back into the IRA, since the benefit of the stretchout would probably far outweigh the fact that the Section 691© deduction applies only to the Federal, but not the state, estate tax.

Gunther, 573 F. Supp. 126 (W.D. Mich. 1982) says yes. Rev. Proc. 2003-16 (which lists death as an example) and the temporary regulations under former Section 4981A suggest yes. But the IRS said no in PLR 200415011.

If the financial institution will let the executor put the money back (within the 60 days), and if the beneficiaries of the IRA are the same as the beneficiaries of the estate, the executor could put the money back, and then either seek a ruling (and take the money back out if the ruling is unfavorable), or run the risk of the excess contribution penalty. But if the financial institution won't let the executor put the money back, she'll need to get a ruling both on the rollover after death and the waiver of the 60 days. Even if the executor puts the money back without calling attention to the IRA owner's death, the financial institution may spot the issue when the beneficiaries set up their beneficiary IRAs.

Does anyone have any thoughts, other than having the executor move to the Western District of Michigan? Was anyone in this group involved in PLR 200415011?

Can an employer have a written loan program that excludes a participant's investment in employer securities for purposes of obtaining a loan? (e.g. all investments BUT the ER Stock Fund can be used for a loan)

A plan sponsor wants to almost freeze benefit accruals, except that the plan had a compensation limit in place for the final year of benefit accrual.

Is there any law to prevent us from drafting plan language to allow the benefit accrual fraction to be frozen as of a certain date, say 12/31/04, but allow the average compensation used in detemining the final accrued benefit to include one more year, say, through 12/31/05? We would also remove the plan's compensation limit so that statutory limits could be used instead for years prior to 12/31/05.

We would be open to not using the word "frozen" if the end result would be the same.

Thanks in advance for any comments or alternative suggestions.

Dave Peckham

An actively employed participant who is over age 70 1/2 and is not a 5% owner wants to know if they can begin to receive their min. distributions.

The required beginning date defined in the plan document is "April 1st of the calendar year following the later of the calendar year in which the Participant attains age 70 1/2 or the calendar year in which the Participant retires."

The only option selected in the adoption agreement is distribution upon termination (no in-service/normal retirement). In researching the regs it appears that the participant cannot take a distribution until they leave the company.

Is this a correct interpretation? Thank you

I know that a deemed distribution is not treated the same as an actual distribution for some purposes (i.e. mandatory withholding). However in a Plan that allows loans from a Safe Harbor Non-Elective source, is a deemed distribution precipitated by a loan default treated the same as an actual distribution? Additionally, if the participant in question is under age 59 1/2, is this distribution from the Safe Harbor Non-Elective source a prohibited transaction?

I am not a California practitioner, but I represent clients with California operations. I have read varying analyses of California's AB 2208, some of which seem to suggest that AB 2208 will indirectly, if not directly, require all California employers with insured medical plans to offer medical insurance coverage to domestic partners in any instance in which the employer is providing spousal coverage.

Other analyses I've read suggest that AB 2208 does not apply directly to employers and does not require employers to provide health benefits to their employees' domestic partners.

I've also received conflicting assessments from a couple of different insurers operating in California.

Any insights would be greatly appreciated.

I'm sure many have run into this in one way or another.

A few years ago a local financial planner contacted us about administering two small profit sharing plans. They wanted us to go through them (essentially work for them). We agreed and had them sign our services and fee agreement.

After receiving the plan information (documents, prior 5500's etc.) it became clear that both plans were a mess. We should have resigned right then and there but we did not. Since it was close to the filing deadline on both plans we spent about twenty hours cleaning up the plans and preparing 5500's.

The financial planner has refused to pay us and has generally not been cooperative in providing us information. The IRS now wants to audit one of the plans. We would like to resign as administrator on both plans as we have never been paid and dont think we should have to go through the audit for free.

Our services and fee agreement states that either party can resign with 30 days written notice.

Does anyone have a take on what our exposure would be by resigning?

Thanks much.

Is there any centralized reference materials (online preferably) that sumamrize the short term trading fees among the various mutual fund companies and their individual funds?

I have a primary job, which is my normal 8-5 job 5 days of the week. Now, I've talked with an editor of a computer journal, and am going to be writing articles for her journal, at $125 a page. I come up with some ideas of what to write about, and talk with it with the editor, then we decide if it's something that would make a good article. I can submit whatever I like (I'm not an official employee, I just submit articles), but the editor obviously can choose to only accept those that she feels are appropriate for the journal (thus it is prudent to talk with her before engaging on a venture). After articles have been accepted, I get a check from her business account.

So, my question is, given that information, what is the tax-treatment of all of this? Because of this separate source of income, are there any additional retirement plan options that are open to me (I currently have a 403b and a RothIRA)?

Thanks for any responses.

Has anyone had any experience with an amortization extension under IRC 412(e)?

How willing is the IRS for grant extensions? What happens if/when the plan becomes adaquately funded? What happens if the plan increases benefits during the extension period?

I'm deveoping retirement forms allowing for retro ASDs and I thought that I would have to provide information including QJSA Relative Value information for all forms of annuity for both the retro ASD and current ASD, because electing a retroASD is an option under the plan.

Now, I'm thinking that I would only have to do the 2 sets of calculations and disclose that including relative value information to the participant under the following circumstances: (1) not all forms of annuity are available at the retroASD, and/or (2) need spousal consent to elect a retroASD if the survivor benefit under that election is less than what would have been available under the plan's QJSA at the current ASD. If those 2 conditions do not apply to the participant, would you agree that I would not be REQUIRED to provide benefit information as of a current ASD??. However, if the situation could apply-i.e. say need spousal consent (2), then it would make sense to provide the information as of both dates for all participants as an administrative practice?

In other words--what is required from a notice perspective? Provide retirement information as of the retroASD and as of a current date OR just as of the retro ASD date with noted caveats mentioned above? Thanks.

I was just talking to someone who contends that if the leased employees are collectively bargained employees of the leasing company, then we don’t even need to worry about whether or not they are covered by a qualified retirement plan maintained by the leasing company since they are excluded from any non-bargained plan that the leasing organization may sponsor.

In other words, he believes that if the leasing company employees are collectively bargained, then the employer who is leasing them can ignore them completely for nondiscrimination and coverage purposes regardless if they are covered by any qualified plan sponsored by the leasing company.

It’s an interesting idea but I’m not sure I agree. Does the collectively bargained attribute of the leased employees follow them through to the firm that leases them?

Assume that a health provider subject to HIPAA receives PHI regarding an individual who is not a patient. Even if the individual is not a patient, doesn't the health care provider still have the responsibility to protect the information under federal law?

I have the same question concerning a health plan subject to HIPAA. If a health plan receives PHI regarding an individual who is not a participant in the plan, isn't the health plan required to protect this information under federal law?

Thanks.

Bob Kaplan mentioned at the ASPA conference that someone was imprisoned for failure to deposit deferrals on a timely basis. Her name was Ida Halworth. He said we should be able to search the DOL website on what happened but I am unable to find anything on this. Does anyone know where I can find this information?

Have friends working for small bookkeeping business. Employer has taken the dedutions from their paychecks but all the deductions and matching employer contributions are not being deposited to the plan. They have spoken with the owner at length about this and after months all is not yet corrected. Deposits for 2003 have finally mostly been made but 2002 plus some of what has been deducted from checks in 2004 still has not been deposited to the plan.

Do these employees have any recourse available to them short of getting an attorneywhich would result in their loosing their jobs?

Thanks,

Quietcook

Question: What are the required minimum distribution requirements for a 5% business owner who retires from the 401(k) Plan at age 70 ½ during the 2004 calendar year and is requesting a transfer from the Plan to an IRA?

We are trying to determine if the 5% business owner who turned age 70 ½ in the calendar year 2004 is required by law to complete his RMD before transferring his account balance to an IRA. The business owner would like to transfer 100% of his 401(k) account balance to an IRA during the 2004 calendar year and delay taking his RMD from the IRA until April 1, 2005. We believe 401(a)9 may require an RMD to be completed prior to the transfer of the 401(k) account balance to an IRA.

Please advise or comment.

I have an IRA account, that has all the losing techonology stocks worth only $1000. Can I close it and take a tax deduction for my losses?

Under the Medicare rules Medicare must be the secondary coverage for employees of an employer who has at least 20 employees and that covers Medicare beneficiaries who are age 65 or older and who have coverage under their employer's group health plan "by virtue of an individual's current employment status." The regs at Section 411.104© state that coverage by virtue of current employment status is coverage by the ghp based on employment including coverage based on a certain number of hours worked. My questions deals with the following: If the plan document defines an eligible employee as an employee who works greater than a certain number of hours ("x hours") and defines a retiree so that the retiree may still work part time but must have fewer than x hours so that they are not an eligible employee, but the retiree is covered not as an employee but only as a retiree, do the Medicare MSP rules still prohibit the ghp from providing secondary coverage for the retiree. I have not been able to find anything which says that this does or does not work. Any tips?

A top hat filing with the DOL must disclose the number of top hat plans "and the number of employees in each plan." Reg. §2520.104-23(b)(1).

Question: does the number of employees refer to the number that are eligible to participate, or just the number who elect to participate?

For example, if 25 employees are offered the opportunity to defer compensation into a nonqualified plan, but only 10 elect to do so, does the company report 25 or 10 as the number of employees in the plan when filing the top hat exemption?