A lady who works with me asked me a question about gains on stock that was gifted to her originally. This is a non-pension issue, and I have absolutely no knowledge in this area. So I told her I'd post her question, to see if any of the experts here can either provide some feedback, or provide some reference sources? Thanks in advance for any feedback! Here's her question:

Situation:

366 shares of bank stock were gifted to me in the early 1980's. Value was approximately $8000. Dividends have been paid in cash so they did not purchase additional shares. I have not redeemed any shares since I have owned it. This stock has split twice so I now own 1464 shares. Value is now approximately $45000.

This bank has been bought by another so I need to turn in my current certificates so I can be issued stock on the new bank.

Questions:

The stock was originally owned by a grandparent but I do not recall if it was gifted to me directly from the grandparent or if it went to a parent then to me. Do I need to know from which generation the stock was gifted?

For 2004 tax purposes, will the sale of the stock of the original bank all be reported as a capital gain?

If so, what info do I need to determine my basis? How do I obtain that info? I have possesion of all of the certificates but no additional information.

Is it to my advantage to convert the stock to the new bank stock or would it be the same tax treatment as selling the stock?

I had not planned on selling all of this stock in one calendar year as I don't want to increase my taxable income by more than $10000 in any one year.

When selling stock that has been split, how is the basis determined? Is it a different method if selling all at once than if selling a portion?

Advice welcome. thanks

Are Calcium Pills eligible for reimbursement?

A company has a 401(k) with a discretionary pay period match. They chose to stop the match at the beginning of the 2003 plan year due to financial constraints. They are now condsidering re-starting the match.

1. Is there an issue restarting the match mid-year if is is a pay-period match?

2. Other than having a problem with prior year testing - i.e. the 2003 ACP of the NHCE's was -0%- is there any reason the HCE's can't share in the match. I would think they have to get the match - except it will be refunded/forfeited due to "prior year testing - unless we amend the plan to current year testing.

Assuming a union and multi-employer bargaining unit

have signed a declaration of trust to create a plan, is

there any reason the trust assets couldn't be maintained

within a union subaccount?? There is joint administration

and audits of the account.

I know the usual procedure is to set up a custodial account

with a bank, but is it required?

I attended the ASPA webcast and had several conversations with other actuaries regarding the 'benefit payout' information that is supposed to be a new disclosure.

Does anyone have an idea HOW this information is supposed to be calculated??

How detailed the calculations have to be - for example a joint and survivor annuity for a retiree - possibilities abound that 'could' be valued - both alive, participant/spouse dies, both die???

The presentation appeared to imply that these calculations are NOT present values at the valuation date BUT the value in the year paid. Does anyone agree with this or disagree?

Just trying to get a handle on how these calculations are to be performed since no direction was provided by FASB.

This is a first for me so I thought I would ask if anyone has ever seen this before and solicit comments.

The mortality factors used to determine optional benefit forms that are actuarially equivalent to the normal form vary depending on when the participant was born.

For DOB < 1940 use UP84,

For 1939 < DOB < 1950 use UP84 set back one year,

For 1949 < DOB < 1959 use UP84 set back two years, and

For 1959 < DOB, use UP84 set back three years.

It smells like an age discrimination issue to me.

I appreciate your feedback.

For an employer who has no need for borrowing (i.e. pre-tax financing), I'm trying to think of an exhaustive list of benefits that an ESOP would provide that simply comp'ing out stock wouldn't provide.

If we were to concentrate solely to the tax benefit inuring to the employer (the employer doesn't really care that the employees would have tax deferral in an ESOP), the only benefit I could see really is the absence of FICA tha would apply if the employer simply comp'd out stock to employees. However, the comp scenario has the benefit of the immediate deduction, where the deduction comes over time with an ESOP via deductible contributions that are used to "pay" off the note to the employer. Further, if the stock is NPT, the employer would ultimately be required to by back the shares distributed from the ESOP if the associated put option is exercised, which can be a cash cruncher.

Any additional thoughts would be appreciated.

Client has an IRA from which she is withdrawing $4,800 monthly to avoid 10% premature distribution penalty. Four years into the withdrawal program, one of the funds from which sytematic withdrawals were coming from was depleted, leaving her $900 short for that month. Broker switched liquidations to a different fund for the next and subsequent months, but never made up the $900 shortfall. Consequently, her year 2003 distribution was short.

CPA is saying she's subject retroactively to the 10% penalty plus interest.

What has been others experience in trying to get relief from the penalty? With distributions at $55,600 annually for 4 years, the penalty will be in excess of $22K for missing $900 in distributions.

An employer that sponsors a PSP goes out of business, but the PSP does not terminate because none of the participants withdraw their vested benefits.

So, the PSP continues to exist year after year. Of course, no new contributions are deposited to the plan because the employer no longer exists. The participants are happy with the income that their accounts produce, so everyone leaves their account alone.

Since the plan never terminated, then I would think that the plan does not have to provide termination notices to the participants.

Here's my questions:

1) Do the participants continue to vest?

2) Does the employer have to provide the participants with any notices?

3) Does plan have to send any participants a Sch SSA? (I thought that an SSA was requied only when a vested participant separates from service. Well, I guess that you could say that the employer's going out of business is ulimate method of causing an employee to separate from service).

A physician group (a C corporation) wants to establish a health reimbursement arrangement (HRA). Like many other physician groups, the group initially pays expenses incurred by physicians, but then allocates the expenses directly to the physician who incurred the expense, and reduces that physician's compensation by the amount of expenses incurred by the physician. Thus, for example, if a physician incurs CME expenses of $3,000, the group pays the $3,000, but the physician's compensation is later reduced by $3,000. The group would like to apply the same method to an HRA they want to establish. Under the HRA, each employee would receive monthly credits of, say, $500, to an HRA Account, subject to a maximum balance of $4,000. The HRA would reimburse the physician from the physician's HRA Account for receipts turned in by the physician, but the group would then reduce the physician's compensation by the amount of reimbursements received by the physician under the HRA. Would such a plan violate the rules applicable to HRAs? Is the arrangement a cafeteria plan, even though there are no elections?

A participant has been receiving minimum required distributions (MRD) for years. The participant has two designated beneficiaries (his son & daughter). The participant dies in 2004 before taking his MRD for the year. The participants daughter wants to take her portion in 2004; his son wants to defer until 2005.

My question is: The 2004 MRD still needs to be distributed. Who gets the MRD?

His estate;

Can it be satisfied by the daughter taking her portion of the benefit; or

Does the MRD need to be prorated between the son & daughter.

Thanks.

Here is my scenario:

H/W roll IRA accounts to Profit Sharing Plan of LLC as one component of huge estate planning technique. 95% of the assets were then used (or will be used) to purchase life insurance. LLC pays members guaranteed payments and LLC contributes to plan on ongoing basis (these amounts are minimal - $3,600 each in contributions per year).

The question is: is there any guidance as to how to determine and payout required minimum distributions for both H/W on an annual basis when no liquid assets exist? I believe this to be a major problem in the attorneys grand plan.

I am relying on recent Rev Proc 2004-16 to value the policies at the premiums paid by the plan (roughly $1.8M) as the plan started 9/03, premiums paid 10/03 and 12/31 plan year end - the valuation date for the 2004 RMD. The plans would not have had a chance to build a sustantial cash value yet. For 2004, I've calculated H's RMD at around $93,000 and W's at around $1,200.

Today, there is enough cash in the account for a couple years of payments but a final insurance premium is due this October that would deplete all but this years payments.

I've looked at incidental benefit rule and some postings here regarding that and it appears rollovers are exempt from the IB rule. Would you all concur?

Any suggestions or resources you might know of to tackle this? My only idea is to borrow against the policies, if available. This ultimately wil deplete cash proceeds of policy at death but we may have no other choice.

Thank you kindly in advance.

Does anyone have any experience with the sale of a company while they have an EPCRS application pending. In our situation, transaction will likely be structured as a stock deal for various reasons and Buyer will presumably desire termination of the 401(k) Plan prior to close. Seller, however, has an EPCRS application pending for various operational errors. Although a number of the errors were self-corrected, the Plan was still required to seek IRS approval for final corrections of certain errors. Approval and correction of those errors is not expected to be a problem as the Plan has proposed using standard IRS corrections. The problem is the EPCRS application has only been submitted for a couple of months and the proposed sale is being pushed up for various reasons. I would appreciate thoughts of anybody having dealt with a similar situation.

Can EPCRS sanctions be paid from the plan?

I have a client who is 100% owner of two corps (A and B). I have been TPA for Corp A's X-tested PS plan for the past four years. While preparing the 9/30/04 contribution calculation I have been informed that there exists Corp B, which was formed in April of 2002 and said Corp B has a 401k plan. There are a few employees that work for both Corps, but i am told that the common employees do not participate in the 401k plan. There is one employee who worked for Corp A until June of 2002 and then moved to Corp B. I'm trying to figure out if i have issues for the 9/30/03 plan year. It sounds like i do. I thought there may be a two or three year grace period when a new controlled group issue arises, is that true?? Thanks.

I know if you make too much money you are not eligible to participate in a Roth IRA. But what do you do if you made a contribution to a Roth IRA only to find out your income is too high for you to be eligible to contribute to it?

I'm finding that some sellers of non-qualified plans for not-for-profits are promoting plans that actually vest in the event of involuntary termination prior to normal retirement age. Does anyone know of any authority that would allow this?

If it is allowed, would it then be considered retirement income or severance income or ??? If severance, would it then be applied against the 2 times earnings cap?

Thanks in advance for any thoughts you have on this, or even what you've observed.

Is an employee on paid leave permitted to make 401(k) contributions from that pay? Any comments and/or citation would be appreciated. Thanks.

Does anyone know what the obligations (i.e. IRS Notification, Customer and Participant Notification) of a Plan Sponsor of a prototype SIMPLE IRA is when the Plan Sponsor is no longer offering the plan to some of its customers?

The details are as follows: A Financial Institution is selling some of its branches. Those branches offered customers a prototype SIMPLE IRA. Because of the sale, the prototype plan is no longer going to be offered to the existing customers. We know that we need to notify the customers, but are not sure if we are required to file anything with the IRS and have not been able to find any information on the subject.

Any help would be greatly appreciated. Thank you.

Has anyone seen a participant threaten litigation against plan trustees for the way the profit sharing plan was managed and the resulting losses in '00,01, and 02? This profit sharing plan is managed by the plan trustees (small business owners) but the salary deferrals under the 401(k) are participant directed under the plan's various fund accounts.

There was a law firm in K.C. advertising for plan participants to contact them if they experienced losses in their retirement accounts at work.

The only cases I have been able to find have dealt with employer stock and not challenging the prudence of the plan trustees in asset management.

Thanks for any insight.