Broker called to inform that a $160,000 bond had been called. This was part of reinvested ESOP proceeds to defer the gain as per Sec. 1042.

I have reviewed Code Sec. 1042 and cannot find an exception that will prevent the taxation of the disposition. Sec. 1042 does except the taxation of replacement property in the events of disposition at death, dispositions by gift, a reorganization under Code Sec. 368 and a subsequent sale of the replacement property to an ESOP.

Please note that he did not sell the bonds. They were called by the issuer. These bonds had an expected 20 year term I believe. So, there was the expected outcome of the bonds being taxable if there wasn't a death first, etc.

Does this become taxable event where the replacement securities are unilaterally disposed of by the issuer?

Does anyone know where I can get a copy of the new DOL rule regarding cashouts between $1000-5000? besides TAG?

The possible problem arrises if you for example change the fund mix in the balanced model and the participants are not given the opportunity to elect the revised version of the model (they would remain invested in the model). I am referring to a very subtle change from say 20% of one fund to 25% of the fund. does this violate the opportunity to excercise control requirement of the 404© regulations?

Loan Policy does not allow a class of participants to receive loans. A participant from this class accidentally received a loan in 2003. How is this corrected?

I am guessing we have to issue a 2003 1099-R for a deemed distribution. The participant is unable to pay back the entire amount of the loan (about $18,000) at this time, can he make payments on this deemed distribution? Also, he is under 59 1/2.

It seems unfair that the participant will face huge tax consequences because the plan, or TPA allowed the loan to be issued.

Company X and Y form a controlled group. Plan A is a tiered Profit Sharing Plan and covers employees of X. Plan B is a 401(k) Plan and covers employees of Y.

Plan A satisfies 410(b) with respect to the Profit Sharing Contribution with all employees of X not receiving a Profit Sharing Contribution.

For 401(a)(4) general test for Plan A, must the denominator of the rate group calculations include the employees of X even though they are not covered under the Plan?

i say there is nothing in the code that prohibits company's from terminating one 401(k) plan and starting another 401(k) plan in the same year. i have some "old timers" in my office that seem to recall something that may have prohibited this in the past. i have told them the only restrictions are the successor plan rules which place restrictions on distributions. can anyone confirm that my opinion is correct?

We have a flex plan where the ER contributes to each eligible employee $150 per month to select any flex plan benefits, along with EE contributions. A participant is going on maternity leave in April, will be gone approx 6 weeks. The plan document does address the timing of the $150 contrib to be contributed monthly, but does not address this, or any, leave. The firm is not subject to FMLA. There is no EE handbook or policy. The ERwants to know if they are required to contribute their contribution in the EE's absence. I know what the "right" thing to do is, but what is required?

I want to start a new business, but I need the funds in my Company 401K to use as collateral. Is there a fund that I can rollover my 401K into so that my lender can use it as collateral (i.e. Roth or CD) Please help. Blaser

With U.S. Bank (Firstar at the time), I had a traditional IRA and a Roth IRA. I transferred these two IRAs to a different bank into two accounts in order to get more interest. A year later, I decided to let an investment representative manage these funds, and they were transferred a third time in April 2003. In August 2003, I discovered that the very first transfer from U.S. Bank was in error as they had marked the wrong box indicating that the Roth was a "traditional" IRA.

When the investment representative received proceeds from both IRAs last April, he combined the funds into one account. I have been trying to get this straightened out since September. I have letters from each of the first two banks indicating their acknowledgment of the error. The investment manager is hesitant to divide the fund back into a Roth and traditional IRA because, he says that it will flag the IRS that I have made another conversion. In the mean time, I can't move my funds.

Does anyone know of a precedent or an IRS guideline to fix this problem?

Looking to learn more about cross-tested plans. Can anyone suggest a seminar, book, etc that is specific as to cross-tested plans that someone in plan adminstration could use. Looking for something that would enable me to understand and offer these plans. Corbel has a workshop, but is not offering it in 2004.

Thanks

TCP

I have a new client with 500 people in a Group Term Life Plan that has never filed a Form 5500. The plan has been around since '95. At first I thought they had a problem, but it seems to me that Notice 90-24 provides an exemption.

Does anyone think they should be filing? If so, why?

Does anyone think they are exempt?

One cannot change the Funding Method if the filing deadline has past.

Is there such a restriction on changing the assumptions?

What if Form 5500 was filed but the Sch B was not?

A not for profit has an ERISA Plan that it froze a few years back and then started a NON-ERISA 403(b) with a different vendor. I'm trying to research a few issues and am not finding a lot:

1. The ERISA Plan document did not permit hardships, but in practice, the employer allowed 4 of them through the years. I noted in this topic's discussions below (Sept. 30, 2003), that 403(b) plans are required to be administered in accordance with the Code and Regs. (and ERISA), but not the plan document and that there are no prototype 403(b) plans. Do we need to be concerned with the fact that the 403(b) was not administered in compliance with the document, or should we just be concerned as to whether the hardship was OK under the Code?

2. Can the document be retroactively amended to the hardships? It has been 3 to 5 years since the hardships.

3. It seems to me that if the ERISA Plan and the NON-ERISA Plan were combined (which is proposed by a vendor), that the merged thing would be an ERISA Plan because old employer matches would be in the new, combined Plan. AGREE??? DISAGREE?

4. It looks like you can update the documents for GUST and EGTRRA whenever, as long as they are administered properly. AGREE or NOT?????

5. Can you ever terminate an ERISA 403(b) Plan that has employer match and employee deferrals in it? Is it possible to require the employer match to be distributed even though the person is still employed, and then either require, or try to convince the employees, to directly transfer the remaining salary deferral amounts to an NON-ERISA 403(b) plan?

Like everyone else, we have a gang of DC plans, and only one or two 403(b)'s, so finding this stuff is tough.

I have a Simple 401(k) plan that was designed with a 1-year eligibility requirement and one entry date, the first day of the plan year in which the employee met the eligibility requirement (not the best plan design by any standard.)

Now, say a participant was hired in December 2002. His one year of service is in December 2003 and therefore is entry date is 01/01/2003. He didn't have the opportunity to defer as he quit shortly after his one year anniversary.

Should the employer be obligated to contribute a QNEC for him (in the amount of the NHCEs average?)

What if if was hired in June and did not quit, would that make a difference?

Plan document is written to require a Profit Sharing Contribution of 10% of compensation. Employer elects Safe Harbor Non-Elective of 3%. Must the Employer contribute the 3% PLUS the 10% or may part of the 10% be used to fund the SH Contribution??

I'm fairly new to administrating a 401k plan for my company and have learned through trial and error what I'm supposed to do. It's been quite frustrating because I didn't have any formal training. I got the basics to get me by and then was left to fly on my own.

Now, almost a year later, I'm trying to learn all the things I should know, procedural and compliance wise. Can anyone direct me to some reputable training sites that would help me to be more proficient at being an administrator?

Thank you.

Elisa

Can anyone tell me why (if ever) you would test a safe harbor match using the 401(a) test when there is no profit sharing contribution? Would there be any purpose? Supposedly the IRS mentioned that "if the match allocation passes under 401(a), no true-up is necessary."

Thank you

We have a number of plans in our office with investments at places like ING, Nationwide, Manulife, etc. Unless they have participant loans, all the assets are in pooled separate accounts reported on the schedules A and D, or in the general account reported on the schedule A, or both.

We report the assets in pooled separate accounts in Item 1c(10) on the Sch H, and the general account assets in item 1c(1).

We are having a discussion in the office regarding how to answer Item 4i on the Schedule H. My interpretation of the instructions is that 4i should be answered "Yes", and a schedule of assets should be attached. Others think that the exception noted for assets held in insurance company pooled separate accounts means that these assets need not be reported at all and answer 4i "No", even if assets are also held in the general account.

We received an audit letter from EBSA saying that if something is being reported in Item 1c(10), item 4i must be answered "yes" and a schedule must be attached, which supports my position, but I am interested in how others complete this question. They aren't always right after all.

Employer has been operating med. exp. reimb. plan in a manner that e/ee's can accumulate expense dollars? from year to year. E/er now wants to make such amounts non-cumulative. E/er proposes to tell all plan participants that as of Jan. 1 next year, amounts will no longer be cumulative and that prior accumulated amounts will be lost unless reimbursements submitted before that date. Employer has had no written plan in place, but plans to get one in place setting forth the "new" rules as of Jan 1. Issues??? Thanks.

What is the ERISA documentation/record retention requirements? Six years I thought. What what needs to be kept, and by whom (the recordkeeper vs. plan sponsor)?