An attorney client has sold his interest in the firm and is moving out to be a sole proprietor. ERA in partnership plan is 55 w/10 years of service; he has attained ERA. He has been receiving annual payments that qualify under 72(t) for the last 3 years. He is setting up a one person 401(k) plan that accepts rollover funds & has an ERA of 55. Game plan is to rollover 100% of his remaining balance of the firm's Plan into his new Plan & continue to take the same 72(t) payments until he has received payments for at least 5 years total and is past the age of 59 1/2. Will these actions continue to qualify for favorable tax treatment or are we putting him in a position to have to recapture taxes on prior annual distributions? THANKS!! I think we are OK, but still worried. TDH

The assets of Sold Company were sold to Purchasing Company. Most of Sold Company's employees were hired by Purchasing Company. Purchasing Company insisted that the Sold Profit-Sharing Plan be terminated. The participants could then elect to rollover their balance to Purchasing Company's qualified plan.

One participant had an outstanding loan. Purchasing Company continued to do the loan repayments through payroll and transmit them to the Sold Comany Plan. Purchasing Company and the plan trustee both ageed to accept the loan balance as part of the rollover once the Sold Plan was termianted.

The Payor for Sold Plan cut a check in the amount of the net account balance (Balance - Loan).

Purchasing Company then remitted the repayments to the Purchasing Plan.

It is now 1099-R time and the payor has issued 2 1099-Rs, one for the amount of the check with a code G and one for the amount of the loan with a code L.

The payor is insisting that the loan balance cannot be included as part of the rollover on the 1099-R. It must either be paid off or defaulted.

It seems to me that what we have here is an "In-kind" distribution and I can see no reason why it can't be included as part of the rollover 1099-R, but so far I have been unable to find anything in writing that says this is OK, probably because it is either (1) so obvious that no one has needed to address it or (2) so unusual that no one has though to address it.

Can anyone help?

Employees leased to Company A through a PEO arrangement participate in the PEO's flex plan. What would prohibit the employees to have uninterrupted participation in the flex plan under the following scenarios?

1) Employees transfer from Company A to Company B. Company B has the same ownership as Company A and also has a leasing arrangement with the PEO.

2) Employees transfer from Company A to Company C. Company C has a different ownership than Company A and also has a leasing arrangement with the PEO. Company C purchases the clientele of Company A and employs the same staff.

3) Employees leave Company A and are rehired to Company D. Company D is an unrelated entity with respect to Company A, but also has a leasing arrangement with the PEO.

Thanks for your expertise.

A self funded health plan has been asked to

preauthorize a bone marrow transplant scheduled

for next week. The plan specifically INCLUDES

bone marrow as one of the covered transplant

procedures. However, it EXCLUDES experimental

procedures.

The participant is included in a clinical study

at a major hospital. While the FDA has apparently

given its approval to the basic procedure, our

TPA has said that it is still considered experimental

in nature. They recommend we deny the preauthorization.

So, problem #1 is the conflict in plan language, but

to further complicate this issue, our TPA has said that

the stop-loss carrier will not pay on the claim....(if

it is deemed experimental.)

How is this best handled? My initial reaction is to

deny the preauthorization and contact the participant

to let him know of the problem and the appeal rights.

In a perfect world the participant would back out

of the clinical trials, and undergo the normal procedures...

or the stop loss carrier would agree to treat the procedure

as a normal bone marrow transplant.

Suggestions??

For a plan I work on, there are several 1099's that were produced for normal distributions taken.

I also have several other participants that will need 1099's filed related to their PS 58 Cost.

Side note - I am not that familiar with the 1099 process. I believe that there is a 1096 that would be provided which would be a total of the 1099's produced.

My question is: Since I have 1099's for 2 different reasons (dist's & PS 58 cost), will I need to submit separate 1096's, or can I just combine them?

From what I hear, this could be a big issue if done incorrectly.

Thanks in advance!

For the year in which the employee enters the plan, plan defines compensation from date the employee became a participant. However, employer has allocated 2003 contributions based on such employee's comp. for the entire plan year. Correction - forfeit the excess amount contributed (plan reduces)? Any possibility of an amendment changing the comp. period to the entire year for first year of participation?

Plans merged as of 12/31/02 should a final 5500 be filed for the MP plan?

I have a DB plan that excludes highly compensated employees. It has a plan year from 2/1 to 1/31. Currently, I use the 12 month period preceding the plan year for the look back year for purposes of determining who is an HCE and thus excludable from the plan. However, I would like to elect to use the calendar year data election (in Notice 97-45), which provides that the look back is the "calendar year beginning with or within the look-back year." My problem is, if I elect the calendar year data election, then I won't know who to exclude from the Plan until almost the end of the applicable Plan year. Is there a way around this problem?

Plan's definition of compensation has no exclusions, however the employer has been excluding bonuses for all contribution and allocation purposes. Understand that the employer should make a QNEC (and earnings) to adjust for the incorrect deferral, but does a QNEC have to be made for the missed employer contributions? Q & A 133 from the Correcting Plan Defects Column states the missed employer contributions need to be made but not in the form of a QNEC. Q & A 135 expands but not sure if it is saying the missed employer contributions must be in the form of a QNEC? Does Rev. Proc. 2003-44 require a QNEC or just make up the missed employer contributions with earnings and put in the regular PS or Match source?

Can you please tell me how you would handle the following situation, and any supporting cite or references?

Participant fails to make loan payment in June 2003, loan should have been deemed at the end of the cure period, which would have been Oct 1, 2003.

Participant terminated in December and requests distribution.

Would you deem the loan and then process the distribution request, or would you offset the loan and then process the distribution request.

The participant now has a distributable event, can you deem it at distribution because it should have been deemed, but never was? Or, does the distributable event now not allow you to deem?

Is there anyway to be warned of duplicat personal information in a DCM import. We've got a few plans that never enter rehires as a rehire, but rather a new hire. If I enter census info. by hand I will get a warning if duplicate information is on the system; thus I know the rehires. If I use the DCM import, I don't get that warning, is there anyway to get that warning using DCM? I've pretty much given up on the client to enter rehires correctly & they have several rehires each year so it is difficult to catch everyone.

Thanks in advance for any guidance.

We have a case involving a 401k plan asset "custodian" demanding documentation

that I feel only the plan "Trustee" is responsible for verifying.

The situation is that the Trustee submitted a request for payment to be made to the

spouse of a deceased plan participant. This request was submitted on the custodian's

distribution request form. This spouse was previously paid out the major portion of

the account by a prior custodian when this was a Money Purchase Account with no

trouble. The balance is some residual earnings.

The new custodian is taking the position that they cannot make the distribution

without being provided the deceased participant's beneficiary designation and death

certificate. They say they must have this documentation for their SAS 70 audit.

Please advise I can further argue this with the new custodian and how .

I am considering transferring an IRA to an account that will be actively managed by a financial advisor. The advisor charges a fee that is a percentage of assets and can be paid by check or by taking the fee out of the account. If I elect to have the fee taken out of the account, is this a taxable event (i.e. am I actually withdrawing funds from the IRA to pay the fee)? Or is just like a fee (non taxable)on a mutual fund?

Can an otherwise eligible employee elect not to participate in a 403(b) plan - i.e., not receive the employer contribution? I know there is a prohibition against irrevocable elections not to participate in standardized prototype 401(k) plans, but what is the rule with respect to 403(b)s?

Was the deadline for a calendar governmental plan to amend to final 401(a)(9) regs December 31, 2003?

Employee obtains stock through an ISO, employee divorces and transfers ISO stock to wife through a bona fide property settlement pursuant to the divorce, can the ex-wife qualify for non-recognition under 1042 if she sells the stock to the ESOP?

The third condition of the exemption from annual examinations by an IQPA states that the administrator must make available for examination, at the participants request, copies of each financial institutions statements and evidence of any required bond.

I interpret this to mean that if a Plan does not have a fidelity bond (even though they have been advised to purchase one many times) they cannot claim the exemption from an IQPA examination on line 4k of Schedule I because they would not be able to furnish proof of a bond that doesn't exist. Others in my office disagree. Wanted to see what others thought about this.

Do I have this right? A db plan that permits continued participation after normal retirement date must provide participants with a benefit equal to the greater of: (1) the age/service benefit or (2) the actuarially increased value of the normal retirement benefit when the participant ultimately retires, unless the plan provides participants a suspension of benefits notice at age 65, in which case the plan need only provide the age/service benefit. Also, if a plan opts to provide the notice, does the plan need to contain a statement that such a notice will be issued?

Can someone help me? I have a safe harbor 401k plan that has a safe harbor match as well as a discretionary match. The employer fully utilizes both matches; however with a last day and 1,000 hour requirement for the discretionary match - they fail ACP testing for the discretionary. To alleviate this problem we amended the plan to remove the accrual requirement for 2003, before the end of the year. Since this was a nonstandardized plan, with last day 1,000 hour requirement we could do this because we were not taking away a benefit from anyone.

My question is since we removed the accrual requirements for the discretionary match (anyone who defers receives a match), do we have to give a discretionary match contribution to any participant who deferred and were paid out prior to the date we amended the plan for 2003?

Since the amendment was not executed until late in the plan year, do I need to give a match to someone who terminated in January?

A healthcare employee is in the process of being terminated for " time theft" - Facts are as follows:

Employee X was working the nightshift at a Nursing Facility with three different locations A,B. and C. - Each night this employee would clock in at location "A", immediately leave "A"'s premises, drive over to, and clock in at location "B", then immediately leave "B", and do the same at location "C". The employee ended up collecting three times his true salary as a result of this fraudulent no show shuffle.

Criminal charges have been filed and are pending with the District Attorney. Question is as follows:

Assuming that the employee winds up convicted (which is certain), Can the Nursing Facility employer attach any employer monies that were contributed into a Qualified plan on behalf of this former employee - or does ERISA preempt any attachments whatsoever?