We have a client, age 68, who has $1,000,000 + in his PS balance. Approximately $950,000 of this balance is from a rollover.

The client takes random taxable distributions each year from his PS balance, usually amounting to around $50,000 to $75,000 yearly.

His plan is held with a brokerage firm and they process his distributions. The brokerage firm has never withheld 20% Federal tax or 4% required state tax from these distributions. The broker says it is optional for the client, and the client always says no tax.

Even though these distributions are coming from Rollover money inside a PS plan, are they not still subject to the mandatory 20% Federal tax?

Here is my scenario...XYZ Corp, for tax purposes, made application in 2003 to change from a C-Corp to an S-Corp. Letter from the IRS, dated May 19, 2003, received by XYZ approving change effective January 1, 2003. Owners were participating in the plan during the first part of the year (as C-Corp) but now will not be able to because of the S-Corp prohibition. My question is this: Must the contributions prior to May 19, 2003 be recharacterized as after tax since the "effective date" issued by the IRS was January 1, 2003 or can the contributions through the date the notice was issued (May 19, 2003) stand and just subsequent contributions be reclassified.

Any help in this matter would be greatly appreciated.

I have been asked to bid on a plan that is

outside of the state in which I am currently

licensed. While the issues that arise under

these plans are primarily under ERISA or

the Code, I am hesitant to provide advice

in a state where I am not licensed.

How do others handle this? Does it

depend entirely upon the PR code in

the state where I will be traveling?

I'm trying to get a CPA firm to change it's PVAB reconciliation from 1/1/2002 to 1/1/2003 to 1/1/2001 to 1/1/2002 for a report accompanying a 2002 Form 5500.

My experience is that years ago all CPAs reported a reconciliation to the valuation date ocurring 1 day after the audit year, but that over the years most changed to a reconciliation to the valuation date falling within the audit year.

I have an auditor balking at such change, asking for a legal or regulatory cite or justification for such a change. Does anybody know these rules or how they are found?

Has anyone encountered a model document for Health Reimbursement Arrangements?

I'm confused... I've been reading all about the 410(b) minimum coverage, 401(a)(26) Minimum Participation and nondiscrimination testing under 401(a) (4).

Is it true that if your plan is not a defined benefit plan, you do not run the 401(a)(26) minimum participation test (unless before 1996)? Am I understanding this right?

Who can you exclude for coverage testing? I read that you can exlude anyone who did not meet the age and service of the plan. If a plan has immediate eligibility for 401(k) portion, you can use one year of service (otherwise exludible employees). Can you also exclude terminated participants that did not work more that 501 hours? I'm confused because Relius is putting the terms with less than 501 hrs in the exludable group. I didn't read anywhere where these ees can be exluded.

Is it true that basically 410(B) deals with minimum coverge while 401(a)(4) deals with nondiscrimination in terms of benefits? At least that's what I think I'm reading...my brain is mush...

We have a plan that only has 401(k) deferral money in it. the document allows for match and profit sharing, but there never has (or probably never will) been any employer match of profit sharing contributions.

The document is a standardized protoype, so all NHCE benefit under the plan. I've always filed the Schedule T reporting that all NHCE benefit.

Now, the sponsor wants to try to separate one of the "divisions" into it's own plan. The attorney is asking for Total EEs, Total HCE, Total exludable NHCE, Total excludable HCE. This seems like data for coverage testing. Is there some other test he will be running to see if we can have a separate plan? His request asked us to exclude ees that have not met the age and year of service requirement. Don't we need to also exlude those who have terminated with less that 501 hours?

Any guidance on this matter would be appreciated.

thank you

A participant in a Money Purchase Pension Plan has been on disability for almost 1 year. He was officially terminated 6 months after he went out on disability. He has made a request for a lump sum payout.

According to the collective bargaining agreement covering this participant, he is entitled to receive 1 year of health and prescription benefits while on disability. The 1st 6 months of contributions are made by the employer and the remaing 6 months of contributions are made by the union.

Should the date the waiting period begins be the date he was officially terminated or should it be the date the employer stops making contributions or the date the union stops making contributions? Or some other date.

If anyone has any answers, please reply ASAP as I am under a strict deadline here.

For Top Heavy Calculation for 11/30/2002, should the $30,000 receivable contribution for 11/30/2001, which was deposited on 4/16/2003, be included?

The contribution was included in the 11/30/2001 valuation and 2001 Form 5500. There was no contribution for PYE 11/30/2002.

I was wondering if anyone would have an opinion on the following....If a plan sponsor has both a DB plan and a comparability plan and the DB plan is intergrated with social security, should I not use imputed disparity results in the general test for the comparability plan?

And, would the same apply for an average benefits test? For example, let's say the employer has a DC profit sharing plan with an integrated formula but they are not covering enough people to pass the ratio percentage test. When the ABT is completed, should I not use imputed disparity?

Thanks!

I seem to have read somewhere that if a 501c3 organization has a 401k plan with a ADP problem for the HCEs, the company can sponsor a 403(b) plan just for the HCEs and doesn't have coverage or ADP problems. Thoughts?

404(a)(7)©(i) mentions that 404(a)(7) does not apply "if no employee is a beneficiary under more than 1 trust or under a trust and an annuity plan." 404(a)(7)©(ii) contains the exemption for 402(g) deferrals.

PLR 8743096 toward the end says: "..section 404(a)(7) would apply even though no contributions are currently being credited to the employee's profit-sharing account. An employee does not cease to be a beneficiary under the profit-sharing plan because contributions are not currently credited to his/her account."

Here is the situation, Plan A is a defined benefit plan, Plan B is a profit sharing plan. A participant of Plan B who has an account balance ceases participation (i.e. no more contributions) and moves to Plan A (both plan documents allow this).

I think that 404(a)(7) will apply and now limit the deductioin to both Plans A and B.

However, I have been told my an attorney that he heard Jim Holland say at a 1997 ASPA convention (and this may be pure unsubstantiated gossip) that 404(a)(7) only applies if the common participant(s) in question are currently benefiting, i.e., receiving an allocation and/or an increase in accruals.

Can anyone shed some informed light on this?

I have a client that wants to discontinue allowing their employees to contribute to the plan. I've never had this situation before. Would it be ok to just amend the plan to change the max deferral % to 0% or should all reference to 401(k) in the plan be removed? In the future, they may want to allow the employees to contribute again.

A quick look at the Conference brochure tells me that Board regulars Tom Poje, Mike Preston, and MGB are all doing sessions this October. Any other regulars, perhaps disguised, also doing a session?

I'm working with a client that wants to implement a 401k for a management company and its associated partners. The management company sits on top of 4 separate operating entities which will not participate int he 401k. The partners in the management company own varying interests in the operating entities. An actuary/TPA has reviewed and indicated that their is not a control group issue provided that the % ownership structure doesn't change.

What are the ramifications, if the % ownership were to change at some point in the future? Does anyone have an article or refernce material that I can use to explain this to the client in very basic terms?

In the ASPA QKA study material, several times it mentions the 415 limit for 2003 is $41,000.

I was surprised to read this. Is the limit not $40,000 for 2003?

I posted this question under the Church Plan heading, but I thought I should try here as well.

Has the IRS established a GUST/EGTRRA remedial amendment period ("RAP") for non-electing church plans. I know the TRA'86 RAP for non-electing church plans had been generally extended to February 28, 2002. But is there (or was there) a deadline for the GUST/EGTRRA changes (to the extent applicable to a non-electing church plan)? Thanks in advance for any help.

Is it proper for an investment adviser to a multiemployer pension fund to collect an annual fee from the fund while receiving commissions on sales to the fund? The investment adviser, in this situation, has a broker dealer license with the company that is paying the adviser commissions for sales. I know that the SEC allows for the receipt of both an annual fee and commissions in the event the adviser has a broker dealer license, but does this situation violate ERISA in any way?

Thank you in advance for your help and guidance.

Is it proper for an investment adviser to a multiemployer pension fund to collect an annual fee from the fund while receiving commissions on sales to the fund? The investment adviser, in this situation, has a broker dealer license with the company that is paying the adviser commissions for sales. I know that the SEC allows for the receipt of both an annual fee and commissions in the event the adviser has a broker dealer license, but does this situation violate ERISA in any way?

Thank you in advance for your help and guidance.

We ran into a 403(b) plan that only allows employees to participate if they defer a minimum of 4%. This seems discriminatory to me and i've never heard of such a thing.

I realize you can have negative elections, but in the case above if someone is negatively elected to 4% and then wants to reduce to 3%, the plan would not allow this.

Any comments?? (should i run from this one and fast??!!)

Thanks

Running into a brain cramp here and want to make sure I'm passing on the right information.

A lawyer asked my opinion on a proposed design for his law firm on a new cash balance plan. They plan on using very conservative interest crediting assumptions coupled with conservative investments to avoid any underfunding exposure (and also sidestepping any "whipsaw" issues). One comment by the consulting actuary who had proposed the plan is the top 25 restrictions under IRC 1.401(a)(4)-5.

In this situation we can assume that cash balances roughly equal assets by design. My thought would be that you convert the cash balance to a SLA benefit, then value using 83 GAM and F and the RPA '94 CL interest rate (90-120%). The conversion to SLA would be done using the plan assumptions, then valued using CL assumptions on the resulting SLA accrued benefit. Presumably (unless we have an inverted yield curve), the spread between the plan interest rate and 120% of the weighted rate would put us comfortably over the 110% threshold that would trigger the top 25 restrictions.

Am I reading this right or do you take the cash balance and convert using CL assumptions to SLA and then revalue using CL assumptions to end up back where you started (in which case you would be nailed given the client's proposed investment strategy)?