Have a situation where a participant has received a cash-out distribution, but wants to roll it over to another qualified plan.

First, he states he did not receive a 30-day notice regarding the distribution.

In a situation like this, what are the options?

My thinking is as follows:

1. If still within 30 days of receipt of check, contact prior employer and state he did not receive a notice and explain he wants a rollover. Perhaps they can reissue the check.

2. If #1 is not an option, then he can come up with the 20% from another source and roll over 100% within 60 days of receipt of check. When he does his taxes, he may get a refund on part of 20%. (Am assuming the 1099R will reflect the lump sum distribution, not a rollover.)

Question: How is the rollover reported on the personal tax return? Is there a line item for this? (I've never paid attention to this before.)

3. He can, still within 60 days of receiving check, roll over the 80%, therefore he will only be taxed on the 20%. However, when rolled over, is this considered after-tax money and does the accepting plan have to allow for this in plan provisions? Same question as #2, how to report on personal taxes?

I'd appreciate any help you can offer! Thanks!

The situation that I have involves an employer that provides medical benefits to its retirees and their dependents. When this individual retired, he elected coverage for himself, but his spouse declined coverage because she was covered under her own employer's plan. Her employer went out of business, and now she wants to enroll under the husband's employer's plan. Is she eligible to do this under the special enrollment rules found in ERISA Section 701(f)? These rules apply to "employees" and dependents of employees. ERISA defines employee as an individual who is employed by an employer. This retiree is not an employee nor is his spouse a dependent of an employee.

Code Section 401(k)(10) permits distributions from a 401(k) plan on plan termination without the establishment or maintance of another defined contribution plan. Pre-EGTRRA regulations stated that the employer could not establish or maintain another plan within 12 months after the plan's termination. The "employer" is determined as of the date of plan termination. Corporation C is a member of the ABC controlled group of corporations. C maintains a 401(k) plan for its employees. The plan is terminated immediately prior to the sale of C's stock by its parent corporation to the DEF controlled group. C's employees immediately become eligible to participate in a plan sponsored by the DEF group. Can distributions be made from the terminated C corporation plan on the basis that the "employer" maintaining the plan after the sale of the stock is not the same employer that maintained the terminated plan? Prior to the sale of the stock, the employer was the ABC controlled group. After the sale, the employer is the DEF controlled group.

I am a little confused on how the VFC program works. We have not made contributions for some participants. We are in the process of correcting it, we figured it out internally. Must we submit this to VFC or can we simply file the 5330 and pay the 15% penalty to the IRS? If we do not do VFC and since we found this internally, will we have to also pay the DOL 20% penalty?

Dr. A owns 100% of professional corporation B, which has no employees other than Dr. A. He also owns (directly and through any attribution) 7.4% of professional liability company X. Dr. A is an independent contractor of X, providing professional services to the patients of X, from which he derives over 30% of his total professional income. Such income is reported by Dr. A on his own personal tax return.

B provides inpatient professional services to patients of hospital H. Such professional services are performed solely by Dr. A, as an employee of B. Neither Dr. A nor B have any ownership interest in H. X has no involvement with B's practice at H. B maintains a profit sharing plan.

Dr. A is clearly a member of an affiliated service group including X as the FSO and Dr. A as both an A Organization and a B Organization. However, is B also a member of such affiliated service group? B provides no services to X. Proposed Regulation 414(m)-2 requires attribution of ownership for the ownership parts of the A organization and B organization test, but not the parts of the test requiring the regular provision of services to or in association with the FSO or having as a significant part of its business the provision of services to the FSO.

I am wondering if anyone knows if the 4958 and 4975 excise taxes can apply to a fiduciary of a tax-exempt entity's pension plan. I realize that the 4958 regulations do not specifically list a fiduciary as a disqualified party or an organization manager, however, it seems that they may fall into the facts and circumstances test under the "manages a discrete segment or activity of the organization that represents a substantial portion of the activities, assets, income or expenses of the organization, as compared to the organization as a whole", category. In this case, would a fiduciary engaged in a 4975 prohibited transaction involving excess benefits be subject to both sets of excise taxes? If anyone definitively knows whether a fiduciary can be considered a disqualified person or an asset manager for purposes of 4958 that would be great as well. Thank you!

Just wanted to check something regarding the attribution rules for adult children under IRC 1563(e)(6)(B). Controlled group questions are generally posed in terms of stock ownership. Yet the code seems, to me, to indicate that the determination of ownership of the "more than 50%" requirement is based upon the ownership of VOTING stock, or VALUE.

So am I correct that if you have a father and adult son, and the stock ownership is 50/50, yet the father's stock is all voting stock and the son's is not, that the son's stock will nevertheless be attributed to the father, in spite of the fact that the number of shares owned is 50/50?

I always refer clients to their attorneys to get these questions answered, but I like to try to know what I'm talking about... Thanks!

Has the list in the final 401(a)(4) reg ever been expanded or modified. For instance, is the new GAR '94 table under 2001-62 an allowable table for nondiscrimination testing?

In calculating the Maximum Regulatory Amount available for a Loan, does a Participant's "Current Vested Balance" include or exclude the current outstanding loan balance?

I'm reading the COBRA regs and going blind. If an employer that maintains a single employer plan joins a multiemployer plan, who is responsible for providing COBRA coverage for the single employer's qualified beneficiaries? The single employer is going to terminate his current plan once he gets approval to join the multiemployer plan.

An employer wants to adopt a safe harbor 401(k) plan with a 3% SHNEC - (no match). Employer wants eligibility requirements to be age 20/1 month of service for deferrals and age 20/6 months of service for the 3%SHNEC. Is it possible to do this? There would not be any service or end of year requirement, of course.

200-3 and 98-52 point out that you can treat the plan as 2 plans and give the SHNEC to the group that meets the 1/yr/age 21 requirement, and test the other using ADP, but how does this work when you use 6/mo/age 20 instead.

Also, assuming that you can do it, if the group of new participants consists exclusively of NCEs, do you automatically pass ADP.

Thank you!!!

Are corrective distributions reported on Schedule H, line 2(f) for the plan year in which the distribution relates or the plan year in which the distribution was made? Example: A plan has a failed ADP test for 2002 and the distribution was made in 2003. Is the corrective distribution shown on the 2002 or 2003 Schedule H?

Thanks in advance.

I have a plan with plan year ending 03/31/03. They need an Excess aggregate distribution along with an excess deferral. I'm getting the distribution done within the 2 1/2 mth period. What code do I use? I'm assuming I use code 8, because if I use code P they would have to amend their taxes...is that correct?

Saw that this just passed the house. I have a couple of questions, for anyone who follows this stuff:

1. If I'm reading it correctly, it would require quarterly statements for any plan that allows participant directed investments. Other opinions?

2. If I'm correct, does anybody have "contacts" in the industry or on the Hill who have a feeling for how likely this is to pass, in current form or something reasonably close to it, the Senate and have the Head Cheese sign it into law?

A lot of plan currently allow participant directed investments, yet only require annual statements. A quarterly requirement would be a pain.

Any input/thoughts appreciated!

I have a client who has a one-person PS plan with merged MPP assets. He is age 55 and wants to start taking distributions from his assets. If we amend his PS Plan to a Normal Retirement Age of 55 and allow for distributions at his NRA, can he get access to his merged MPP assets?

I am trying to find a reference that indicates if hours paid while on workman's compensation should be counted toward hours for vesting purposes.

Just got back from the Mid-Atlantic Employee Benefits Conference. To the consternation of a number of people in the audience Shultz and Holland said that the following plan designs raise impermissible CODA issues.

Two Groups--One group is the sole director and shareholder of a corporation and the other group is everyone else. Corporate formalities are followed at the end of the year and corporate minutes reflect the allocation to be given to each group. Shultz and Holland commented that this may be an impermissible CODA on behalf of the owner.

Multiple Groups--Each shareholder is in his or her own group and everyone else is in a final group. Each shareholder informally expresses his or her recommendation on how much he or she wants for an allocation for his or her group and the Board adopts the recommendation with formal corporate action. Shultz and Holland commented that this may be an impermissible CODA for the shareholders.

Shultz commented that this may be an area deserving some "soft guidance."

The non-Service people on the panel commented that if this raises impermissible CODA/qualification issues, you will probably have a number of doctors out there with plans subject to disqualification.

If a frozen accrual, non-US DB plan, which has been around for awhile, has never done FAS87 costs, how does it work if they now want to start recognizing it? Can we just start it fresh now, computing the initial net obligation/asset as of the 1st recognition date (i.e. 1/1/2002)? Are there any special rules to follow?

Thanks.

Can anyone provide a reference to an article, etc., discussing

the ability of owners, directors, incorporators, sole proprietors, etc.,

to participate in a multiemployer DB/DC plan?

Some of our plans allow former bargaining unit alums to

participate in a limited fashion, while other prohibit it

altogether.

I need a refresher on the IRS/DOL guidelines.

Thanks

This is probably a common question. We have a wave plan that also has a pay to pay allocation only given to those active on the last day of the plan year. After all was said and done they did not pass the general test as contributions. They do pass as benefits. However, they don't pass the gateway because they can't meet the 1/3 test and one benefiting participant did not receive 5%. Is it acceptable to do a corrective amendment to bring the one person up to 5% if a reasonable business criteria can be found for giving this employee a Qnec?

Thanks

Suzie