As I read it,

EGTRRA changed things a little bit

The adjustments are now based using the quarter starting July 1, 2001.

The CPI-U for this period was

July 2001 177.5

Aug 2001 177.5

Sept 2001 178.3

Total 533.3

Currently the values are

Feb 2003 183.1

Mar 2003 184.2

Apr 2003 183.8 -just released today, it actually dropped

Total 551.1

so the indexed rate for the 401(A)(17) limit would be

200,000 * (551.1 / 533.3) = 206,675

EGTRRA says the increase will be in increments of 5000, so based on that the comp limit will be 205,000 next year.

Of course, the actual values used will be based on the data for the period July - Sept 2003, but this gives an idea how things currently stand.

Can an HCE elect to waive his right to receive a 3% non-elective safe harbor contribution?

Can an HCE elect to waive his right to receive a 3% non-elective safe harbor contribution?

Is a self-funded VEBA that is established by a group of "unrelated employers who are engaged in the same line of business in the same geographic locale" (VEBA membership reqt.) to provide group health benefits to the employees of those employers also a MEWA since it is also "welfare benefit plan which is established for the purpose of providing a welfare benefit to the employees of two or more unrelated employers"?

The VEBA is not established under a collective bargaining agreement, by a rural electric cooperative, or by a rural telephone cooperative association.

Thanks.

Would an amendment ceasing benefit accruals effective 8/1/03 violate 411(d)(6) by limiting 2003 plan year compensation to pre-8/1/03 compensation?

Assume a calendar year accumulation plan with a benefit of 2% of plan year compensation; the full benefit is provided with 1000 HOS; and no benefit with less than 1000 HOS.

If this would be allowed in a money purchase plan (and I believe it would), is there any reason it would not be allowed in a defined benefit plan?

The amendment would not violate the double-proration rule in 2530.204-2(d) or the anti-cutback rule in 1.411(a)-7©(5). Neither discrimination nor top heavy is a consideration.

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?