Either I'm loosing my mind or just getting old (and my hearing is going)!

I was recetnly at a seminar and I am almost certain that the speaker noted that for hardship withdrawals from any source (401k deferrals, match , profit sharing) they are no longer allowed to be rolled over?

did this change? My understanding was that only deferrals were prohibited from being rolled over?

Thanks!

Can someone point me to a good site that has a listing of the Treasury Regs. I want to point a client to the specific wording of Treas Reg 1.401(k)-1(f)(4)(ii)

A site with all the regs would be great.

Thanks!

A owns Company Z. Company Z has a Plan (calendar year).

B owns Company Y. Company Y has a Plan (calendar year). B is A's dad. A is over 21.

During 2002 B sells Company Y to A.

It seems to me that the transition rules give me a pass on the coverage testing issues in 2002 (and in 2003).

Am I understanding the transition rule correctly?

Thanks

I am a participant in a 401(K) Plan my current provider is halting all trading and transfers for five business days at the end of each quarter. Neither I, nor any other Plan participant has recieved any written notice or e-mail. Does this constitute a Blackout and do I have any recourse. I am really concerned especially in these market conditions.

I recently had a client turn in a receipt to get reimbursed for his annual fee to have his newborn child's stem cells blood frozen for future reference in case there is ever a need to cure some kind of disease. He is paying a significant amount to have this frozen in a cryogenic lab.

Are the fees he pays to have the cells stored reimbursable under his fsa?

does a participant that is only entitled to a top heavy contribution need to be bumped up to 5% for gateway requirements?

As a third party administrator, we currently provide administration for 225 employer groups for their medical and/or dependent care spending FSA accounts. Recently we have lost a couple groups to a competitor TPA, for the reason this TPA does not require any type of receipts to be submitted when a plan participant requests reimbursement from their FSA accounts. Rather they are allowed to go on-line, indicate the amount they are requesting, and the requested reimbursement amount will then be direct deposited into their designated checking/savings account.

We have actually contacted this TPA and they have told us it is up to the plan participant to submit only those claims that are eligible and the ultimate responsibility lies with the plan participant, rather than with the employer and/or the TPA. I disagree since the claims substantiation rules in Section 125 make it very clear that in order for an Employer and/or Administrator to reimburse out of an FSA, the plan participant is not only required to submit a statement saying the expense will or has not been reimbursed by any insurance or other reimbursement program, in addition to a statement from a third party provider.

Any comments from other TPA's?

Chris Koch

Benefit Extras, Inc.

If a company has a SARSEP and the owner sells the business to some of the EEs, changing Tax I.D. but not the name, can they continue to sponsor the SARSEP?

Their accountant is telling them they can not continue it any longer and must return the deferrals made in 2003.

Background Info: I'm a CFP reviewing a prospective clients 401(k) plan and their failed 2002 ADP test. We're unable to reach the TPA who is ill which is prompting this post. We've learned the TPA uses DATAIR. There are 43 Not Otherwise Excludable NHCEs, 16 Otherwise Excludable HCEs, and 4 Not Otherwise Excludable HCEs. The test result is providing "Suggestions to Satisfy Test". But, there are two Distributions columns, the first is "All EEs" with a total distribution amount of $5,764, and the second column is called "Test Sep." and that total distribution amount is $3,605.

Which column/amount is the client to use? We understand there is a deadline approaching for corrections - March 15th. Thanx.

I currently have a roth IRA in an expensive fund that charges high fees. I would like to do a roth IRA in a new fund that is index or no-load without taking out the money that has accrued in the expensive Roth IRA. How do I do this? Do I just start a new fund now in a new fund and stop funding that old one?

I went from a Sep IRA to IRA to Roth and bought a stock that we thought would be good but it tanked. I paid taxes on the money in 2001. The roth is about worthless now. Is there any way to recover the tax that I paid. I'm sure not, but just trying to get some answers. And yes, I know only pick stocks that are going up.

Here is what we are trying to accomplish. Company sponsors a k plan and matches eligible participants. Company wants to carve out most of the employees and start a new SH k plan. Original plan will amended to exclude everyone but factory workers. New Safe Harbor will exclude factory workers and be available to all others. Assets from original plan will be merged to new SH plan for the non factory workers.

If new SH plan goes into effect 4/1/03, but some the deferrals went into the original plan for the first 3 months, how do you do the ADP test for the 2003 plan year assuming both are a calendar year end.

THIS IS KIND OF A TWO PART QUESTION--

IN 2001 I CONVERTED MY TRADITIONAL IRA TO A ROTH IRA AND THE BANK TOOK A 10% TAX OUT. I NEVER DID ANY SPECIAL FORMS WITH MY 1040 THAT YEAR, SHOULD I HAVE?

PART TWO--

IN 2002, I CASHED OUT ALMOST ALL THE ROTH IRA TO HELP PUT MONEY DOWN ON A HOUSE. NOW I'M NOT SURE IF I NEED TO DO A SPECIAL FORM ON MY TAXES THIS YEAR OR JUST COUNT IT AS INCOME. ALSO DOES IT HAVE TO BE REPORTED ON 2002 TAXES OR DO YOU HAVE A COUPLE OF YEARS TO REPORT LIKE YOU CAN ON A 401K.

I am currently trying to run both the concentration percentage and the comparative coverage ratios tests (eligibility ND test) on my company's cafeteria plan.

I understand how the tests work re the safe harbor, but I am not sure where to look to determine the compensation cut-off to determine who is highly-compensated and who is non-highly compensated. Do you use the same definition as under the 401(k) plan? Thanks!

Our plan was submitted approximately a year ago to the IRS pursuant to the VCP submissions procedure. The plan had numerous defects. We are very close to receiving the compliance statement (the IRS recently faxed us our second draft compliance statement). We learned just last week that the plan failed the adp/acp testing for the 2001 plan year; therefore, corrective distributions and contributions must be made. The third-party administrator acknowledges that it was completely its fault. I do not see anything under the VCP procedures and/or the SCP procedures that would prohibit us from self-correcting this failure and not bringing it to the IRS' attention. Specifically, Part V, 10.07 (4) provides that if a plan sponsor discovers additional, unrelated qualification failures after its initial submission, it may request that such failure be added. If anybody feels that this issue should be brought to the reviewing agent's attention, please let me know and let me know where I can find such language.

I have an employee who elected to have $1,200.00 deducted yearly for dependent care. His parents babysit his kids all year except for Sept thru Dec. He then send the kids to a daycare. The 1200.00 was for this cost during Sept and Dec. His parents have now retired and can babysit all year long. Can he change his election?

There is no status change at all.

Can a publicly traded company ESOP use an average trading price to determine the amount of the diversification distribution for qualified participants? In other words, the company has proposed that after the 90 day period has expired, the trustee will sell the diversified shares and give those participants who elected to diversify an amount equal to the number of shares diversified multiplied by an average trading price obtained by the trustee. The plan document is silent on the issue of determining fair market value for diversification purposes.

I am involved in terminating an overfunded 30 life DB plan, all NHCEs. The plan sponsor would like to use IRC Sec 4980(d)(3) to provide a pro-rata benefit increase of 20%. He would then revert the balance of the excess and owe only a 20% excise tax on that amount.

The problem: There are no active participants among the 30 and 4980(d)(3) requires that only 40% of the 20% or 8% of the excess may be used to provide the prorata benefit increase to the non actives. 12% must be used to provide a prorata increase to the actives, of which there are none.

At face value it would appear that the prorata benefit increase is not an option for this plan if the sponsor wants a 20% excise tax. (The sponsor is not interested in doing the other option, a 25% transfer to a succesor plan.)

Questions:

1. Is anyone aware of the policy reason for this 8% rule?

2. I have been unable to locate the Committee Reports related to the legislation than enacted this code section, I believe OBRA 90, PL 101-508, Oct 1990. It someone has access to the Committe Report for just 4980(d)(3), could you fax it to me at 757 877-1311? Much appreciated.

3. Anything that I'm missing that would allow me to proceed?

We have a participant coming forward who in 1992 received a letter from the Social Security Administration saying that he was owed benefits by this client's plan. We have no record of this person or his balance, nor does the company, but presumably at some point in the distant past his name was put on an SSA. Of course that would have been several trustees and several TPA's ago. We don't even know when he supposedly worked there.

Does anyone know whose burden this is, in terms of the participant vs. the employer? Does the employer have to prove that the person was paid, or does the participant have to prove that he wasn't? It has been proposed to force the person to provide copies of all his tax returns to accomplish the latter, but somehow I don't think that would fly. It would be nice to be able to get a copy of a 1099R for the person, but I don't even know from when it would be, or whether the IRS keeps them for that length of time.

New 401k plan established for Company A with initial short plan yr (short limit yr) because Co. A terminated leasing agreement mid yr with XYZ and established their own plan. Moast but not all of Co. A employees were leased from Co.XYZ. XYZ had a 401k plan that Co. A "co-sponsored" according to a letter they sent Co. A. upon termination of the leasing agreement.

Co A elected to have plan assets of their employees transferred into their new plan making it a successor plan- correct?

How do we do the ADP/ACP test for the first short year?