How is Form 1099R completed when a RMD is made payable to a trust on behalf of a nonspousal beneficiary? Is the Recipient the Trust or the Beneficiary? I'm assuming the Trust satisfied the designated beneficiary requirements. Is the distribution still taxable to the beneficiary?

Husband ones 50% of company. Wife and son also work for the company. Husband transfers all stock ownership to son in 2001. for top heavy test for 2002, is husband and wife included as Key?

Thanks.

I ran across a broker that is using a individual variable annuity as investment option for a defined benefit plan. I have not seen this done before. Here is how it works. The trustees buy and individual annuity using the an older participant or retiree in the defined benefit plan. the issuing insurance company pays a bonus to the plan for the initial investment..which is shown as an investment gain. the investment plus the gain can then be invested in variable seperate accounts, the fixed account or a combination of the two. The individual variable annuity has a step up feature that locks in the highest value of the annuity. If and when the participant dies the annuity pays out the highest cash value based on the step up and an additional death benefit.

Has anyone ever seen this before? Is it legal? It is definitely an interesting funding idea especially with the uncertainty of the stock market. Something seems a little strange buying an annuity based on the life of a retiree or participant...but I guess it is done in away when corporations buy Key Man insurance. Curious if anyone has any knowledge about this.

I'm trying to do a mini-survey and find out what is the maximum age that dependents can be on your health (medical, dental and vision) plans?

Currently we are up to age 25, but after age 19 you must be a full-time student and submit proof that you are every year. 25 seems old to me.

Could you also let me know if your plan requires full-time students to submit proof or if you go by the IRS dependent regulations that if you are NOT a full-time student then you must reside at home.

Thanks for your input.

On Carol's checklist for governmental plans, she says: "These rules may be a source of problems for governmental plans, e.g., Rhode Island, where a court recently held that an attempt to roll back benefits to comply with the section 415 limits violated state constitutional provisions."

I have heard this situation in Rhode Island refered to a number of times, but no specifics are given. Carol, or anybody, can you link me to a case citation, or summary, or anything that would help learn more about what happened there. It would be very nice to have a cautionary tale to tell other people. I would like something that can be shown to other people to warn about this issue.

Does a plan have to have any specific provision to allow employees to start withdrawing from a 401(k) while he or she is still working?

An employee was paid about $45,000 in LTD. She then received a WC award. The plan provides that LTD payments are integrated with WC awards. So, the Company notified the employee that she had to repay the $45,000 of LTD. A staff negotiator almost had a repayment agreement with the Company that took into account (as a credit against the amount she owes the Company) LTD payments that have not been paid to her but to which she is entitled. The Company negotiator changed. The new negotiator says that there can be no offset of unpaid LTD because it is a violation of ERISA? She won't clarify her position. Does anyone know what she means? Is she referring to the prohibited transaction regs perhaps? Maybe the proposed regulations about Release of Claims and Extensions of Credit are the answer? Any thoughts will be appreciated.

An employee was paid about $45,000 in LTD. She then received a WC award. The plan provides that LTD payments are integrated with WC awards. So, the Company notified the employee that she had to repay the $45,000 of LTD. A staff negotiator almost had a repayment agreement with the Company that took into account (as a credit against the amount she owes the Company) LTD payments that have not been paid to her but to which she is entitled. The Company negotiator changed. The new negotiator says that there can be no offset of unpaid LTD because it is a violation of ERISA? She won't clarify her position. Does anyone know what she means? Is she referring to the prohibited transaction regs perhaps? Maybe the proposed regulations about Release of Claims and Extensions of Credit are the answer? Any thoughts will be appreciated.

Are all participants that terminated during a plan year, with a benefit, required to be reported on that years Sch SSA.

eg., A terminated participant in 2002 with an account balance, are they required to be reported on the 2002 SSA.

In the past it seems that we have been reporting terminees in the prior year that have not been paid out. So, will everyone that has a terminated participant during the year, w/ account balance, have an SSA?

Anyone care to clear this up for me?

For the first year of an employer, only 5-percent owners can be HCEs because there is no look-back year. How about for the first year of a plan?

I am probably making this way to difficult. If you fail the ADP test and have HCEs over 50 you can recharacterize some deferrals as catch-up. But does the maximum deferral percentage have to remain uniform for all HCEs?

For example, the NHCE ADP is 3% so the max average for HCEs is 5%. I have an HCE over 50 that is deferring 3% and an HCE under 50 that is deferring 9% for an average of 6.5%. If I recharacterize 2% of the over 50 guy to be catchup, don't I also have to limit the under 50 guy to 1% since I am effectively setting a limit of 1%?

Can someone explain to me the basics of how you determine what you need to contribute to your plan? Is it the excess of the charges over the credits that you tally up in your FSA? How does the 90% gateway rule come into play? Is that a component of the charges in the FSA if your plan falls below 90% or does that 90% rule determine your contribution?

Thanks in advance

Chip

Does anyone have a reference or have knowledge of whether or not state sponsored health plans (i.e., for those of you in NY, Child Health Plus) can be reimbursed through a Premium Reimbursement Account? I think 'no' because the plan is not employer sponsored and the employee is not the policy holder. Any comments would be helpful.

I have a plan that contributes a match, profit sharing and a 3% safe harbor. We do not run the ADP/ACP tests because of the S/H, and ran the Top Heavy test this year (which they fail, but b/c of the safe harbor, it's ok). The company is questionning the excluded balance of an employee. This plan is a calender year plan, and the employee was key in 2001. While he is still an officer in 2002, and owns more than 1% (but less than 5), he does not meet the salary requirements for the 1% and officers tests, so he is now a former key. His balance was excluded from the t/h.

My question is: When I run the top heavy test at the end of the 2003 plan year, will he still be considered a former key, and thus his balance is excluded, or will he become a non-key employee, and his balance included in the test? We have looked at the 2002 ERISA book and the 2000 Pension Answer book and cannot get a definitive answer. Does anyone know how this will be handled? Thanks for your help!

I am working on a profit sharing allocation and the ADP test. The owners comp is low due to one entity but there in a CG and there comp among all entities would be sufficient to pass. Their comp in just the one entity will cause the plan to fail ADP. Can they use all comps if the other entities are not participating employers?

Also, can the combined comp be used for allocation purposes.

We are operating Relius on a network Citrix server.

Is anyone getting this message:

"Transaction Entry cannot be exited while the Transaction Import/Export program is running" ?

If so, any ideas for a solution?

We added a 401(k) feature to a profit sharing plan effective 7/1/2002.

Notice 98-52 allows you to exclude Compensation prior to becoming eligible

Could one use Compensation from 7/1/2002 for purposes of calculating the 3% nonelective safe harbor contribution?

If so, a cite would be helpful

Many of our Money Purchase plans are "merging" into the employer's existing 401K/Profit Sharing plans. I am wondering how this is supposed to be noted on the Schedule I- specifically I am talking about line 5a where it asks "Has a resolution to terminate the plan been adopted during the plan year or any prior year? If yes, enter the amount of any plan assets that reverted to the employer this year." I am filing the final 5500's for these plans.

Does merging count as "terminating" the plan? If so, I had some forfeitures from distributions that took place (but the distributions were not because of the plan merger). Should this amount be noted in the blank? It doesn't sound right to me but I am not sure.

Thanks again for your help,

Rachel Diederich

Interesting question:

Plan has liberal eligibility (immediate) for deferrals and 3% SHNEC, and standard 21 & 1 YOS for profit sharing. HCEs get 20% so gateway percent is 5%.

If I use disaggregate those under 21 or with less than 1 year of service for purposes of the gateway rules, must they also be excluded from the NCT portion of the general test?

In other words, is disaggregation for the gateways also disaggregation for the general test, or can I simply treat those under 21/1 as not subject to the gateway?

p.s. After looking at this, it seems that you either disaggregate or you don't. Can't have it both ways I guess. Wishful thinking.

A sole proprietor established a SIMPLE IRA, completed the salary reduction form and made elective deferrals and matching contributions throughout the year 2002.

His accountant has now adivsed the sole proprietor that he had no compensation for the year 2002 and therefore he was not eligible to make contributions to the SIMPLE.

What are the options & tax implications?

Does it make a difference if the plan was not in existence for 2 years?