I have looked back over the messages for the past year and this question has been asked twice, but never answered. I hope someone will be able to answer it this time.

Our firm has always included the cash value of life insurance policies, owned as assets of defined contribution plans, as an asset on the 5500. During 2002, we took over administration for plan which had four life insurance policies with cash values equal to about $30,000. The value of those cash policies was not included on their previous 5500. I called the previous record-keeper and was told that they never include the cash values as assets of the plan on the 5500.

All insurance policies were surrendered since the last 5500 was filed and the assets deposited to the participants' accounts. Since the cash values were not included on last year's 5500, how do I account for this additional $30,000 in plan assets? I don't believe the gain can be attributed to investment gain.

Any help would be appreciated.

Are participant loan payments pre-tax or after tax? This client has loans repaid through payroll deduction, and I'm not sure of the answer. It would seem that they should be pre-tax, since the money that was lent was pre-tax, but if loan repayments are not made through payroll deduction (the participant sends a check) then isn't that money after tax money?

:confused:

Simple Intial Error; Correct Solution?...Or Did It Cause More Errors?

Facts:

1. In 1999, Roth IRA (RIRA) owner "direct transfers" his RIRA from Custodian A to Custodian B.

2. "Initial Error": Custodian B *misclassifies* the Roth Account as a traditional IRA (TIRA) and sets up in 1999 the received RIRA as a TIRA.

3. Owner finds custodian B's error in Jan. 2002 and notifies custodian B. Custodian B immediately "fixes" the error on their books by "direct transfering" the assets from custodian B's TIRA to a new RIRA at custodian B.

4. On 4/15/2002 IRA owner makes a real traditional IRA contribution to custodian B who deposits this contribution in the old TIRA which earlier in 2002 had the erroneous Roth amount withdrawn from it.

5. Note, Custodian B did *not* make the correction to the intial problem retroactive. The IRA owner is now seemingly stuck with a false TIRA/RIRA account history that shows a TIRA account "opened" in 1999, a TIRA withdrawal in 2002, a RIRA "opened" in 2002, a deposit in 2002, etc. All non-reporting non taxable events but still a false history.

Questions:

1. Was this the correct way to fix the intial error? Have you seen other custodians handle this error the same way? If not how did they handle it?

2. Any other problems? BTW this was originally a 1998 Roth conversion taxable over 4 years (which were paid correctly).

thanks, interested in any response.

Reg

Has anyone heard of any proposed regulation or future changes that would allow this plan to be treated as the Roth IRAs for tax purposes instead of the traditional deferral method.

Does the maximum 401K contribution limit of 11000 (in 2002)include empolyer match dollars, or just what you put in out of paycheck.

thanks in advance

Am I reading the code correctly in assuming a grandchild to an 100% owner is not an HCE? But if the situation was reversed(grandchild the owner) they would both be in the test? Thanks.

rollover from qualified plan has been completed during 2002. While doing 1099 for distribution it has been discovered that it was rolled into a Roth IRA which you cannot do. Any advice on what to do from here? Is distribution now considered a lump-sum subject to tax and penalties?

thanks...

Can an Employer reimburse their plan for plan expenses that were initially paid from the plan's asset account?

The professors in my university's college of medicince receive two paychecks. One from the university for teaching duties and one from the faculty practice plan, a separate 501©(3) organization, for their clinical practice of medicine. The FPP does not currently sponsor a retirement plan and it is being discussed that it may make sense to have the physicians become 100% employees of the university so that the state teachers retirement system will provide benefits on 100% of their compensation.

We've received word from the TRS that moving the docs completely to the university will result in a reduction of the creditable years of service each doc has in the TRS. I think this is to compensate for the fact that the TRS, for all the years that two paychecks were handed out, received no contributions on compensation paid from the FPP. Without this reduction, TRS would be paying out benefits based on 100% of salary, while in past years contributions to TRS were made on only part of the salary.

The TRS will give the docs the option to buy back the reduction of the years of service, but wants the money up front. Some amounts required to buy back the years are fairly large and the docs may not have other qualified retirement accounts that may be transferred to the TRS as the purchase price.

So, it is likely that many docs will have to borrow the money from a bank to make the purchase and pay back the bank with after-tax dollars. Is this purchase covered by 415(n) even though they are buying back years which they agreed to give up to have their benefits calculated on 100% of salary? In other words, do years which had been credited to a person, but have been taken away, meet the definition of permissive service credit in 415(n)(3)?

If 415(n) doesn't apply, then what are the possible consequences of a voluntary purchase with after-tax dollars?

Thanks,

Ken Davis

Univ. of South Alabama

I have a plan which is based out of the State of Maryland. Supposively, the State of Maryland has a law which states, an employee catorigized as casual labor does not have to be provided benefits.

Can I exclude this type of class of employee even if some of them meet the hours requirement to enter the plan?

If a signatory contractor to a collective bargaining agreement with a union fails to pay employee pension benefits, and the union is unable to recover these lost pension benefits through all legal means, is the union pension fund liable to cover these lost employee pension benefits, or are they lost to the employee. I was told that the employee would get credit for vesting purposes, but would not get credit for benefit accrual. I believe this violates IRS and DOL regulations covering ERISA but am not certain. I am an inquiring employee and would be grateful for any information on this subject. Thanks.

For 2002:

1. what are the maximum deferral limits in a SARSEP?

2. what is the maximum % of compensation you can use?

3. do you include deferrals in compensation when calculating the max % or do you have to deduct them like you used to?

4. do SARSEP's have to do ADP testing?

5. what is the allowable catch up contribution?

Also, I have read that the maximum deferral amt may have been changed to 25% of taxable comp....20% of gross comp. Can someone explain this to me? is this the same as the 13.04% when it was 15%? (not that i really understood that either.)

I don't deal with SARSEP's at all, and don't know if they were included with the EGTRRA changes. I think I read something some time ago with some technical corrections made to EGTRRA included with the JCWAA which affected SEP's, but would like the opinion of someone with more experience with SARSEP's then I have before I jump to any conclusions.

thanks for any help....

My plan document has a fixed match at 25% of the first 4%. I found out that for 2001 and the first nine months of 2002 my old TPA was calculating the match at 50% of the first 4%.

For the last three months of 2002 I calculated the match becuase I changed TPA. I did the match based on the document formula.

Do I have to forfeit the excess match for 2001 and 2002? Can I do an amendment to the plan to change the match for 2001 and 2002 to 50% of the first 4%? I would rather amend the plan than mess with everyone's account.

new client has 100% ownership of C-Corp and S-Corp businesses. Family members are all paid from C Corp and all employees are paid from S Corp

C Corp has a SEP plan (was not offered to S Corp) This has existed for some time (mom, dad, and kids only)

S Corp has a SIMPLE plan (not as old as the SEP) includes employees only - no family

I presume this is a problem since there is common ownership, as the SEP should have included the employees from the S Corp.

What needs to be done to correct or fix this situation? Or is this really ok?

This question relates to a pre-EGTRRA year:

If the plan provisions have a limit on deferrals (i.e. 15% of compensation) and the participant exceeds both the plan limit and 402(g) limit, which is corrected first? How does this work?

I have a group of a couple hundred churches who would like to form an association for the purpose of having the association offer a self-funded health plan to the employees of the member churches. The goal is to have the plan qualify as a church plan. It is my understanding that the association would have to qualify under 501© in order for the plan to be a church plan. Is this correct? If so, how can I get the association to qualify under 501© if its sole purpose is to offer insurance to member churches?

Seeking opinions on advantages of one appeal with voluntary arbitration versus two appeal procedure. What are most group health plans implementing with the new regulations?

We have a 401(k) with employer matching that begins after 12 months of service and also 100% vesting that begins after 12 months of service. Employees can contribute after 3 months.

Lots of employees come and go. If an employee works one year or so, leaves, then returns, can we resume the employer matching and 100% vesting after a shorter time period such as 3 months?

Employee waived enrollment rights for company medical insurance. So, if SHE later gets married, how does this marriage allow her to enroll herself in the company health plan under the IRS consistency provisions?

(there was an old, pre-2000 posting that said that marriage would be a QE to allow her to enroll, regardless of her initial waiving of the benefit)

:confused:

(I will also add )

What if Employee HAD insurance then got married and spouse has more money than Bill Gates so Employee decides he/she doesn't want to bother with insurance anymore. Can Employee revoke election WITHOUT another plan to go to?

Does anyone know where I might find statistics on what percent of qualified plans file form 5558 requesting an extension?