This has been asked before, but I can't understand the answers.

How do you handle outstanding loan issues when a QDRO is received? Example: Participant's total balance is $50,000, $10,000 of that is a loan. QDRO specifies 50% to the alternate payee. It seems to me the alternate payee is entitled to $25,000 in liquid assets. The participant's balance is then $25,000, $10,000 of that is still the loan. Is this correct?

I have a DB plan effective 1/1/02. First plan year is short year ending 11/30/02. Plan year is now 12/1-11/30. Fiscal year is calendar. Beginning of year valuation date. If the contributions for the first two plan years are made in 12/02 would they both be deductible for 2002 fiscal year? thanks.

I've had someone tell me that the deferral limit of 12K currently is not part of the 40K maximum annual addition. Looking at 415©(2) I do not see anything that takes deferrals out of the definition of "employee contributions". I had run into this issue once before shortly after EGTRRA was passed, but wanted to verify that the answer was still the same, i.e., 40K is the max (except for 1K catch-up contributions) and that 401(k) deferrals counted in that 40K figure. Thanks for the feedback.

I have a participant who will be 54 when he separates from service. Am I correct in saying that if he takes a distribution at age 55, he will be subject to the 10% early distribution penalty?

The literature I have states that the 10% is waived at age 55 only if the participant separates from service AFTER he/she attains age 55.

Will someone confirm this for me?

Thanks in advance...

We have only HCE's who want to have a cafeteria plan where no Key employees are going to partcipate. Can we have a Health Insurance Premium and Dependent Care contribution 125 plan? Do we have problems with non-discimination testing?

I know that after-tax contributions to a 401(k) plan are subject to discrimination testing, I believe an ACP type test. However, I cannot find statutory support. A senior moment, I guess! Can anyone help? Thanks.

Can anyone give me a link to P.L.104-188.

I am also looking for an IRS National office memo that was given to Brain Graff in June and published by ASPA.

Thanks, Sue

New Privacy Rules say that a disclosure wavier is not required for drug testing/physicals if OSHA, MSHA, or state law require it, however what about drug testing for pre-employment, for-cause, after accident, follow-up, etc., and physicals (that comply with ADA, etc.) for is NOT required by OSHA, MSHA or state law? It seems like a full blown compliance with the HIPAA Privacy Rule is required. Tell me I'm wrong and why! Please!

You would think HHS would also cite DOT drug testing requirements as well???

Have there been any changes to the rules that allow permitted disparity in a SEP Plan? I have a CPA who thinks it can no longer be done, but I don't recall seeing anything that changes the rules.

I know this might not be the right spot to ask but I need feedback here.

Looking for product for the start-up small plans that will track sources of money, at the product level. Product that does not require a packaged TPA. Product that has no minimums.

Can anyone tell me names of companies that would provide this service. Kemper used to before becoming Scudder.

If a match is used to partially satisfy the top heavy minimum in a non-safe harbor 401(k) plan, is the additional employer contribution to get to 3% subject to testing under 401(a)(4)?

How would the non-match top heavy minimum be treated if the discretionary contribution were subject to general testing for other reasons, e.g. cross tested formula?

For example, assume a plan's discretionary formula must be general tested, and it happens to be top heavy and one person gets a match of 2%, but is ineligible for the discretionary contribution. Presumably the employer must contribute an additional 1% to satisfy top heavy testing. Would this 1% be treated as a discretionary contribution for purposes of the NCT portion of the general test. Presumably yes.

Second example: The plan has no discretionary contribution other than a top heavy minimum Assume an HCE gets a 2% match which must be supplemented by a 1% discretionary contribution. Is this subject to general testing under 401(a)(4)? because it is non-uniform?

What options are available. There are four 25% shareholders, one of whom is the only full time employee of the S-Corp. The other three are not employed by the S-Corp. There are 23 other employees of the S-Corp, all part-time, and don't want to include them in the plan if at all possible.

thanks

In determining how to handle unlocatables for a terminated 401(k) Plan, are there issues around taxing the distribution at 100% and reporting to the IRS ? My understanding is the participant would then be responsible for claiming this amount when filing their income tax return. This may not be the most favorable option to the participant as their monies become taxable, but it is necessary to close out the plan as swiftly as possible. Are there other considerations ?

I have reviewed other posts, and have not found any discussion on point for this issue, so I apologize if there has been one.

401(k) participant has a loan outstanding when plan is notified of Bankruptcy filing. We shut off the loan deduction, and (when the appropriate time comes) default the loan.

QUESTION: should we also be shutting off the contribution?

My feeling is that the participant himself can do that if he so desires, but that the plan and its recordkeepoer have neither the right nor the responsibility to do so.

RCK

Are there provisions of FMLA which have an impact on QPs? If an employee is out because of FMLA, does that time count for eligiblity and vesting? Thanks, Jay Denny

I received a fee estimate of 1000 to 1500 to draft the cafeteria plan document for a 20 e/ee e/er. The options initially would include a flexible spending arrangement with health ins. and dependent care assistance as benefit options. Is the fee estimate out of line??? Thanks.

Three doc's are three of the four e/ee's of a medical practice. They are interested in a cafeteria plan. It appears to me that they would immediately run into a non-discrimination issue just based on the demographics and that a cafeteria plan would not benefit them from the tax standpoint, i.e., flunking the non-discrminiation tests causes benefits to become taxable to the HCE's. If I'm correct, it seems that the non-discrimination rules effectively prohibit small employers from utilizing cafeteria plans. Any suggestions??

Does anyone recall if there is an infromal amount of time the IRS would use to consider an employee as having completed 1000 hours of service - assuming the employer failed to keep track of actual hours. I kind of recall in a seminar I attended the speaker referenced 5 months worked. Just wondering.

I have a clear recollection that for a profit sharing plan with a discretionary nonelective contribution provision, it is possible to amend the allocation formula after the end of the year and change how the discretionary contribution is allocated among eligible employees. For example, it would be possible to amend a calendar year profit sharing plan today to change the allocation methodology from an equal percent of pay to a cross tested or age-weighted approach even though that would mean a lesser allocation for some nonkey employees.

I believe the IRS's position is that because the contribution is discretionary, there is no accrued benefit until the contribution is actually made. The employer could decide after year end not to make a contribution. Stated another way, there is nothing wrong with amending a plan after year end to create a second allocation methodology and electing to make a contribution using the new methodology and electing not to make a contribution pursuant to the original methodology.

Does anyone remember when and where the IRS made this pronouncement or alternatively does anyone have a different opinion/recollection? Thanks.

A couple divorced over thirty years ago and never addressed the husband's 401(k) balance in the community settlement. The ex-spouse is now requesting her portion of the 401(k). What should be done? Is there any statue of limitations or what would have been the law addressing divorces at that time.