IRC Section 404(k) and further guidance in Notice 2002-2 discuss the timing of the deduction for dividends that are reinvested in employer securities in an ESOP. A dividend that is reinvested is deductible on the later of 1) an irrevocable participant election or 2) reinvestment in employer securities. What do they mean by "reinvestment"? What if the employer pays the dividend to the ESOP but employer securities have not been purchased yet? For example, a client pays quarterly dividends. The last dividend was paid 9/30/02 and for those who irrevocably elected reinvest in dividends, the amount is just sitting in the ESOP since they haven't purchased stock. Would it still be deductible for 2002?

Employer has been funding their SIMPLE IRA match throughout the year. However, they have contributed more than 3% of pay for some of the participants.

How can this be corrected? I am not having much luck finding anything that talks about what happens when the employer contributes too much in the SIMPLE IRA.

Any input is greatly appreciated. Thanks.

Can an employer amend their existing FSA Plan to allow for ER contributions at any time during the plan year or must this be done prior to the beginning of the plan year?

Thanks,

Joe

I just got terminated from a job that I was at for almost 5 years. I do not think I will qualify for unemployment benefits and even if I do, it will be atleast 5 weeks before I get a check. I am thinking of taking my 401k money and using it to pay my rent, car loan and my son's high school tuition. Can I do this? If so how do I go about this and what will my penalties be? How fast can I get my hands on this money? I have no other financial sources available to me and I need money immediately. I am totally clueless about this subject.

Kind of a tough one here. I hope someone has some experience with this.

I start out with an installation of Relius 7.3. The computer had been previously upgraded to IE 5.5 SP1 from IE 5.0. We had some issues with this installation and I upgraded it to IE 5.5 SP2. That wasn't working out so I rolled back the installation thinking it would revert back to IE 5.5 SP1, but instead it went back to IE 5.0.

After all this we went with the latest version IE 6.0 SP1. My question is, would the install and uninstall of the previous version of IE have any adverse effect on the Relius installation? Has anyone had experience with this at all?

Lastly, if we do need to uninstall Relius and reinstall it, what is the best method?

Thanks for any and all help.

Two companies are members of a controlled group. Each company has an ESOP with different plan years. Three employees receive compensation from both companies and are eligible to participate in both ESOPs. These 3 employees receive less than $60,000 each from Company A. The same 3 employees receive in excess of $100,000 each from Company B. Can these employees be considered NHC's in the Company A plan and HC's n the Company B plan?

I discovered something today that I previously hadn't been aware of. I have a new cross tested 401(k) plan using the 3% safe harbor. This is a new plan effective 1/1/02, and we did a preliminary study a year ago, using three HCE's (owners). Everything tested out, maxing the three doctors at $40,000.

Today we get the census, and the spouses of the three HCE's were paid $14,000 and deferred $11,000! Of course, we were never told ahead of time! We still pass the nondiscriminatory classification test, but fail the average benefits test big time since the combined EBR's for the spouses are so high (126 in one case).

If the HCE's want to max out, the only viable option I see is reducing the deferrals of the spouses and refunding the excess. Question: Is there authority to refund the excess? There is no ADP failure here. Any ideas, besides not cross-testing this year? Thanks.

We have a client who just recently got married. She is wondering if her new spouse's expense that was incurred 2 weeks prior to the marriage is eligible for reimbursement.

Can she claim the expenses or not, since they were not married at the time of the procedure?

I'm looking at somthing that was prepared for a CPA's CPE credit that reads as follows:

"Because the employee has alreadygone through all available plan loans and still needs cash, a hardship withdrawal signals the immediate default on the plan loan, which in turn will be treated as a distribution subject to income tax and possibly a penalty tax ona premature distribution. Hence, the amount of the hardship withdrawal may need to be grossed-up considerably."

Could this be true? If a participant has an outstanding loan, then takes a hardship, is the loan a deemed distribution? I've never heard of this?

Comments are MUCH appreciated.

Michele

When a plan accepts rollovers from another qualified plan, does the plan accepting the rollover have to provide any reporting to the IRS.

The previous plan will produce a 1099-R indicating the amount was rolled over to a Qualified plan. Wasn't sure if TPA or someone else needs to do some type of filing. I know IRA accounts report it on 5498.

Thanks

Here's a somewhat esoteric question for everyone relating to the application of the minimum required distribution rules to a post-death 401(k) distribution.

The facts: Former participant (Mr. X) was receiving MRDs from the plan based on a single life table, even though Mr. X was married and his beneficiary was Mrs. X. Mr. X dies.

Small complication: MRDs continue to Mr. X following his death for a year or three.

Friendly multinational conglomerate/recordkeeper informs plan sponsor that Mrs. X should have received the entirety of Mr. X's account by 12/31 of the year following his death. Because she did not, the 50% excise tax applies. Friendly recordkeeper proposes to withhold this amount as a "service" to Mrs. X (what kind of "service" that is, I don't know--probably not one that I'd like to personally avail myself of).

As a basis for this position, friendly recordkeeper indicates that the MRD was calculated using a single life table. As a result, the life expectancy of Mrs. X doesn't matter (i.e., it's as if he named a non-spouse or trust beneficiary).

The 87 MRD rules apply to this determination, BTW.

Has anyone got any thoughts on this? Plan sponsor would like to avoid soaking Mrs. X, but friendly recordkeeper really really wants to give her the benefits of its withholding "service". Any of you work with a friendly recordkeeper who looks at the MRD world the same way?

Much obliged.

Small not for profit org permits employees to establish TDAs with TIAA-CREF. Employees have a "reasonable choice of investment alternatives" within TIAA-CREF universe. Is the 403(B) arrangement still within the ERISA exception even if only TIAA-CREF offers accounts/annuities to participants? My understanding is that DOL Reg. 2510.3-2(f) does not require employer to seek out other funding alternatives.

Employer also maintains a employer contributory only 403(B) plan with TIAA-CREF that does comply with ERISA.

Didn't get answers on this on the DB board so any help here would be appreciated -

Can someone give me the short version of underfunded plans and make up contributions.

first, when is it determined? year end? by plan actuaries? for which type of plans typically? and which plans have no underfunding requirements.

secondly, if it is determined, (what is the timing test, at anytime?, or as of plan year end?) that the plan is underfunded, what steps are to be taken, within what time frameframe. is there a reporting requirement? penalties assessed?

what governs? pbgc? dol? irs? common sense (just kidding on that last one)

happy healthy and prosperous holiday season and new year to all.

Thanks as always.

I have a 55 year old client who had been taking, say, $100,000 annually for a few years. With new 72(t) changes, he could elect to reduce that to a new RMD of, say $30,000 for 2002. However, he had already taken $50,000 in 2002 before we caught up with him.

. a)Is he now forced to continue with the $50,000 figure going forward, or can he still go with the lesser $30,000?

. b) Does continuing the $50,000 pose a problem, since it is not really the precise amount that any of the methods would have calculated. (i.e., too low for the old method and too high for the new tables!) Or can he establish any amount he want as long as it exceeds the RMD and he maintains it?

Thanks!

We have a local gov't client that joined PERS and discontinued their existing DB plan. Benefits in the DB were transferred to the State system. Some participants (retired, terminated) were already in pay status and annuities were not purchased for them in connection with the merger. Now,their benefits are in the State system and they are no longer receiving their benefits. Client now wants to go back and "preserve" those benefits and continue payment to those particiapnts. How should this have been handled in the first place? How should this "merger" have been documented? How can we now correct?

Gary,

Hello. Today, I have a client who is desperately looking to open and fund a SIMPLE IRA for plan year 2002. The fund company is telling me that the IRS deadline for the signed plan adoption agreement was Oct 1, 2002 and that the employees need a 60 day enrollment period. The client's accountant is arguing that if the client and employees are ready and willing to do all the paperwork by today or tomorrow, then that would satisfy the IRS (according to his interpretation). I need help. I do not know the tax code for SIMPLE IRA's. Can you help me out?

I was under the impression that a SIMPLE plan using form 5304 had to 're-adopt' the plan each year and give notice to employees prior to the plan year.

If an employer understood it this way, adopted a new SIMPLE IRA on 4-1-01, effective 4-1-01, and the only notice given was for the year 2001. Do they still have a SIMPLE???

They presumed not and in 2002 adopted a profit sharing plan. However, in year end work with their new CPA it is discovered that a bookkeeper who is no longer there did send in salary deferral contributions for an employee. Should these be handled with correcting distributions?

hello-

i have read some other posts on classifications, but did not find the answer i was looking for. i have a law firm that would like to set up a plan where each hce has the ability to max out, put in nothing, or anything in between. assuming the only way to do this is with a new comp plan giving them each their own class, any suggestions on what to use for the name of each class? 4 hce's- 1 owner 80%, 2 owners 10% each, the 4th hce not an owner but compensation makes him an hce.

thanks for any help.

Must a sole proprietor who has (or is interested in setting up) a "Uni-K" plan have their elective deferrals made by December 31? I seem to remember reading somewhere that the elective deferrals can be made up through the due date of the tax return. Any help would be appreciated!

This plan has a discretionary match contribution, which is determined for the entire plan year (not on a payroll period) basis. At the beginning of the plan year, employees were informed that effective for the plan year beginning January 1, 2002, and for each plan year thereafter, until modified by resolution of the Boards of Directors, the corporation shall match XX% of a participant’s salary reduction contribution, up to a maximum XX% of a participant’s compensation.

At the end of the 2002 plan year, the employer now wants to increase the match for the plan year. Can the employer do this?? I was under the impression that the employer must disclose the match formula for the plan year so eligible participant can consider the match formula in making their salary reduction elections.

Also, I and trying to find any regulations, notices, etc. that says the employer must disclose the match percentage before the plan year begins. ERISA 2520.102 is vague.

Thanks!