I want to merge a MP into a PSP for 2003. If I do a 204(h) at the end of the year that means I can merge into a PSP on January 15th, right? If so, should my GUST effective date be January 15, 2003, and I would not have to restate the MP?

At one time cross-testing was not available in a prototype document. Is that still the case? Employer has a prototype safe harbor 401(k) PSP with a cal yr end currently in place and e/er is considering amending for cross-testing. The prototype doc is standardized such that terminated participants with > 500 hours are due an allocation under the current allocation formula. Also, part's terminating b/c of death, retirement and disability are entitled to an allocation regardless of hours of service. With that said, would the easiest thing to do be to amend and restate effective 1/1/03 the plan using a volume submitter document allowing for cross-testing. I am assuming there have been terminees with > 500 hours.... If not, then there shouldn't be a problem with amending and restating using a vol submitter doc effective 1/1/02. Any suggestions?? Thanks.

A person wants to make the beneficiary of his IRA a trust, not his spouse. Does he need spousal consent to do so?

It has been suggested by our auditors that we perform monthly reconciliations of our trust statements in greater detail than we currently do.

Our plan has daily valuation. Recordkeeper and Trustee both Merrill Lynch. For the monthly trust statements, I generally use them to verify that our contributions have posted to the trust and to track distributions and loans. I don't really reconcile much beyond that.

What is the norm for monthly reconciliation on a plan with a daily val? What kinds of things do you look for? Any helpful hints for me?

Thanks!

I have a client that changed it's corporate structure, moving all employees to a new entity. The ownership structure is still the same, however the new entity has a 12/31 year end while the old entity and it's plan had a 6/30 year end. Now, of course, they want to change the plan year end to 12/31. They are aware of the vesting implications and also plan on making an employer contribution for the short plan year so employees do not have a cut back, although the profit sharing contribution is a discretionary one.

Question 1....Is an amendment sufficient to change the plan year end?

Question 2...Is it too late to do this?

Question 3...If not, would the effective date of the amendment be 12/31/2002? or July 1, 2002?

Does anyone have a clue on what happens in the following case:

converted IRA to ROTH in 1998 the value was then 20k the current value is 8k. I paid tax on this 20k prorated over the 4 years, if I cashed out today how would I account for the lost in value and the taxes paid in those years?

thanks for your help.

BMAC

Colleagues,

I am looking to indentify an inexpensive individual healthcare plan for my father;not yet 65. Any suggestions would be welcomed.

There seems to be a lot of Buzz out there on individual (k) plans, those marketed to the self-employed with no EE's.

My question is what makes this plan different. Seems like we can use our regular prototype document and create the same thing. No need to have a "special" type of document. Any thoughts.

Employee A is attempting to roll money from a prevoius employer into the ABC, Inc. Profit Sharing Plan. The rollover chek is made payable to ABC, Inc. fbo Employee A. I am inclined to suggest that ABC, Inc. have the check returned to previous employer's plan and have it reissued to to ABC, Inc. Profit Sharing Plan fbo Employee A. It bothers me that this check isn't made payable to the Plan.

Am I making too much out of this? Should the rollover be accepted as is?

For the over age 50 catch up, are elective deferrals to 403 and 457 plans aggregated?

Thanks,

Johnny

I have a money purchase plan where a participant died in 1989. At that time the participant was 66 years old.

The non-spouse beneficiaries (his 3 daughters) took out a distribution shortly after he died. There was a trailing contribution deposited in 1990, this money was never withdrawn.

Problem: Since the entire balance was not withdrawn within 5-years (5-year rule Reg. 1.401(a)(9)) will there be an excise tax to be paid? If so how is this figured? The balance in the account at this time is $2,800.

Do you need to send in an automatic 20% for a minimum distribution? Or can they simply report it on their taxes?

Thanks!

Can a SEP that currently has a 2 year service requirement be amended to 3 years?

if a plan participant is over age 59 1/2 and is taking an in-service withdrawal from a 401(k) plan of her elective deferrals, what is the mandatory fed tax withholding? 20%? any way around this?

This is a very bad joke. The punch line is going to hurt. What is really sad is I drag it out so long. I wouldn't be surprised if Dave Baker kicks me off for this one. Exit now before it is too late.

Ok. You were warned.

Our story takes place in Russia, back in the good old days, before the glorious revolution, before there was talk of ‘proletariat’ and ‘bourgeoisie’ and other terms I have no idea how to spell. And it concerns a certain Rudy Rudovich, who lived in one of the small villages that surrounded Moscow. Rudy was a poor dirt farmer. That is being kind, perhaps in a good year he had a bumper crop of ‘dirt’. You see, Rudy was missing a few screws, so to speak. And our hero was quite the hen-pecked husband.

Once when I was telling this joke someone stopped me and said I shouldn’t be redundant. Hen-pecked and husband go without saying. Now, I have to take the individual’s word for it. I have never been married, and as I am in my mid 40’s maybe I will never find that out. Well, anyway, it was “We need more firewood, Rudy” and all he could reply was “Yes, dear.” Or “Are you done with the dishes?” “I will get to them as soon as I finish the sweeping, dear”. Poor Rudy. Day after day. Month after month. Year after year.

If I had more time, I would explain where the term ‘hen-pecked’ comes from. But that is another bad joke, and it’s Christmas, and having you hear one bad joke is unkind enough for the season.

One spring day, the sky was dark and threatening. But it was mid-April, and Rudy always sowed the seeds that day, and he wasn’t about to break his pattern. His wife had invited some ladies over. They were playing bridge, and drinking tea, and eating cupcakes with frosting on them. You know, the ones cutely decorated with those little round silver candies on top. Yeh, I thought you knew. Well, Rudy grabbed his seed pouch and headed out the door. Oh, maybe some of you don’t know. Those little silver candies are called dragees. You can get about 2 ounces of them for a couple of bucks. Well, maybe if they are on sale you can get them cheaper, but they are not that expensive. And you get so many of them, I don’t think they would ever sell them in bulk. Did you ever read the label on them?

It says ‘Use only as a decoration’ and ‘Non-edible’. I’m not kidding. That’s why they make them out of sugar so kids won’t eat them. Yeh, right. But seriously, look at the ingredients: Sugar, corn starch, gelatin, acetic acid and silver. Honest. They actually use silver in making these. That’s why you aren’t suppose to eat them. You could get silver poisoning. Oooohhh. A plot for a muder mystery. Slowly poison someone by…oh, that’s another story. Anyway, do the math, silver sells for around $4.50 an ounce and you purchased 2 ounces of these things for a couple of bucks. There must be enough silver in these things to, hmmm. And that would be if you ate the whole container of them. Guess I wouldn’t lose sleep over whether you ate any or not.

Ok, see you learned something new, so maybe it was worth reading this far. Now leave before you get to the punch line because it is going to hurt.

Where was I? Oh yeah, Rudy was going out the door to plant the crop. About 5 minutes later there was a clap of thunder, and the skies burst forth with a torrential downpour.

Of course, one of the ladies blurted out “Guess it won’t be long before your husband comes back, huh?” to which his wife replied “Rudy? That idiot hasn’t got enough sense to come in out of the rain”

And so it was true. One hour, two hour, all morning rain, rain and more rain. And still Rudy had not returned. Finally, about lunch time Rudy swung open the door, soaking wet. The ladies looked up at this somewhat pathetic looking figure, but rather than express any words of comfort or sympathy, there was nothing but giggles. And then his wife let into him.

“Don’t you dare track mud in the house”

“Yes, dear”

“And don’t you dare hang your wet things over the furniture”

“I won’t. dear”

“Rudy, I swear, I don’t think you even know what rain is, do you?”

“Guess I don’t dear”

Looks like it’s gonna be another banner year for the dirt farmer!

So spring passed by, summer followed. One Wednesday evening, about 7 there was a knock at the door. Rudy’s wife looked up from her book and shouted “There is someone at the door”

“I’ll get it, dear” Rudy said, emerging from the kitchen, soapy hands, apron and all.

He opened the door, and standing there 6 individuals – members of the newly formed communist party. They had a very good sales pitch. “Be a Red, or be dead”. A convincing argument, especially when accompanied by the guns they brandished. They wanted Rudy to go their meeting that night, and, though he wasn’t the brightest, Rudy knew it was in his best interest to go. He had started to walk out the door when that old familiar voice resounded “Not until you finish the dishes, mister”

Rudy returned to the kitchen “Of course dear. How silly of me”

One of the communists took a step in and said “Listen lady…” but that was as far as he got.

“Excuse me. Did I invite you in?”

Wisely, he took a step back. Perhaps the world of events might have been different if there were more Mrs. Rudovich’s!

It took Rudy about 5 minutes to finish his chore and off he went. Secretly, his wife was glad. She put her book down, got up from her chair, went over to the bookcase, and behind the third book on the middle shelf pulled out a chocolate bar.

The Wednesday night meetings went on for about two months.

(By the way, I could have picked any night of the week, it has nothing to do with the joke if you are trying to figure out where this is headed. I will warn you again to give up on this one, it will save you a big groan at the end.)

After about two months, the communists (or Reds, if you will) decided they weren’t making much progress with Rudy. They convinced him he would best serve the party by simply growing food – they would handle the nasty end of things. They even managed to convince him it wasn’t a good idea to plant in the rain, as the seeds washed away. And to top things off, they gave him a red bandana to wear. “Remember Rudy, be a Red or be dead” Wear it for your health. Rudy was only to happy to comply.

Fall came and went, followed by winter. Rudy put up a Christmas tree (well, this is a Christmas joke, I have to fit Christmas in somewhere). It was one of the few times of the year there was peace in the house. Ok already, the rest of the year his wife gave him a piece of her mind. But that’s not the punch line I have been warning you about. It is coming. Beware!

Spring came at last. And it was almost like déjà vu. Threatening skies. The wife had the ladies over for bridge. There were iced cupcakes, but no silver candies on top this year. No, not because they were worried about the warning labels, but simply because Rudy’s wife was on a diet.

Rudy headed out the door armed with his seed bag. And just like last year the skies opened up. Terrible rainstorm. Of course the ladies started in with some nasty remarks, remembering last year’s fiasco. Finally, to climax the snide remarks Rudy’s wife said “I told you that dolt doesn’t know what rain is”

And at that moment, the door swung open, and banged against the wall. Now Rudy’s wife was sitting in the chair with her back to the door. She didn’t know Rudy was dry – he had been standing under the eves on the porch rather than being out in the garden. The other ladies were somewhat speechless, so his wife, bidding 2 hearts, added “Don’t track mud in the house”

“Not muddy dear” Rudy replied.

“Well don’t drip water all over the place”

“Not wet dear” came the reply.

“Look, Mister. Don’t get wise with me. I know you don’t have enough sense to come in out of the rain. Like I was telling my friends, you don’t even know what rain is. Just what have you got to say for yourself?” And turning, her jaw dropped as she saw her husband standing there, dry and clean.

And the Rudy, waving that red bandana the communists had given him simply said

“Rudolf the Red knows rain ….dear”

I warned you it was bad.

All kidding aside, may God bless your holidays! Much Peace in your homes!

I was recently asked to represent a plan whose consultant has not made the required GUST filing. I know how to take care of this issue, but when making the required amendments I noticed that it has NO language pertaining to Direct Rollovers. My recollection is that this was required beginning in 1994 or 1995?? Nonetheless the plan did receive a determination letter in 1995 without the rollover language.

I am including EGTRRA language in the restatement and could include an entire section on rollovers. Operationally, I am told that the plan has allowed rollovers in rare instances of small benefit cashouts, etc. Otherwise the form of benefit is a straight life annuity or a QJSA.

How would this best be handled?

Is it true that a client must adopt a new Model form (5305-SEP or 5305-SIMPLE) by the end of the calendar year in which a revised form has been published?

Seasons Greetings all.

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 ya.

Thanks as always.

Is it OK to use the IRS Model Tax Notice issued early 2002 or does it have to be modified to reflect the proposed regs which were published May 2002?

We left off the entity code on one investment on the Schedule D and the DOL wrote the client asking that it be corrected and an amended return be filed. Question - does the entire 5500, including all schedules, have to be sent in or can the client simply send in the 5500 stating it's amended and the revised Schedule D? Thanks for any assistance on this.