Can an employer require employees who enroll in the medical and dental plans to be on the plan until open enrollment? The employee pays 50% of their premium and 100% for their dependents. The employer will not allow them to terminate coverage until open enrollment. Is this legal? THANKS

I have a 401(k) Safe Harbor plan using the matching contribution to satisfy the safe harbor. There is no regular match provided for in the plan. Can I elect to used Non-Elective contribution forfeitures to offset the safe harbor match deposit required? The provisions of the Plan Document do not address what "match" may be reduced by forfeitures. Thank you for any insight into this matter.

Hi Everyone,

A non-owner/non-key employee continues to work and particiapte in a workplace retirement plan until they turn age 73 in 2002. Under modifications to the 401(a)(9) Regs (dating back to the mid- 1990's) they can postpone commencement of their RMD's until the LATER of turning age 70 1/2 or retirement from the employer plan.

At retirement in 2002 they request and complete a Direct Rollover of the full proceeds to an IRA before 2002 closes.

Are they required to take an RMD for 2002 from:

1. the workplace place prior to the Direct Rollover to the IRA?

2. the Receiving IRA? (it has no balance as of December 31, 2001)

3. No RMD until Dsitribution Year 2003?

Any citable reference would also be appreicated.

Three cases in the past two days involving this issue.

Cordially,

David Hammond

Hi Everyone,

EGTRRA provisions now permit IRA's to accept after-tax money residing in workplace retirement plans to be rolled over into Traditional IRA's. Apparently these monies do have to be "separately accounted" within the IRA that accepts them.

While not an everyday event, it is potentially quite common.

When such after-tax monies are subsequently distributed from the IRA which receives them, has any official guidance been forthcoming on how these funds are to be recovered?

First out? Pro-rated with other taxable IRA funds? (I was unoffically told to expect pro-rated treatment.)

Looking for a citable source.

Insight would be appreciated.

Cordially,

David Hammond

I must be having a brain freeze. I am looking at the ASPA Journal, July/Aug 2002 edition, at the article titled "Single-Participant 401(k) Plan Sales Strategies for Third Party Administrators". They have a table on Page 16, and I just can't seem to come up with their numbers. For example, I would think that a SP with Net Profits of $10K would have a max contribution of $9,235. If someone could take the time to show me what I am missing, I would appreciate it.

General rule for salary deferral to 457(B) is deferral election must be in place before compensation is earned (unless its a new plan or new participant).

What about a 457(B) funded with an employer contribution only?

Can an employer decide to bonus an executive on December 31, 2002, and have the bonus be contributed in its entirety to the 457(B) plan? In such an instance, wouldn't the organization have until December 31, 2002 to adopt the plan document?

Is it too late to establish a 401(k) plan (not utilizing the Safe Harbor provisions, but rather the 3% assumed deferral rate for prior year) on 12/10/02 for the 2002 plan year AND be a Safe Harbor for 2003?

Would your answer change if the establishment date was 12/1/02 (thus meeting the 30-day Notice requirement for existing CODA's)?

There is a DB plan that was terminated 12/31/2000. Because of illiquid assets and administrative delay, the assets of the plan have not yet been paid out. Now the corporation is having a fine year in 2002.

Can the DB plan be unterminated? I realize certain document updates may be needed, but what other issues are there? How would the funding standard account be resurrected?

For a plan with a 1/1 entry date, do the members have to be enrolled ON 1/1 or can they enroll at any time during that month?

An individual is an active participant in a 401(k) plan and turned age 70 1?2 in 2002. He is not a 5% or more owner. The individual also maintains IRAs outside the plan. May the individual take his minimum distributions from the IRAs and roll the remaining amounts to the plan, thereby avoiding future minimum distributions until he terminates employment with his employer. (The plan accepts rollovers from IRAs.)

A client had a sarsep that has been rolled into their new 401k plan during 2002. As this is from an ira type plan is this considered a related rollover? Its not from a qualified 401a plan, but is technically from the employer. I'm thinking about having to include this rollover $ in the test for top heavy, correct?

A participant has single coverage and the premiums are paid through our cafeteria plan. Participant has outside coverage for her children (cheaper than our plan) and wants to know if these premiums can be reimbursed under our Health Care FSA. I don't think so, but cannot find anything to prove me right. Can anyone point me in the right direction.

Also, I assume this would fall under the same rule as above, a new employee has COBRA coverage with a prior employer --- can these payments be reimbursed under the FSA?

Thanks for any help.

No longer a 401k worker my Pension knowledge is rusty ! I have the option of defaulting on a 401k loan. If I pay the loan back, it is with after tax money that will be taxed again when I retire and withdraw? so doesn't it make sense to default and take the 10% penalty?

Hi. I have a new job involving 401(k) administration for a single employer.

The plan was in existence prior to 2002 under one prototype and will be amended this year to move to another provider's prototype. I have been asked to review the new adoption agreement (compare it to the old to make sure it is consistent, etc.) and I have been working on that.

However, I need straight answer re the GUST and EGTRRA amendment time frames and what must be included. I did find checklists offered from the Groom Law Group, but is there anything else I should be looking for/worrying about?

Also, does anyone know of a good educational course I could use to get up to speed on these issues?

Any help is greatly appreciated! Thanks.

Plan currently has 1 yr and age 21 eligibilty for participation. Client is suggesting changing eligibility for deferrals to immediate but leaving 1 yr wait on match. Doesn't this change the match to non-safe harbor?

Thanks!

Is there any limit to the number of IRA to Roth IRA conversions that an individual can make in one tax year?

Currently I have a 501©(9) VEBA that provides minimal benefits (i.e. death benefits, disaster benefits, life insurance, etc...). The Fund has over $600,000 in it, however the Trustees do not want to administer the Plan any longer. Individual participants have credit accounts with anywhere from $50 to $10,000. Is it possible to convert this plan to a Defined Contribution Pension Plan and then allow individual participants to roll there money over into another tax deferred arrangement? If so, what should I be concerned about?

Currently I have a 501©(9) VEBA that provides minimal benefits (i.e. death benefits, disaster benefits, life insurance, etc...). The Fund has over $600,000 in it, however the Trustees do not want to administer the Plan any longer. Individual participants have credit accounts with anywhere from $50 to $10,000. Is it possible to convert this plan to a Defined Contribution Pension Plan and then allow individual participants to roll there money over into another tax deferred arrangement? If so, what should I be concerned about?

A client of ours has a participant in Chapter 13. The US Bankruptcy Court "order" calls for the loan payments to stop and the client stopped the payments in early 2002. However, the order also states that the loan shall "survive the Plan, and shall be paid by the Debtors after the entry of an Order of Discharge". Does this mean that the loan is not to be deemed defaulted and treated as a taxable distribution? The participant believes that the loan will just remain in suspense for 3 years.

Does anyone know where I might find a simple checklist or questionnaire that I can send out with my census requests for an employer to complete to determine if they may be considered a controlled group or ASG? Thank you.