Does anyone know if the CA State Withholding requirement on retirement distributions looks to the state the employer is in (CA in this case) or the current residence of the participant receiving a distribution ? In other words, if a participant terminated employment from a CA company and now lives in a state without required State withholding, is state withholding still required on their retirement distribution (assuming no rollover) ?

An employer maintains a defined benefit plan for the benefit of certain employees. The plan benefits 50% of the nonexcludable highly compensated employees and 50% of the nonexcludable nonhighly compensated employees. The plan benefits more than 40% of the employer's employees and satisfies the ratio percentage test by covering at least 35% (70% x 50%) of the nonhighly compensated employees. The plan provides a uniform formula benefit for all participating employees. The question is whether this plan may satisfy Section 401(a)(4) under the uniform safe-harbor, or whether it must do general testing because it has excluded some nonexcludable employees.

A client has an IRA that held a high-tech stock that he told the broker to sell. Unfortunately, the broker did not sell and the client incurred a huge loss in value. The client has incurred $12,000 in legal fees to initiate a lawsuit against the securities firm. They have paid $6,000 already from their personal account, and they want to get reimbursed from the IRA. Secondly, they want to know if they can pay the remaining $6,000 in legal fees from the IRA assets. I think I know the answer to the first question since it seems like that would be a prohibited transaction. Where could I confirm that they could pay the other remaining legal fees from the IRA directly?

IRA owner dies in 2001 at age 76. Spouse is sole beneficiary and elects to treat IRA as her own. She is age 71. For the 2002 minimum distribution, is the calculation based on her single life expectancy or may she base the calculation on the Uniform Lifetime table since she has now designated beneficiaries on the account?

We have a client who has had a ps plan with us for years. Effective 11/01/02 he added a 401(k) feature. The owner would like to know how much he can defer (estimate only) for the 2002 year. The document states compensation is for the entire year. Here are my basic question:

1.) Can I use the new rule that allows you to assume the non-highlys contributed 3% since this isn't really a new plan?

Thanks for any input.

Company A has an existing SEP and some funding for current year has been occurred. A new cross-tested PS Plan has been added for current year effective 1/1.

I know contributions and deduction limits are looked at on an aggregated basis, but what about the cross-test itself?

If the Profit Sharing allocations pass the Ratio Percentage test, I think I'm home free. But if the cross-test can only be passed by undertaking the Average Beneffits Test, do I ignore the SEP contributions when performing the ABT?

A SEP (and a SARSEP for that matter) are not "qualified plans" and I think I need not aggregate them for the cross-test. Am I correct?

Fact scenario:

SH owns 49% of Acme; the ESOP owns 51% of Acme.

If the plan provides that the company, not the trust, must purchase stock when a put is exercised and the company has the right of first refusal on any stock sale, it is not conceivable that the SH will actually become a majority owner after the company has bought back enough stock due to puts and rights of first refusals being exercised?

Am I missing something?

Tx for any insight.

The Final LOan Regs gives dates as :

Effective Date: These regulations are effective December 3, 2002.

Applicability Date: These regulations apply to assignments, pledges, and loans

made on or after January 1, 2004.

What exactly does this mean? How is effective date differ from applicability date?

I have a new client that wants to have termination options different from those we are used to seeing.

Specifically, she wants a terminating ee to have the choice between terminating coverage at date of termination, OR pretaxing the entire remainder of the deductions from the last paycheck, and thus extending coverage until the end of the plan year, for both Medical Reimbursement and Dependent Care reimbursement.

I've suggested she consider Cobra coverage for the Medical Reimbursement account, at least, but she says no, that's not what they have in mind.

Has anyone ever designed a plan like this before?

Thanks!

Carolynn

I just received the pamphlet for the Corbel Advanced Pension Conference and one of the topics is "QNEC Creativitity after the New Regulations". I also heard at an ASPA conference that the IRS was doing away with bottom up QNECS. Have I missed a regulation? Do I need to be concerenced using bottom ups for 2002? Does anyone know where the new regs are? If so, please help. Thanks

I know absolutely nothing about ESOPs but was asked a question about income tax withholding on a distribution from an ESOP:

Plan distributed (lump sum) shares to terminated participant. Corportion purchased the shares back from the participant. Is this subject to 20% income tax withholding? :confused:

Thanks.

I have a question about correcting deferrals on non-deferrable compensation (according to the plan document). Take for example Participant A who elected to defer 5% of comp. The plan received 5% of deferrable comp and 5% of non-deferrable comp. Participant A could have elected to defer at a higher percentage and probably intended to defer up to the full 402(g) limit or at least 5% of deferrable and non-deferrable comp (because he hasn't complained yet about excess deferral amounts).

Do you think we should return deferrals on the non-deferrable comp? Do you think plan qualification is safe with keeping those deferrals in the plan under the assumption that Participant A would have elected a higher percentage had he understood that a large portion of his total comp was not deferrable?

The plan document is clear about deferrable comp, but participant communication (SPD, forms, memos, etc.) is vague. The IRS may have a qualification issue with keeping the money in the plan, but the DOL may have an issue with returning the money because participants may not have made an informed decision.

I have a question about correcting deferrals on non-deferrable compensation (according to the plan document). Take for example Participant A who elected to defer 5% of comp. The plan received 5% of deferrable comp and 5% of non-deferrable comp. Participant A could have elected to defer at a higher percentage and probably intended to defer up to the full 402(g) limit or at least 5% of deferrable and non-deferrable comp (because he hasn't complained yet about excess deferral amounts).

Do you think we should return deferrals on the non-deferrable comp? Do you think plan qualification is safe with keeping those deferrals in the plan under the assumption that Participant A would have elected a higher percentage had he understood that a large portion of his total comp was not deferrable?

The plan document is clear about deferrable comp, but participant communication (SPD, forms, memos, etc.) is vague. The IRS may have a qualification issue with keeping the money in the plan, but the DOL may have an issue with returning the money because participants may not have made an informed decision.

Thanks

We originally prepared a volume submitter plan back in August of 1998 using the Corbel checklist date 4/10/1997. We did not obtain a determination letter on this plan because the IRS had not opened the determination letter program.

We have since amended the plan onto a prototype plan document.

Do we need to file for a determination letter on the original plan which is a pre-GUST document? Or does the opinion letter on the new prototype document cover it?

Thanks.

If a DC plan account has after-tax, 401(k) and matching balances, is there any ordering of the distribution permitted or must it be proportional across all types of money (assuming the same beneficiary or no beneficiary)?

If you can choose to take the required amount from one type of money, such as 401(k), can you apply the after-tax non-taxable balance to the distribution?

I have a small NCP plan - 2 owners in classs 1 and all other eligibe employees in group 2. The plan requires an employee to be employed on the last day of the plan year to share in a contribuiton. The volume sumbitter does NOT contain fail safe provisions for passing ratio percentage test.

The profit sharing is a discretionary amount in which participants in each group share at an equal percentage of compensation based on the total dollar amount to be allocated withing each group. The employer has decided on the contribution amount to be allocated however, I am having serious problem passing coverage testing.

There are 5 NHCE's of which 4 were termianted prior to the last day of the plan year. The plan does not pass 410(B) ratio percentage test and I can't get it close to passing ABT because of the four termianted ee's - all of whom worked over 500 hours during the plan year.

Do you think I can do a retoractive amendment to the plan to add back some or all of the NHCE's to pass ABT?

It appears that the DOL final regulations regarding automatic distributions that must be rolled into an IRA if they are over $1,000 and under $5,000 have not yet been finalized. Is anyone aware of any ruling contrary to this? Thanks

For a local government plan with a local govt. plan sponsor that meets continuously (rather than in legislative session), what is/was the deadline for GUST updates?

Thanks.

I am thinking about investing for the first time in a ROTH IRA, with the possible maximum of $3,000 for myself, and possibly another $3,000 for my wife. I assume that I would need to do this sometime this month, in order to get in a contribution in for the year 2002, then I could even repeat this next month for the year 2003? Over the last 1-2 years, what has been the average rate of return (or loss) on these investments?

I am really wondering if this would be an investment that would be worthwhile for my particular situation. I am 36 years old, and currently own and operate two small businesses, which I have done for the last 10 years. My adjusted gross income usually runs in the 90k bracket, but has gone well over 100k for several years. I presently own around 350k in commercial real estate, which is 100% debt free, 200k+ in inventory, along with collectables investments of 150k+.

I recently sold off a piece of commercial real estate and made a pretty hefty profit. I used this profit to pay off my only existing debt...my house, which added another 300k to my assets. After this was done, I was still left with 175k cash. I plunked all this money into a monthly renewable bank CD, and after 7 months (at 2.35%) I am still wondering if this was a wise move. I like the security of knowing the money won't lose any principle, but I do hate the low rate of return it is bringing!

I am very conservative in nature, and do feel safe with my present situation. I was thinking though, that a ROTH IRA might be a "plan C," if you may, in providing another alternative source of income, if my assets every got lost/taken, or if I ever decide to sell the businesses and real estate in later life.

My old college buddies, whom invested in stocks and mutual funds, over the past 10 years, are now crying the blues. I feel I took the right path over them, by investing in real estate. Also, while they were leisurely playing many games of golf and trying to keep up with the Jones by acquiring the latest stock market offerings, I was steadily and methodically devoting my time & energy to my businesses. Oh no, I am talking myself out of this IRA again! Am I beyond financial help?

Thank you for any suggestions to my original questions.

general partner makes a capital contribution to the partnership pursuant to a promissory note (this contribution amounts to compensation for the GP's management of the investments associated w/ the partnership). Pension Fund wants to invest in the partnership, but there is a concern that the loan to the GP will qualify as a prohibited transaction (the partnership's assets in this scenario will qualify as plan assets). Is anyone aware of either a DOL class transaction exemption or individual transaction exemption covering this arrangement (i.e. the loan to a party in interst)?

Thank you in advance ...