Are plans established through collective bargaining required to be submitted to the IRS for approval? We have one 401(k) plan where the contribution formula does not conform to a prototype or volume submitter document. We believe we will have to draft an individually designed plan document. Any advise?

Is it possible to have an ESOP loan meet all requirements of the regulations and be a line of credit form of a loan? If so, what are the pitfalls to watch for? If not, please provide a cite that would make this impermissible.

Thanks!

Thomas Bill. American Competitiveness and Corporate Accountability Act of 2002 (H.R. 5095) introduced by Ways and Means Committee Chairman Bill Thomas (R-Ca) imposes immediate taxation on certain "funded" deferred compensation arrangements for directors, officers, and 10% shareholders of public and private companies. Effective for amounts deferred after July 10,2002.

Blocks use of rabbi trusts, cases where employee has any interest in the property used to fund the arrangement, or where funds are not available to creditors of company at all times (rather than merely upon bankruptcy or insolvency). Blocks cases where employee rights are greater than those of general crditor (e.g. third party guarantees). Also causes deferrals to be taxable if plan permits distributions other than separation from service, death, specified time, or pursuant to a fixed schedule (thus blocking "haircut" distribution provisions or distributions for hardship, change of control, or in the event of taxability). Also prohihibits any acceleration by employer and trusts subsequent agreement to accelerate as if taxable in the year of original deferral. Taxes deferrals through trusts with factors making it difficult for creditors to reach (e.g. offshore trust). If this passes, we will eliminate some of the "best practices" being used by companies today.

Can a small business establish a SH 401k that has no employer contributions? Neither an employer nonelective contribution nor an employer matching contribution.

Is there any 401k plan that allows only employee contributions with no employer contributions?

An employee is divorced. She and her husband have a son, who (according to the divorce agreement) each gets to claim as a dependent on their taxes returns in alternating years. The employee's company has an off-calendar year plan (8/1/02-7/31/03). So for part of the plan year, 8/1/02-12/31/02, she will not be claiming the son as her tax dependent -- BUT she does pay every month of every year towards his daycare and he lives with her primarily.

1) Is using the FSA based on custody, tax dependent status, who pays, or where the child lives?? Or a combination of these 4 things?

2) Secondly, IF she can't claim reimbursement for the remainder of 2002, then she does not want to have money taken out of her paycheck through the DCFSA until January. It is my understanding that she has to have the money taken out of her check evenly across the entire plan year. Or, can she wait until 1/1 to join the FSA and only have money taken out for the remainder of the plan year?

She is very frustrated that she is locked into a plan year that does not coincide with the calendar year -- plus she has this funky tax dependent situation. Help!!

I have a client who has a last day employment rule and insists on funding his MPP plan early in the plan year. As a result, the contributions he funded in 2001 exceeded the amount of his required contribution. Corporate tax return is on extension. Is an excise tax due as a result of the "nondeductible" contribution?If so, can the excess funds be returned to the employer prior to the due date of the corporate return to avoid the excise tax? Is the excess reportable on Schedule R?

WHAT ARE SOME OF SPECIFIC PROCEDURES PERFORMED BY PRACTIONERS DOING 401K AUDITS, WHEN THE ASSET CUSTODIAN, TRUSTEE, ETC. DOES NOT MEET THE REQUIREMENTS FOR A LIMITED SCOPE AUDIT UNDER DOL SECTION CFR 2520.103-8?

I have a 403(B) plan, which claims church plan status. They have a U.S. citizen working outside the country as a contract employee on a contract basis. The question that has arisen is whether that contract "employee" is eligible to participate in the Plan or excluded without any specific exclusion written into the document.

I know the church plan has alot more freedom but am trying to work through the issue. Even your insight from an ERISA perspective will be appreciated.

Thank you in advance for your feedback.

andmik

In a non-union multiple employer profit sharing plan with 2 employers who do not share employees, can Co A designate its contribution to only be allocated to A employees and Co B designate its to only be designated to B employees? Can you provide me with ANY kind of cite, even a hornbook excerpt? If this is possible, can the plan still file one 5500?

A Key Employee took an in-service distribution from a calendar year top heavy plan in 2000. He terminated employment in 2002. How are the two distributions now treated under EGTRRA's lookback rules? Does each have its own clock,1 year for the termination and 4 years for the in-service?Or does the fact that he doesn't have any service in 2003 remove both from the balances at 12/31/03?

Does anyone know of a good resource for information on HRAs?

I have read the IRS Notices and understand that information, but I am looking for guidance on compliancy (especially in Plan documents/SPDs) and/or pros and cons of such DC Plans.

I know they are sort of new on the benefits scene, in terms of a "go-ahead" from the IRS, so other people's experiences in dealing with the set-up and administration of such plans would be most helpful.

Thanks.

Company A is owned by 2 individuals and maintains a 401(k). They intend to change their business as of 12-31-02, terminate all their employees, terminate the 401(k), make distributions. Effective 1-1-03 they (same 2 owners although the ownership %s change) intend to reestablish themselves as Company B, hire those employees back and establish a new 401(k). Reason given is they want to make a total break as Company A.

Rationale for doing this vs. Company B assuming the plan of A notwithstanding, do you think Company B would be considered a separate employer for purposes of establishing a new 401(k) and avoiding the successor plan rule?

Can a participant who has reached normal retirement age under a profit sharing plan take a distribution of his account if he is still employed by the same employer? The participant is actually the sole proprietor of this company. Or does the plan document have to address whether a participant can take the distribution?

An employee's in-home, non-relative dependent care provider becomes ill and is unable to care for the employee's child for a month. She will resume care for the child upon recovery. The employee wants to change his DCAP election to eliminate his contribution for the month of the illness. Apparently, no other dependent care costs will be incurred during this period. The plan has adopted all of the IRS change in status rules. The regulations and examples do not directly address this issue. Would you allow the change? If so, it seems the change could only be made prospectively and would not apply to any prior weeks in which the provider was unable to care for the child.

A question has arisen regarding the following:

A HCE is NOT benefitting under the plan (for some reason).

A second HCE is benefitting under the plan BUT has a zero accrual rate (for some reason).

Are rate groups required for BOTH HCEs???

IF so, what accrual rate is used for the first HCE?? (Zero is not correct because he actually has none)

The reason for the question appears to be a difference in the testing under 410b for the plan versus for the rate group (the rules are slightly different).

Thanks, in advance, for any input provided.

Doc A owns 100% of a few companies and 50% of other companies with Doc B. As of a month ago, all employees of all companies became employees of a new company (of which Doc owns 100%) and are leased back to his other companies (both the 100% and 50% ownership ones).

Ideal situation - give as little as possible to everyone except Doc A, including Doc B.

Doable situation? - An accountant did research on this and feels that if a 10% Safe Harbor contribution is made to all leased employees, Doc A can pretty do whatever type of plan he selects. I am not familiar with the 10% SH rule - so, is it true?

Of course the call with the question just came in and they all wanted the answer yesterday so...any help or reference anyone can give me is much appreciated. Thank you.

I have a technical question regarding IRA minimum distribution requirements and the new regs:

Client began receiving minimum distributions in 1988. We are unable to determine what method (joint, single, etc.) he was using.

He died in 1994 at which time a trust was established and his wife began receiving distributions. She was 69. The initial divisor was "17" and declines by 1 each year.

The question is: Can we change the method to distribute based on HER life expenctancy under the new regs? Objective is to slow the distributions down.

In IRS Notice 2002-10, 4.05 the IRS mentions that employers are required to notify eligible participants of the increased contribution limits into SEP & SIMPLE IRA plans due to EGTRRA. I haven't heard much about this notice requirement. I found a sample notice on the BISYS website. However, I am confused: I understand the necessity of informing participants in a SIMPLE & SARSEP plan of the increased contribution limits. But why would there be a notice requirement for employers to notify participants of the increased employer contribution limits under EGTRRA for SEP plans - especially if the participant has no say in how much (or whether) the employer will make a SEP contribution.

Has anyone heard if the IRS's intent in Notice 2002-10, 4.05 was directed only at SIMPLE and SAR-SEPs but not including SEPs?

Has anyone heard much about this notice requirement at all?

The current SPD indicates that participants can have two outstanding loans. Would changing the number of outstanding loans the plan allows (i.e., from two to one) require an SMM?

If not, is there any requirement to disclose the change to participants?

I've just been shown a 401k - form 5500 for what I believe to be a governmental entity, i.e. established under the "municipal" tiltle of the state's statutes. The form indicated that this was a "Union 401k" and was established 1/1/2000. I'm told that this entity assumed the employees from a for-profit corporation beginning in 2000. The 5500 shows only about $6000 in assets, 11 accounts and about $4000 of income from "Others (including rollovers)". I was also told that in 2001 the entity has expanded the plan to cover non-union employees. My assumption is that my friend needs to tell the entity that they do not have a valid 401k and that corrective action must be undertaken, but I'm not certain where to tell him that the corrective action should begin. I'd appreciate any insight or questions that might help clear thing up.