:confused: :confused:

Please help....

Excess contributions were rolled over from a terminated qualified plan along with the rest of the assets to a 401(k). Recently (July 2002), it has been discovered that there were excess matching contributions to 4 employees in 1999 and 2000. I've investigated the matter and found that it qualifies as a insignificant operational failure that can be corrected by a SCP.

The main problem : These excess contributions never should have been rolled over from the old terminated plan to the new 401(k). Therefore, they must be rolled back to the old terminated plan. In other words, the excess contributions belong to the old plan, thus, they cannot be put in a suspense account or simply transferred and used against future matching contributions. What can the employer do with this money so that the old plan is not disqualified (and thus would immediately tax all the rollovers) and what would be its tax treatment (i.e. 1099 forms, etc.)?

We greatly appreciate any help in this matter!

P.S.: The organization is privately owned.

:confused: :confused:

Please help....

Excess contributions were rolled over from a terminated qualified plan along with the rest of the assets to a 401(k). Recently (July 2002), it has been discovered that there were excess matching contributions to 4 employees in 1999 and 2000. I've investigated the matter and found that it qualifies as a insignificant operational failure that can be corrected by a SCP.

The main problem : These excess contributions never should have been rolled over from the old terminated plan to the new 401(k). Therefore, they must be rolled back to the old terminated plan. What can the employer do with this money so that the old plan is not disqualified (and thus would immediately tax all the rollovers) and what would be its tax treatment (i.e. 1099 forms, etc.)?

We greatly appreciate any help in this matter!

P.S.: The organization is privately owned.

I have a client who is 59 1/2, still employed, and wants to rollover her 403(B)7 to an IRA.

I found information where one of the following events must occur. 59 1/2, seperated from service, dies or becomes disabled. The participant one of the events.

Does IRS hate all welfare benefit plans? No, but they apparently have a serious bias against those plans purporting to comply with IRC section 419A(f)(6). In a pair of moves recently IRS has acted to eliminate such arrangements. In Notice 2000-15 and Notice 2001-51, IRS published its view that such arrangements are “potentially abusive tax shelters”. As such, participation in such arrangements must be reported to IRS on an attachment to the tax return of the corporation participating in such an arrangement.

Under new regulations, the disclosure requirements apply to individuals who participate in such arrangements, and the tax effect test of Notice 2000-15 has been eliminated, thus requiring all such arrangements to be disclosed. In addition, proposed regulations promulgated under IRC section 419A(f)(6) (finally!) have closed the door on variations between employers and products.

The proposed regulations rehash the requirements of section 419A(f)(6) and add the following additional requirements: (1) plan document must require the Administrator to maintain records verifying compliance with section 419A(f)(6), and (2) the IRS and participating employers (or their representatives) must have the right to examine and copy all such records.

In one new position the IRS claims that all life insurance premiums must be based on current age, thus eliminating both individual term and cash value life insurance policies. And in a laughable position, IRS, in one of the examples, claims that life insurance cash values are the reason that renewal premiums are lower than initial premiums. The examples demonstrate IRS’s view that the only benefits that comply with the proposed regulations are those that could be provided and tax-deducted without section 419A(f)(6).

While Congress apparently meant to leave the door open for something under section 419A(f)(6), IRS means to close it to everything. Do the Committee Reports under 419A(f)(6) say anything about “tax shelters”? No, they speak about multiple-employer welfare benefits plans and the conditions under which Congress intended to authorize them. Apparently Congress forgot to check with IRS first.

The irony is that as far as the new “blunderbuss” regulations and Notices go in attempting to curtain abusive arrangements, their efforts will have little effect in the marketplace. The Notices and regulations do not address abusive arrangements purporting to exist under IRC section 419A(f)(5), so those promoters of former 419A(f)(6) arrangements will simply change the Code section to 419A(f)(5) and enter into an agreement with (bribe?) a union to jointly sponsor such a plan. Although IRS may argue that such arrangement is “similar to” 419A(f)(6) plans, opinion letters are already being provided that assure the public that such arrangements are “substantially dissimilar to those” potentially abusive tax shelters existing under 419A(f)(6).

The Bush administration’s IRS used all their ammo to eliminate a varmint once and for all, but like the elusive Osama bin Ladin, abusive welfare benefit arrangements will simply move and take another form.

Our client, a 501©(3), has a 403(B) plan and a 401(a) plan. The employees may make contributions into the 403(B) plan while the employer makes matching contributions and discretionary contributions into the 401(a) plan. These are separate plans. They have more than 100 particpants and have been filing the 401(a) as a large plan with an audit. Is this correct? They have a new TPA who is advising them that because it is a 401(a) plan they are exempt for the audit requirement. I realize that the 403(B) plan is exempt from audit but I'm unclear on the 401(a) plan. Any help would be appreciated and cites would be welcomed!

We have a client that has a 20 participant profit sharing plan. Assets are pooled rather than self-directed. The majority company owner (key and highly compensated participant) has now retired and sold the company to two junior partners. Rather than terminate the plan, the junior partners (now combined own 100%) decided to maintain the plan and simply pay the retiree his balance from the plan. The plan has a December year end. In December of 2001 he called our office and asked what his distribution options were. We indicated that he could get paid his prior account balance (December 31, 2000 balance, if he were paid from the trust prior to December 31, 2001) or take a distribution during the 2002 year and share in any earnings or losses of the trust through December 31, 2001. In addition, we indicated he could leave his benefit in the plan beyond December 31, 2002 and share in earnings or losses for the 2002 year.

He called a month ago and wanted his distribution based on his December 31, 2001 balance. As of June 30, 2002, the plan lost 24% from its December 31, 2001 value. His 2001 balance was approximately $1,000,000 and remaining employees had about $350,000. He is demanding to receive his $1,000,000 even though making that distribution will almost wipe out all other participant benefits. We mentioned that the plan will be required to perform a special mid-year valuation to allocate losses to all participants (including him) prior to distributing his benefit (i.e. he will share in the loss). The other alternative is to wait until after the 2002 year and hope plan investments recover.

The plan document allows for a special valuation at any time during the plan year. He claims he does not want to share in the losses and does not care if all other participant benefits go to zero.

He is holding us responsible for not for-warning him of this potential problem.

Anyone have thoughts on this?

Thank you.

Would Aspirin EC Tab 81MG be an eligible drug for reimbursement if it is a prescription? I am thinking it is not due to the fact that it is aspirin and it can be bought over the counter.

Since there is no Remedial Amendment Peiod for 403(B) and 457 plans would everyone agree that the plan must be operated under the current regulatory requirements even if the language is not yet in the plan or agreement but that regulatory changes that may be voluntarily adopted may not be implemented unless formally in the plan or agreement ?

My brokerage (eTrade) just sent a letter telling me they will no longer hold my Roth IRA for free. After December 31, 2002, it will cost $25 a year I think. Does anyone know of any other brokerage that will maintain the Roth IRA without further charge. Gee, I don't know why they don't think it is worth their time, as they don't have to do anything with it. When I trade, I used to use eTrade but when I move my Roth, I will probably use someone else. Can you suggest any free or competitive Roth IRA trustees?

Can anyone direct me to a credible source for a definition of 'medical implant' (i.e., pacemaker)? The health plan in question has weak definitions and we are having difficulty with a provider who is upcoding to take advantage of a paid-in-full benefit.

A 401(k) plan provides that if an employee defers at least 3% of his Compensation, the employer will make a matching contribution equal to 6% of the employee's Compensation. The plan document defines Compensation to exclude incentive pay. However, the plan has been operated so as to include incentive pay in Compensation. As a result, employees receiving incentive pay have been allowed to defer more than they should have and have received a matching contribution larger than they should have. How should this operational defect be corrected?

parent company owns two subsidiary companies -

one is the plan sponsor, the other is the investment manager for that plan sponsors retirement plan?

is this problematic for any party in interest, affiliate, or prohibited transaction rules????

thanks?

I have a plan that has been audited for several years as a June year end. They have now switched to a Dec. year end. I understand that they can defer the reporting on the short year (July to Dec) until they file the 5500 for the next calendar year. The information in the short year still needs to be audited, though, doesn't it? My understanding that it was just a deferral of when to report on the audited period, not an exception to the audit requirement. I keep going back and forth with the administrator on this issue.

I am currently revising my company's SPD for CO-OP students, to whom we offer employee-only medical coverage while they are employed here. I know that I need to keep the HIPAA special enrollment provision in the SPD.

My question: Since the coverage is available only to the CO-OP students (not to the employee's spouse or dependents), can I modify the HIPAA language to take out references to special enrollments for the spouse and dependents? Also, I'm curious what we would be required to do if we received a QMCSO on one of these

CO-OP students - would we be forced to cover one of their dependents?

Any input appreciated.

After tax refunds, the actual after tax contribution is not taxable but the earnings are? What if there is a loss? No taxes owed?

What about penalty because it is done after 2 1/2 months of the year end? Does the employer pay on after tax contribution refunds?

I have an employer who has a group health plan but only some employees participate due to the high cost. The employees who do not participate in the group plan have individual plans (these individual plans cost less then the group plan). The employer takes payroll deductions for the employees with the indivdual plans and the employer pays the insurance companies the premiums (with the employee's contribution).

This employer is considering implementing a section 125. Can the premiums for both the group plan AND the individual plans be taken out pre-tax?

I just have a quick question. I have two Roth IRA accounts. Does the maximum contribution apply to each account seperately or my accounts as a whole. In other words, can I contribute $3000 to each account or only $3000 total.

Thanks

A C corporation (A-corp) is owned 50/50 by its sole employee and another C corporation (B-corp). The sole employee is not otherwise related to B-corp. A-corp has a profit sharing plan and money purchase plan that has been in existence for 3 years with total assets less than $100,000 until this year. Can A-corp file a 5500-EZ? The instructions to form 5500-EZ qualifies the definition of a one-participate plan by stating that the participant must own the entire business. Has anyone found further guidance to clarify "ownership"?

Who are "affected participants" entitled to full vesting when a DB plan is terminated? Obviously, active participants who are not yet fully vested must become fully vested. What about the following employees:

(a) Former employee who terminated with zero vesting.

(B) Former employee who terminated with partial vesting and is not in pay status.

© Former employee who terminated with partial vesting and is receiving an annuity.

Thanks.

It's my understanding that a plan sponsor may apply the EGTRRA comp limit retroactively without having to demonstrate that the increased benefits are non-discriminatory. Is this correct?

If the answer is yes,is this a one-time opportunity?If the sponsor chooses to apply the limit only prospectively as part of the EGTRRA amdment,then at some time in the future decides to make it retroactive,does he still escape the non-discrim issues?