If a plan is amended to a Safe Harbor plan, and no other contributions are made to the plan after the effective date of the Safe Harbor provision other than the deferral and match under the safe harbor formula, would the plan still be exempt from 416 application even though it holds assets that were not under the terms of the Safe Harbor conditions (contributed prior to the inception date of the Safe Harbor amendment)? In addition, doesn't it seem odd that the exemption from 416 would eliminate non participants and those participating at less than a 3% level to be excluded from a minimum now? Seems sort of out of kilter to me though that is what the law reads. Thoughts anyone?

What's the general opinion on whether or not the IRS will require a signature amendment to IRA based employer plans?

Do you think a custodian will be required to provide IRA owners with a copy of the amended IRA plan document, whether or not the amendment requires a signature?

Finally, shouldn’t the amendment to the disclosure statement include changes to GUST?

Thanks

Hi Everyone,

IRS Announcement 2002-49 released this morning extends the dealine for using Revised IRA Model Documents for establishing new IRA's as of June 1, 2002 as originally prescribed in IRS Rev. Proc. 2002-10. The Text of the annoucement follows:

"Extended Period for Use of Certain Forms

IRS Announcement 2002-49

In Rev. Proc. 2002-10, 2002-4 I.R.B. 401, the Service provided that existing model IRAs, SEPs and SIMPLE IRA plans may not be used after June 1, 2002, to establish new IRAs, SEPs or SIMPLE IRA plans. In response to comments, the Service is extending the June 1 deadline to October 1, 2002. Thus, a financial institution may use an existing model IRA to establish a new IRA for a customer through October 1, 2002. Similarly, an employer may use an existing model SEP or SIMPLE IRA plan to establish such a plan through October 1, 2002. The deadlines by which revised model forms must be adopted under Rev. Proc. 2002-10 are unchanged."

Cordially

David Hammond

Company A buys out Company B, both companies have 401k plans, but the decision is made that Company B assets will not be rolled into Company A plan, nor is Company B plan terminated to allow participants to roll into IRAs, but rather it is "frozen" participants can only take distribution at normal retirement age or if terminated from new company A.

What possible reasons could this decision have been made?

Assume a Cafeteria Plan with the following components plans: premium conversion for group health insurance (GHP), health flexible spending arrangement (Health FSA), and dependent care assistance program (DCAP). The employer is large and all plans have well in excess of 100 employees participating at the beginning of the plan year.

The 5500 for the Cafeteria Plan and the DCAP component are no longer required. But the GHP and Health FSA still require a filing. The employer used to file a "consolidated" 5500 for the Cafeteria Plan and all underlying component welfare plans (i.e., GHP and Health FSA).

Now that the Cafeteria Plan filing requirement has been removed, must the employer file 2 separate Form 5500s (one for the GHP and another for the Health FSA)?

Thanks for your thoughts!

Could someone please let me know when is the last day of the year to make Roth IRA contributions?

Does using a plan loan to keep a foreclosure from happening on your principal residence qualify a participant to amortize longer than five years?

When employees take leave or are temporarily laid off, an employer advances them the health premium and permits them to make "catch-up" deductions under the employer's POP.

Pre-tax deductions are made on an per-hour basis. If the employees do not work enough hours during the remainder of the the plan year to re-pay the advanced premiums through pre-tax deductions, may the employer require the employees to repay the balance due on an after-tax basis after the plan year closes?

The FMLA regulation states that catch-up contributions may also be made on an after-tax basis. See 1.125-3 Q&A 3 (3)(iv). Is this an all-or-nothing rule or can a portion of the catch-up be made pre-tax, and another portion be made after-tax?:confused:

Thanks in advance for the any advice. Here's the situation:

In October 2000, I opened and fully funded ROTH IRAs for both my wife and me. Come 2000 tax filing time in April of 2001, we found that due to our income and ROTH phase out rules we could not fully contribute to ROTHs. So we recharacterized a portion of each roth to traditional IRAs.

So we filed taxes for 2000 each having a ROTH and a TRADITIONAL.

We then filed taxes for 2001 and we had each fully funded our ROTHs for 2001 (which we were allowed to due this time)

Now we are in 2002 and my question is this: can I make the traditional IRAs amounts (which we were "forced" to create because of our one-time high income level in 2000) into ROTH IRAs this year.

Or is there some rule that since they went from ROTH to TRADITIONAL that they cant go back to ROTH?

Or I have I simply passed out from exhaustion?

thanks again.

Thanks in advance for the any advice. Here's the situation:

In October 2000, I opened and fully funded ROTH IRAs for both my wife and me. Come 2000 tax filing time in April of 2001, we found that due to our income and ROTH phase out rules we could not fully contribute to ROTHs. So we recharacterized a portion of each roth to traditional IRAs.

So we filed taxes for 2000 each having a ROTH and a TRADITIONAL.

We then filed taxes for 2001 and we had each fully funded our ROTHs for 2001 (which we were allowed to due this time)

Now we are in 2002 and my question is this: can I make the traditional IRAs amounts (which we were "forced" to create because of our one-time high income level in 2000) into ROTH IRAs this year.

Or is there some rule that since they went from ROTH to TRADITIONAL that they cant go back to ROTH?

Or I have I simply passed out from exhaustion?

thanks again.

Can a 457(B) plan provide for removing excess contributions from a 457(B) plan for a np before end of tax year? Eg. at end of 2002 total ee and er contributions exceed the $11,000 limit. Reg. 1.457-2(e) states that the plan must provide that the amount of the deferral must not exceed the 457(B) limit. Existing regs fro correcting plans under 1.457-2(l) do not discuss failure of NP plan to comply with regs because they were written before np became subject to 457. Could the excess amt be returned to the employee by end of taxable year since it is not deferred? I am assuming that 457 plans like 403(B) plans are not required to be administered in accordance with their terms- they must only comply with the law, eg. amounts held under the plan cannot exceed 457(B) maximum. Therefore (1) are all deferrals under the plan taxed because the plan becomes an ineligible 457(f) plan if the deferral amount is exceeded, (2) is the excess treated as an after tax contribution subject to taxation in year of contribution but can only be distributed as provided in 457(B) or (3) can excess be refunded to employeebefore end of year of contribution since it is taxed as wages and not deferred?

Did everyone see the white paper put out by the Joint Committe on Taxation on April 17th? They put out an excellent overview of nonqualified plans etc "Present Law and Background Relating to Executive Compensation". It's 46 pages.

A Plan uses the prior year method for nondiscrimination testing. The Plan Admin would like to retroactively amend the Plan to use the current year method beginning with the 2001 plan year. Can a plan be retroactively amended to switch? Notice 98-1 says that "A plan using the prior year method may adopt the current year testing method for any subsequent testing year." Should this be interpreted to mean that you may only amend to switch to the current year method in a plan year prior to the first year in which it will apply? There is an 1999 ASPA Q&A on this subject (#60 for anyone who wants to take a peek), but the answer is unclear at best (the question is whether A or B applies, and the IRS answer is essentially "yes").

This seems like a question for which there is an obvious answer, but I have had a difficult time finding a concrete answer under the law.

A publicly traded company sponsors an ESOP comprised of both a stock bonus plan and a money purchase plan. Under the money purchase portion of the ESOP, the employer must contribute 5% of compensation. The contributions are made in the form of employer stock, not cash. Is the number of shares contributed and allocated to participant accounts based on the market value of the shares on the allocation date under the plan document (e.g., the last day of the plan year), or is the number of shares that must be contributed based on the market value of the shares on the date the contribution is actually made?

Using the improper value could lead to potential deduction or 412 problems if there is a fluctuation in the value of the stock.

For deduction purposes, it is my understanding that the deduction would be determined by multiplying the number of shares contributed by the market value of shares on the date the contribution is actually made. Would 412 apply a similar rule? That is to say, would the number of shares needed to satisfy the minimum funding obligation also be determined based on the market value of shares on the date of actual contribution?

Thank you in advance for your input.

As many of you know the Florida Retirement System is offering to its 600,000 members a new participant directed Defined Contribution plan under Section 401(a). The following link provides a summary of the available investment options:

http://www.myfrs.com/pdf/Invest_Fund_Summary.pdf

How do these investment funds compare to other large participant directed DC plans?

I am trying to find information on temporary agencies that offer retirement plan benefits to their employees. (By that, I mean the people who are assigned to the agencies client locations.) In particular, what eligibility criteria is most common? Also, what is considered a termination for purposes of distribution of the account? Do the temp agencies make any matching contributions? I will appreciate any experiences or ideas you can share with me. There doesn't seem to be much real information on the web - just that temporary workers are beginning to get more benefits from their employers. Thanks.

If your plan allows medical coverage for a child over 19 who is not a student... does your financial dependency criteria exactly match that of the IRS to avoid imputed income issues? For example, plan allows unmarried children to age 21... no questions asked! If this child works and files taxes, is imputed income applicable to the employee?

Has anyone heard of a legislation, soon to be in effect, which would have IRAs subjected to back-up withholding, if the IRS finds discrepancies in the IRA owner’s tax ID number and a Form W- 9 is not provided to the IRA custodian/trustee within certain timeframe.

I have a client with an overfunded DB plan. he is the only participant. he reached retirement age several years ago and did not take any money. he wants to know what his options are with respect to the overfunded money if he takes a lump sum distribution. someone suggested that he take distributions retroative to when he could have taken them. is this a viable option? if so what would the authority be for this position?

Is it possible for the same plan document to be used for 2 different plans? For example, if an employer has one plan for non-union employees, and a separate plan for union employees, can both plans be included in the same document (not a prototype, not separate but identical plan documents, but actually the same document which lists both Plan 001 and Plan 002)? Or does each plan have to have its own separate document?