First date of new company existence is 7/1/00.

Effective date of 401(k) plan is 1/1/02.

To determine HCEs for calendar year 2002 plan year, would the dollar amount be prorated since the employees only had the possibility of 6 months of compensation, or would the determination be made using the full dollar limit?

The IRS just released Notice 2002-24, which indefinitely suspended the requirement for taxpayers to file Schedule F for Fringe Benefit Plans. Is Form 5500 still required?

OK, this one was just different enough that I thought I'd throw it out there for comment, if anyone is interested. For the record, I searched the Boards and other areas and couldn't find anything quite equivalent.

Our employee was pregnant at open enrollment and elected a generous amount in her Health Care Spending Account to cover her medical expenses associated with the birth of her child. She recently miscarried and wants to know if this qualifies as a reason to change the election amount, as she will no longer incur the expenses she had planned on.

My opinion is that this change in her medical condition, unfortunate though it may be, does not fit within any of the regulations' exceptions. Thoughts?

Is it a prohibited tranaction and violation of the "exclusive benefit" rule if the owner of a business is also the trustee of the plan and is also the registered representitive (broker) on his company's 401(k) plan?

What if the owner/trustee/broker makes commissions? And what if he/she does not?

We are looking at adding 457 options for our employees of a public school system. We offer 403b plans but don't have a SPD or any written plan as it is not required by 403b rules. We have several vendors who provide TSA products for the 403b plan.

Are we required to have a written 457 plan? If not, how do we handle the requirement for 457 contributions being put into a trust? Our 403b vendors sign a TSA plan agreement and hold harmless but there is no requirement for those funds going into a trust.

If no written 457 plan is required for public school employers as is the case with 403b plans are there sample 457 vendor agreements available?

Any one know where I can get prior C-1 exams? ASPA does not offer them for purchase anymore.

I have FIL method, changed the asset method to an approved asset method in Section 3, and the result is a small negative unfunded. Does section 6.02(6) prohibit this change (that is, under automatic approval)? or does it, in conjunction with Section 4.01(2), automatically entitle (require?) me to set the unfunded to zero?

I think this is the answer: since the unfunded is negative, automatic approval is denied. Period. However, I might still have automaitc approval to change to something else anyway, including changing from FIL to FIL.

Am I reading correctly? Comments?

Suppose an individual has funds in an IRA and wants to start a new business. The individual directs the Trustee to use the IRA assets to capitalize an S Corporation (the IRA is the sole shareholder). Three questions:

1. May an IRA hold S Corporation Stock?

2. If so, is the S Corporation's income UBTI?

3. Are there any prohibited transaction issues?

A 401(k) plan is top heavy and the sponsor does not intend to make a discretionary contribution, but is required to make a top heavy minimum contribution for all employees under the plan's top heavy section.

Because the top heavy minimum does not go to terminees, it happens that the top heavy allocations would not pass coverage.

Are top heavy minimums by themselves subject to 410(B)?

Would they be reportable as a dissagregated money type for 5500 Schedule T purposes?

Where in the Code, Regulations or IRS Rulings is the requirement that a plan must operate in accordance with its terms in order to remain tax qualified?

I have a 501©(3) organization that established a 403(B) plan in 1989. A plan document exists which requires an employer contribution equal to 4% of compensation.

From the reading I have done it appears the plan document does not need to be amended for GUST as it is not a qualifed plan - true?

And, if the sponsor wants to take advantage of the new catch-up contribution rules under EGTRRA (subject to IRC 402(g)(7)), would a "good faith" amendment be appropriate and if so, when should it be adopted assuming a calendar year end plan?

I defaulted on a loan to one of my annuities. I claimed the money on my taxes many years ago and now I am being told by the company that the remaining money will be eaten up by the interest on the loan before I am eligible to withdraw it. I don't know what to do...please give me some advise.

My understanding is that spousal consent for a distribution or loan is NOT required in a profit sharing (or 401(k) plan) that provides only for lump sum and installment payment forms, makes the spouse the 100% beneficiary of the death benefit, does not have transfer money from a J&S plan, and is not used to offset a DB plan. Is that correct? Did I miss any other requirement to avoid spousal consent? Is there any problem with a plan adopting a policy of requiring spousal consent if it truly is not required by the terms of the plan?

Can anyone provide a cite showing that spousal consent is not required in the situation listed above?

My understanding is that spousal consent for a distribution or loan is NOT required in a profit sharing (or 401(k) plan) that provides only for lump sum and installment payment forms, makes the spouse the 100% beneficiary of the death benefit, does not have transfer money from a J&S plan, and is not used to offset a DB plan. Is that correct? Did I miss any other requirement to avoid spousal consent? Is there any problem with a plan adopting a policy of requiring spousal consent if it truly is not required by the terms of the plan?

Can anyone provide a cite showing that spousal consent is not required in the situation listed above?

I could have sworn that I had read that an employer could not have a SARSEP and a qualified plan in the same year. I have a client that wants to adopt a 401k mid year but something tells me this can't be done. I have no basis for this conclusion except to say I though I read something. Can anybody confirm or deny this?:confused:

I received some mixed information regarding the appropriate use of participant forfeitures in a section 125 plan.

I understand that forfeitures can be used to offset administrative expenses or to reallocate dollars back to plan participants.

However, I'm not clear on whether the forfeitures may be used to reduce payment of future claims. For example, can we use last years forfeitures as a deposit in this years Flex account and reallocate participant payroll deductions ?

What do most organizations do?

I've been searching for Proposed Reg 1.125-2 Q&A 7 that is mentioned in Question 60 of the Section 125 Q&A that on this site but I'm having trouble finding it.

Any input is appreciated.

I have a Safe Harbor plan document that states the employer will use the 3% Nonelective Contribution. However, the employer (part of a PEO) made a 100% up to 15% Match Contribution (which is the old allocation - prior to SH).

Apparently there was a lack of communication and the payroll department did not stop the match contribution when the SH amendment was signed changing the allocation.

I'm looking for confirmation or further suggestion on how to correct this defect/administrative oversight...

In the ERISA Outline Book - Pg 15.541 - I've found that under "Misapplication of allocation formula" that I would in so many words - forfeit the Match contribution and reallocate as per the plan document as a 3% Nonelective Contribution.

Any suggestions or further comments are appreciated.

Also, this plan is failing 404 & 415 and is Top Heavy. Therefore, if I can correct the "Misapplication of allocation formula", then 404 and 415 will pass and the Top Heavy minimum is taken care of - this was the employer's intention.

I have a client who owns about 25% of his employer and participates in his employer's 401(k) Plan. In addition, he is a director of an unrelated entity and received directors fees for that work which he reports on Schedule C of his tax return. He has had a 25% pension plan for several years with respect to the directors fees.

In addition, he has many personal investments and this year he rented office space and hired an employee, just to keep track of these investments. The expense of the employee and office space are treated as investment expenses and deducted on Schedule A of his personal income tax return, subject to the 2% of AGI floor. The pension plan he maintains for his director fees has an immediate eligibility provision in it. My question, as you've probably guessed by now, does he have to make a 25% contribution to a pension account on behalf of this new employee?

If the Schedule C buisness is a separate business form the investments (which I think they would be since one generates SE income and the other does not), would the investment business have to specifically adopt the plan before she would be eligible. If so, would the investment entity have to adopt the plan to keep it qualified? If so, could they adopt in 2002 and use the otherwise excludable employee exception to keep from failing the coverage test for 2001. Thanks for any help you can give.

We have a client that has a cafeteria plan that provides a "benefit allowance" to each participant to help offset the cost of their benefits. Each participant makes their elections prior to the beginning of the plan year, but some of the benefits are pending approval by the insurance company. Please advise if there is any guidance anywhere on whether the participant should be allowed to use the "benefit allowance" toward other benefits if they are denied coverage for the benefits that they originally elected?

We have a relatively new, to us, Taft Hartley client who maintains a benefits bank which often produces large $ bank amounts that are often not used up by age 65 .... Medicare has indicated that the plan not medicare is primary until the bank is used up ... this makes NOOOOOOOO sense to me ... does anyone have experience with this type of medicare ruling??

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jlcowden