We took over the record-keeping for a plan in 2001. I was reviewing the outstanding loans with the client and they said that they were unaware of one of the loans. In researching this, they discovered that an employee took a loan in 2000 but never made any payments on that loan. I have determined that the loan defaulted in 2001.

The participant wants to leave the loan in default and receive a 1099 for the deemed distribution. I have explained that the amount of the loan is taxable for the 2001 calendar year and that if she has already filed her tax return, she will have to file an amended return. I have also explained to her that although she must report this income for 2001, she will not recieve her 1099 until next year because it is too late to receive a 1099 this year.

This seems fairly simple to me, which always gets me worried. Have I missed anything?

Thank you.

I have one management company and three other companies for which it performs services. I believe that makes the management company a B-Org and the three other companies FSOs. There are three owners. If Owners A and B each own 50% of the Mgmt Co. and 4% of each of the three other companies and Owner C owns 92% in each of the three other companies, would that be considered an ASG??? Thanks.

When can a sponsor change the integration level for a SEP? I know that with a qualified plan there are two camps, one that says prior to the end of the PY and one that says before the contribution is due. But what is the rule for SEPs?

Are there any circumstances under which a town can have a 401(k) plan?

Hi,

As a result of the GUST restatement process, we have quite a few employers deciding that they want to eliminate pre-59 1/2 in-service withdrawals and hardship withdrawals of profit sharing money and retain this feature only for 401(k) monies (for the hardship only).

We're not sure if this is a 411(d)(6) right that needs to protected for accrued balances. Any ideas?

My question relates to the use of the credit balance to satisfy the 412(m) charges.

I have an employer who funds the plan throughout the year. His schedule of contributions in 2001 is:

2/28/01 - 10,000

5/31/01 - 25,750

7/31/01 - 10,000

11/30/01 - 10,000

The 5/31/01 contribution was deemed to be for the 2000 plan year and was the exact amount to satisfy the maximum deductible contribution. As a result there was a credit balance in the amount of 5,000.

From Notice 89-52, I know that a credit balance will accrue interest from the last day of the prior plan year to be used to satisfy the late quarterly contribution for the year. But I also know that the credit balance cannot satisfy a late quarterly payment until the contribution that caused the credit balance is actually made.

Assuming the quarterly payment due 4/15/01 is 20,000, I am thinking that I use the 2/28/01 and 7/31/01 contributions to satisfy it and disregard the 5/31/01 contribution until the 7/15/01 payment? Then when using the 5/31/01 payment interest would accrue from 1/1/01.

Anyone think differently?

What year should be used on the Forms 1099-R and 5498 if the recharacterization occurs after the deadline?

Facts:

1. Roth converted in 1998. Owner dies 9/1999.

2. Executor elected to recharacterize Roth on 12/31/99 (which was the deadline). Custodian does not make the transfer in time.

3. After receiving the positive PLR, Custodian makes the actually transfer in 12/2001 completing the recharacterization.

4. Custodian sends us (and IRS) the "2001"1099-R's that record the distribution. No doubt they also sent the IRS "2001" form 5498 recording the contribution.

5. PLR says we must amend decendent's 1998 tax return to complete recharacterization.

6. After the recharterization transfer, a spousal rollover was completed, then the spouse did a roth conversion. These three actions were all completed in 12/2001. (IRS orally told us that the 30 day rule would not apply in this case).

Question#1: The PLR does not say WHAT YEAR the 1099 and 5498's should be coded: 1998?, 1999, 2001?. In other words is it recorded "as if" the transfer had occured on the deadline date ("1999") or when the transfer actually took place after the deadline ("2001")?

Question#2: Before I was thinking that it couldn't be 2001 on the 1099-R because that would invalidate spouse's Roth conversion in 12/2001 (30 day rule). But reg 408A-5 Q&A-9 is not clear if this 30 day rule is applicable when the owner/estate who recharacterizes is different than the second IRA owner (spouse) who converts. Does the 30 day rule even apply when the owners, as in this case, are different?

Reg

Can an employee's interest in a 457(f) plan maitained by a tax exempt, non-governmental entity be transferred to a for-profit entity's "top hat" plan if both plans permit the transaction? By this I mean, can it be transferred without the transfer being a taxable distribution to the employee. The employee has a sizeable balance in 457(f) plan. He is moving to a taxable entity, but does not want to be taxed on the balance. The 457(f) plan says you must take your distribution when you leave. (Perhaps that can be negotiated around or the money moved before the employee moves.)

Company A has purchased 100% of Company B. Company A maintains a 401(k) Plan. Company B does not maintain any qualified plan nor have they ever sponsored a qualified plan.

The purchase agreement did not contain provisions of the entry by Company B employees into Company A's 401(k) plan. However, Company A has promised Company B employees entry as of 5/1/02.

As far as plan documentation goes, what are the appropriate action steps?

I dont think this will qualify as an adopting employer, since Company B is completely controlled by Company A so I think that the Years of Service and Eligibility provisions of the plan will need to be amended to reflect the change.

Would you all agree with this? Am I overlooking anything else?

Thank you.

The following question was posed to me and I didn't have a clue -

Individual is a partner in "Partnership A" that sponsors a Profit Sharing Plan.

Same individual is also a partner in "Partnership B" that does not sponsor a plan.

Individual has earned income from Partnership A and a loss from Partnership B - with a total net loss for income tax purposes. Does the net loss affect this individual's ability to deduct his Profit Sharing contribution received from Partnership A?

(For purposes of this question, assume no controlled group or ASG issues.)

Thanks for any and all responses!

i have a money purchase plan which was frozen in 2000 and the

plan assets were transferred to the company's profit sharing plan

in the same year. i filed form 5500 schedule r to report the distribution from the MPP but did not complete the minimum funding section since the plan was frozen. i received a notice from

the dol requesting minimum funding information. did i complete

the form correctly?

We are a TPA and at the end of each quarter our 401(k) Plan Sponsors send us employee census data for the quarter. In the past this information has included Section 125 data (health insurance premiums, etc.) paid by each person. Since the 25% annual additions limit has been raised to 100%, we think we don't need to get this 125 data anymore. Any thoughts? Thanks in advance...

My wife has a Roth IRA that was fully funded ($2,000) in tax year 2001. She is also self-employed and deposited another $600 into a SEP-IRA she had set up for tax year 2001. Our accountant said that you can only fund ONE IRA in a given year-- but does this apply when you have a SEP??

:confused:

What section of the IRS code shows the exception that allows a school district to pay an employee (in this case the superintendent) a sum of money into a 401(a) account and not make this available to other employees?

When my son was born two years ago, I opened a Roth IRA for him, in addition to the ones I have for my wife and myself. I thought this was perfectly legal, although someone questioned me recently. Is this legal? Can I contribute even if our combined salaries exceed the $160,000 limit?

Any opinions on Coverdell vs. 529 education plans?

Can anyone tell me how can find out for sure if someone has the CEBS designation? I am doing a background check on someone.

Can a one participant, one employee sep plan terminate and the balance be transferred to a profit sharing plan adopted by that self employed individual? Also, can his regular IRA also be transferred into that profit sharing plan?

Could some one direct me to a web site/list of 401(k) providers who offer investments and bundled services for k plans with assets in the 8-9 figure range.

If your child receives a full scholarship, will the 529 plan allow you to take the money out with a penalty, or are you required to give it to a family member?

Does anyone know where I can get a copy of yesterday's IRS ruling on obesity and weight loss programs?