I am confused about the accelerated vesting schedules due to EGTRRA. If a plan currently has a 5-year graded vesting schedule do they have to amend it to a 6-year graded schedule or can they continue with the 5-year schedule because it provides for faster vesting? (I realize that the employer also could amend to the 3-year cliff to make the employees even better off if they would choose).

I have an ESOP that froze contributions and fully vested participants on 9/30/99. The Plan states that forfeitures occur following a 1-year BIS. At the time the Plan was frozen, the ER did not restore forfeitures for those participants who had not received a distribution from the Plan, were partially vested, but had forfeited their non-vested balance prior to having a 5-year BIS. On 9/30/01, the Plan terminated.

The question is whether or not forfeitures need to be restored for those participants who never received a distribution from the Plan, but whose non-vested balance was forfeited prior to their having a 5-year BIS, as of the date of freeze?

Thanks

If an employee starts working as a temp via an employment agency and then gets hired by the employer, when is the employees commencement date for purposes of participation etc.? The plan also excludes leased employees.

I believe it is the date that they are hired by the employer, not the date they start as a temp with the agency.

We are implementing a 457(B) plan for the top hat group of a non-profit organization. The plan document states that distributions must commence "on a date selected by the Participant during the sixty day period following Severance of Employment, unless the Participant subsequently makes a one time additional written election in accordance with Code section 457(B) to defer commencement of benefits to a specified later date.

Are these the only options for commencing distributions under a 457(b)top hat plan? Also,for the one time written election, does the person have to give the exact date they want the distributions to commence and is that irrevocable? For example, a person states he wants the distribution to start at age 67 and then he cannot change it?

I would appreciate your input!

How do most self-funded plans define dependent child eligibility particularly where a child or step-child does not live with the employee? Do plans cover step-children not living with the employee? We have our plan defined as primarily dependent upon the employee for support. Can we say that must be declared as a dependent on their tax return? Do other plans exclude step-children not living with the employee?

If a plan sponsor has 2 defined contribution plans, what contributions are included towards the cross-tested (5% or 1/3) gateway?

If there is a cross-tested 401(k) plan with a profit sharing feature, and a money purchase plan, do money purchase plan contributions count toward the gateway? Does this depend on whether or not the plans are aggregated for 410(B) purposes? What if the money purchase plan is the cross-tested plan?

Am I correct that QNECs and safe harbor 401(k) nonelective (usually 3%) contributions generally count toward the gateway?

What about top-heavy minimum contributions?

We are establishing a multiple employer 401(k) plan for an association of employers. Some of the employers now have their own single employer 401(k)'s; we'll be merging them into the multiple employer plan. Question: if a single employer calendar year plan is merged into the calendar year multiple employer plan at 5/1/02, do we have to aggregate the "old" plan and the new plan for testing purposes? Or can they be tested separately?Same people will be covered in both the old and new plans.

And ideas? Thanks!

a series of questions involving a qualified DB

plan which is to be normally terminated..

plan has a set of retirees (participants in pay status), receiving monthly benefit payment,

and retirees elected various J&s factors-

(by terms of the plan) when they retired.

Here are questions:

(1) Retirees are required to be provided annuities from a dol approved insurer, a a part

of the termination process... correct ?

(2) Under what circumstances can the value

of the annuity provided be different than value

of payment they are already receiving ?

(3) Do anuites- provided- have to match the j&s

factors in effect for those in pay status ?

(4) Under what circumstances - can retirees,

be forced to accept a lump sum in lieu of an annuity ?

(5) Plan has both pre-65 and 65 + retirees.

Pre-65 retirees were allowed to select and draw

their pensions immdiately. Can these participants,

be given annuities (reduced) - e.g., based on

lower age 65 deferred value/s. Put another way,

can a normal plan termination be used to effectively defeat 411(d) of the code, and essentially "cutback early retirees)" ?

I am a complete newbie to IRAs.

About me:

I am a 37 year old male US citizen working abroad in Frankfurt, Germany. I am employed by a German company.

I am married to a 32 year old employee of the US Foreign Service. My wife would also like to open a Roth IRA.

We file a combined US tax return. My wife pays US income taxes while I pay German income taxes. Because I earn less than the legal limit, I am exempt from paying US income taxes.

We have no children and do not plan on having any.

My wife read about the Roth IRA and it sounded great for us.

How can I open a Roth IRA and how can I contribute. I don't believe payroll deduction would be possible.

Thanks for any tips on how I can begin this project. If this is the wrong place to post such a question, please excuse me and direct me (if you would be so kind) to the correct forum.

Al Brandt

Situation:

- son owns 100% of construction company

- parents used to own company, actual ownership now is 0%, but they still work there

In researching whether the parents own >5% via ownership attribution rules I found 2 different answers. There are some posts on this board indicating that attribution goes from kids to parents and vice versa, but I also found one that says ownership only attributes from kids to parents if the kids are under 21.

I have a page from an old Journal of Pension Benefits article which reads as follows:

- Description: children

- Actual owner: 1) child under age 21

- Constructive owner: each parent

- Description: children

- Actual owner: 1) child over age 21

- Constructive owner: a parent who owns (before application of thia paragraph) more than 50% (in value or voting power) of the corporate stock

It would be great to get the parents out of the HCE category on the ADP test (both made 11k and deferred 15%).

Sorry for the long post, I wanted to get all the facts out there.

Can someone enlighten me please?

Thanks. Maverick

i had a roth ira excess contribution for tax year 2000 that i corrected by having the trustee remove the excess along with any earnings and apply it towards a tax year 2001 roth contribution. this was all completed and included on my tax year 2000 filing. the trustee transfer was done in february of 2001. i received the 1099R that states the exact amount that was distributed for tax year 2001, however,it has a code J8 assigned to it so i'm a little confused as to what to do with the 1099R and it's filing. i thought that it was taxable in year 2000, even though the distribution was made in year 2001. i feel that the reasoning for the J8 distribution code is because the distribution was made in year 2001. since i already included the distribution in tax year 2000 filing ( which was the year that the excess contribution was made ), do i do nothing with the 1099R or do i need to include it also in tax year 2001 since that was the year that the distribution was made ? if anyone can help, i beg you to please o please help this tired and weary soul. thanks, bob edwards

Client's K plan allows client to make a matching contribution for NHCEs only equal to lesser 100% of deferral and 6% of pay. Client forgets about the 6% limit and matchs 100% of deferrals which results in "excess" matchs from $81 to $2,000 aggregating to about $9,000. Effectively, client contributed too much for NHCEs only but no other problems (e.g., no 415 issues). The accounts are self-directed and many of the participants have their accounts at different brokers so any correction which leaves the excess in the plan will be really messy to accomplish. Semi-seriously, is it worth correcting this error when it benefitted only the NHCEs and no other problems exist?

In early 2001 taxpayer makes 2000 contribution to a new roth.

When the time comes to file thier 2001 tax return, he discovers that his income is too high for a Roth. He does not want to recharacterize as a regular IRA. He must withdraw the $2000 & any earnings before the due date of the tax return. The earnings are taxable.

What is the tax impact if the $2000 had been invested & the investment had fallen in value to $700 at the time of withdrawal?

Can they take the $1300 loss?

If so, what kind of loss?

Thanks.

I have several mortgage investments in my Roth-IRA. Can I use my Roth-IRA for a loan to someone interested in buying a house from me?

I just got an email regarding the economic stimulus package that might contain some corrective legislation issues. I haven't seen it as I'm logging in remotely, but does anyone know if anything with respect to 403(B) or 457 was addressed?

Plan termed last year - approx. 15 people never cashed their distribution checks. We were thinking of just re-issuing them per original instructions. Let's say someone originally elected a rollover to another qualified plan & is no longer with that company. How do we handle issuance of a replacement check with different instructions? Becasue 1099-r's already went out for '01 how do we correct tax reporting?

Thanks,

Brian

One of our clients mainatins and ESOP & a 401k. A participant termed last year & was paid her balance in both plans, however 401k distribution was taken out of ESOP assets. What is the proper method to correct?

Thanks,

Brian

Here is the text of a recent release from the Arkansas tax authorities, about the EGTRRA mismatch between the Internal Revenue Code and Arkansas' tax code. Thanks to attorney Tom Overbey for the contribution! -- Dave Baker

-----------------

RECENT FEDERAL INCOME TAX LAW CHANGES AFFECTING ARKANSAS INCOME TAX LAW ON IRA'S, EDUCATION IRA'S, PENSION, AND DEFERRED COMPENSATION PLANS

Congress recently amended several provisions of federal income tax law creating new rules for IRA's, pension plans, and deferred compensation plans. These changes occurred following adjournment of the 2001 Arkansas General Assembly. Many of the federal code sections that were amended have previously been incorporated into Arkansas tax law. These changes have created differences between current federal and state law concerning IRA's, education IRA's, pension plans, and deferred compensation plans. Arkansas cannot automatically adopt these federal law changes without action by the General Assembly. The Department of Finance and Administration (DFA) anticipates that the General Assembly will retroactively adopt these provisions early during the 2003 legislative session. As a result, DFA has developed the following plan to address these recent federal tax law changes:

. Draft the 2002 state income tax forms and instructions to accommodate the retroactive adoption of these recent federal law changes affecting IRA's, education IRA's, pension plans, and deferred compensation plans, early in the 2003 legislative session;

. Institute an aggressive taxpayer education program explaining the differences between current federal and state law;

. Inform taxpayers and tax professionals that the 2003 General Assembly may adopt these federal law changes retroactively early in the 2003 legislative session;

. Encourage taxpayers and tax professionals to refrain from filing their 2002 tax returns until the General Assembly has addressed these federal law changes;

. DFA will prepare a bill that can be pre-filed and be ready for consideration early in the 2003 legislative session to adopt these federal IRA, education IRA, pension, and deferred compensation changes;

. If the General Assembly determines that certain provisions of the new federal law should not be adopted retroactively, DFA will abate interest and penalty assessed against taxpayers who followed the federal law changes when preparing their return.

------------------

Tom Overbey

Overbey, Graham & Strigel, PLC

Pavilion Centre, Suite 240

8315 Cantrell Road

Little Rock, Arkansas 72227-2423

Little Rock: 501-664-8105, Ext. 108

Fayetteville: 501-442-3554

Cell: 501-258-1610

Fax: 501-219-2993

Email: toverbey@ogslaw.com

Currently have a 5310 pending. agent wants amendments for:

-- exclusion of hardship withdrawals from definition of eligible rollover distribution

-- repeal of 415(e) combined plan limitation

-- comp reduction regarding qualified transportation fringes inclusion in def. of comp for 414(s) and 415

Anyone have any sample language re a plain vanilla profit sharing plan??

Thanks.

May I preface the conversation that we never terminated a plan.

I have a plan sponsor that would like to terminate his 401(k) plan because he wants to get at his money (100%) which is a substantial peice of cash. Regardless of the tax consequences he would like to move everything to a SEP and keep money flowing to the employees.

What flags should I raise before moving forward?

Thank you for any assistance you may provide.