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??

__________________

jlcowden

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!