While I know Governmental Section 457 plan distributions will now be reportable on Form 1099-R,

what of distributions under an annuity life payout? I have heard opinion that such distributions would continue to be reported by W2. This strikes me as incorrect.

Anyone?

Now that 457 plans are required to report all distributions on a Form 1099-R, what codes should be used to report the distributions? Can code 7 be used for all distributions except death, which would use 4? (Unless the distribution contains a rollover from a plan that is subject to the 10% early withdrawal penalty.) If a code 7 was used instead of a code 4 for a death benefit, what impact (if any) does this have on the beneficiary?

Multiple employer 401(k) plan is adopted in 2000, but no action is taken to actually implement the plan. Early in 2002, the plan accepts a transfer of assets & liabilities from another (unrelated) multiple employer plan. Prior to this trustee-to-trustee transfer, the new plan had no assets and no participants.

I seem to recall seeing something in the past to the effect that a plan was not considered to be in existence until it had assets/participants. Sorry for the sketchy details, but we're still gathering facts.

Is the GUST remedial amendment period (RAP) for the new plan based on its date of adoption in 2000, resulting in a GUST RAP that ends 2/28/02? Seems the alternative would be that the RAP is based on the 2002 date when the plan accepted the transfer of assets & liabilities.

Thanks for all responses.

SB 657 has been passed in the Senate, and is now in the Assembly Revenue and Taxation Committee.

AB 1122 has been passed by the Assembly and the Senate Committee on Revenue and Taxation, and is in the Senate Committee on Appropriations.

Governor Davis' proposed budget is based on complete compliance with EGTRRA.

The State Franchise Tax Board has indicated that even if California does not enact full conformity with EGTRRA, there are no means to disqualify a plan on the state level.

For more info, follow this link: http://www.pensioninfo.org/2002_02_01_acv.html#9683436

We have an employee that was divorced in 1994 who made arrangements to continue to cover his wife on his medical plan as his dependent.

We purchased the company in 1998 and he continued the wife on the plan as his dependent (probably because no one knew of the situation). Now the employee is complaining because his ex isn't paying her medical bills and it is going against his credit rating and he wants her off the plan as his dependent.

I think she should just be dropped from the plan because she has had much more than 36 months of continued coverage. Others think we should drop her now and offer her 36 months of COBRA coverage.

Their divorce decree says - The Husband shall maintain for the benefit of the Wife his current medical/health insurance or equivalent plan for so long as the Wife is eligible and for so long as said insurance is available through his employer.

Your opinions please. Drop now - or 36 months of COBRA - what do we do?

Can you start a 401k in mid year when your company has an existing simple IRA

We have an employee that was divorced in 1994 who made arrangements to continue to cover his wife on his medical plan as his dependent.

We purchased the company in 1998 and he continued the wife on the plan as his dependent (probably because no one knew of the situation). Now the employee is complaining because his ex isn't paying her medical bills and it is going against his credit rating and he wants her off the plan as his dependent.

I think she should just be dropped from the plan because she has had much more than 36 months of continued coverage. Others think we should drop her now and offer her 36 months of COBRA coverage.

Their divorce decree says - The Husband shall maintain for the benefit of the Wife his current medical/health insurance or equivalent plan for so long as the Wife is eligible and for so long as said insurance is available through his employer.

Your opinions please. Drop now - or 36 months of COBRA - what do we do?

I am an employee (salaried) at a small (10 employees) engineering company. It is my understanding that the company’s 401(k) plan was found to be top heavy for the plan year ending 12/31/2001. As a result, the company is being required to deposit an additional $2,500 (employer contribution) into my 401(k) account this year (2002). However, in order to offset this additional expense, my employer has reduced my salary for the year by an equivalent amount. My employer has documented these steps in a memo to me. My question is, is this legal? I would think that skirting the top heavy rules so easily would not be allowed. Thank you.

I am confused (nothing new). A client has a Sar Sep. Is it automatically deemed top heavy if a key employee makes salary deferrals into it, or do you have to perform the 60% balance test to determine if it is top heavy? Also someone has sugguested to me that starting in 2002 a Sar Sep no longer has to perform the top heavy test, although the ADP still has to be performed.

Is this true?

If an employer sponsors two plans, and one is individually-designed, while the other is a prototype:

Does the employer get to rely on Rev. Proc 2000-20, Section 19.05 where it says -

"An employer that adopts, before the end of the remedial amendment period (determined without regard to the extension provided by this section), any M&P plan or volume submitter specimen plan of a sponsor or practitioner will, for purposes of this section, be deemed to have adopted each other M&P plan or volume submitter specimen plan of that sponsor or practitioner."

- and extend the deadline for restating the individually-designed plan past Feb 28? Assume the individually-designed plan will be restated to a prototype.

What if the individually-designed plan was not restated to a protoype, but merged into the existing prototype plan?

Thanks.

Eligibility is 1,000 hours and year of service. Entry dates are 1/2 and 7/1. Break in service rule does not appply.

John is hired 6/1/2000 and quits 3/1/2001 after having worked 1,500 hours. He is rehired 9/1/2001.

Is he a participant as of 9/1/2001? Or must he work 1,000 hours in calendar year 2001 and enter 1/1/2002 if does work that many hours?

Thanks.

I know you should not be trustee, if your banking organization has the loan for the shares, but are there any problems in a situation like this?

The plan is not a leveraged ESOP. Employer wants us to take over as a Directed Trustee. Employer also has a relationship with the commercial side of our banking organization. The current trustee apparently does not want to continue the relationship. The Information I have received states this plan is too small for current trustee. I don't know of any other problems in this plan.

What pitfalls would you foresee in a relationship like this?

We read all the time about 401(k) plan fees - what is acceptable to be paid from the plan, the affect of loads or other service fees, etc.

What about DB plan fees? Are they not an issue because of the nature of the benefit given to participants (that is, participants need not be interested in fees because it has no bearing on their ultimate benefits)?

I assume plan trustees are faced with same issues as with dc plans. Correct?

Any insight is appreciated.

Can IRS user fees for determination letters be deducted from plan assets?

The state of FL has a mandate to cover grandchildren (those born to dependents

of employees) for the first 18 months for medical coverage

Are there any other states that have similar mandates?

I have a cross tested PS/401(k) plan that fails 401(a)(4) on first attempt. I'm now looking for alternatives.

Plan allocations are based on gross wages (unreduced for elective deferrals).

The one owner has gross pay of $225,000 and defers $10,000. Almost all other employees defer to both 401(k) plan and to 125 plan.

I want to switch (for testing purposes only) to compensation less deferrals, which also qualifies as 414(s) comp. Under this approach, all employees have lower comp, thus higher EBARS, except the owner, who would still have the same EBAR because his comp for testing would still be $170,000, because $225,000 less his deferrals still exceeds $170,000.

This significantly improves my results. Anything wrong with this approach?

I recently attended a seminar that indicated that if you have already amended for EGTRRA and then you restate for GUST, you must then amend again for EGTRRA.

I've been looking around for more information on this but have come up with nothing. Can any one else comment on this topic?

Datair is only testing employees benefiting for the gateway tests thereby excluding terms because plan does not allocate to them.

Additionally, for purposes of 415© Compensation for the 5% gateway they indicate that you can exclude any compensation prior to a participants entry date.

I was under the impression that the 5% gateway had to be for all eligible participants and that the 3 times allocation rate was based on employees benefiting.

Any thoughts?

An attorney asked me if there are any special considerations regarding 403 (B) that would allow a much larger contribution from a church to a minister (lump sum). It seems that the church would like to give the minister, of the past 15 years, a gift of $150,000. They want to give it completely without triggering constructive receipt. I don't see how this can be done without the use of a Rabbi Trust. Is there indeed a 403(B) provision that allows for a more generous contribution than just 25% and catch-up (he is apparantly 60 years old).

Cool Site!!

An operational question came up from my payroll group that I was unable to answer. Currently, our payroll system calculates 401(k) deferrals, deducts them from gross pay, then deducts Section 125 premiums. Because of the nature of our workforce, this means that employees often fall behind in their premium payments becuase their checks aren't large enough to cover the deduction.

Our payroll group is of the opinion (erroneous, I believe) that changing the order of the deductions will enable them to withhold the entire premium - what they would like to do is to deduct 125 premiums, calculate the 401(k) deferral, and then defer that amount to the extent possible given the remaining wages after the premiums.

My gut is telling me that this is not permissible, however I was not able to find any authority that explicitly addresses this particular question - does anyone know of any resources / authorities that address this issue? Thanks!