Please one more time short and simple:

In determining if an employee in a SARSEP (employer is a corporation) has deferred over the 15% of comp limit do you first exclude the deferral amount (i.e. total gross compensation minus deferral X 15%)?

In determining the deferral percentage for the ADP test in a SARSEP the deferral amount is a percentage of the total gross compensation (which includes the deferral), correct ?

Has any of this changed for plan years beginning in 2002?

(Glad I don't run into many of these) Thanks much.

In regard to a qualified plan, is the life expectancy of a participant who dies after reaching age 70 1/2 used to determine the distribution paid in the year of death or is it the life expectancy of the beneficiary? I was not sure in regard to the minimum distribution requirements whether a distribution could even be taken before the year after the year of death of the participant. Thank you!

We have a participant who worked for two companies and deferred more than $10,500 and has asked our plan to refund the excess amount. The amount we are refunding as excess deferrals was matched, but our counsel has told us that we do not need to forfeit the associated match as it is not a "plan correction" but a "participant tax correction" so that match should remain in her account. His argument is that she could have just as easily had us return the amount from the prior employer plan contributions (that were rolled over to us). However, we do not have the earnings information to do this calculation, so we are returning it from her deferral account instead. Any thoughts?

What about if a plan has a higher rate of match based on length of service. It seems that under the BRF "current availablity" test, age and service conditions are disregarded, so the test would automatically pass. However, I'm slightly confused on how the "effective availabity" test applies. This is based on how many employees can be expected to actually satsify the specific criteria. I would think that all employeees can be expected to satisfy it, assuming they stay employed. Does anyone have any thoughts on this?

Here is my situation:

Company A is owned 50/50 by two doctors. July 2001, they split with Dr. 1 remaining in the exsisting company and Dr. 2 forming a new company and taking half the employees with him. Dr. 2 received his max contribution of $35,000 under Company A's 401(k) PS and MPP Plans.

Two questions:

Do the employees now employed with Dr. 2 under Company B receive new 415 limits for their Company 2 comp?

Must the employees now employed by Dr. 2 be given the opportunity to withdraw their money from the MPP and 401(k) Plans from Company A, or can that money automatically be transfered to new 401(k) and MPP Plans under Company B?

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?