what is the maximum amount that can be put in a 401(k) profit sharing plan for the year 2001. I am getting conflicting answers. Is it 15% of $170,000 (max comp) or is it 25%.

Is it permissable to refund 402(g) excess for 2001 via a payroll adjustment (negative contribution) in 2002? The employer has adjusted the W-2 for 2001 to reflect the payroll adjustment from 2002. If this is allowable, do earnings have to be included in the payroll adjustment? If not allowable, what are the implictions? Thanks!

Under what circumstances can an employer decrease the portion of the premium payment for which it is responsible under an insurance arrangement provided under its cafeteria plan? For example, if the employer pays 75% of the premium for its employee's health insurance, and the employee pays 25%, can an employer declare in the middle of a plan year that it will only pay 50% of the premium cost, requiring employees to make up the rest?

Can anyone advise on the definition the of a top-paid group?

"for years before 2002, the top 20 percent of employees, ranked by compensation paid durring a given year, are considered members of the top-paid group once the election is made."

Are these eligible employees or all employees?

Thanks!

Is there any difference between a lay-off and a termination? This concerns a potential client who has an existing 401k plan. Some of his employees have recently joined a union and will be covered under a union plan. These employees have account balances in his existing plan. It is my opinion that joining a union is not a distributable event even though he will now be excluding members of the union from the existing plan.

If someone is laid-off for a very short period of time - say days, not weeks - can they say they are terminated and request a distribution? What if they request a distribution but go back to work before the distribution has been processed? Is there some standard of time to consider?

I appreciate any help you might be able to give me.

Have you properly amended your plan to reflect any changes that you made to the plan year, eligibility requirements, benefits, or IRS regulations?*

*There have been changes in IRS regulations in 1997, 1999, 2000, 2001 and 2002.

Have you properly amended your plan to reflect any changes you made to the plan year, eligibility requirements, benefits, or IRS regulations?

You answered . . . is NO

Your Section 125 Plan is out of compliance.

There have been changes in the IRS Regulations in the past few years.

The above text explains my understand of the 125 plan rules.

Since there are countless plans out their that have not been

updated, what if anything is the goverment going to do about it ?? is there a safe way to correct this for employers ?? refiled

the correct 5500 forms for the years in question ??

I look forward to hear the collect wisdom of those who read this board.

A 401(l) plan's benefit service was frozen on 7/31/98. However, participants receive compensation indexation to their termination date. Because this was a 401(l) plan, benefits testing under the general test has never been necessary, and is still not necessary even with frozen service.

For coverage, the ratio percentage test was met on 7/31/98, the date the benefit service was frozen. 1.401(a)(4)-13(d)(5)(ii)(B) seems to say that the plan meets meaningful on-going coverage since the ratio percentage test was passed at 7/31/98 (the fresh start date).

Others in my office thought that I would continue to have to meet coverage requirements on an annual basis, either with the ratio percentage test or with average benefits percentage testing. Some indicated that I would meet the average benefits percentage testing automatically using the projected method because each person's benefit accrual would be zero.

What do you think?

I can't put my finger on this one, but it smells bad to me. I'm hopeful someone can clarify this issue for me.

I have a client that wants to front the proceeds of a bona fide participant loan to a participant. They'll cut the individual a check now. When the loan check arrives from the trust, the participant will sign over the check to the employer.

I want to say that the fronting of the money to the participant is a prohibited transaction, but am not sure. Anyone have anything specific they can point me to?

Thanks.

Hi-

I administer a 401(k) plan for a client who has a separate profit sharing plan with another firm. I have completed testing for their plan year ended 12/31/01. They failed the ADP test and refunds are needed. They are also Top Heavy for 2002. Do the plans need to be aggregated for the 415 and Top Heavy tests? Anything else I should be aware of in a situation like this?

Thanks!

Does anyone have any comments on the validity of products being currently marketed through which vendors contend that granting vested options NP execs to acquire mutual fund shares escape the 457(f) rules? I know that Treasury intends to address this issue soon with new 457 regulations. Any comments in the interim?

:confused:

A client sponsors a 457 plan. The State passes legislation splitting the client into two separate entities. One is our client. The other is a new entity that sets up a similar plan. For unknown reasons, this was not handled as a spin-off. Participants in the new plan (who were former employees of our client, and have balances in our client's plan) want to rollover their balances into their new plan. The question is: should we rollover their vested balances, or treat the state legislation that created the new entity as a partial termination of our client's plan, such that the affected employees are 100% vested?

My company currently has a policy that anyone working 20 or more hours per week earns vacation, sick and holidays. We would like to stop this policy and allow only full time employees (working 40 or more hours per week) to continue these benefits. Can we do this? What kind of length of notice do we have to provide)? Also, can we tell them anything they have accrued this year to date must be used before the end of the year?

I have a start up company where their first year of existance was 2001. During this year they also started a 401K plan for their employees. They have three "5%" owners who will be tested as HCEs on the ADP Test. Since no one had any salary for the prior year they are the only HCEs. The test fails miserably.

Is it okay to apply IRC Section 401(K)(3)(F) (the Statutory Exclusion rule) to eliminate all the NHCEs from being tested since no one worked a full year of service?

This would leave 3 HCEs and no NHCEs which, according to

Treas. Reg 1.410(B)-6, deems the plan to pass ADP Testing.

Am I interpreting the regs correctly here?

i have an integrated ps plan with 2 hce's and 1 nhce. the hce's want the same allocation although one of the made double what the other one made. is there any way to do this? i was thinking of limiting compensation or limiting the allocation amount to what the lowest paid hce would get....any ideas? also, what would the affect be on the nhce as she made more than the lowest paid hce? i appreciate any advice....

Can a governmental defined contribution plan impose a maximum age (e.g. 70) for contributing to

the plan? Or would this be prohibited under ADEA?

Can anyone tell me how a private tax-exempt organization is suppose to record/report the assets held in a Top Hat plan. I realize these are "unfunded" plans, but since the investments for such plans are assets of the employer, not sure how they show up on the financials.

I have a client that had both a Profit Sharing Plan and Money Purchase Plan. He decided that the Money Purchase contribution formula would change from an annual formula of 10% of compensation (calendar year plan), to 10% of compensation from 1/01/01 through 5/31/01. Also, the plan would merge into the Profit Sharing Plan effective June 1, 2001. The client is an attorney. He went ahead and executed an amendment, resolution, and even the 204(h) notice (without letting us in on it). Everything seems to be ok with that part. We checked the language of each.

My questions are:

1) Is there some horrible consequence of having the merger effective in the middle of the year? The 204(h) notice does include the fact that no participant will accrue benefits under the money purchase plan after May 31, 2001.

2) Should there really be two amendments, Resolution and Notice? One addressing the change in the formula. The other addressing the merger.

I sure would like some input.

Thanks

1.401(a)(4)-8(B)(2)(ii)(B) says:

(B) Normalization

The account balances determined under paragraph (B)(2)(ii)(A) of this section are normalized by treating them as single-sum benefits that are immediately and unconditionally payable to the employee. A standard interest rate, and a straight life annuity factor that is based on the same or a different standard interest rate and on a standard mortality table, must be used in normalizing these benefits. In addition, no mortality may be assumed prior to the employee's testing age.

My understanding is that to run this test, the employer contribution (account balance) is divided by the mortality factor at that age.

For example, a contribution of $5,000.00 is divided by factor UP84@8.5% for age 43 10/12 deferred to age 65, or 1.0780, to get 4,638.22. This amount is then divided by the Compensation to get the equivalent accrual rate.

The equivalent accrual rate for each participant is then the percentages used to run the average benefit ratio test.

Is anyone able to confirm that this is the right approach?

Once doing this, is it then necessary to also run the cross-testing where the contribution amounts are projected forward to NRD? In the case of the data I'm working with, this is a tougher test which requires a lower HCE contribution rate to pass. The results are different due to not counting mortality until age 65.

It happens, that in addition to this, running the 410(B) test by rate groups is even tougher with this data, requiring an even lower percentage for the HCE.

Thank you very much for any advice.

Facts:

Prototype Document submitted to the IRS for GUST ...awaiting opinion letter

Employer has made significant amendments to the pre gust prototype.

Q: Do they have to file as an individually designed doc before 2/28/02 or can they rely on the extended remedial period of one year from the Gust opinion letter on the Prototype, which has not yet been received from the IRS?