I know that this question isn't related to plan administration, but I thought that I would get the best response here. I am planning to go to our HR person to discuss a raise and I was wondering what the "average pension/benefits administrator" is earning. Does anybody have any suggestions of what I should shoot for?? THANKS!

Is anybody interpreting the new top-heavy exception for safe harbor plans to only apply to plans that have NEVER had any other types of contributions.

EGTRRA 613(d) says:

.........the term 'top-heavy plan' shall NOT include a plan which consists SOLELY of -

(i) a cash or deferred arrangement which eets the requirements of section 401(k)(12), and

(ii) matching contributions with respect to which the requirements of section 401(m)(11) are met.

That is, does "SOLELY" in the statute mean that no other types of contributions were ever made to the plan or does "SOLELY" mean no other contributions were made for the current plan year?

Thanks.

I understand that the regulations do not require earnings to be calculated on excess contributions during the gap period if the plan so provides. So if the gap period turns out to be an 11 month period (for example) a participant's excess contribution will not have any earnings or losses during this 11 month gap period. I find this to be a little strange or unfair to the participant? Am I missing something?

I have read through the regulations regarding Section 132 plans and cannot find the answer to this question. If a company wants to establish one of these plans, do the funds have to be held in a separate account? (Similar to a Flexible Spending Account)If so, does the account have to be a "trust"? Can the company earn interest on those funds? Any materials I could reference would be helpful.

Thanks!

I am so close to paying of my *@#!& student loans, and just had the exciting thought that perhaps I can use my roth ira?! If so, will I only pay tax on the earnings and no penalty since it is for higher education?

I didn't know if you could pay a student loan, or if you had to currently be enrolled in a college.

Please advise!

Regards,

SLM

Looking for advice. I have a new plan that has employer money in a pooled account and allows employee money in fund choices. Since I believe 404© is out, is there a certain number of times I must allow the participants to be able to make fund choices? The employer wants to allow semi annual changes. Is this acceptable? Thanks.

Can money which would otherwise be "forfeited" in a medical flexible spending account be contributed to a 401(k)? How would this be accomplished?

We have a company that recently bought out another. They have changed the old companies name, EIN and 401(k) Plan name. The nature of the job has not changed at all, basically it just changed hands. Same desk rule, right? But can you still apply this rule? We are going to takeover the 401(k) and would like some confirmation on whether it should be considered a takeover or a full Plan termination. Thanks for your help!

I'm a new Dad looking for investment vehicles for my kids future college education.

I know about 529 plans and will heavely consider them. But apart from that...would opening a ROTH under my name or my spouses name be a good idea of saving for future education? I ask this since you can take out the contributions for anyreason without penalty (not the earnings though).

Therefore if I contribute $2000 a year towards a ROTH, by the time my daughter is around 20 and ready for college, I could (potentally) pull out $40000 for her education. Does this sound right.

Meanwhile, during that 20 year time period, my ROTH would have been growing (hopefully, depending on the investment I choose).

As a side advantage, if the college thing doesn't work out and she doesn't go, my wife and I have an added retirement vehicle to our already working 401K contribution efforts.

(i'm done blabbering) does this all sound right?

Seems like a flexable idea to me.

thanks in advance.

:confused: I have heard that when a plan sponsor files for bankruptcy, that there is accelerated vesting for all participants in the plan.

Anybody know if this is true or not?

And, are there any "events" that would accelerate the vesting to 100% for participants of a plan?

Thanks

Furry

Can anyone explain to me the difference between a (1) unit benefit, (2) fixed benefit and a (3) flat benefit? I am trying to fill out a Form 5300 and I do not know which to put down. Thanks so much!

Is it allowable under a 401(k) Plan to have a different deferral limit % for NHCEs than for HCEs?

For example, HCEs limited to 15% up to $11,000, but NHCE limited to 25% up to $11,000?

What happens in the event of divorce, when a participant is taking substantially equal payments from IRA? Spouse will get on-half of IRA, therefore he will need to reduce amount he is taking monthly. How does he avoid getting penalized 10% for altering pymt schedule?

Here is the result of some research I recently did on the topic - I welcome all comments/criticism.

"Counting EGTRRA Before It’s Hatched:

California Legislators Struggle to Bring State Tax Laws Into Conformity

With New Federal Deduction Limits

In June of last year, Congress passed sweeping legislative changes affecting retirement plans, known as “EGTRRA” (short for the Economic Growth and Tax Relief Reconciliation Act of 2001). Among other significant changes, EGTRRA (a) increased contribution limits (and corresponding deductions under federal income taxes) under IRAs (including Roth IRAs, traditional IRAs, and Education IRAs), (B) increased contribution and deduction limits under qualified retirement plans (including salary deferral limits under Section 401(k), 403(B), and 457 plans), introduced a “catch-up” deferral for individuals aged 50 or older, and increased rollover options among IRAs and qualified plans. Most EGTRRA changes are effective for plan years beginning on or after January 1, 2002.

Many of you may have already approved modifications to your retirement plan documents conforming to EGTRRA’s new provisions. Employees who participate in such plans, or who maintain IRAs, have warmly welcomed the increased opportunities for retirement savings under EGTRRA.

However, in California and approximately a dozen other states, state income tax laws do not automatically conform to federal standards. As a consequence, employees in these states who participate in retirement arrangements to the maximum extent now permitted under federal law could face state income tax liability on contributions that exceed state tax levels. Conceivably, an employee’s entire retirement savings could be subject to state taxation under such circumstances, but it is unlikely that state taxing authorities would adopt so drastic an approach.

A recent article in the Los Angeles Times (January 6, 2002 Business Section) summarized this dilemma and mentioned three pieces of conforming legislation now before the California legislature. The applicable bills are SB 657, sponsored by Senator Jack Scott (D-Pasadena), AB 1744, sponsored by Assembly Member Ellen M. Corbett (D-San Leandro), and AB 1743, sponsored by Assembly Member John Campbell (D-Irvine).

Although there are distinctions among the bills, each essentially seeks to conform California’s Revenue and Taxation Code to the new contribution and deduction limits available to both individuals and businesses under EGTRRA (Note: AB 1744 would not allow deductions under state taxes for increased contributions to Education IRAs).

Of the three pieces of legislation, Assembly Bills 1743 and 1744 were only just introduced on January 7, 2002, while SB 657 has already been amended and is currently before the Committee on Revenue and Taxation, slated for hearing on January 9, 2002. According to a consultant to the Committee who is assisting Senator Scott on the Bill, it is widely acknowledged in Sacramento that passage of conforming legislation must occur sometime during 2002. That said, the consultant would not acknowledge that passage this year is a “done deal, “ because conforming the state tax laws will cost the state between $40 to $50 million dollars during a year when difficult budget issues are already looming on the horizon. Although the consultant stated that passage of conforming legislation is possible sometime in January or February of 2002, delays are possible in the event the matter gets caught up in the budget approval process. If conforming legislation is not finalized until next year, it is possible that the legislation would allow the filing of amended returns or other tax reporting that would permit employees to catch-up, for state tax purposes, with their federal deferral limits.

How does this sum up, for purposes of employee communications? It is safe to say that it is likely that California will enact legislation later this year, to conform to EGTRRA. In the meantime, an employee has two options: (a) defer up to the maximum federal limits in anticipation of timely changes to state law, with the potential of exceeding state income tax deduction limits if state law changes are delayed; and (B) under-defer, for federal purposes, until such time as state law catches up to the EGTRRA standard. In this latter instance, it is possible the employee will miss out on maximum federal deductions if conforming legislation does not pass until 2003, and takes effect on a prospective basis only.

For those of you who are interested in tracking the progress of the various Senate and Assembly Bills, contact information for the Senator Scott, and for Assembly Members Corbett and Campbell can be found at http://democrats.assembly.ca.gov/english/index.htm."

© Christine P. Roberts, Esq. 2002

i opened an ira for the tax yr '01, w/o knowing all the rules and regulations.

i did not/ could not deduct the $2000 because i already contributed to a 401k plan at work. so can i now convert this to a roth? do i have to pay a penalty?

i do not know if a form for this was submitted cause i files with intuit

'on line'? thx..........

We have a plan that was terminated in the first part of 2001. The termination was submitted to the IRS and an approval letter was received in December. The plan is a calendar year plan.

Distributions are being made currently. We did not include any EGTRRA language in the termination amendment. Does anyone know whether we are required to add in language for EGTRRA? Of particular concern to me are the rollover rules (Re rolling out, not rolling in). If you think we need to amend for some EGTRRA provisions... which ones? Rollover and top-heavy are the only ones that come to mind.

I have a problem with an employee who is trying to roll some of her IRA accounts into her Profit Sharing Plan which I administer.

The Profit Sharing Plan is at Nationwide. The trustee is the Employer. The IRA is at Merrill Lynch.

The employee wants to roll the Merrill Lynch money into Nationwide. Here is what Merrill Lynch wants:

A letter from the employee saying she wants it transferred, specifying how check is to be payable, etc.--but accompanied by an acceptance letter from NATIONWIDE (huh?). I dont get why if we are transferring money from Merrill to a trustee, why the acceptance letter would not come from the Trustee??? why does the IRA fund group 1) care where the money is going, or 2) need a letter from the custodian (not the Trustee...) of where the money is going??? If we are doing a custodian to trustee transfer, why wouldnt it be that a letter of acceptance from the trustee is required?? Since Nationwide is not trustee, what right would they have to write an acceptance letter? Since it is the trustee who decides to accept the rollover or not. I am confused.....

has anyone done any of these yet?

How do you transition a city government that has a 403b plan into the appropriate plan, one that allows employee only pre-tax contributions. Also, what would be the appropriate plan to transition into.

If an employee does not hit a plan limit or the applicable 402(g) limit for deferrals are previous contributions that had been designated as catch up contributions then reclassified as ordinary deferrals up to the applicable limits?

Assuming a plan has a calendar plan year, and has created a Board of Director's Resolution to terminate the plan as of Aug. 31. However, assets are not fully liquidated until Sept. 30. Is compensation limits (i.e. $170,000) prorated for the 8 months ending in August or do you need to pro-rate the compensation limit through September?