I have participant that is 55 years of age with over 20 years and is a participant in an ESOP plan. The stock is not publicly traded. The plan has been in existence for about 7 years. In the SPD it states that a participant that is 55 years of age and has ten years of participation in the ESOP plan can diversify out of the corp. stock. I don't believe I have ever seen it based on participation but rather years of service...although most of the ESOPs that I have dealt with have been older than 10 years.

Can an ESOP plan still require 10 years of plan participation for a participant that has reached 55 years of age and has over 20 years of service....even though the plan hasn't even been around for 10 years? Seems to put those participants that are nearing retirement age in a bad situation. The company is not in the best of financial shape.

with svc pack 8 at 6.0 a change was made to the nondiscrim calculation involving permitted disparity.

first, I will say two things. I have been wrong before, and I will be wrong again, I am merely stating why I disagree.

2nd, I didn't see any indication of this change in the svc pack 8 notes, but I could easily have missed it. It caught me by surprise, but I didn't read every single thing in the notes.

anyway, with svc pack 8, if you impute disparity, the factors are now adjusted for months as well. Reg 1.401(l)-3(e)(3) clearly states that this is required when using an age other than SSRA, so there seems to be a basis for this argument.

however, 1.401(a)(4)-12 definitions says (1) If the plan provides the same uniform normal retirement age for all employees, the employee's testing age is the employee's normal retirement age under the plan.

now, for example using the Corbel document (though I am sure other document are similar) I have

Normal retirement age = 65, normal retirement date = 1st of month coincident or next following.

so now the system no longer tests on normal retirement age, but rather normal retirement date. and that is the crux of the matter.

but, for the sake of argument, lets suppose that I am to use normal retirement date as my testing age rather than my normal retirement age.In that case, I have someone whose mormal retirement is 65, another whose normal retirement will be 65 and 1 month. I no linger have a uniform reirement age.

therefore, I must use 1.401(a)(4)-12 testing age (3) if the plan does not provide a uniform retirement NRA, the employees testing age is 65.

I am back to testing age 65 rather than 65 and 1 month as a testing age.

and 1.401(a)(4)-7©(4)(iii)(B) says the .75 percent adjustment, pursuant to 1.401(l)-3(e) using as the age at which benefits commence the lesser of age 65 or the employees testing age.

Note this is the lesser of 65 or the testing age, so using 65 and 1 month makes little sense to me.

actually, in this case, if one does not have a uniform retirement age, then one could test using SSRA, as permitted under the SPBJA changes (though one has to be careful there because of other testing concerns)

if you agree with the above argument, then you will have to code your plans 'date of event' rather than 'first of the month following'. while this might not quite coincide with your document, it is what I have to do for now. In a DC plan this date is almost insignificant anyway.

FACTS: Sole Proprietor ("SP") has 1 employee ("EE"). SP makes about $120,000 of self-employment income and EE is paid $20,000 per year. SP is 52 and EE is 40.

ISSUE: Can SP set up a Defined Benefit Plan for 2002 that provides for the maximum benefit and also set up a safe harbor 401(k) plan, and deduct all of the contributions?

MY DISCUSSION: Assume that the DB funding is about $60,000 for SP and $5,000 for EE which is clearly more than the 25% limit imposed by §404(a)(7). (Also assume that the DB plan satisfies the top heavy minimum.) If EE elects to defer 8% to a 401(k) plan, then SP can defer $12,000. But if EE does not defer any, then SP can't defer unless he makes a safe harbor contribution of 3% for EE. It seems to me that deduction of this 3% safe harbor contribution would be prevented by §404(a)(7), but the deferrals (SP's and EE's) would be deductible under §404(n) that was added to the IRC by EGTRRA.

Can SP defer the $1,000 catch up regardless of any deferral by EE? Can the safe harbor plan use a matching contribution instead, and if EE does not defer, then have deferrals by SP as the only contributions (since the DB plan is satisfying the top heavy minimum)?

Thanks for your thoughts on these issues.

I want to make sure I understand this correctly. To meet the exemption from User Fee a plan that was first effective on or after 12/9/1989 must file the application for FDL before end of GUST remedial amendment period. This applies to terminations also? If a plan that was first effective in 1994, terminates in 2000 and files F5310 in January 2001, there is no user fee?

One more question- the difference between the Roth and regular is that you don't get to deduct the contributions on your taxes, correct? So it's as if you just put them in a savings account, right? But is that it? You've just payed income tax on it as part of your regular pay, you don't continue to have to pay taxes on the increases in the account, as you do with interest from a regular savings account, do you? I apologize for my ignorance, but I am truly new at this.

Thanks!

I'm finally able to open a Roth IRA and need some assistance. Clarify- each spouse can deposit only $2000.00 for 2001 and $3000.00 each for 2002? What if you want to deposit more? This is not a rollover, conversion, we are starting with a new account, new money.

And, can you withdraw periodically without penalty as long as it is still the principle amount? Do you have to pay yourself back within a certain time frame, or at all?

What is the best place to open an account?

Thanks!

MY INCOME EXCEEDED THE LIMIT FOR CONTRIBUTING $$ INTO A ROTH ACCOUNT...DUE TO ALOT OF OVERTIME. WHAT TYPE OF PENALTY AM I LOOKING AT?

:confused: In 1999 an individual trustee distributed $5,000 excess from a a 401(k) with profit sharing plan and money purchase plan. (Probably was 3-5 separate checks because of the way funds were invested.) The participant didn't realize the amount was in excess of his entitled amount.

When the trustee notified the participant of the error in 2001, the participant agreed that based on prior cases he should return the full amount of the overdistribution to the plan.

What recourse does the participant have against the trustee and plan sponsor because the participant invested the money in good faith and the $5,000 decreased to $1,000. Now the trustee is insisting the participant repay the full $5,000, so the participant has to take $4,000 of his own money to repay the plan.

Any case law or other information to help the participant would be appreciated. My email is lol98@prodigy.net

Thank you for reading this post.

:confused: In 1999 an individual trustee distributed $5,000 excess from a a 401(k) with profit sharing plan and money purchase plan. (Probably was 3-5 separate checks because of the way funds were invested.) The participant didn't realize the amount was in excess of his entitled amount.

When the trustee notified the participant of the error in 2001, the participant agreed that based on prior cases he should return the full amount of the overdistribution to the plan.

What recourse does the participant have against the trustee and plan sponsor because the participant invested the money in good faith and the $5,000 decreased to $1,000. Now the trustee is insisting the participant repay the full $5,000, so the participant has to take $4,000 of his own money to repay the plan.

Any case law or other information to help the participant would be appreciated. My email is lol98@prodigy.net

Thank you for reading this post.

I have a sole proprietor with a sarsepp who recently became an s-corp. Can his s-corp continue the sarsepp?

Opinions on whether the assets and obligations of a subsidiary's SERP (for employees and non-employee directors) can be transfered to the purchaser of the parent - with the subsidiary remaining as a sole remaining entity?? Seems like there could be potential issues/questions re. constructive receipt, and whether the assets need to be subject to forfeiture by creditors of your employer?? In this case, some individuals would not be employees of the purchaser of the parent.

Is there any stats on how many people in this country have an IRA and/or Roth IRA? And if so, who compiles it? The Feds, the banking industry or....?

A SAR-SEP fails the 1.25% test for 2001 and must return money to the HCE. Does this return count against his 15% limit for 2001? Or can the employer make a contribution sufficient that the HCE would receive 15% (ER plus salary deferral)?

I am trying to complete the testing on a DC plan and am having trouble with the officer test when determining key employees. The employee is an officer and has comp for the year exceeding $35,000.

Is $35,000.00 the correct indexed dollar limitation? Or is it $70,000.00?

When meeting the funding requirements for a Top Heavy plan you have to fund at least 3% or if less what the highest contribution percentage was for the Key employees. How is the percentage for each of the Key's calculated if there are ADP/ACP refunds involved? Would you back out the refund and then calculate what their contribution rate was for the year? For the plan in question, the highest Key contributed 3.3%, but is going to be getting back most of it due to ADP failures. So do I use 3.3% or do I figure up the percentage after the correction and use that as the minimum funding percent for the top heavy contribution?

We're having a lively discussion in our office over what our recommendation should be to clients who merged their MP balances into PS plans. Should we recommend that all balances now be subject to the QJSA or only the merged MP balances?

One concern expressed is that we screw up and not get the spouse to sign off on a MP distribution if the wrong form is used since new participants, not having MP balances, won't have any portion of their distribution subject to QJSA.

Another concern is if the PS exception is maintained, there presumably would be two distribution forms, one for the PS with no spousal consent and one for the MP with spousal consent. (And a lot more work.) Could one form be used for the particpant with MP and PS balances in which the spousal signature is required even if the exception applies for the PS balance?

Would one form be acceptable if a caveat was added that the spousal consent only pertains to the MP balance?

Facts:

New 401(k) Plan effective- January 1, 2002.

Open enrollment done on October 15, 2001 informing all employees hired as of that date to be able to start contributing in the Plan as of January 1, 2002.

Can you pick October 15, 2001 as the dual eligibility date? Anybody hired between October 16, 2001 and December 31, 2001 would have to meet the eligibility.

I don't think October 15, 2001 could be used as a dual eligibility date since it is a date before the plan goes into effect. The earliest dual eligibility date would have to be January 1, 2002 when the plan was first effective.

Any feedback would be appreciated.

Thank you.

We have an employer interested in adopting Safe Harbor Match and wants to change the minimim deferral contribution percentage currently listed in the adoption agreement from 1% to 3%. Would he be able to do this or would this be discriminatory against the NHCE's?

Please advise / confirm on the following:

We administer accounts which run July - June

and September - August. Would we be correct that the July - June groups should now be filing with the "2000" form for the year 2000-2001 (going by the START date of the plan year)???

What happens if our accounts call to get the forms from the IRS and they are told that they are on back order - - - and as a result will not be able to file in a timely manner?

Any and all advice, recommendations, suggestions appreciated.

Many government plans include death benefits that are payable to the participant's children until they attain age 18. Some plans we've seen also continue payments to the surviving spouse until his/her death or remarriage. Is this a violation of the 401(a)(9) five year payout rule? Since the plan dictates the spouse and/or children as the beneficiaries, it does not appear that they are treated as "designated beneficiaries".