It appears that the $35,000 415 limit is effective for Limitation Years ENDING in 2001. But the $40,000 415 limit is not effective for Limitation Years ending in 2002, but for years BEGINNING in 2002...I am looking at IRS News Release IR-2001-115 3rd paragraph. Is my interpretation correct? This seems inconsistent and is confusing to me.

As a CPA and auditor, one of my tasks is to consider whether significant actuarial assumptions used to calculate employers' accounting for defined benefit plans are "reasonable." Is there any published information on actuarial assumed rates of return on plan assets and discount rates that are considered "reasonable" in light of current market and economic conditions, or ranges of rates expected to be used in 12/31/01 actuarial assumptions?

One of my clients is a one man corporation with a Profit Sharing Plan and a Money Purchase Pension Plan. Contributions are made during prior year that go over the 404 limit and so are non-deductible and can't be allocated to the participant because of 415 limits. A 10% excise tax is paid. During the current year, the plans are terminated because corporation is defunct. Participant has comp that uses up the non-deductible contributions in the pension plan for the current year but not enough to allow allocation and deduction of all of the carry forward non-deductible contributions in the profit sharing plan. What is the correct way to handle? Must all remaining non-deductible contributions revert to the corporation and a 50% excise tax is due? Is another 10% excise tax due? Could plan fees be paid from the reversion amount to reduce it and thereby reduce the 50% excise tax? (Similar to db plan reversions?)

Can an inactive participant (an employee who is out of work due to temporary disability and who will be returning to work next month) take a hardship distribution, or does their "inactive" status preclude such a distribution?

Must a spouse's consent to a distribution from a 401(k) Plan be notarized? The Plan document is silent on this, our distribution form says it is required, but an ex-employee is really bucking this. He has over $5000 in the Plan, and in those cases we require spouse's notarized consent. We want to be able to give him a reg or ruling that says this is required, or, if it's not required, we might consider taking it off the form.

Thanks!

Here is my question:

I have a situation where a 501©(3) company with a 403(B) plan moved all of its employees to a for-profit entity with a 401(k) plan purusant to a corporate deal. At that time, all but one participant in the 403(B) plan elected to withdraw/rollover their funds so the company now has one person in a frozen 403(B) plan that the company continues administer.

My question is, at this point, is there anything that this company can do to "force" the sole remaining participant out of the plan (without violating any laws) other than to simply attempt to "entice" this person with the new rollover options?

What effect, if any, does the fact that this person is under 59 1/2, and experienced a "severance from service" a few years ago when this restructuring took place but has not otherwise had a "triggering event" at this time, have on the participant's ability to rollover such funds, tax-free, under the new law (to the 401(k) plan, for example)?

I haven't researched this yet, but I thought someone out there may have already looked in to this. I have a multiple employer 401(k) plan, since each employer is tested separately for 401(k) and 401(m), can each employer elect separately to be covered by the "safe harbor" rules or does the whole plan need to be covered?

We are a TPA of cafeteria plans and are looking to purchase new administration software. I was hoping to get some responses on what software some of you are using and how you like it. We are mainly looking at Bemas, DataPath125, Datair FlexPlus/Cafeteria Admin and Fast-Flex Plus. Please let me know any good or bad. Any help is greatly appreciated!!

5500 forms - Part 1 Item C

Regarding the box "collective bargaining" - we work with school systems - and while SOME employees belong to unions and make the 125 plans part of their contract - this is not true for all. Should the collective bargaining question be answered yes or no?

The plans for the schools are usually all inclusive and not specific to particular to a specific group, i.e. teachers, bus drivers etc.

(There is no language in the Plan Docs regarding this)

THANKS!

Can anyone provide some guidence on a QDRO that is ordered to be valued through first quarter of a prior year when the plan is valued annually?

It is my understanding that a plan sponsor may amend the plan during the current plan year to eliminate the safe harbor match contribution for a plan year after issuing the required notice to participants. Is this correct? Any suggestions on language to use in the notice, and is 30 days notice to the participants enough?

I am also wondering if an employer can decide to deposit the entire safe harbor contribution after the end of the plan year, and in this way leave themselves open to the option of amending the plan during the plan year to eliminate the safe harbor match. This would be similar in operation to the supplementary notice for the 3% non-elective contribution issued 30 days prior to the end of the plan year.

Additionally, can the plan sponsor then place the plan back into safe harbor status by issuing the required notice 30 to 90 days prior to the start of the next plan year?

Thanks for your feedback

I am making a corrective contribution for a client of mine who failed to allow eligible participants to enter their 401(k) plan in 1999. I have been using Revenue Procedure 2001-17 as my reference for these calculations.

I have calculated QNCs for lost 401(k) & 401(m) contributions in conjunction with Rev Proc 2001-17. I am now calculating lost investment earnings for 1999, 2000 & 2001. I am using an "average plan rate of return", per Rev Proc 2001-17, to calculate the lost investment earnings and this return is negative for 2000 & 2001. Do I allocate losses on the corrections for these 2 years?

Does anyone have any practical experience in this area? Am in urgent need of some advice, before I make a judgment call of my own, because the total correction for 1999 has to be made by 12/31/01.

Hope someone can help!! Thanks!

Does anyone have any suggested procedures for Plan Administrators to utilize when accepting rollovers from the various sources now available. ie. if there is basis the administrator needs to be aware.

Our client has a Safe Harbor 401k Plan with a 5/31 plan year. The client is now wanting to change to a calendar year and run a short plan year for 6/1/01 - 12/31/01.

Can you use the Safe Harbor provisions for a short plan year?

The HCE deferred $8,500 in May 2001. Does this mean his maximum deferral for the short plan year can only be $2,000?

The employer contribution is a cross-tested formula. Am I correct in saying the $35,000 annual limit must be prorated to $20,417 (7 months)?

Thanks for your help.

Regarding the box "collective bargaining" - we work with school systems - and while SOME employees belong to unions and make the 125 plans part of their contract - this is not true for all. Should the collective bargaining question be answered yes or no?

The plans for the schools are usually all inclusive and not specific to particular to a specific group, i.e. teachers, bus drivers etc.

Thanks.

(There is no language in the Plan Docs regarding this)

That ever-quotable sister of mine had a rottweiler. Rottweiler's are much maligned, hers was the sweetest (and dumbest) dog you ever did meet. The neighborhood kids would taunt the dog (generally not a good idea where rottweilers are concerned) while walking the length of the fence along the street.

One day, my sister heard the dog barking loudly and decided to investigate. It was winter and upon walking outside she saw a school age boy (presumably walking to school) who was throwing large chunks of snow into the yard. The dog, of course, was going insane. It had it's rear legs off the ground, balancing it's immense frame on the top of the chain link fence while defending the yard. A very short, one-sided exchange took place:

Sis: "If you can't walk your a** to school - by God I'll kick it there!"

There was no answer from the student - but he did make his way to school double quick.

I've never been able to incorporate this into any situations I have run into. And I've tried! Just doesn't work for me. Maybe it's in the delivery?

I just wanted to confirm that it was still OK for a shareholder of a corporation to set up a Keogh in relation to director's fees received from the corp while at the same time contributing to the corp's 401(k) as an employee. I seem to remember some discussion a few years back about the IRS trying to block this sort of thing, but I thought that nothing had come of it.

Does my memory serve correctly?

Thanks

Rod

My sister has always had some of the better responses to those things that happen to each of us in our lives.

Coming back from vacation out of the country, her fiancee, upon reaching customs, answered questions about the amount of money he spent (it was very much $$) and claimed he had nothing to declare (he ate very well though). They immediately pulled him aside and searched his luggage. My sister, who was immediately behind him and obviously with him, answered:

Customs: How much money did you spend?

Sis: $XXXX ( don't recall the amount - not required for story)

Customs: What did you get?

Sis: "RIPPED OFF!"

Customs: Go ahead, have a nice day!

(I think they recognized the attitude as distinctly American and figured her harmless/unable to smuggle fruit into the country)

We have a client who provides a daycare facility there. All employees who participate are required to have that daycare amount taken out of there paycheck to pay the provider. The clients question is can they take that money out of there employees paychecks under a pre-tax basis under the Section 125 plan. My understanding was that the Dependent Care Account is a reimbursement account. There would be no reimbursements involved.

Facts:

IRA owner:

DOB 10/1929, thus 70.5 year 2000, therefor RBD is 4/1/2001.

Spouse:

DOB 7/1930, thus 70.5 year 2001

therfor RBD is 4/1/2002.

IRA owner dies on 9/1999 (before he starts MRDs). Sps is the prime bene.

Question:

If the spouse does not take out a MRD by 12/31/2000 (end-of-year following DOD and for all future years at what date is the IRA deemed to be the spouses under the "deemed" election for failure to take out a MRD under 408-8 Q&A A-4(B)?

I used to think it was 12/31/2004 (5 year rule) but Pub. 590 says that if no election is chosen and specified (by the plan?) and the spouse is the bene then the default election is the life expectancy of the designated bene. If so this deadline would be 12/31/2000 whether you apply 401(a)(9)(B)(iii) or the spousal exception under (B)(iv).

So the IRA would be considered the spouse's if the spouse does not take out an election by 12/31/2000?

Do you agree?

Is there anything wrong with the following strategy: elect the 5 year method then just before 12/31/2004 take out everything and do a spousal rollover into the spouse's IRA. MRD still due for 2004 but sps. defers all the other MRDs from 2000 through 2003.

Am I missing something? BTW, how does one elect to use the 5 year method if the default (spouse elects nothing) is life expectancy method?