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?

This one was only relayed to me - I wasn't there - but it was hilarious. Of course, maybe you had to be there.

Anyone with any years on them, or who drove an old American car as their first car/winter beater, knows that posi-traction (limited-slip) is that which supplied power to both rear wheels of the car (drive wheels -usually on older cars).

Some people know this because of the movie "My Cousin Vinny" in which Marisa Tomei's character explains why the defendants car could not leave two equal tire marks in the escape of the crime they are accused of (their car didn't have posi-traction).

Anyway, a friend of the family, who thinks they know very much about classic cars, upon being passed by a very dressed up classic muscle car at more than 50 MPH remarked:

"That car's set up like it's got Posi!"

Now, the obvious is just that - how can you tell if a car that is moving more than 50 MPH has power being supplied to both rear wheels? You can't. You would need to examine the car or see it spinning tires in the mud/leaving a burnout.

So for the rest of that day, we spent our time making equally ridiculous claims - the more ridiculous the better - about other cars, like:

"That car went around the corner like it's got power windows!"

"He took off from that stoplight like he's got factory floor mats!"

"That guy's set up like he's got the factory original lighter!"

"He got up to speed like that's the car's original paint!"

- but, maybe you had to be there. Or at least need to be car people.

Regards

An Employer wants to establish a SIMPLE IRA. The employer is owned by a Father and his six children equally, and these seven people are the only employees. The Father is also 100% shareholder of three other businesses. These three companies do not have and have never had any qualified plan. Are there any controlled group issues that would either prevent the first mentioned company from establishing a SIMPLE IRA or requiring a plan for the Father's other businesses?

I have a plan that is subject to QJSA rules. On the beneficiary form the spouse waived her right as to the designation of beneficiary where the 3 kids were named the beneficiaries. The waiver further stated that by siging the waiver she would receive no benefit from the plan. The participant is wanting to take a loan and is stating that his spouse has waived her right and therefore her consent is not needed on the loan application. Does the waiver of the beneficiary designation that was signed by the spouse and notorized exempt the need to obtain spousal consent for the loan? I'm questioning whether a beneficiary designation form signed over a year ago where the spouse waived her rights still holds true for the loan or if perhaps consent is required because the waiver cannot be more than 90 days old to be considered valid.

in the past it seemed that our admin. group would tell an employer that if they did not receive a response from a terminated participant that they could cash out the term. part. balance without consent if it was less than $5000. Sometimes the employer would, sometimes they would not. After reading the detail closer in the regs. it appears that electing involuntary cash outs the employer dosen't really have a choice, anyone with less than $5,000 is paid out immediately.

So does this mean anyone with a balance of less than $5000 in a plan with an involuntary cash out provision MUST BE PAID asap , irregardless of plan distribution rules stated in the document, and/ or the possibility that they might be due additional $ from a year end profit share or forfeiture allocation? and dosen't this present more of an administrative burden than the standard distr. rules? I'm hesitating to include this provision in the new docs. being drafted/amended for gust. any comments or thoughts on how others are using this option?

A friend had once obtained a slightly used very high performance car! It had all the goodies and we spent an afternoon looking for things we would change about it - if it were up to us. Finding none, I finally went out of my way to find one and remarked:

"Aha! Here it is! When I lean my seat back, the wind coming in the open window around the windshield pillar buffets my ear and is very unpleasant."

(this of course was a joke - nobody would ride in the car this way)

To this, my friend adjusted the air flow control from fresh to recirculated and said: "How's that?"

I was terrified - having recently experienced my other friend with "no rear brakes" in his car.

"How's what?" I said. Wincing at the very thought.

He pointed to the control and said: "That changes the way the air comes into the car."

He meant it. Obviously someone had told him this and he learned it. Just never realized they were talking about the way the air comes into the car - through the vents!

Sad that he would think it would somehow change air through an open window! Perhaps he thought spoilers popped up from the windshield pillars and deflected the wind? He should've had to surrender the car to me on the spot!

A friend once wished very much to become an executive assistant, responsible for - among other things - travel arrangements, proofreading, written communications etc.

During our brief carpools, all the following happened:

Me: Wish I had some time off coming up.

Friend: "Do we get Veternarians Day off?"

- I called her on that one - she refused to see it my way at first. I think I finally made my point when I said:

"Veternarian's Day, ah yes, the day Allied forces stormed the beaches of Normandy and vaccinated the Axis forces for distemper."

Think they were mad? What about when we went island hopping in the Pacific, during the later stages of the war, and those "veternarians" of ours stormed beaches and neutered any opposition?

Also, we once engaged in conversation regarding spine injury and the terrible possible consequences. I thought we were going to examine in depth if we were strong enough to handle such a thing.

Me: I think it would be very hard for me to now lose use of my limbs. If, on the other hand, I was born in such a way, I would never know the difference. Not that that would be any easier - but I think it would be worse to be taken away from me now.

Friend: "I don't think I could ever handle being a parapalegal"

I didn't immediately call her attention to this one. Feeling bad for her - considering "Veternarians Day" I instead replied:

Me: Being a parapalegic (lightly stressed the word) would be a tough hand to be dealt.

Friend: "I know it would be hard to be a parapalegal" (greatly stressing it herself as if to correct me)

ONE MORE

During a debate about where three of us would grab a pizza on a long planned night out:

Me: I like most any pizza - Little Ceasar's is fine with me.

Friend: "I hate little seizures!"

Yes, we all hate seizures, little or otherwise!

A good friend once informed me - while traveling in his rather new car - that he would have to take the car in for the brakes. Looking at his odometer, I remarked he should not have to replace his brake pads as he had only 15K miles. He then informed me his brakes wear fast as he doesn't have any rear brakes.

I was momentarily alramed! Amazingly, I didn't ask much more. Just told him all cars have rear brakes - if they didn't, it would be akin to riding a bike downhill and pulling just the front brake. Your rear would come up and you would roll end over end again and again. Nothing more was said...

Then we reached the gas station - it was cold out so the window was up. I could hear some commotion and saw my friend motioning to his rear tire. When I climbed out he exclaimed: "See - see, no rear brakes!" It became apparrent that if he was unable to view the calipers and pads (disc brakes) he was sure there were none.

A brief conversation ensued, where I educated him about that new-fangled creation, the drum brake!

Please check me on this:

An eligible employer is a state/local government, or a non-church, non-governmental tax-exempt agency. An eligible employer can have an ineligible plan - or can become ineligible due to administration of the plan failing to meet requirements.

So what is an ineligible employer? Are these the non-governmental, non tax-exempt agencies that would establish a top-hat plan for a select group of management?

Is it fair to assume these would be "for profit" entities? (not always - but generally)

Who constitutes "ineligible" employers? Anyone not covered under the definition of an "eligible" employer? HELP.

How do the "universal availability" rules for catch-up contributions apply for companies that are in a QSLOB? Must all plans in a QSLOB offer catch-up contributions, even though the plans are tested separately for non-discrimination?

We have a takeover plan. Investments currently are not participant directed. Employer wants to allow participants the option to either self direct or to allow the employer to continue to direct investments. If a participant initially chooses to allow the employer to direct investments, that participant could later change his/her mind and later choose to self-direct at any time.

Can the plan sponsor still avail themselves of 404© relief, assuming all other requirements are met?