We're considering implementing one of the safe-harbors. We have a union environment. What experiences have you had using one of the safe harbors? Any plusses or minuses you can share with us? What landmines should we look out for?

I'm 25 and am interested in opening a Roth IRA. How does one go about opening one? Is it necessary to shop around for rates? How is a Roth different from a 401(k) (which I don't qualify for currently)?

Also, I'm unclear as to how a Roth can be tax-free unless compensations come out of one's pay check before taxes are withheld.

Just to confirm, it is NOT an acceptable shortcut around COBRA regulations re: deriving premiums for a self-insured plan, for the plan to get a COBRA premium quote from an insurer applicable to plans of comparable size/claims experience?

I have a client whose ins. broker is insisting that this is a widely-accepted methodology.

Regarding Cafeteria Plans and COBRA:

We have someone who has been participating in our Flex. Health acct. through COBRA beginning in Sept. She sent payment for Sept., but has not paid for October. Yesterday I received a reimbursement request for a service rendered 9/28/01. Does date of service still matter if the person is partcipating through COBRA? Basically, my question is, even though she hasn't paid for October, do I still need to reimburse her for a service rendered in Sept.? Some regulations I read made me think I do NOT have to--because by not paying for October, she is effectively no longer participating in the plan. Does anyone know for sure?

Can a person make a donation to a charitable organization, more specifically a church, by transfering money from their 401k plan without being charged penalties or taxed?

Is anyone aware of any law that will require Social Security Numbers to be removed from benefit statements in the future?

Going to ASPA next week.

Anybody else?

Our 'fearless leader' Dave Baker is giving a talk Wednesday!

I have a water/mutual irrigation (gov't) company that is moving ahead with establishing a new 401(k) plan under the new 501©(12) rules, but now they want to know whether then can combine the plan with their existing 401(a) Thrift Plan. The Thrift plan is a money purchase pension plan set up to provide for 10% contribution after mandatory 4% employee contribution. This scares me, because generally MPPPs aren't allowed to have CODAs; however, can this CODA be included with the MPPP in this case because it is a "rural cooperative plan" under the new 501©(12) rules? HELP!!!!

What does everyone think about the following scenarios involving a DC plan that is restated effective January 1, 2001 but that is requesting a GUST determination letter filing?

a. Plan received a determination letter in 1994 and has been amended 3 times since then (1996, 1998 and 1999), including amendment for ALL necessary GUST changes which were incorporated in the 1999 amendment with an effective date of January 1, 1997. In 2001, plan adopts some design issues and restates. All the prior language in the plan relating to effective dates "e.g., the August 5, 1997 effective date for increases from $3,500 to $5,000" is wiped out (since this would be unnecessary in a 1/1/01 effective date plan). What do I do when I submit for a GUST determination letter request? Is attaching the old plan submitted in 1994, all amendments thereto and a copy of the 2001 Restatement good enough? Doesn't the IRS require in Rev. Proc. 2000-20 that I restate for GUST? Have I messed up by making the effective date of the new Restatement 1/1/01 and not 1/1/97? Was I supposed to go in to the 1999 Restatement and put "effective 1/1/01" for all the design-based changes I wanted to take effect in January 1, 2001?

b. Plan has a restatement effective January 1, 1997 that incorporates all GUST changes necessary for a GUST I determination letter. Plan receives a GUST I determination letter in 1999. Plan is restated on 1/1/01 and submits for a GUST II determination letter. Do I have a problem (assuming the same issues above) because the new restatement is effective 1/1/01 and not January 1, 1999 (the date non-GUST I GUST provisions take effect)? Does anyone think the IRS will have a problem with this?

As another question, what is the true effect of the GUST remedial amendment period? If I submit a determination letter request on December 30, 2001 and the IRS tells me that my USERRA provision is not exactly right, how long do I have to amend the plan to fix my USERRA provision? I ask because it seems like we are outside of the general 401(B)(1) "remedial amendment period" and are in a special "statutory (i.e. GUST) remedial amendment period." Am I in trouble if there is a mistake found after 12/31/01? Will the IRS argue that I was supposed to have submitted my application earlier (say in April), so that I'd have plenty of time left in the GUST remedial amendment period to make any corrections should any errors be found?

Thanks all!

Two questions regarding funding a QTIP with traditional IRA:

Consider married couple, second marriage for both, with "his" and "her" adult kids. Fairly typical A/B plan: Family by-pass trust and QTIP marital trust for wife. Husband is owner of traditional IRA. Husband is 68 years old, but in very poor health.

1) If the husband/IRA owner dies before his RBD, will the QTIP be considered a "qualifying trust" under the new proposed regs - so that surviving spouse can then use her life expectancy to calculate the RMDs?

2) If not, and the IRA is used to fund a non-qualifying trust (whether the QTIP marital or the Family "by-pass" Trust), so that a 5-year payout plan is required, then:

If the spouse is entitled to all income from the QTIP marital trust, will each year's one-fifth payout from the IRA be considered "income" and thus be payable on demand to the spouse?

Or can the trust language be drafted to limit the amount of IRA distribution that is to be "income", with the balance of the distribution being trust "principal"?

I'm sure the answer is out there and I've just missed it. We have a client who is currently receiving RMD's. He wants his 2001 and possibly 2002 distributions under the '87 regs. Can he adopt the model amendment in 2003 for distributions in 2003, provided the new regs have not yet been finalized?

IRS Announcement 2001-18, in correcting its first model amendment, states "With respect to distributions under the Plan made for calendar years beginning or or after January 1, 2001 (ALTERNATIVELY, SPECIFY A LATER CALENDAR YEAR FOR WHICH THE AMENDMENT IS TO BE INITIALLY EFFECTIVE)...." [capitalization is from the IRS]

This is not the alternative amendment from Ann. 2001-82, but a correction of the first model.

So back to my question, if, in 2003, the client wants to switch, may he do so by adopting the first amendment, as corrected above, in 2003 and specifying the calendar year 2003 as the initial effective date? This is obviously after the GUST RAP.

Thanks for any insight.

Profit Sharing Plan with CODA is Top Heavy for the Plan Year.... There was no discretionary profit sharing contribution contributed to the plan and the employer match is also discretionary. The Key Employees do not contribute to the plan (EE Def.). Since there were no contributions made to the plan on behalf of Key Employees, is a top heavy contribution required to be made to Non-Key Employees?????

I am trying to quickly verify the timing of the addition of a 3% safe harbor contribution to an existing 401k plan that has profit sharing language.

General question under the new proposed catch-up contributions regulations: can a participant who is suspended from making elective deferrals choose to make catch-up contributions? (Let's assume the plan in general permits catch-up contributions).

My own vote is that a suspension is not a limit, and therefore a suspended participant cannot make catch-up contributions. It's unclear enough that I wanted to collect others' opinions.

Follow-up question is does it matter whether the limit is required by law (where it doesn't seem to have made the list in the regulation) or an employer limit? 4 specific examples designed to explore this:

a) Plan follows hardship withdrawal safe harbor rules and suspends future elective deferrals for 6 months for distributions taken after 12/31/2001. Can participant make catch-up contributions during that suspension?

b) Plan follows old hardship withdrawal safe harbor rules and isn't changed for EGTRRA so the suspension period is 12 months. Can participant make catch-up contributions during the first half and/or second half of the suspension?

c) Plan uses more than one resources test. Let's say it uses the general test relying on the employee's representation but also uses the safe harbor test with the 6-month suspension. Arguably the suspension is not legally required but a matter of cautious plan design. Can suspended participant make catch-up contributions?

d) Suspension is clearly a matter of plan design only. For example, employer contributions may be withdrawn by those with 5 years of plan participation but only if participant is suspended for 6 or 12 months. Can a participant with that type of suspension make catch-up contributions?

I have a plan with investments in a limited partnership. I am provided with unit values for the partnerships that I have used in the past as the mv on the valuation date. This year however, I also rec'd a copy of the K-1s. I assumed that item J(e) Capital Account AT EOY would match the unit value on valuation date multiplied by number of units held, but this is not the case. Anybody know what I should use?

In April of 2001 my status at work was changed from full time to part time on call. This was done for the companies protection as they had no reason to terminate me. I have not worked for them since April. It is now October. I have been attending school to change professions. Today I went to my personal investor (private investment plan and asked him to take over the hospitals retirement plan for me while putting aside an amount for accumulating bills. It is also necessary as the funds they choose have been doing poorly even before the terrible attack on September 11. I was told I could not do so without quitting my employment, claiming hardship or borrowing against it. I dont have much in there, but want to save what I have in addition to pay for further tuition costs. I also have a daughter in college who needs financial aid as well. It is very frustrating to realize that although I have not contributed to the 403 (B) since my "convenient" change in status in the spring, I cannot touch the money I have saved since my beginning employment in October of 1998. Even in a hardship case I was told I would pay a 20% penalty and not get ANY company matched contributions in either case. :mad: Something seems askew... IS THIS MY MONEY? I dont want to sit and watch it dwindle even further...

Any help would be appreciated.

I have a prospective plan that is hung up on a trustee issue. The current administrator is telling the client that they will absorb all liability for the plan and that the plan sponsor will incur no liability. We have told the client that a corporate trustee may harbor some liability, but as a plan sponsor, they are still responsible for the plan overall, which includes any liability that may arise. Does anyone have any cites, cases, etc. that could help us to prove our point to the client that regardless of who they appoint as a trustee, they will still retain some liability?

May a plan with more than 100 participants whose RPA current liability is more than 90% funded or meets the volatility requirements deduct the difference between the assets and the RPA current liability? Or do you have to be actually subject to the AFC?

In the case of an employee who was "covered" by a predecessor plan, you must count the employee's years of service under the predecessor plan when determining vesting service in the successor plan. Would an employee have to be a participant in the predecessor plan to be "covered" or would an employee be considered "covered" if they were working for the employer and would have entered the plan as soon as they met the age and service requirements.

Company A sells substantially all of its assets to Company B. Company B hires most, but not all, of Company A's employees. Some of the employees not hired by Company B are let go by Company A, while a few are retained by Company A to wind-up Company A's affairs. Company A continues its health plan during the wind-up process.

Under the COBRA regs, as long as Company A continues its health plan, that plan is responsible for COBRA for (a) any qualified beneficiaries who were already on COBRA at the time of the sale, (B) the employees who were not hired by Company B and who were let go by Company A, and © any employees retained by Company A who subsequently are terminated.

As I read the COBRA regs, if Company A terminates its health plan, Company B, as a successor employer, will have COBRA liability for the 3 groups of people described above. The regs address this situation, but the answers are less than clear.

With respect to the group described in (a), I presume that Company B's obligation will continue only until the original COBRA period expires. Correct?

With respect to the group described in (B), Company B's obligation will continue until 18 months after the sale/termination of employment. Correct?

Group © is where I get confused. If Company A terminates its group health plan at some point after the sale, what exactly is Company B's obligation?

I can see a couple of possible scenarios. Company A might terminate the remaining employees one or a few at a time while it still maintains a health plan. In that case, I presume that Company A's plan would provide COBRA until the plan is terminated, at which point Company B's plan would pick up the obligation for the rest of the 18 months.

Another scenario is that Company A could terminate its health plan before it completes the wind-up and terminates these employees. In that event, does Company B have to immediately offer coverage to the remaining employees? If so, for how long? Has there really been a qualifying event?

If Company B's obligation does not kick in until these employees are terminated by Company A, then does Company B have to offer a full 18-month period from that date, or from the date of the sale?

Any help on these issues would be much appreciated.