In considering a design for an ESOP provision, given the new regulations under EGTRRA, how are pass-through dividends handled for non-vested (less than 100%) employees? Is the entire dividend paid out, regardless of vested percent? Or is the vested amount paid out and the non-vested amount re-invested?

Anybody know much about these? I know what they are, and the theory, but I'm having trouble justifying some of what is going on with regard to qualified plans, and maybe the IRS has provided guidance I don't know about!

We had a client who is a PEO. Member companies would sign a contract with the PEO, and essentially "terminate" their employees, and hire them back from the PEO. The PEO has no right to hire and fire them, cannot direct their work, hours, etc... essentially they are a payroll service. They wanted a 401(k) for the PEO, and then individual companies would have a cross-tested plan covering only the keys, while the non-keys would participate in the 401(k).

We told them to go find another TPA. But I'm curious as to what other folks out there think of this type of arrangement, and whether you are aware of any IRS guidance regarding PEO's and their sponsorship of qualified plans. Thanks in advance.

Is the retroactive application of the $200,000 comp limit subject to non-discrimination testing? Or is it still a matter of plan design- a safe harbor plan is still a safe harbor, a general test plnis still ageneral test plan?

would it be a problem if a plan sponsor amended its plan which previously provided for a discreitionary match so as to add a last day rule for HCE's prior to the end of the plan year? Thus effectively adding an additional allocation condition during the plan year for HCE's but not NHCE's.

Elective deferrals are added to w-2 compensation for purposes of 415. Does this include elective deferrals under a 457(B) non-qualified deferred compensation plan?

I am wondering if I need to adjust an owner and his wife's compensation before calcualting their contribution. Here's the situation: 100% owner and wife both work for company. Owner's compensation is $200,000 and wife's compensation is $230,000. I know that they are both considered owners because of attribution rule. Do I need to aggregate them because they are husband and wife, and therefore adjust both of their compensation amounts down so that the sum of both does not exceed $170,000 for purposes of allocation the profit sharing contribution? Or do I not aggregate their compensation amounts, and simply allocate each contribution using $170,000 for each person. Please help...:confused:

Trying to figure out the best design for a business owner who makes $200,000, no employees other than spouse who takes $25,000. Would like to avoid establishing a K feature. Anyone remember the old 40% MPP's we used to set up to get around family aggregation rules? With that in mind, could we establish a simple standardized PSP...deductible limit would be 25% x $225,000 or $56,250. Business owner would receive $40,000 and spouse would receive $16,250. Am I missing something here? If this is do-able, is this the BEST design for this scenario?

Must a plan document specify the percentage allocation for each rate group, or a maximum which the allocation does not exceed, in order to satisfy the "definitely determinable" benefit formula rule?

Is the answer to this question changed in any way by the introduction of the gateway testing rules?

Is there clear authority that a 414(e) church plan which is a welfare plan cannot elect ERISA coverage under Code section 410(d)? All I've found is rumor and innuendo....

Thanks!!

In order to put unallocated shares back into the company's hands, a merged ESOP and 401(k) is going to do the following: First, the 401(k) matching contribution will be in stock from the unallocated shares but through a roundabout method. First, participants will be matched in cash in pay period but will not be allowed to invest this money until the end of a particular quarter at which point the cash would be used to purchase some of the unallocated shares and then will be immediately redeemed by the employer. Is this a prohibited transaction because it does not fall specifically within the limitation for a purchase of stock between the plan and the employer? What about the immediate redemption? Has anyone seen this before?

The IRS Cincinnati office distributed a tack-on GUST amendment for terminating plans, some time back. Is it still an acceptable way to update a plan terminating in 2001? Would the answer be different depending on whether or not the plan intends to file a Form 5310?

I have 4 501©(3) organizations that want to adopt 401(k) plan. How do I determine if they are a control group or if they need to adopt as multiple employer?

Does anyone know if the normal 401(k) restrictions apply to distributions of catch-up contributions? I would think the answer is yes since these are basically additional elective deferrals.

What is everyone doing administratively? Are you creating special codes for catch-up contributions for ADP purposes (since catch-ups are not included in this test)? Since individuals can make catch-up contributions from the beginning of the year, it seems like you would have to create two boxes - one that computes the normal 402(g) (or 100% of comp) limit and one that computes additional catch-up contributions. What then happens if the employee leaves mid-year and the amount in the normal 402(g) box and the catch-up box is LESS than $11,000? Presumably all of this would have to be lumped back into one box and then tested under ADP. Wouldn't this lead to an administrative nightmare? What's the best way to go about doing this?

I'd be interested to know what companies are doing to administer the catch-up rules. Thanks.

I assume that a pick-up contribution in a gov'l plan is not considered a matching contribution, such that a 7-year graded vesting schedule can continue to apply to such contributions on and after 1-1-02(ie, EGTRRA's vesting provisions regarding matching contributions do not apply). (This plan, though gov'l, has applied ERISA's vesting requirements up to this point.) Is this assumption correct?

The plan has a mandatory 5% employee deferral (under 414(h)(2)) and the employer makes a 7% contribution. I see no reason or authority for this being considered a match, but I want to make sure I am not missing something.

I have a prospective client who has leased employees and the client himself is paid by the leasing company. Can an employer be a leased employee and sponsor a plan??

two questions: 1) does the catch up count against the overall 415 limits? i dont think it does but if everything else is designed correctly a partiicipant might be able to get 41,000 for 2002, correct?

2) does the plan have to be amended for EGTRRA at the time of the catch-up or can the amedment be done by the last day of the plan year?

I'm doing research on the use of Variable Forward Contracts when used with Employee Stock Options. There doesn't appear to be a lot of literature explaining the mechanics of these forward contracts. Can someone point me in a useful direction? Specifically, I'm trying to really understand how they work, and how brokers make these contracts worthwhile. Any help anyone can provide would be most appreciated.

Best,

Joel Howe

Can a one life calendar year standardized MP plan terminate currently, adopt a DB plan for 2001 and fund only the DB plan for 2001??? I'm thinking this since a DB plan is considered a greater benefit than a MP plan.

If a company doesn't offer a self-insured Flexible Spending Account (under Code 105(h)), but wants to contribute toward an FSA under Section 125, what non-discrimination testing issues need to be addressed? Do both employee and employer contributions need to be factored in when calculating the 25% Key test? 55% Average benefits test? Help!:confused:

Can an employer charge the COBRA premium +2% for one Qualified Beneficiary, and just the COBRA premium (without the 2%) for another Qualified Beneficiary? Thanks