An attorney is drafting a GUST document for one of my clients. One of the sections explains the rates used to calculate the PVAB. It says to use either the Act. Eq. rates (which includes language for the 30 yr rate) or the PBGC rates, whichever rates produce the greater benefit. I don't think that the PBGC rates should be included in this document and I'm looking for some confirmation.

Another issue came up. The question is when the GATT rates replace the PBGC rates prior to the adoption of the GUST document. I was under the impression that prior to 2001, valueing lump sums would be based on the greater of benefits provided by using GATT rates or rates specified in the plan doc (including PBGC rates). And beginning in 2001, PBGC rates would no longer be used. The attorney thought the cut off date for using the PBGC rates was the adoption of the GUST document, not 2001. Any confirmation or correction would be appreciated.

Thanks.

Background

The assets in a 401(k) consist of mutual funds and employer stocks. At the time of service seperation, in a lump sum distribution, the mutual fund amounts are transferred to an IRA as a direct rollover and the balance is paid as employer stock certificates. The IRA amount is thus exempt from withholding. Under IRC section 402(e)(4), the “net unrealized appreciation” of the employer stocks can be treated as deferred income as an option and hence not subject to immediate withholding. Thus the only taxable amount in the year of the distribution is the “cost basis” for the stocks.

Question

Can an exemption from withholding be claimed on this “cost basis” amount under Internal Revenue Code section 3405(d)(8)?

Administrator has the option of either (1) transferring these funds to the PBGC or (2) purchasing an annuity. I am familiar with the PBGC option, but wondering if anyone has any experiences to share with the purchase of annuities option. What due diligence is required? Fixed or Variable? etc... Thanks for any feedback!

How is the 15% excise tax, due to a late deposit of salary deferral contributions, computed for purposes of completing Form 5330? Is it computed based on 15% of the late deposit or 15% of the intersest on the late deposit?

Defined benefit plans that permit the repurchase of refunded service credit typically require that the member repay the refunded account balance and also require that the member pay an interest payment or withdrawal fee. That payment or fee is typically not credited to the member's account and will not be repaid to the member if the member subsequently refunds his account balance before retirement. Assuming the plan accepts rollovers of eligible rollover distributions to be used to repurchase the refunded service, is it also permissible for the plan to accept a rollover to pay the interest payment or withdrawal fee?

Client has a Living Revocable Trust that includes the following:

1) Credit-Shelter ("Family") trust and QTIP Marital Trust;

2) Pecuniary credit-shelter funding formula

Grantor intends that his IRA funds the QTIP marital trust. There is language included in the Trust document that will allow the QTIP to qualify for the marital deduction according to Rev Rul 2000-2.

BUT: I am concerned that the pecuniary funding formula under this trust document may cause IRD issues.

ISSUE: Will the use of the pecuniary formula trigger IRD/income tax for the spouse as beneficiary of the QTIP when the IRA is used to fund the QTIP?

My reading thus far has given conflicting info: I have read that the ENTIRE value of the IRA may be treated as IRD when a pecuniary formula is used. Elsewhere I have read that when a client designates a QTIP trust as beneficiary of an IRA, this does NOT cause recognition of IRD because it is similar to a specific bequest of property.

HELP!!

Should I advise client to restate trust using Fractional formula?

Thanks in advance -

AmyK

We have a plan that the employer wants the broker to perform the following actions for the plan:

Transferring funds over the internet. (The participants give them their PIN and he makes the transfers.)

Receives contributions from multiple locations, consolidates them, and sends one wire.

Sign distribution forms as the plan representative.

Receive all correspondence that we would normally send to the plan, including nondiscrim results, statements, and 5500 reporting.

These are in addition to the normal investment advisor functions he performs for the plan.

Is he disqualified and would these be prohibited transactions?

Does anyone know what an "age neutral" plan is?

A client has asked if this would benefit him. Owner is 35 and new-comparability won't work. He was advised by friends to look into an age-neutral plan.

From everything I can find, we would define 3 rate groups - owner, nhce1 and nhce2. We would then classify the younger nhces into the nhce1 group and the older nhces into the nhce2 group.

Nhce1 would get a higher allocation rate than the owner and nhce2, while nhce2 would get a smaller rate.

Everything is then tested using the general test.

Is this correct? or am I missing something?

Any help would be appreciated.

Thanks.

How do you calculate and distribute a minimum distribution for a participant who has only an outstanding loan balance?

Would this involve a partial deemed distribution on the loan...reported on 1099 for 2001?

Has anyone given much thought to the "relief" from the same desk rule offered by EGTRRA's change in the 401(k) distribution event from a separation from service to a severance from employment? It seems that this change will help in asset sales where there is a change in employer, but not in stock sales. Rather, in cases where a subsidiary is being sold, one still has to rely on 401(k)(10) to make a distribution, which means that there remains a problem if the seller or buyer is a non-corporate entity such as an LLC or a partnership since 401(k)(10) is not available in those situations. In other stock sales where the entire company or group is being sold, Buyer has to deal with either continuing the Seller's 401(k) plan, merging it with Buyer's 401(k) Plan or possibly having the Seller terminate it before closing in order to allow distributions. Anyone with additional or contrary thoughts out there about the repeal of the same desk rule? Thanks.

Please advise sources for administration of a client's Medical Reimbursement Plan Trust. I have a 401(k) client who has had for years an Executive Corporate Medical Reimbursement Plan Trust administered by Lincoln Financial Group. They have received notice that Lincoln will discontinue this product as of 1/1/2002. I have not worked with Executive Medical Reimbursement administration for years and have no sources to recommend. Please advise if you have information on who is still doing this work that I may refer them to.

Where can I get information regarding the non-discrim testing for a self-insured medical and dental plan?

I hope someone can help answer a question for me...

My husband was laid-off in May, and we elected COBRA in order to avoid potential problems with Pre-existing condition issues should his unemployment end up lasting more than the magic 180 days.

Well, thankfully, he found a new job ... but the problem is that when the job offer was made, the company misrepresented the health plan benefits ... and it turns out they are useless to our family. We thought we could just continue on COBRA a while longer until they transfer us to a new state in 4 months or so, where there is a health plan available that meets our needs. But their HR dept says we can't do that and that once we become eligible for benefits (Nov 1) our COBRA will be terminated.

This doesn't seem right. Can't we keep the COBRA somehow?

Can anyone shed some light on this for me?

Thank you,

April and the Zoo

Can someone clarify this rule. Do you use the $170K compensation limit to determine maximum employee contribution allowed or the employer matching contribution. We track the $10,500 employee contribution limit and the employer contribution limit at $5,100. (3% match on a compensation limit of $170K). We have some employees, who may reach the 170K in June, thus they may not shelter the 10,500 max allowable contribution or the company match.

If a plan is top-heavy for the 2001 calendar year (based on a 12/31/00 determination date), and the plan sponsor's fiscal year ends 8/31, when must the top-heavy contribution be made to avoid needing to use the top-heavy correction mentioned in Revenue Procedure 2001-17?

I realize an organization can not establish a SIMPLE IRA if they have any other plan in existence for which contributions are being made, including a 403(B) tax sheltered annuity.

Situation: A person owns a for profit business and has set up a SIMPLE IRA and the spouse also works in this business and receives compensation along with working part-time at a tax-exempt 501©(3) organization that offers a voluntary 403(B) plan.

I realize that generally an employee could participate in both and that the deferral limits must be aggregated. However, my question is whether this spouse (possibly considered an owner and therefore in "control" of both the for-profit and the 403(B) account) can actually participate in both? And, if did participate in the 403(B) only, whether that would have any effect on the for-profit business ability to offer the SIMPLE at all. much less be excluded from participation somehow?

Help! I have never done one of these before. I usually just do the Cafeteria Plan and fully insured group medical plans. There were 117 participants at plan year end. First year of self-funding, and also the last - client hated it. Do I need a schedule H or I? Does the return need an audit? How do I find out exactly what questions to answer?? Any help is greatly appreciated.

When was the term "Minimum Required Distribution" officially changed to "Required Minimum Distribution? Please cite the authority.

Peace,

Joel L. Frank

is it allowable to retroactively amend a plan to change the plan year? i have a plan that is a calendar year end and wants to change their plan year to 9/30. however, they want to make the short plan year from 1/1 - 9/30/2001. thank you.

I'm told my pension (lump sum) is based on the lower of two rates; 30 Yr. T rates and PBGC. I'm not sure how the lump sum is calculated however! :confused:

I meet the age and/or service requirements to be able to retire without any reduction in my pension. My age is 56 for life expectancy purposes.

The "yearly" pension is equal to 1% for every year of service based on the average of the best five year's salary. Example of the "yearly" pension would be: .35 (35yrs) X $100K (Avg.) = $35K Yr.

Can someone please tell me what the formula or methodology is for calculating the "actuarial equivalent" lump sum payment based on my age and the above noted "yearly" pension option?

There must be a simple way to calculate it, right? Or no?

Thanks!