I have received conflicting information reagrding a Governmental organization being able to Opt-out of Social Security. One told me that no one is able to opt-out anymore except for possible seasonal/part-time employees. The other said it could be done provided they never had filed a 218 Agreement to remain in Soc. Sec.

Can anyone help clarify this for me. Thanks

I've got a MPPP that employer just notified me that they want to terminate as of September 30, 2001. Plan year ends September 30. Employer will fully fund for plan year ending September 30, 2001. I have just taken a closer look at 4980F contained in EGTRRA and saw the reference to the minimum 3 month notice period for amendments effective after the date of enactment of EGTRRA. Does that mean that employer will now not be able to terminate the plan until 3 months from today's date (assuming amendment to terminate signed off on today and participants given notice of amendment today? In other words, unless and until Treasury adopts regulations to address it (possibly exempting plans with fewer than 100 e/ee's under 4980F(e)(2)(A), will there always be a 3 month mandatory notice period? I will check to see if any interim guidance has been put out by the IRS which I have not yet seen which addresses this.

Could you refer me to the Code which illustrates participation and eligibility for S-Corps in a 125?

If the forfeitures of a target benefit or money purchase plan exceed the contribution formula amount, what is done with the forfeitures that exceed the amount? Can they be placed in a suspense account? Does it matter if the forfeitures exceed the formula amount because the plan sponsor made an actual contribuiton in addition to the forfeitures?

Question I'm hoping someone can help us with. Can we hold a former employee (terminated during a reduction in staff) responsible for money paid in excess of her contributions to the medical spending account? Our administrator paid the claims because they were incurred during her employment and were toward her annual contracted amount. Any assistance is greatly appreciated.

a plan has put a 1,000 accrual requirement on the match contribution. They apparantely have not been following this provision as some distributed accounts (less than 1000 hours) have received matching contributions. Should these participants who technically should not have received match be included in the ACP test? For purposes of the ACP test, they are ineligible as they did not work 1000 hours.

We have a client who is interested in investing the proceeds from his sale of stock to an ESOP in notes of General Electric Capital Corporation. The client has been advised that GECC paper is no longer "qualified replacement property" (presumably because such notes no longer meet the requirements of Code Section 1042). Does anyone have any relevant information about these GECC notes?

Are there any exceptions for a profit sharing plan not needing a bond?

In a defined contribution plan:

If forfeitures are used to reduce employer contributions, and the employer makes a contribution that, together with the forfeitures, would exceed the 404 deductible limit, has the employer made a nondeductible contribution? Or can the forfeitures be placed in a suspense account and used to reduce a future year contribution?

Is the answer different for money purchase and target plans as opposed to profit sharing, 401(k), and ESOP, etc.?

We are a governmental entity. We have adopted a 401(a) defined contribution plan as our alternative retirement plan in lieu of Social Security beginning Oct 1, 2001.

Is the 401(a) tax deferred from federal, state, and/or medicare?

The agency is contributing 6.2% and the employee is contributing 6.2% (mandatory) to this 401(a) in place of Social Security. How does the W-2 reflect these contributions? Thanks!

A client died over the weekend. On the Friday before, his son, who had a valid power of attorney, made a request to withdraw a substantial sum from his father's IRA. The request did not reach the IRA custodian until after close of business on Friday. It was effected on Monday, after the death of the client.

My question is whether the income is taxed to the decedent or to the estate? If the income is treated as belonging to the decedent then his estate can be reduced by the amount of the income tax liability associated with that distribution. My feeling is that because the transfer did not actually take place until the Monday, that is when the income is recognized and therefore it belongs to the Estate -but does anybody have any thoughts?

Thanks

We currently pay 100% (ind and family) for partners and salaried employees benefits and 100% (ind only) for hourly employees. If we were to implement an opt out policy (reimbursed 50% of employer cost) is there a discrimination issue? Also, if we did this opt out (same as above) for just salaried employees is there a bigger issue?

Any help would be greatly appreciated.

A year ago our company entered into Chapter 11 bankruptcy and the workforce has been reduced from around 100 employees to less than 10. Recently, we found that our plan administrator had levied over $800 and in some cases $1500 against each of our personal dwindling 401K balances without prior notification. Since we had not encountered fees before the bankruptcy is it legal for the administrator to levy fees without representing or notifying us beforehand? Secondly, please consider our dilemma where we risk losing our savings and the only recourse is to leave the company and seek employment elsewhere allowing us to rollover the plan to an IRA or another plan. What are our options in what appears to be excessive fees and perhaps illegal intervention of our 401K savings plan? What are the requirements that the administrator must convey to allow such large fees? If this is indeed inappropriate, under what terms may we contact the savings institution and notify them of the transgression by our administrator?

A retiring client, age 65, needs cash and wishes to distribute the employer securities (in-kind) from his 401(k), pay income taxes on the basis, and immediately sell the distributed shares at capital gains rates versus taking a fully income taxable distribution from the plan.

His average cost basis is $30 per share with a market value of $100 per share on the day he requests the distribution. A few days later the In-Kind distribution is made when the value of the stock has suddenly dropped to $25 per share ($5 per share less than his basis).

Would the In-Kind distribution still be taxed on his basis of $30 per share (despite the $25 per share market value)?

If the client is taxed at $30 per share, could he claim a loss if he immediately sold the distributed shares at $25 per share? Would it be a long-term or short-term capital loss?

Or would the In-Kind distribution be taxed at the market value of $25 per share?

If the client did not really need the cash, I would imagine that he could get the recently distributed In-Kind share certificates into an IRA within 60 days, pretend the whole thing never happened, and pray for the market value to rise.

STRATEGY FOR CLIENTS PLANNING WITH NUA IN A BEAR MARKET:

Assume another executive, an active participant in the same 401(k) plan that is not scheduled to retire for several years has a average cost basis of let’s say $50 per share for the employer securities in his 401(k). The total combined current market value of his 401(k) is $1.2 million (600k in employer securities and 600k in mutual funds). He is very happy with the long-term outlook and the current fundamentals of the employer stock despite its recent fall from a $100 per share market value to a $25 per share market value.

Do you see any tax disadvantages to having such a plan participant sell his existing employer securities with a current basis of $50 per basis only to re-purchase it a day later with a new basis of $25 per share? I am not much for short-term trading (especially with 1.2 mil) so perhaps the client would consider placing two transactions in one day as follows:

This client would simply instruct his plan to:

1) Sell his existing 600K in employer securities and purchase 600k in mutual funds.

2) Then he would immediately place another trade instructing his plan to sell his existing 600k in mutual funds and purchase 600K in employer securities.

He has now dropped his basis from $50 per share to a basis of $25 per share and still holds the same amount of employer securities and funds! If the stock continues to decrease in value and he maintains the same level of confidence in the stock, he will repeat this transaction in an effort to obtain an even lower basis in the employer securities.

If someone is planning on using an In-Kind distribution as part of his or her overall long-term tax strategy, doesn’t it make sense to obtain the lowest possible cost basis? Excluding portfolio diversification, what are some of the disadvantages to this approach?

Doesn't really bleong here... but:

is it true SEPs remain 15% in 2002?

If I have an IRA and a 403(B), can I take my RMD (I'm 74) distribution from my IRA only or must I treat them seperately and take one from IRA and one from the 403(b? Also, can I roll my 403(B) into my IRA? And finally, in determing the 2001 RMD I"m supposed to take, do I use the age I was on 1/1/01 or the age I am on 12/31/01?

Thanks

Company Alpha sponsors a defined benefit plan and a defined contribution plan. A participant in both plans terminates his/her employment with Company Alpha. Assume his/her accrued benefit and

account balance exceed their respective cash out limits. The participant would like to take a distribution from the defined benefit plan, in the form of a lump sum distribution, and roll that

amount into the profit sharing plan. The profit sharing plan is an eligible retirement plan. Since, at the time of the rollover, the individual is not an employee, can he/she make a rollover contribution to the profit sharing plan?

An employee is covered through a cafeteria plan. Her self-employed spouse's coverage through an agent has been cancelled due to the discovery of a condition that has been ruled pre-existing. Can the employee then add the spouse to her coverage? All the guidance I see talks about losing coverage due to a job change or eligibilty change. Again, the spouse is not losing coverage through his employer, as he is self-employed.

Sponsor of a Simple 401(k) wants to amend to be

a "traditional" 401(k). They are not using the

Model Amendment (Rev. Proc. 97-9) but have an Adoption Agreement. Can they amend to a traditional 401(k) this year (protecting accruals), or do they have to wait until 1-1-02?

And since there's 100% vesting under a Simple (k),

do all existing participants have to remain 100% vested going forward, not only in existing Simple contributions, but in the new traditional (k) employer contributions too? There are discussions under the 401(k) section, that indicate the vesting schedule must follow the participant.

We are the TPA for an orphaned plan where the plan sponsor filed for bankruptcy, terminated all employees, and closed their offices. We are in the process of terminating the plan. A plan audit is required for which the accountant's fee will be paid from the plan assets. If we decide not to have an audit conducted and file Form 5500 without the accountant's report who would the DOL & IRS impose delinquent filing penalties & fees? The bankruptcy estate?