We are considering several changes to our plan design and would like to know if anyone has gotten a determination letter on a 401(k) plan document that included a bottom-up QNEC. Anyone have trouble getting a determination letter for a plan with this feature?

Thanks.

PAL

We are beginning to start contacting our clients about the restatement process. We have found out that the nonstandardized document we will be using (Corbel) will no longer need to be submitted to IRS. Now we are kicking around in our office the idea of switching all of our clients currently using the standarized to non-standarized.

Can anyone think of an advantage of staying with the standarized document?

Any thoughts would be appreciated.

Is a plan sponsor allowed to charge the plan for reimbursement of wages for the HR person who handles the internal administration of a profit sharing lan?

I have a 412(i) plan going in at 70% of the max contribution. The C Corporation employer is making profit sharing contributions at 25500 per employee per year. There are no nonhighly compensated employees. We are considering starting the plan on Dec 1. My question is if the annual 412(i) contribution is 50,000 but we are only making a 2001 contribution of 4166, is the 412(i) contribution deductable in full in 2001 as well as the profit sharing contribution? 404(a)(7) limits deductions to the greater of 25% of comp or the minimum funding standard of 412(i). The 25% of comp of 140K seems to be 35000. So could the difference of 9500 be funded into a 412(i) plan?

A prototype 401k plan is amended from a fiscal year ending 8/30/00 to a calendar year beginning 01/01/01. The amendment is not signed until 3/01. Is this ok? The only references are 1.401(a)(4)-5, but this change is not specifically referenced.

i have a qualified plan sponsor who does not intend to deposit a 2000 matching contribution prior to the corporate tax filing deadline (9/15/01). the sponsor is not concerned about this being a tax deductible contribution for 2000. currently the plan doc says that the contribution must be deposited by the corp tax filing deadline, however, the attorney has said that he could amend the plan to allow for a later date.

what is the drop dead date for depositing this contribution. other than deductibility, what are the ramifications of a late deposit?

thanks!

~~~Reposted by Popular Demand~~~

re: IRC 402(h) Exclusion Limit under EGTRRA

Although the EGTRRA did not make any changes to the rules regarding the participant's exclusion of SEP and SARSEP contributions under Code Section 402(h), technical corrections are likely to be forthcoming. It is unclear to what extent Code Sections 402(h) will be changed, if at all. The practitioner will need to examine any change by taking into account the following:

1. Whether the "percentage limit" (currently 15 percent) on the exclusion of contributions from a participant's income, is increased (i.e., to 25 percent). [iRC § 402(h)(2)(A)]

2. Whether elective contributions (within appropriate limits) are excluded from a participant's income in addition to the percentage limit (up to the $40,000 aggregate limit under Code Section 415).

3. Whether elective contributions continue to be excluded for the purpose of applying the percentage limit, thus requiring that only "includible" (taxable) compensation be considered [iRC § 402(h)(2)(A)]

4. Whether the reduction to the $40,000 (for 2002) limit should continue to apply when the plan is integrated. [iRC § 402(h)(2)(B)] With a projected taxable wage base (TWB) of $84,900 for 2002, the maximum SEP contribution for 2002 would be $35,160.70 ($40,000 - ($84,900 x .057)) in a plan fully integrated at the projected TWB amount. The language of Code Section 402(h)(2)(B) would appear antiquated and inconsistent with current legislative intent.

5. Whether the compensation cap of $200,000 under Code Section 401(a)(17) for 2002 will apply for the purpose of the percentage limit, which in the authors opinion, it has never been subject to, although it does apply to Code Section 415.

6. Whether elective contributions (within appropriate limits) are deductible by the employer in addition to the 25 percent of aggregate compensation deduction limit (but not in excess of the $40,000 per participant limit under Code Section 415). [iRC § 404(n)].

I submitted a comment to Treasury and Senate officials on July 18, 2001, proposing the following changes be made to address these issues:

(a) Amend Code Section 402(h)(2) (dealing with the exclusion from income) as follows:

Limitations on Employer Contributions. - Contributions made by an employer (other than elective deferral contributions made pursuant to an arrangement under section 408(k)(6)) to a simplified employee pension with respect to an employee for any year shall be treated as distributed or made available to such employee and as contributions made by the employee to the extent such contributions exceed the lesser of -

(A) 25 percent of the compensation [Authors Note: Or "includible compensation," see item 3 above] (within the meaning of section 414(s)) from such employer for the year (determined without regard to the employer contributions to the simplified employee pension), or

(B) The limitation in effect under section 415©(1)(A).

(B) Strike the remainder of Code Section 402(h)(2)(B).

© Amend new Code Section 404(n) (dealing with the 100 percent deduction rules for elective deferrals) as follows:

Elective deferrals (as defined in section 402(g)(3)) shall not be subject to any limitation contained in paragraph (3), (7), or (9) of subsection (a), or subparagraph © of subsection (h)(1), and such elective deferrals shall not be taken into account in applying any such limitation to any other contributions.

Amounts (including elective contributions) that exceed the exclusion limit (currently 15%) should be reported as "wages" on an Employee's Form W-2. In most likelyhood, this will eliminate the 10 percent nondeductible contribution penalty tax under Code Section 4972.

~~~Reposted by Popular Demand~~~

A plan uses the cash-out method of distribution. A partially vested employee is rehired prior to five breaks in service. What specific disclosure is required to be given the former participant upon rehire informing him or her of the right to repay the distributed balance? Thanks.

Employer with self-insured group health plan wants to restructure benefits, such that employees are offered additional cash compensation if they opt our of discretionary benefits including group health coverage. Presuming these employees are not Medicare eligible through age or disability, is there any problem with the Medicare Secondary Payer Act, in making such an offer? As a precaution shouldn't the employer get a written statement from employees who opt out, demonstrating that they have coverage elsewhere (e.g., through a spouse's employer)?

Cafeteria plan participant wants to add spouse to coverage under group medical mid-year, due to increase in cost of spouse's coverage under her employer's group health plan.

Cafeteria plan does not have open enrollment for medical plan (self-insured plan). Adding spouse to coverage is not a problem, however can the employee change his pre-tax premium payment, mid year, to include the spousal premium?

What do we call Safe harbor disaggregated portion of the plan for item 4e of Schedule T. This plan also has a profit sharing contribution therefore I already have a disaggregated portion called "nonelective".

I have an IRA/SAR SEP which I have had for 6 years. Is it possible to move some of the account funds into a Roth IRA? Can I change my weekly payroll deductions to go directly to a Roth?

Thanks Jerry L

I notice the article today that says that severance pay cannot be used for 401(k) contributions because only active employees can participate. What if the layoff involves so many employees that it triggers WARN Act pay and the employees are entitled to 60 days of pay and benefits. How do you give them the 60 days of 401(k) when you cannot use severence pay and the employees are gone?

EGTRRA 641© expands this to include 403(B) and 457. My question is, who is the "administrator" under a typical 403(B) salary deferral arrangement? In other words, who will be responsible for this - the employer, or the insurance company, mutual fund, etc.? Thanks.

Is it allowable for a Minimum Required Distribution from an IRA to be made "in-kind"? For example, instead of taking a $10,000 MRD in cash, could an IRA holder take 500 shares of ABC corp stock with a fair market value at the time of distribution of $20? The transaction of course is treated as $10,000 of taxable income. Does the $20 fair market value then become the basis of the stock for the account holder?

I don't see why this can't happen, but would appreciate any comments and cites, if they are available. Thanks.

As part of our divorce settlement, my ex-husband is entitled to 1/3 of my 401k. I was told we needed to fill out a form (quadro?) Neither of us has an attorney. Any info on how to actualize this transaction would be greatly appreciated.

It seems to me that since we will not get taxed on money that is already in a Roth IRA, that it would make since to put the Roth money in a mutual fund that is really aggressive, like a Tech fund with high turnover percentages. Of couse this now seems like a null idea due to the drop in the Tech market. But overall, Gains, dividends, and turnover doesn't matter in a Roth . . . Right?

Of course one should always stay diversified.

I welcome any thoughts on this subject.

Zane

What are the consequences of an plan administrator (employer) authorizing plan distributions earlier than allowed in the plan document? The timing per the adoption agreement is within a reasonable time period after the plan year in which termination of employment occurs. The employer is paying out benefits to participants who terminated in 2001. This is a money purchase plan with a 1000 hour/ last day requirement to receive a contribution so these people will not be receiving any additional contrbutions into the plan.

I have always been a stickler at following the plan document when it comes to the timing of distributions, but it seems like plan sponsors i am currently working with as well as other professionals in the business have become very "flexible" in paying participant out.

Anyone have any insight?

An employee was allowed to defer in 2000, but employer discovered later that she was not eligible. I understand that correction of this insignificant operational defect should be distribution of the deferral, plus applicable earnings. What about losses? The deferral amount was only $276, so if losses are taken into account, the amount to be distributed won't be much. Also, does the employer issue a 1099-R for 2001, or is the $ taxable in 2000, and, if so, how reported?

I'm sure this has been covered before, but my search isn't turning up anything on point. Thanks for any help.

GBurns posted messages regarding a "boot Leg" version and a real version of HI Plan. He did not specify who was who or if he had evaluated what they call "Due Dilligence".

Any info before we proceed.

Thank-you

Ross