With regards to EGTRRA in 2002, I read an article in a national magazine that said in addition to a $40K profit sharing contribution, it would be possible to also make upwards of $11K as a 401(k) contribution. Add in the catchup contribution for the participant over age 50, and a $52K contribution is possible.

The author made a reference to EGTRRA's change in Section 404 which I had interpreted to state that for the purposes of deduction limits of Section 404, one no longer has to deduct deferrals from comp to determine the Plan's maximum contribution of 25%. But I thought each participant is still restricted by 415© to a total of $40K in 2002.

Can someone clarify this for me?

Thanks.

Have a new client who is using a 52-53 week plan year. The "2002" plan year begins December 30, 2001, (plan year ends the Saturday coinciding with or closest to, whether preceding or following, December 31st of each calendar year, so the 2001 year ends December 29, 2001). How will EGTRRA apply as it relates to plan years beginning after December 31, 2001.

Any comments?

Diane

I inherited an IRA from my 69 year old brother. I know I can take distributions over 5 years, my life expectancy, or lump sum. If I do want to take distributions over my life but want to move the money from the company where it is now (change custodians), what is the best way to do that?

Do I change it to a beneficiary IRA and then do a trustee to trustee transfer or is there a better way? Does it have to be re-titled to a beneficiary IRA?

If so, what is the correct wording for a beneficiary IRA?

How should a client calculate the FICA liability (actually, just the HI portion since the SocSec portion is capped) pursuant to a NQDC Plan which allows the participants to direct their own "investments", similar to a 401(k)? More clearly, since the formal IRS regs now require FICA withholding on the principal amount of deferral plus one year's interest, how can the sponsoring company (and the EE) satisfy its FICA obligation if the amount of the interest can't be determined until the last day of the year? I'm familiar with the lag method and the estimated method. Is that what other companies are doing?

A participant, who is over age 59 1/2, wants to remove her life insurance policy from her 401(k) plan. That is, she wants to keep the policy but wants to own it outside the plan (I don't know why). I believe that she can take possession of the policy outside the plan and that the consequences are that she is liable for income tax on the cash value of the policy when distributed.

Am I correct in this? And, since there will not be any actual cash involved, is there a problem with the mandatory 20% withholding rule?

A 5558 extension was filed with the wrong plan number. How should the 5500 be filed so that it is not considered late?

We called the PWBA and the person at the PWBA said they did not know and gave us a number for the DOL. The person at the DOL said to file the 5500 as an amended return and attach a letter of explanation. It does not make sense to me that we would check the amended return box when the 5500 has never been filed in the past.

Has anyone else had this situation? If so, how did you complete the 5500?

Is it possible to purchase government securities (t-bills, bonds) inside an IRA and have the coupon payments made outside the IRA, without it being considered a (taxable) distribution from the IRA?

Is there a trend developing around the reduction of 401(k) match? Seems I've been reading about a number of large companies reducing their employer 401(k) match. Delphi is one of the companies that has done this. Is this purely a short term cost savings tactic that is preferable to position reductions or other more painful tactics? Or is this something unique to Delphi and others in the automotive industry? I'm very curious about the rationale behind a move like this given it's uneven impact on only those employees enrolled in the plan and because it seems like a pretty unusual step to take. Other's experience and perspective would be greatly appreciated. Maybe this is a much more common practice than I realize.

A privately held corporation has a SIMPLE. One of the employees of the privately held corporation also participates in a 401(k) plan at another employer. Is there a coordination issue on the amount the employee can contribute? What are the limits to consider?

Who generally files (or is repsonsible for filing) the Form 5500 required for a Master Trust Investment Account (MTIA) as a Direct Filing Entity (DFE)? Is this filing generally done by the regulated financial institution that serves as trustee or custodian? Is this filing generally done by TPAs? Does anyone have experience with Form 5500s filed by MTIAs?

I would appreciate any information on this subject that is not directly out of the Form 5500 instructions. Thanks.

If a plan has a 2-year wait to enter, are the employees with greater than 1 YOS but less than 2 excludable from 410(B) coverage?

EGTRRA changed the rules for determining when a plan is top-heavy. According to 2001-56, the new rules (definition of key employee, distributions, etc.) are analyzed on December 31, 2001 for a 2002 calendar year plan - the last day of the prior plan year. A new plan was adopted for 2001. Therefore, the determination date for the current plan year is also December 31, 2001 - the last day of the current plan year. It seems to me that you must apply 2 definitions and analyses to December 31, 2001 - one for the current year using the old rules and one for 2002, using the new rules. Has anyone heard anything to the contrary?

Has anyone heard of using an IRA to make a loan for a mortgage on a single family house. Loan would come from the IRA and the interest and principal payments deposited back in the IRA. Can you do this? If so, what are the pro and cons aside from investment/credit risk?

thanks

Our company started a 401K plan in May 2000. I have stopped making contributions to the plan, and my employer has discontinued making matching contributions because of a decline in business. For a number of reasons, no one has been particularly happy with the plan, and many of us would like to move our money.

I have both Roth and regular IRA accounts with another broker, and would like to know if I can rollover the funds of the 401 to either IRA account. I'd guess that since the 401 contributions were pre-tax, any rollover would be to the regular IRA. The fact that Congress may increase the maximum IRA contributions to $5000 makes this move, if possible, even more compelling.

So, can I close out the 401 and roll it over to either IRA account?

Carl C.

we were advised that the repeal of 415e would allow the following:

1. receive the maximum 415 limit in a 401k plan (i.e. 35k for 2001)

2. the maximum benefit allowable in a db plan ($135000)

is this correct? i was under the impression that the repeal was re: the 1.0 calc only but you still had the issue of either the 25% of comp limit or the full db limit, depending on which plan you fund.

we are interested in setting up a 401k plan in addition to our db since it is our understanding the deferrals will not count towards the deductible limit, thus, deferrals will be okay, as long as we don't fund the er portion (since we intend to fully fund the db)

were we advised correctly on the max 35k due to the repeal of 415e?

bb

Our prototype under TRA'86 was written assuming that the match was made at year-end (i.e., it did not contain a provision or option to calculate it on a payroll period basis). We therefore generally only permitted employers to change the matching formula from plan year to plan year...

Just when or how frequently can the matching formula be amended (or amended from fixed to "discretionary")? Our new prototype for GUST contains an option to specify that the match is based on "each payroll period". Does that provision (versus match based on "entire plan year") have a bearing on the timing or frequency of when the matching formula can be amended?

I recall that IRS Notice 2000-3 (regarding safe harbor) specified that safe harbor matching contributions can be ceased mid-plan year with 30 days advance written notice to the employees. Does this same approach hold true for any amendments to a plan's matching formula - i.e., it can be made at any time during the plan year provided that a written employee notice is provided 30 days before the effective date of the change?

And is this 30 day notice similar to the 204(h) notice, or where in the regulations is it discussed?

Thanks for your help...

Will the new benefits i.e. roll-over options, contribution limits, catch-up plans, non-refundable tax credits, for 401(k) employees effective 1/1/2002 also be applicable to public sector 401(a) money purchase pension plans? If so will these benefits be an option of the plan administrator or required to be included in the plan?

Does a 3% safe harbor contribution also satisfy the minimum top heavy contribution for a top heavy plan?

When a Plan amends its definition of compensation, and/or adds a compensation exclusion (i.e., bonuses, overtime, or compensation earned before a participant's "entry date")...

Can these types of changes be made mid-plan year? Or, if the effect of these amendments is a reduction in the compensation that will be considered for that year, is that a reduction of an IRS protected benefit? Say this is for a 401(k) plan with a discretionary match and discretionary profit sharing made at year-end.

If any of the contributions were mandatory, would that have any bearing on the ability to amend the definition mid-plan year?

Does the presence of an "employed on the last day" requirement have any bearing on the ability to do this mid-plan year? (The impact of the definition of Compensation, however, extends beyond those provisions that can have a "last day" requirement...)

Thanks for your input...

Just wondering what others know regarding the Nov. 15th extension for 5500's normally due with extension on 10/15.

Are all plans automatically eligible for this extension regardless of where they are located? I spoke with a representative at the PWBA and she said "it applies to all plans and, considering the circumstances, proof won't be required so long as the return is filed by 11/15.... however, every effort should be made to file as soon as possible..."

The response wasn't exactly definite, has anyone else inquired with the PWBA directly and received a different response?