I have just received an interpretation (NOT from the IRS) that Section 642 of EGTRRA does not allow IRA assets to be used to purchase service credit, but merely to rollover into an employer's retirement plan's 401(k) plan.

Is that the reading of that provision that you'all get?

Thanks

A cash balance plan doc says interest credit is 4%. However, every year since its inception they have added an ad hoc amendment to provide for an interest credit of 8%.

Should this now be a permanent plan feature or amendment? i.e. any precedent? Or could this be considered a 411 forfeiture in accordance w/ 96-8?

Any comments out there?

My sibling and I inherited a traditional IRA last year (2000). My sibling wired their 1/2 of the fund to a personal account out -of -state and I left my half intact. A year later, my 1/2 is still intact, accruing interest. Questions:

1) my bank says I can leave it that way indefinitely as

long as I take out at least the minimum distribution

yearly. (they claim that my sibling taking 1/2 out last

year qualified for that). Is this true?

2) My parent was issued the 1099 for the amount of

funds withdrawn by my sibling. Was this correct? My

sibling says this was wrong. Should have been

made out to him and that my bank officials were

uncooperative to make the change.

3) How am I going to be taxed on this - should I have

received some sort of 1099?

With money purchase plans effectively becoming obsolete under EGTRRA, many employers that are sponsoring 2 plans (a MP and a PS plan) are interesting in merging the plans into 1 plan. Let's say that an employer's goal are:

1) To maintain only 1 plan going forward;

2) To eliminate the annuity provisions of the former MP money in the profit sharing plan (if the plans were merged);

3) To avoid 100% vesting of former MP money; and

4) To keep leakage (participants taking premature distributions) of the former MP money low.

It seems to me that a plan merger solves issues #1, #3 (maybe) and#4. Termination of the MP plan solves issues #1 and #2. However, what solves all four?

Maybe an employer could utlize the liberalized EGTRRA elective transfer rules and give all participants the option to transfer their MP balance to the PS plan, thus cleansing the former MP money of the annuity rules. Assuming that 95% of the participants actually make this election, that would leave a couple people with balances in the MP plan. Could the employer then terminate the MP plan, make these remaining participants 100% vested and force distribution of these accounts? What potential problems do you see here?

What are other employers requiring for pre-65 retirees' continuance under health plans? Any employer contribution?

Thanks

Ned Strain

National YMCA Employee Benefits Plan

Who pays the sanction associated with obtaining a Walk-in Closing Agreement for a multi-employer pension plan?

Can a brokerage affiliated Trustee of an ESOP purchase stock from the broker/dealer's inventory where the only market in the stock is from the broker/dealer? Our thoughts were that a disqualified person under an ESOP can sell stock to the ESOP as long as the purchase is at fair market value. We normally only process agency trades for qualified plans purchasing company stock except in this case our inventory is the only source of stock.

Anyone have any thoughts?

I was granted Phantom Stock from my prior employer (ESOP Co) because my ESOP allocation was reduced as I had contributed the maximum allowable to the 401k plan and therefore hit my 415 limit. The amount of my Phantom Stock grant was equal to the number of shares I did not receive on my ESOP allocation due to the 415 limit. At the time, the Phantom Stock plan stated that it would be paid out in the same mannerism as the ESOP distributions. The ESOP plan (co is a S corp) converts my company stock to other investments (similar to those provided in a 401k plan) and allows me to rollover these investments out of the ESOP and into a qualified retirement plan over a 5 years period ($25k per year for up to 5 years).

Now I am being told that the Phantom Stock will not be paid out until after my ESOP investments are distributed (IE, in the fifth of 5 years), and that the funds will not be invested at all during these years (the $ amount is frozen).

Had I known this, I would have reduced my 401k contribution because these Phantom Stock funds will not be invested over a 5 year period and are at risk of being lost if the company goes bankrupt...are there any rules governing modifications to the distribution policy of nonqualified plans? Does the state law (California) protect me at all in this instance?

Also, doesn't the Phantom Stock payment need to be treated as Ordinary Income with income taxes withheld? (They are proposing that they will issue the check after five years with no taxes withheld).

A client will be shifting to a PPO. The client wants to encourage certain employees to opt out of medical coverage. Accordingly, if employees elect to opt out of coverage, the client will give them a certain amount of cash (all or a portion of the employer-portion for PPO coverage). The client has a cafeteria plan. Must these payments be treated as taxable benefits under a cafeteria plan (under the argument that all employees basically have flex dollars)? Alternatively, can these amounts be paid outside the cafeteria plan?

On another note, may the client pay different amounts to different employees under this opt-out provision?

It would appear that these amounts would be paid under the cafeteria plan. If so, the client would need to worry about non-discrimination requirements if different amounts were paid.

Thanks in advance. Ed

After 2001 will the 402(g) limit still have to be reduced in the year the 6 month suspension of deferrals ends by the deferrals made in the prior year?

I have a client who is still employed and taking minimum distributions from a defined benefit plan in an annuitized form. We have adjusted the minimum each year according to the accrued benefit for the prior year. Question: Can he change the form of the minimum to an "individual account" type for purposes of determining the required minimum distribution? Both types of minimums for defined benefit plans are addressed in the Proposed Regulations (see Section1.401(a)(9) - 6 Q&A-1).

Can a plan pay the premium for the ERISA required fidelity bond? I have reviewed the recent DOL guidance, and while it doesn't appear to mention bond premiums, it seems that the premiums would be a "fiduciary" expense which can be paid from the plan.

I have a profit sharing plan that has not made a contribution in about 3 years. In 1999 line 6, BOY participants of the 5500 was 109. Line 7f of the same 5500 was 148. I am assuming that 148 is my BOY, for the 2000 form 5500. Up until the new forms this client always filed the ez form because they were always under 100 participants.

I am correct that for the 2000 5500 this client needs an audit report??

Thanks

susan

I was wondering if anyone could tell me their practices with respect to how frequently they value stock under an executive comp plan? I have an ISO plan and a non-qualified stock option plan (not a 423 plan) and regularly have annual valuations by an outside appraiser conducted to determine the fair market value of stock issued under these plans. With respect to ISOs, I know the stock must be granted at its fair market value on the date of grant. In theory, if I had a number of corporate events occur after I valued my stock and I granted additional ISOs using a value I ascertained 6 months ago during my annual valuation, aren't I in danger of having my ISOs recharacterized as NQSOs? But my main question is how often are people out there valuing their stocks? Annually? Quarterly? Thanks so much everyone! (I posted this message on the deferred comp board as well).

I was wondering if anyone could tell me their practices with respect to how frequently they value stock under an executive comp plan? I have an ISO plan and a non-qualified stock option plan (not a 423 plan) and regularly have annual valuations by an outside appraiser conducted to determine the fair market value of stock issued under these plans. With respect to ISOs, I know the stock must be granted at its fair market value on the date of grant. In theory, if I had a number of corporate events occur after I valued my stock and I granted additional ISOs using a value I ascertained 6 months ago during my annual valuation, aren't I in danger of having my ISOs recharacterized as NQSOs? But my main question is how often are people out there valuing their stocks? Annually? Quarterly? Thanks so much everyone!

Rev. Proc. 2000-27 provides that the remedial amendment period for a government plan expires as follows:

.01 The remedial amendment period for governmental plans, as defined in sec. 414(d), is extended to the later of (i) the last day of the first plan year beginning on or after January 1, 2001, or (ii) the last day of the first plan year beginning on or after the "2000 legislative date" (that is, the 90th day after the opening of the first legislative session beginning after December 31, 1999, of the governing body with authority to amend the plan, if that body does not meet continuously).

Technically the "2000 legislative date" would allow calendar year state plans to amend their plan no later than the end of 2002 if a legislature did not meet in 2000, but met in 2001. However, I do not know how that exception has been interpreted. For example, is it broadly interpreted to allow an extended date for all plans created by state law in which the state legislature does not meet continuously. Or is there also a requirement that in order for this exception to apply that the state plan must be unable to be amended except by act of the legislature?

Would it matter if the state agency that has administers the plan has the express or implied authority to amend the plan in matters that don't affect substantive rights of participants?

I need to file an amended return for a 12/31/00 return. Anyone know how long it takes the PWBA to process these returns or how I can "confirm" the processing of the original as per the instructions?

If I missed an instruction somewhere, let me know that, too!

Thanks.

Ervin Barham

What is a person's average comp as of 1/1/2002 in a calendar plan, when the person has always earned $200,000? Does the new limit apply to past years? I've read a couple of arguments that it should be applied retroactively, but IRS' guidance is needed.

Any recent developments, or indication of whether or when guidance will be issued?

Employer sponsors a profit sharing / 401(k) plan. Employer currently contributes 5% of pay to all eligible employees and an additional 5% of pay on compensation that exceeds the social security wage base.

Employer is considering contributing $40,000 for employees who also are 5% owners but otherwise not changing the allocation formula. General 401(a)(4) test on a benefits (age-weighted) basis is run without imputing permitted disparity and passes easily. Because all NHCEs receive at least a 5% allocation and no HCEs receive an allocation greater than 20% when measured on a contributions basis, the new cross-testing regulations don't pose a problem.

Employer is also considering fully vested the contribution (and meeting other requirements of qualified nonelective contributions) and using it to satisfy the 3% of pay employer nonmatching option for a 401(k) safe harbor so that no ADP testing is required. My question (finally!) is whether this is permitted for contributions that are allocated using the social security wage base as the integration level if the actual 401(a)(4) testing does not impute permitted disparity.

I heard the IRS is either significantly reducing or eliminating user fees effective 2002!

Where can I find the IRS announcement/notice to that effect?