The below questions all relate to 2002.

1. Will a participant who elects to roll over 100% of his assets have to be given the OPTION of either rolling over everything or rolling over everything except her after-tax basis?

2. Can a participant elect to have his assets distributed to him (with appropriate withholding) and then roll over the entire amount, INCLUDING after-tax basis, to an IRA or another Qualified Plan within 60 days? If rolled over to another QP, will the new administrator take the participant's word as to how much is after-tax basis, or is some documentation necessary? I assume the new administrator will also have to track the after-tax basis?

3. If assets that include after-tax basis are rolled over from a QP to an IRA, can any of it be rolled over again to another QP at a later date?

An employer with a 401(k) plan wants to terminate the plan's loan policy. Is a resolution to terminate the policy all that is needed?

According to its report posted at http://www.icmarc.org/retirementreform/cal457.html, ICMA Corp. is of the opinion that employers should wait until California tax law is updated before implementing EGTRRA's higher ($11k/$12k vs. $8.5k) 457 limits, "taxable when received" provisions, and 457-to-qualified plan rollovers.

According to ICMA, California law could consider any 2002 457 deferrals over the 2001 $8,500 limit (adjusted for inflation) to be excess contributions for California state income tax purposes.

According to ICMA, under state law, EGTRRA rollovers from a 457 plan to a non-457 plan could be a taxable distribution, and under state law participants may not be able to change their benefit payment schedules. (It seems California law still applies the pre-EGTRRA "constructive receipt"/"taxable when made available" concept instead of EGTRRA's "taxable when received" recognition model.)

According to ICMA, current California law does not prohibit a state and local governmental 457 plan from implementing EGTRRA, but doing so could have a negative impact on its participants' California state income tax liability.

ICMA says it is likely that in early 2002 the California legislature will modify state tax law to conform to EGTRRA, retroactive to 1/1/2002. ICMA encourages employers to urge our elected state representatives and the Governor to resolve this matter as swiftly as possible.

I am researching the possibility of moving our 401(k) plan to safe harbor and would like to know the percentage of plans that are already safe harbor. We have about 6500 employees. Any info on data resources would be appreciated.

recently i read that an employer can do a notice 30 days before the first day of the plan year saying that they might make the safe harbor nonelective contribution and then 30 days before the end of the next plan year they must decide whether they will or wont be making the contribution. I call this the wait and see nonelective safe harbor. Is this accurate or are their other restrictions?

Here is an interesting question:

A 50+ employer group currently has a Pre-tax Premium Account including group health, group dental, and group vision. However, several employees have spouses whose group health deductions (with other employers) are not on a pre-tax basis.

Question: Can this employer add to their current plan an Outside Insurance Premium Account which will allow an employee to run his/her spouse’s outside group insurance premiums through this employer’s plan on a pre-tax basis?

I don’t think it can be done, but the employer tells me he has heard of other groups doing it.

I appreciate any help you can give me.

We have encountered the very popular ineligible deferral problem discussed at length on this site. It appears that most persons uniformly suggest reporting a corrective distribution of ineligible deferrals using Form 1099R. However, what code would you use in box 7 on Form 1099R to report such distribution? It isn't really a code "8" is it? It isn't a return of excess deferral or contribution. And if you use code "8," what if you really do fail the ADP/ACP test and have to make refunds - then you'd have code "8" distributions that really are code "8" distributions and some code "8" distributions that really are not code "8" distributions. Problem is that there is no other code to reflect a refund of ineligible deferrals on Form 1099R. Isn't this a problem?

I am doing a projected 2001 calendar year adp test. On the census, an employee shows up with a date of hire of 7/1/2000. The Plan's eligiblity is no age, 3 months of service, and you enter on the first day of the month following. So, she enters the plan on 10/1/2000.

But for adp testing purposes, can I treat her as "otherwise excludable" up until 1/1/2002? Or do I have to test her along with the rest of the "non-excludables", effective 7/1/2001.

Thanks

I am doing a projected 2001 calendar year adp test. On the census, an employee shows up with a date of hire of 7/1/2000. The Plan's eligiblity is no age, 3 months of service, and you enter on the first day of the month following. So, she enters the plan on 10/1/2000.

But for adp testing purposes, can I treat her as "otherwise excludable" up until 1/1/2002? Or do I have to test her along with the rest of the "non-excludables", effective 7/1/2001.

Thanks

A company was purchased, their 401k plan was frozen, and EEs began to participate in the new company's plan. No plan merger occurred. A 5% owner had received a Min. Distrib. under the old Plan. He is not a 5% owner under the new company. Does he have to continue to take MRDs from either or both plans? I can find nothing in my resource data, so I really appreciate any help.

The deductibility limit for SEP Plans is going to 25% in 2002, but I heard that the individual contribution limit under code section 415 remains at 15%. How can this be?? Looking for some clarification.

Thanks,

Joe

Sole proprietor started his business on 11/20/01. He will probably have net profit of $15,000 between 11/20/01 - 12/31/01. He has no employees.

He wants to establish a Simple-IRA for calendar year 2001, within the next few days.

MY QUESTIONS:

1) Can he contribute a max of $ 6,950 to his new Simple-IRA account for year 2001 (if he does in fact have $15,000 net profit from 11/20/01 - 12/31/01) ..... comprised as follows ?

$6,500 elective deferral + $450 [3% match on $15,000 income] = $ 6,950

2) By what deadline must he contribute the $6,500 elective deferral ?

3) By what deadline must he contribute the $ 450 match ?

4) For next year (2002) ... must he contribute his elective deferrals monthly ? ... or can he wait and make one big lump contribution for the whole year 2002 ?

5) Since he gets no salary check from his business (remember he is a sole-proprietor) ... are the words "elective deferals" & "match" the proper terms to use when discussing his contributions.

Can a 401k loan (interest payments made on the loan) secured by a primary residence be tax-deductible in the year the loan payments are made (just like a regular home mortgage deduction)?

If so, what are the requirements to make this loan conform to the home mortgage tax-deductibility requirements by the IRS?

Must a lien be filed against the house? Must the 401k administrator report interest paid to the IRS? Are there any requirements either I or the 401k plan administrator must follow?

I want to avoid paying the interest part of the loan back with after-tax money, then pay taxes on the interest portion of the money again when I withdraw the money from the plan some years into the future.

My Roth IRA ($8000 contribution) has $2000 current stock value. I wonder if I can sell the stock and deduce my investment loss in my 2001 tax return? Thanks for any help.

A client is a large company that has recently put some of its salespeople on a commission basis. Commissions are not included in the definition of compensation for purposes of the client's defined benefit plan.

One of the execs of the client who has worked in the insurance industry has said that at a former employer, salespeople who were paid on a commission basis were given "fictitious salaries" for purposes of the defined benefit plan. This exec also said that it is common practice in the insurance industry to do this.

I have never heard of this and am doubtful about how and whether such a thing could work.

Does anybody have any knowledge of "fictitious salaries" or any similar practice through which commissioned participants are deemed to have earned some sort of surrogate for commissions? For those of you who work with defined benefit plans in which some participants earn commissions, how do you handle the definition of compensation? Are all commissions included? Some commissions to a ceiling?

TIA

A client maintains both a money purchase plan and a profit sharing plan. The employer is interested in merging the plans effective 1/1/02. A consultant indicated that the employer needed to provide a 30-day notice to participants apprising them of the plan merger. Is this accurate? I was unable to locate any authority that would require a 30-day notice being provided. Any thought? Thanks. Ed

The company payroll system cut off 401K payroll deductions and contributions in Oct-00 when I hit the Federal limit of 10,500 for the year. I was not informed of the fact that they had initiated the stop and was unaware of any rules regarding a contribution limit.

I'm a salaried employee with direct deposit and quite frankly never noticed this change since there are around 11 other deductions on the pay stub. The company payroll system did NOT resume deductions and contributions starting on Jan 1, 01.

I've been given many different lines regarding why they cannot fix the back deductions and contributions. They've also stated that it was my error since I did not "tell" T. Rowe Price (firm where money is sent to) to resume deductions. T. Rowe Price's system continued to state that I was at the 20% deduction level and stated the company's payroll system should have just resumed sending money on Jan. 1, 01.

What can be done to get this fixed and do I need to seek legal assistance?

Employer match attributable to excess contributions is forfieted. However, does anyone have any idea as to WHEN the orphaned match amount is calculated? If calculated BEFORE the ACP test (after the ADP test), then the amount would be forfeited regardless if a portion is vested. If calculated AFTER the ACP test, and there is an ACP failure, then the vested portion attributable to the ACP test (excess aggregate contributions) would first be returned to the participant. Obviously, this would be the most favorable hierarchy for participants affected by both ACP refunds and orphaned match.

Hi all, I'm new to my job and can't find a specific answer to this question. We have recently discovered that we reimbursed a Dental claim, for services completed in 1999! Our reimbursement was made in August 2001.

We do not suspect fraudulent intentions, however the matter remains that we paid out over $600 in error.

What is the next step? Do we file a 1099? Ask for the money to be returned? Thanks for your help.

Can a 401 (k) plan purchase and distribute annuities to non-spouse beneficiaries?