I am looking for any information on the following questions:

1) Is it possible for 401(k) plan participants to pay the administrative fees associated with their account directly (with after tax dollars) rather than out of their plan assets?

2) If so, is the amount paid considered a contribution to the plan or is the employee still permitted to receive the full $35,000 for that year?"

EGTRRA provides that a plan may provide that the present value of a participant's nonforfeitable accrued benefit may be determined for distributions after 2001 without regard to the portion attributable to rollover contributions. The new model good-faith amendments seem to indicate that this provision may not be available for plans which are subject to the QJSA rules--"The following optional sample amendment may be adopted by plans that provide for involuntary cash-outs, other than plans that are subject to the qualified joint and survivor annuity requirements of §§401(a)(11) and 417 of the Code." Does this mean that a profit sharing plan which includes the survivor annuity requirements cannot adopt an amendment providing for the exclusion of rollover contributions in these calculations?

We have fiscal year plan with a 9/30/00 year end. Completed all the work. ADP & ACP tests both failed, refunds were made. Employer now informs us that the salaries provided us were incorrect.

With the new salaries ADP test fails, but not as bad; the ACP test fails worse. The net effect is that the HCE's received to large a refund. It is my understanding that the appropriate correction is to have the HCE's return the excess amount received. Is that correct?

Assuming the proper correction is to return the excess amount received, can I net the ADP and ACP test differences against each other and have the net excess retruned or do the HCE's have to return the ADP excess and get another distribution for the ACP excess. Example: HCE received a total of $200. $100 for the ADP test, $100 for the ACP test. Should have received a total of $180; $60 for the ADP test and $120 for the ACP test. Can I have the HCE return the net difference of $20 or should the HCE return $40 for the ADP excess and receive an additional check of $20 for the ACP excess?

Pursuant to the contract between the employer and the insurance company, a 401k plan has a surrender charge (first 10 years, decreasing percentage) for all withdrawals that aren't retirement, death or disability.

Within those 10 years the employer terminates the plan thus forcing all participants to have their funds disbursed and the insurance company takes a surrender charge out of every participant's account.

Is there any way for the participants to force the employer to pay this charge?

employer agrees in plan to pay "administrative expenses," but has stated this is not an administrative expense.

Are these provisions the norm (is there a br/fid duty claim for entering into this contract?)

Can there be a br/fiduciary claim for implementing the termination in such a way that each participant loses 7% of account?

Anything else you can think of???

Are Profit Sharing Plans exempt from aquiring fidelity bonds their first year? I allways thought so, but I didn't see anything in ERISA 412 stating that.

Also

If a bond is required the 1st year, what about a Profit Sharing Plan where the Profit Sharing contribution is a receivable. Would one be required then? Would if make a difference if the 5500 was done on a cash or accrual basis.

We have several employers that have both MP and PS plans that have the assets of both plans invested in one account. I have heard a few people say that comingling the assets of more than one plan of the same employer creates a Master Trust. I'm not sure that it does. Does anyone have any thoughts on this? Also if a MP and PS plan have all assets of both plans comingled, should there be only one trust EIN that both plans use, or should there be seperate trust EINs for each plan.

i have a controlled group of corporations that have seperate 401k

plans that have different matching formulas and investment options. is this set up permitted and if so what are the testing implications?

What have you found effective in cutting health care costs for employers with 150-200 employees. What are the typical heath care costs for this size group.

Is anyone aware whether 401(k) plan assets can be used to purchase DB plan service credits? I know that this is permissible for other 401(a) plans, but wasn't sure whether there was a particular restriction with respect to 401(k) plans.

When a plan sponsor maintains a 401(k) plan, and also maintains another DC plan with a different plan year than the 401(k) plan, what special issues must be considered?

How are 415 limits determined (if the limitation year for each plan is the plan year of that plan)?

How is 404 deductibility determined?

How is 410(B) coverage determined?

I am aware that for 416 top-heavy purposes, the plans are aggregated by using the determination dates that fall within the same calendar year.

To determine ADP and ACP tests [if the 2nd plan is also a 401(k)] the plan years ending within the same calendar year would be added.

To determine who is an HCE, plan years beginning in the same calendar year would be aggregated.

Are there other issues that require aggregation of the plans?

Target benefit plan adopted in 1989. Contributions calculated pursuant to formula in document. E/er has not filed 1997 through 2000 5500's and has other defects in plan. My understanding is that TRA '86 made changes to target benefit formulas. This plan doc was never amended for those changes nor for any other required changes since its adoption. Can anyone confirm that the target benefit formulas were amended? Clearly, the correct contribution would be one calculated as per the amended target benefit formula. Also, the plan purchased an insurance policy on a participant who was ineligible for a contribution as he had already hit his normal retirement age. The plan has paid the premiums on this policy since day 1. Any insight as to correcting the defect concerning the insurance policy? Anyone know of a good resource with respect to target benefit plans in general??

Thanks.

I know 2001-17 outlines several methods concerning how to allocate lost earnings when utilizing various correction methods; however, what about losses? Obviously in light of current market performance, a participant would have been hard pressed to earn a positive return (at least for the past 18 months). Do you just give them a money market rate of return or do you use the statutory rate similar to the DOL method?

Company A sells Company B in a stock sale to Company C on June 1, 2001. As of date of sale, Company C stops participating in the Company A 401(k) Plan and becomes a participating employer in the Company C 401(k) Plan. (No transfer of plan account balances due to disposition of a subsidiary rule; instead distributions are made from Company A plan and participant may roll over money to Company C plan.) While not addressed in the sale agreement, I assume the compensation and deferrals of the Company B employees will be included in testing in the Company A Plan up to date of sale and included in the testing for the Company C Plan, along with the Company C employees, from June 1 – December 31 2001.

My question is how to determine the HCE or Non-HCE status of the Company B employees for this June 1 – December 31 period under the Company C Plan. Do I need to get the records and look back to the compensation earned by the employees in 2000 or can the new controlled group start date of June 1 be considered the first day of employment for these employees in the new controlled group – meaning that the Company B employees have no prior compensation with the new controlled group and therefore can all be treated as Non-HCEs for this period? I do not think there is any definite IRS position on this. Any thoughts would be appreciated.

(Would the treatment be different if the sale was an asset sale and not a stock sale and the Company B employees had become employees of Company C and had their account balances transferred from A Plan to C Plan?)

Thank-you for any responses on these matters. I would like to know what others are doing in these different situations for 2001.

Should I use a Roth as an option to pay off my mortgage.

I just refinanced to a 15 yr. fixed mortgage (6.25%). I now have an extra $200 per month. Instead of prepaying the mortgage and getting a 6.25% return I was thinking about putting the extra $200 towards a Roth IRA (maybe and Index Fund).

My reasoning is this:

The $200 per month grows tax free

Lets say after 10 years, I take out the principle ($24,000) and pay off the mortgage. The $24,000 is not taxed because it is the original contribution amount and now the gains/interest can be left until I retire.

Is this sound investing or should I:

1) Put the $200 towards the principle and be happy with 6.25%

2) Put the $200 in an Index Fund, pay the taxes as it grows, and pay off the mortgage when the fund = the outstanding loan amount.

3) Forget about paying off the mortgage early and invest for the long haul.

Thanks,

I must be missing something. Why use an Education IRA when a Roth still allows for tax free distributions for higher education?

From what I understand, you are better investing in a Roth for higher education because you have higher contribution limits and you are still allowed to take the Hope Tax Credit.

Do I have this straight? I need to start saving for my childrens' education, and I am looking at the Roth. Am I way off base on this one?

Thanks,

I'm working on a calendar year plan. I've been asked to project the 2002 ACP percentage allowed for the HCEs.

There's been a lot of hiring the last few years, and employer doesn't match for Post-Doctorate fellows nor non-resident aliens.

To make the numbers work, I've basically said, to be in the ACP test for 2001, you had to be hired before 7/1/00. (There's a three month service requirement, but I've got no HCEs to put into the separate group.)

Rationale is that I could have a one year wait and an entry date of six months later.

Just wondering if this is aggressive number grinding.

Company A sells Company B effective July 1, 1999. For the remainder of 1999 Plan Year and for five months of 2000 Plan Year, Company B is a participating employer in the Company A 401(k) Plan, which is therefore treated as a multiple employer plan from July 1, 1999 through May 31, 2000. Company B establishes its own Plan effective June 1, 2000 and the portion of the Company A Plan that covered the Company B employees is “spun-off” to the new Company B Plan. In 2001 the Company B Plan is fully restated for GUST (effective back to its initial June 1, 2000 effective date) and will be submitted to the IRS for a determination letter.

1. While the Company B Plan is drafted as having a June 1, 2000 effective date, Company B did all if its 2000 testing on a calendar year basis as if its multiple employer piece of the Company A Plan that was spun off and the Company B Plan spin-off plan were one Plan for all plan coverage, testing, compensation purposes for 2000. Is that correct or should the two separate plans be tested separately for each portion of the year that it was in existence?

(Company A included Company B in its testing for the period January 1, 1999 – June 30, 1999 and Company B tested from July 1, 1999 – December 31, 1999 on its own.)

2. Company B plans on submitting its 2001 GUST Restatement for a determination letter. I assume it also should submit its initial Plan document effective April 1, 2000. What about the Company A Plan? I assume that Company B does not need to be concerned with submitting the Company A Plan, even though a portion of it was “spun-off” into the Company B Plan. Is that correct? Can the Company B Plan receive a “clean” determination letter without submitting anything relative to the Company A Plan?

Thanks for your help on this.

We are a 401(k) TPA, and are exploring paperless employment termination distributions for the 401(k) Plans we administer. Right now participants fax or mail us a form to request a distribution. Is anyone handling this process paperless?

Does anyone know of a reason why a plan cannot have an integrated profit sharing contribution formula in addition to a 3% safe harbor contribution? Wht does it mean in Code Section 401(k)(12)(E)(ii) by "without regard to Code Section 401(l)? These seems to imply that as long as the 3% safe harbor meets the 401(k)(12) requirements, you can have additional contributions, but that the additional intergrated contribution cannot be considered in determining whether the safe harbor is met.

Does anyone know where I can find info on which states have legislation allowing tax-free W/D from the ROTH IRA (assuming it is a qualified w/d)?