Hi Everyone,

Two issues to inquire about.

Has anyone heard of an "OFFICIAL" IRS position (in writing) on the applicability of the New RMD Rules for beneficiaries of decedent IRA's were the IRA owner died in 2000 or 2001. IRS seemed to indicate verbally last spring that this would be possible but it was not an official IRS position at that time a while back. Has IRS so ruled? If so is any citation available?

Has anyone seen any additional "OFFICIAL" IRS information on the ability of an IRA Beneficiary to name a Beneficiary during their residual payout period. Yes, there have been several PLR's on this issue dating to the early 1990's and yes many IRA Fiduciaries do it routinely these days, still many do not. I have had several Pension Attorney's indicate to me that the naming of a beneficiary is the province of only the Trust Grantor and not the Beneficary. You can conjure up lots of implied liability in this regard, yet the NEW RMD Rules seem to cry for the ability for this to be permitted.

Looking for tangible information and not conjecture. ;-)

Thanks to all.

David H.

According to the ERISA Outline Book, in order to be a leased employee, that employee must be substantially full-time for at least a year. It goes on to describe "substantially full-time" as 1,500 hours or 75% of the customary hours in that job position. Therefore, the 1,000 hour rule has no relevance for leased employees?

More specifically, the company I am working with has more leased employees than other employees but the leased employees work only seasonally, during the summer. They probably do not even get in 1,000 hours so they would never become employees eligible to participate in the company's qualfied plan, correct?

Can a seasonal worker who works 4 months a year be considered to be on a "leave of absence" for the other 8 months for purposes of the participant loan rules?

If a first year plan has greater than 100 participants as of the beginning of the plan year, is this company required to file a Schedule H or can they opt to file a Schedule I until they reach 120 participants?

An employee provides outside services to his or her employer as an independent contractor. Presuming the provision of such services meets the definition of an independent contractor relationship, and not that of a common law employee, is there any prohibition on the employer issuing a 1099 and a W-2 to the same individual for any given year?

I understand that this might be an audit trigger, but am trying to confirm whether there is an outright prohibition on this form of reporting.

Company B bought Company A effective 10/1/2000. We are the record-keeper for Company A. Plan assets did not transfer until 2001. Record-keeper for Company B included the employees of Company A in their discrimination test for 2000. But they included all 12 months of these employees' wages and deferrals in that test. Although we have requested census information from Company A for many months, we have yet to receive it, and therefore, have not completed their discrimination test. It was my belief that we would perform a discrimination test for Company A based on the wages and deferrals for the 9 months of 2000 before Company B purchased them.

My question is, did the record-keeper for Company B do the right thing with that discrimination test and if they did, does that mean that I do not have to perform a discrimination test for Company A? Also, I do not know if this is relevant, but the 2000 Form 5500 for Company B did not include the assets from Company A that had not transferred as of 12/31/00.

Does and employer/employee relationship have to exist to offer COBRA? If independent contractors are covered under a group policy along with employees, do independent contractors also eligible to receive COBRA benefits?

Questions on filing Form 5500 for employee benefit plans:

1) Should contract date with the benefit carrier be the plan year end date to report on Form 5500?

2) If participants are over 100, is an audited financial statement required? What criteria to look for to determine if audit is required.

3) If the name of the plan changed, but the EIN remained the same, is there some type of reporting which must be done?

4) Should EAP be reported on Form 5500?

5) Is an audit required for a fringe benefit plan?

6) What penalties could be assessed for not filing for plan year 1999 and 2000?

7) Is an employee benefit plan exempt from filing Form 5500?

I am doing some research on bonuses being included in the definition of compensation for Defined Benefit Plans. Does anyone out there know how to find out what percentage of bonus most Fortune 500 companies are using for compensation for their Defined benefit Plans? I looked at a few proxies at FreeEdgar Online, but they don't seem to mention if any portion of bonuses over a certain dollar amount are excluded from the definition of compensation.

Has anybody encountered a situation where, in a qualified plan, the participant desires to name a partnership as his/her primary and/or contingent designated beneficiary? The rationale behind this is to keep the children, who would be the beneficiaries of the partnership (a different family member would be the owner of the partnership), from "taking the money from the plan and running".

Assume the death of the participant and a distribution now has to be made. What are the tax consequences of a distribution being made? Can the money be distributed based on the life expectancy of the children, or does it have to be distributed immediately to the partnership?

Seems to be complicated, but any thoughts would be appreciated. Thanks.

A 401(k) plan didn't pass testing for year 2000 so about $5,000 had to be returned to the president and one other HCE. A check was just sent to the trustee by the mutual fund company for the amounts. Is it correct that the refunds are taxable income for 2001, the refunds should not be subject to payroll taxes since payroll taxes were already paid on the same money during 2000, and the income should be reported by the company to the employees on form 1099 in early 2002 for the 2001 tax year?

Does anyone have any recommendations for financial education presentation materials for use in making presentations to employees or the general public (for example, through community college or cooperative extension programs)? Also--any recommendations for running time-value of money and simple investment calculations, which can be used as part of a group or individual presentation?

My 401k at the company I left is with Cigna. I can rollover the 401k into an IRA with them.

I was told the following by one of their respresentatives:

- They pay the $40.00 exiting fee.

- No annual/custodial fee for balances of $5,000 and more.

- They have the mutual funds I want such as Vanguard Index 500, Janus Worldwide (if I transfer all of my 401k balance into the fund before the 401k is rolled over), Fidelity Growth & Income, etc.

- They are a discount brokerage.

- Transaction fees are 0.65% of the principal amount.

The above all seem like pluses to me. The transaction fee doesn't seem exorbitant either. Talking to the Cigna representatives, though, have given me the feeling like they're trying to pull something, or they're not telling me the full story.

Does anyone have experience with Cigna, good or bad?

When exactly is the transaction fee charged? Each time a fund buys more stock?

Any input and advice greatly appreciated. Need in a hurry, my deadline to rollover is next week!

Thanks!

Zelly

Is it legal for a DB Plan to have different forms of benefit based on years of service?

For example, if a participant has less than 15 years of service his benefit is based on a Straight Life Annuity, but if a participant has 15 or more years, his benefit is based on a 10 Year Certain and Life Annuity.

Is it clear when the new EGTRRA limits/rules such as 415, 401(a)(17), and catch-up contributions will apply for off-calendar plan years? For example, plan year and limitation year is 12/31-12/30. Will the new 415 limit apply for the period 12/31/01-12/30/02 OR 12/31/02-12/30/03??

I have a new client who took a $20,000 premature distribution from a 401(k) plan, but did not self-assess the IRC 72(t) penalty on her return. She used the monies to purchase a first home.

I am aware of an exception to this penalty if the premature distribution is from an IRA (up to $10,000). Had she rolled over a distribution to an IRA, then distributed the $20,000, half of the distribution would have been exempt from this penalty.

Are you aware of any PLR's or other cases in which the taxpayer got out of the penalty for first time home purchase from a 401(k) plan?

Several employees have changed to hourly or part-time status and their new pay will not cover their loan repayment amounts.

It is not possible to reamortize the loans to lower the payments since the terms already are at the maximum 5 years and some have only 1-2 years left.

There is the one-year extension for leave of absence but that does not apply in this case.

Besides defaulting on these loans, what are some other options?

If our recordkeeper will accept personal checks, I suppose we could offer that but I don't want to have to offer that for all active employees or terminated employees if they catch wind of this.

Thanks in advance for your suggestions.

Several participants (but not all) participants for 1 company received 1099-Rs with an incorrect code, indicating nontaxable distributions rather than the correct taxable distribution codes. The 1096 appears that it would not change.

How should the incorrect 1099-R filings be corrected?

Does the US Tax Code specify that $contributions to Sec 529 college tuition plans (paid by a business) are deductible by the business .... if the beneficiaries of the tuition plans are the children of the business' employees ?

My client (a LLC), wants to start making contributions to the Sec 529 tuition plans of its employees' children .... and deduct those payments as a tax-free fringe benefit to it's employees. Can it be done ?

If that won't work .... Can the business establish a Sec 125 plan and have the Sec 529 tuition plans as one of the pre-tax benefits of the Sec 125 plan ?

Did Defined Benefit plan documents have to be updated at the same time DC plans were updated for TRA '86, UCA '92, OBRA '93? My client has an old DB document (mid 80s). Is the plan out of compliance?