Greetings,

For people 50 and older who can make an additional $1,000 contribution to their 401k or 403b next year: can they contribute the extra $1,000 regardless of their income (even if they are only eligible to contribute say $2,000 to their account)?

Regards,

Jeff Salisbury

How are benefits computed for non 5% owners once a participant retires well after attaining age 70.5? (The plan has been amended to defer payments for non 5% owners to retirement which could occur after attaining age 70.5)

I have notice 97-75 which defines the actuarial increase start date (namely the 4/1 following the calendar year after attainment of age 70.5, or 1/1/97 if later.) I need assistance in interpreting Q&A 2 and 3 of this notice. My initial reading tells me that once the person is beyond age 70.5 (ex. retires at 75), that the benefit he will receive beginning at 75 will be no less than the actuarial equivalent of the benefit he would have received on the 4/1 following the calendar he attaind age 70.5, plus any actuarial adjustments thereafter until the age he retires (age 75 in my example). In other words, it doesn't matter if the person received a suspension of benefit notice at age 65 (NRA), the fact of the matter is that at age 75, his benefit needs to be computed as if no suspension notice had been provided. Has anyone had to deal with this yet?

Thanks!

doesn't a third party administrator have liability when they have not received premiums from an employer for several months, yet they are still verifying insurance coverage to providers as covered?

Employer wants to make sliding scale contributions to employees' FSAs, based on longevity of employment; e.g., $500 for employees w/0-2 years of employment, $1,000 for employees with 2 - 5 years, and up.

Only one HCE is employed, that person is not necessarily in the highest longevity bracket.

Presuming the plan passes the key employee concentration test, would this arrangement be permissible?

Can an employeer who has had a policy for many years to provide BCBS Major medical coverage for their employees and retirees at no cost begin to provide the same coverage only it the retiree elects to pay for this coverage? In addition raise the prescription co-pay from $5 to $10 then change it again to $10 for generic and $20 for name brands

It appears that it is permissible to have a SEP that is integrated with SS and that has a flexible yearly contribution. However, for a sole proprietor it seems that calculating the allowable contributions set ups a circular reference (in addition to the normal one that limits the deduction to 13.04%). With a set, required %, the calc seems pretty straight forward, but with a non-required, flexible contribution, I seem to run into a deadend. It seems to require that the gross contribution amount be selected first and then the employee allocations calculated in a multi-step process that does not allow for the self-employed limitation. Or am I just confusing myself on something simple?

[Calculation shown below based on facts in later posts - GSL]

Notice 2001-56 was released this afternoon.

The effective date for the new definitions of key employees for top heaviness is determination years in 2001 (to determine top heaviness in 2002).

The effective date for mandatory nonparticipation following a hardship distribution includes distributions in 2001. Therefore, the period may end at the later of 6 months or 1/1/2002.

Also, Notice 2001-57 contains the model good-faith amendments (and adoption agreement language) for all of EGTRRA.

Notice 2001-56 was released this afternoon.

The $200,000 compensation limit may be applied retroactively when computing average compensation for an accrued benefit calculation in 2002.

I know that a matching contribution need not necessarily be a component of the same plan of the elective deferral (or, rarely after-tax) contribution. For example, I have commonly seen plan designs where an elective deferral has been deposited into a 403(B) plan, while the matching contribution was made to a 401(a)plan.

Following this logic, can "matches" into a 403(B) plan be made contingent on contributions to non-retirement plans? For example, Employer X wants to provide participants with a choice of making an elective deferral into a 403(B) plan that will be matched in the 403(B), or making contributions to a 529 educational savings account that would also be "matched" in the 403(B). Is this permissible? I suspect not, but I can't find a cite that would prohibit such a "match"?

If such an arrangement is permissible, would the 403(B) "match" be considered a matching contribution for testing purposes? I suspect not, since Reg. 1.401(m)(B)(4)(ii)(A) defines matching contributions that are made "on behalf of an employee on account of the employee's elective contributions or employee contributions for the plan year."

Any insight that anyone can provide will be greatly appreciated, as always!

Question on an independent contractor with possibly leased employees -

Situation - I have a group of four doctors and each is an independent contractor for a clinic. The clinic has a staff of approximately 10 employees. There is no plan for the clinic staff and only one of the doctors has a plan (MP). Some of the clinic staff members perform services exclusively for the doc with the MP. They take direction and instruction from her. However, she does not hire or fire (but has the discretion to advise of termination or hire.) Any revenue generated by the doc goes 55% to her and 45% to the clinic. She receives W-2 income from her own company as do each of the other doctors. Client was advised several years back that the employees of the clinic are not considered leased employees, however, the CPA and office manager are concerned that there may be a potential problem. There is no leasing agreement between the doctors and the clinic.

Should the employees that work directly 'for' this doc be considered leased employees?::confused:

I'm going to tell this client to consult an attorney, but I'm curious for my own information. Client has both a money purchase and a profit sharing plan. 3 HC's, currently no NHC's. In 1994, they had a NHC who was a participant. Their certified census data for 1994 said the NHC terminated employment.

Lo and behold, it now turns out that this wasn't true. Don't have the details yet, but it appears that at that time, they shifted employee over to some sort of leasing organization, but continued to employ him full time. NO contributions were made for him in 94-97, when he did actually terminate employment.

My best guess is that this would have to be handled under VCP. (took me 20 minutes to figure out which letters went with which correction program - changed a lot since I last looked!) Possibly under VCO, but I'd be concerned that this would be considered an "egregious" failure. Any opinions on this? Also, since contributions under the money purchase plan were missed, will the client have minimum funding penalties as well?

Thanks in advance for any opinions you might have.

Any ideas on how to determine the cost of a limited partnership for the attachment to Schedule H? I know the initial investment and the number of units held. I don't know how the distributions each year affect my original investment cost. Thanks.

mck

Do the 2001 Required Minimum Distribution (RMD) proposed regulations apply to RMDs from 403(B) plans in 2001? For 401(k) and other qualified plans, a model amendment is provided, but it does not appear that any similar amendment is available to 403(B) plans. Does this mean that 403(B) plans must use the "old" rules for 2001, but the "new" rules for 2002?

How is the participant count determined for a frozen 401(k) plan? Can all employees who have not met the eligibility requirements and reached an entry date as of the date of the freeze be ignored?

Does an employee of a company with a self insured health insurance plan have any protection when they have incurred medical bills thinking that they had coverage and find out two months later the plan and employer are filing bankruptcy? The providers all verified coverage, but were denied payment and now they are billing the employee. The employee had medical premiums deducted from his paycheck. Thanks for any suggestions.

Are there any hidden problems when investments in employer stock are done on a unitized basis?

The third party administrator is pushing for it, so that it can use daily valuation for all of the investment vehicles available under the plan.

While I am not overly enamored with unitizing investments in employer stock, it seems to be particularly appropriate where the stock is thinly traded, so that purchases and sales could not be always effected as soon as possible after the plan receives the investment directions without having a significant impact on the stock price.

It does seem that it is vital that the plan clearly communicate to employees that:

1. the value of their units will directly correspond to the value of the stock (e.g., because of the cash that will also be

held in the fund); and

2. sales and purchases will not be made at the trading price on the day on which their investment directions are given to the plan.

Does anybody have any thoughts on this topic that they would like to share?

I am self employed and do not have, or ever had, any employees. I have a money purchase, profit sharing plan (paired plan formerly Keogh). Since this is a "qualified" plan it is my understanding that these assets are protected from creditors under ERISA. Is that correct? I have been told yes and I have been told no because I have never had any employees. Thank you.

I am setting up a new plan. The employer wants to have two matches in the plan - one that satisfies the basic safe harbor match (100% of first 3% and 50% of the next 2%), and one that is a discretionary match. The basic safe harbor match will be 100% vested, and the discretionary match will be subject to a 5 year vesting schedule (20% a year). Does having that second discretionary match cause problems in falling under the safe harbor rules? Will the ADP/ACP tests need to be run?

What is the deadline date for contributing to a Sep IRA as a prior year contribution?

Up until when can I make a prior year sep contribution?