Do shares in an S corporation held through an ESOP count toward the 2% shareholder limit in Section 1372?

What are spousal consent rules for distributions from 401k plans?

Please site the laws or codes applicable to spousal consent.

Given a company that has a cross-tested MP plan with NRA defined as 55 and a DB plan covering many of the same employees with NRA defined as 65 (which is more representative of the group's actual retirement experience).

Is it appropriate to use a Testing Age of 65 when performing an aggregate DB/DC nondiscrimination test under 1.401(a)(4)-9©?

The definition of Testing Age under 1.401(a)(4)-12 gives me the impression that the age to use is the latest NRA under any of the plans in the testing group (without regard to which plans the participant is actually participating in). However, I wasn't sure if I needed to be concerned with the Consistency Rule of paragraph (iv) of -9©. I would appreciate any thoughts shared or experiences during audit.

What happens when a controlled group existed between two companies, but no one (?) knew about it?

The same two individuals own two companies: 50% - 50% each.

The companies each had qualified plans - one a 401(k), one a plain profit sharing; each company had different recordkeepers and investment vehicles, so no one was aware that a controlled group existed (although I assume they have the same accountant, they did not answer the controlled group question properly on the year-end census that they received each year).

Also, what if both companies are on Standardized Prototypes, which would not allow any employees to be excluded?

Is this an IRS correction program problem / resolution?

Thank you.

Can anyone suggest a source for language on drafting a Summary of Material Modification for our 403(B) plan? Thanks.

Consider a defined benefit plan, for which the end of the GUST remedial amendment period is December 31, 2001.

Does the amended document need to be adopted by 12/31/2001 or does the IRS require that the GUST amended document be filed for a determination letter by 12/31/2001?

I have been told that in order to take advantage of the GUST remedial amendment the IRS requires that the amended document be submitted for a determination letter no later than 12/31/2001. Is this true? I always thought that determination letters were not required.

Is there a Rev. Proc. or Rev. Ruling that addresses this?

Thanks.

Assume that a defined contribution plan is subject to the QPSA/QJSA requirements and that a portion of contributions is used to purchase term life insurance. Are the life insurance proceeds also subject to the QPSA/QJSA requirements, or just the accumulated account balance? If so, would the normal form of payment of the life insurance to the survivng spouse be an annuity? The plan document identifies the insurance as part of the death benefit payable under the plan. Plan sponsors and administrators I've spoken to seem to think the insurance proceeds are subject to joint and survivor requirements, while others in the insurance industry say that 100% of the proceeds would go the designated beneficiary whether the participant was married or not.

If an employer establishes a plan to reimburse former executives and their spouses for medical expenses, is there any way around the Section 105(h) discrimination problem, other than to make the plan available to all former employees?

In my experience it is fairly common to have a private retirement plan or deferred compensation arrangement for an executive, that calls for reimbursement of medical expenses for the executive and his or her spouse, for a set period of time following retirement. Are these being established with knowledge of the discrimination problem, on the premise that the 105(h) problem is not strictly enforced, or is there some loophole that makes it permissible?

Would a dependent turing the age of 19 be considered a qualifying event for COBRA? Maybe loss of dependent-child status?

Thanks in advance.

In a non-qualified employee stock purchase plan that has 4 quarterly purchase dates (as stated in the Plan Document), is it possible to change the date as stated of the purchase. If so, would a Plan Amendment need to be done?

Does anyone offer a higher rate employer contribution toward health insurance for employees who have worked for long periods of time? Example, if the employer currently pays 50%, if the employees works more than 3 yrs. the employer pays 60%, 4 yrs. 70% etc.

Also, do you contribute the same amount for single as well as family coverage.

We are currently looking to update our policies and are trying to get a feel for what other people are doing. If you respond could you please include how many employees you have.

Thanks ahead of time.

Marcy

We are considering several changes to our plan design and would like to know if anyone has gotten a determination letter on a 401(k) plan document that included a bottom-up QNEC. Anyone have trouble getting a determination letter for a plan with this feature?

Thanks.

PAL

We are beginning to start contacting our clients about the restatement process. We have found out that the nonstandardized document we will be using (Corbel) will no longer need to be submitted to IRS. Now we are kicking around in our office the idea of switching all of our clients currently using the standarized to non-standarized.

Can anyone think of an advantage of staying with the standarized document?

Any thoughts would be appreciated.

Is a plan sponsor allowed to charge the plan for reimbursement of wages for the HR person who handles the internal administration of a profit sharing lan?

I have a 412(i) plan going in at 70% of the max contribution. The C Corporation employer is making profit sharing contributions at 25500 per employee per year. There are no nonhighly compensated employees. We are considering starting the plan on Dec 1. My question is if the annual 412(i) contribution is 50,000 but we are only making a 2001 contribution of 4166, is the 412(i) contribution deductable in full in 2001 as well as the profit sharing contribution? 404(a)(7) limits deductions to the greater of 25% of comp or the minimum funding standard of 412(i). The 25% of comp of 140K seems to be 35000. So could the difference of 9500 be funded into a 412(i) plan?

A prototype 401k plan is amended from a fiscal year ending 8/30/00 to a calendar year beginning 01/01/01. The amendment is not signed until 3/01. Is this ok? The only references are 1.401(a)(4)-5, but this change is not specifically referenced.

i have a qualified plan sponsor who does not intend to deposit a 2000 matching contribution prior to the corporate tax filing deadline (9/15/01). the sponsor is not concerned about this being a tax deductible contribution for 2000. currently the plan doc says that the contribution must be deposited by the corp tax filing deadline, however, the attorney has said that he could amend the plan to allow for a later date.

what is the drop dead date for depositing this contribution. other than deductibility, what are the ramifications of a late deposit?

thanks!

~~~Reposted by Popular Demand~~~

re: IRC 402(h) Exclusion Limit under EGTRRA

Although the EGTRRA did not make any changes to the rules regarding the participant's exclusion of SEP and SARSEP contributions under Code Section 402(h), technical corrections are likely to be forthcoming. It is unclear to what extent Code Sections 402(h) will be changed, if at all. The practitioner will need to examine any change by taking into account the following:

1. Whether the "percentage limit" (currently 15 percent) on the exclusion of contributions from a participant's income, is increased (i.e., to 25 percent). [iRC § 402(h)(2)(A)]

2. Whether elective contributions (within appropriate limits) are excluded from a participant's income in addition to the percentage limit (up to the $40,000 aggregate limit under Code Section 415).

3. Whether elective contributions continue to be excluded for the purpose of applying the percentage limit, thus requiring that only "includible" (taxable) compensation be considered [iRC § 402(h)(2)(A)]

4. Whether the reduction to the $40,000 (for 2002) limit should continue to apply when the plan is integrated. [iRC § 402(h)(2)(B)] With a projected taxable wage base (TWB) of $84,900 for 2002, the maximum SEP contribution for 2002 would be $35,160.70 ($40,000 - ($84,900 x .057)) in a plan fully integrated at the projected TWB amount. The language of Code Section 402(h)(2)(B) would appear antiquated and inconsistent with current legislative intent.

5. Whether the compensation cap of $200,000 under Code Section 401(a)(17) for 2002 will apply for the purpose of the percentage limit, which in the authors opinion, it has never been subject to, although it does apply to Code Section 415.

6. Whether elective contributions (within appropriate limits) are deductible by the employer in addition to the 25 percent of aggregate compensation deduction limit (but not in excess of the $40,000 per participant limit under Code Section 415). [iRC § 404(n)].

I submitted a comment to Treasury and Senate officials on July 18, 2001, proposing the following changes be made to address these issues:

(a) Amend Code Section 402(h)(2) (dealing with the exclusion from income) as follows:

Limitations on Employer Contributions. - Contributions made by an employer (other than elective deferral contributions made pursuant to an arrangement under section 408(k)(6)) to a simplified employee pension with respect to an employee for any year shall be treated as distributed or made available to such employee and as contributions made by the employee to the extent such contributions exceed the lesser of -

(A) 25 percent of the compensation [Authors Note: Or "includible compensation," see item 3 above] (within the meaning of section 414(s)) from such employer for the year (determined without regard to the employer contributions to the simplified employee pension), or

(B) The limitation in effect under section 415©(1)(A).

(B) Strike the remainder of Code Section 402(h)(2)(B).

© Amend new Code Section 404(n) (dealing with the 100 percent deduction rules for elective deferrals) as follows:

Elective deferrals (as defined in section 402(g)(3)) shall not be subject to any limitation contained in paragraph (3), (7), or (9) of subsection (a), or subparagraph © of subsection (h)(1), and such elective deferrals shall not be taken into account in applying any such limitation to any other contributions.

Amounts (including elective contributions) that exceed the exclusion limit (currently 15%) should be reported as "wages" on an Employee's Form W-2. In most likelyhood, this will eliminate the 10 percent nondeductible contribution penalty tax under Code Section 4972.

~~~Reposted by Popular Demand~~~

A plan uses the cash-out method of distribution. A partially vested employee is rehired prior to five breaks in service. What specific disclosure is required to be given the former participant upon rehire informing him or her of the right to repay the distributed balance? Thanks.

Employer with self-insured group health plan wants to restructure benefits, such that employees are offered additional cash compensation if they opt our of discretionary benefits including group health coverage. Presuming these employees are not Medicare eligible through age or disability, is there any problem with the Medicare Secondary Payer Act, in making such an offer? As a precaution shouldn't the employer get a written statement from employees who opt out, demonstrating that they have coverage elsewhere (e.g., through a spouse's employer)?