I've had an employee ask me a question concerning what would happen to their funds if the company were to "go under." I'm not entirely sure as the reasoning behind the question and am fairly new with 401k but without looking at the plan documents yet, which I will do, I thought I'd shoot you the question too. It is my understanding that the employee's funds are guaranteed but the employer's match is where I'm not certain. If the employee is already 100% vested in the funds, would there be any reason, some type of law that states they would not be entitled to those funds?

They mentioned the possibility of transferring out the funds from their current account, stopping all deductions and restarting their deductions in October. I don't believe this is possible but since I'm not an expert...I'm thinking other than a loan, hardship withdrawal or a termination, an employee can't just withdraw/transfer the funds as they want.

Any help is appreciated!!

I've had an employee ask me a question concerning what would happen to their funds if our company were to "go under." I'm not entirely sure as the reasoning behind the question and am fairly new to 401k but without looking at the plan documents yet, which I will do, I thought I'd shoot you the question too. It is my understanding that the employee's funds are guaranteed but the employer's match is where I'm not certain. If the employee is already 100% vested in the funds, would there be any reason, some type of law that states they would not be entitled to those funds?

They mentioned the possibility of transferring out the funds from their current account, stopping all deductions and restarting their deductions in October. I don't believe this is possible but since I'm not an expert...I'm thinking other than a loan, hardship withdrawal or a termination, an employee can't just withdraw/transfer the funds as they want.

Any help is appreciated!!!

I had a traditional IRA that I rolled over

from a 401k in 1993. I did nothing with

the account until late 1998, when I converted

it to a Roth and made a $2000 contribution.

I paid the taxes the following year in full.

At the peak of the market the account was

worth nearly 10,000 dollars but now is about

65% of that and losing ground steadily.

I am heavily in debt and need to withdraw

the account.

I've been trying to read up on the parameters

and it's very confusing. It seems to me

that I should not owe tax, just the 10%

penalty. After calling my broker who was

virtually no help! and reading the IRS

pubs, I am still not clear. Do I have it

right? What about the 5 year rule on

contributions, does it apply in this case?

Earl Baker

A few weeks ago, Brian Graff of ASPA gave a very brief overview about WHY the sunset clause was included in the most recent pension legislation - having to do with the number of votes needed to pass a piece of legislation of such a large tax reprieve.

Can someone provide a more detailed explanation?

401(k) plan also provides that ees may make after-tax contributions. The ER incorrectly treated all of the elective deferrals as after-tax contributions. This happened for three or four years before it came to our attention.

I'm looking for suggestions as to the best way to correct. There have been distributions that have been rolled over to IRAs by participants. Seems to me these amounts did not qualify for rollover and in addition to the Plan's problems, we have IRA/Excise tax problems.

Hi. I recently tried to withdraw the funds from my Roth IRA account but was told by my online broker that I had to fill out a special form and submit it to them in order to do so. Upon receiving the form and analyzing it it doesn't seem that I fit into any of the categories listed.

I started the Roth IRA in late 1999, and made a $2000 contribution in both 1999 and 2000 (total of $4000). (By the way, I am 31 years old). It seems from the form that I will have to incur a penalty if I want to withdraw the funds, but I can't see how that should be since the total value of the account is less than I contributed to it (it is worth a little less than $4000).

Any insight someone can offer would be most appreciated.

Thank you.

Craig

Here is a dumb question: if a DB plan provides for a lump sum payment option, and specifies that actuarial factors in general shall be computed on the basis of a specified interest rate and mortality table, does that mean that mortality is actually or necessarily taken into account in determining the lump sum amount to be paid where a participant who is retiring elects that option? I would have thought that the interest rate alone would apply in determining the lump sum value. Any help is greatly appreciated from someone who is definitely mathematically-challenged! :confused:

Can a 401(k) plan document include inservice withdrawals at age 55? If so and a participant rolls to an IRA is there a penalty?

I have been told that it is permitted under the Internal Revenue Code for an active employee to contribute, on a pre-tax basis, toward the cost of retiree health insurance.

I do not believe that this is true.

Can someone supply me with information on this topic? Rulings or documents that I could find would be appreciated.

Thanks!

Ben Schutzenhofer

Can anyone confirm whether an individual with an account under a SEP will be able to rollover those funds to a qualified plan under the new EGTRRA rules? The new law does not make specific reference to rollovers from SEPs to other types of plans. However, since SEPs are generally subject to the same distribution rules as IRAs, can we now assume that a rollover will be permitted between a SEP and a qualified plan beginning in 2002?

We are a public college system. We are considering contracting for the administration of our 401(a) DC Plan.

The contract would be for virtually all administration except on-site enrollment and offering investments. (The on-site enrollment would be done by the colleges' H.R staff. The investment options and participant account record-keeping would be provided by separate "Fund Sponsors" that the TPA would help select).

We need sample contracts for the above--especially information about the manner and amount of compensation to the TPA.

Thanks

In the prior year, the sole assets of a defined contribution plan were allocated insurance/annuity contracts. Therefore, there was no audit requirement and the contracts were only reported on Schedule A of the 5500.

In the current year, the plan has both allocated and unallocated contracts and an audit will be required. The allocated contracts will still be excluded from the plan financial statements and only be reported on the Schedule A.

Does this change the testing of participant data? Since the allocated insurance contracts are excluded from the plan's financial statements, they will not be covered by the auditor's report. Do I need to perform any testing on the individual participant's holding these allocated insurance/annuity contracts?

Also, is the fact that the plan allows these investments usually footnoted and, if so, with or without amounts?

Please provide any references/sources that you have found on this subject.

In the summaries of HR1836 I have not seen mention of the ability to use IRA funds to purchase service credit in governmental DB Plans. I was under the impression that was part of the legislation. Is it? Is the IRS working on rules on how it is to handled?

I think I would like to start a Roth IRA account. I have an existing traditional IRA but I am 28 and don't have a ton in there yet. I would think changing it over now would help me more in the long run. My question is, should I expect to have to pay fees and commissions on a Roth IRA? Can you recommend where I would go to start one (pref. with no fees and commissions)?

I recently started an Roth IRA account for two purposes. One being for retirement and two for help in saving for my new borns college. I was told that there would be no penalty for deducting from the account as long as the money was going to a educational institution. Is this correct?

A surviving spouse was treated as having received proceeds from an individual retirement account (IRA) that were owned by her deceased husband and, therefore, was a payee or distributee of the IRA. However, to the extent that the amounts standing in the IRA were directly transferred to one or more IRAs maintained in the name of the surviving spouse, the transferred amounts were includible in the surviving spouse's gross income since the proceeds were not rolled over within the applicable time period.

Letter Ruling 200126038, April 4, 2001

LETTER TOO LONG- THIS SITE IS RESTRICTED TO 10,000 WORDS FOR POSTING

Letter Ruling 200126040, April 4, 2001

Extension of time for making certain elections

This is in response to the *****, letter, submitted by your authorized representative on your behalf, as supplemented by correspondence dated in which you request relief under section 301.9100-3 of the Procedure and Administration Regulations.Taxpayer A is married to Taxpayer B. Taxpayer A and B file joint Federal Income Tax Returns.During December, 1998, Taxpayers A and B converted several traditional individual retirement arrangements (IRAs) to Roth IRAs. Taxpayer A converted IRA V in the amount of Sum E to Roth IRA Y. Taxpayer B converted IRA U in the amount of Sum C to Roth IRA W. Additionally, Taxpayer B transferred Sum D from a traditional IRA to Roth IRA X.IRA U and Roth IRA W either were or are maintained with Company M. IRA V and Roth IRAs X and Y either are or were maintained with Company N.The conversion of the traditional IRAs to the Roth IRAs by Taxpayers A and B, summarized above, were accomplished at the suggestion of their broker. Your authorized representative asserts, on your behalf, that Taxpayers A and B either were misadvised by the agent of their broker or misunderstood his instructions so that they believed that they could convert their traditional IRAs to Roth IRAs as long as their adjusted gross income for the year of conversion did not exceed $150,000. Additionally, your authorized representative asserts that Taxpayers A and B either were misadvised by the agent of their broker or misunderstood his instructions so that they believed that they had until April 15, 1999 to convert their traditional IRAs to Roth IRAs. Finally, they believed that they had until April 15, 2000 to reconvert their Roth IRAs to traditional IRAs if necessary.Taxpayers A and B became aware of their inability to convert their traditional IRAs to Roth IRAs during calendar year 2000 when their 1998 Federal Tax Return was being prepared. Taxpayers A and B had previously filed for an extension of the filing date with respect to their 1998 Federal Income Tax Return and, as asserted by your authorized representative, paid the amount that would have been due on said 1998 return if they could have converted their traditional IRAs to Roth IRAs.As of the date of this ruling request, Taxpayers A and B have not filed their 1998 Federal Income Tax Return. Additionally, as of the date of this ruling request, Taxpayers A and B have not reconverted their Roth IRAs to traditional IRAs.Taxpayers A's and B's Federal adjusted gross income for 1998 (calendar year 1998) exceeded $100,000.This request for relief under section 301.9100-3 of the Procedure and Administration Regulations was made pursuant to the advice of Taxpayer A's and Taxpayer B's accountant and was filed shortly after Taxpayers A and B discovered that they were ineligible to convert their traditional IRAs to Roth IRAs because their adjusted gross income exceeded permissible limits.Based on the above, you, through your authorized representative, request the following letter ruling:That, pursuant to section 301.9100-3 of the regulations, Taxpayers A and B are granted a period not to exceed six months from the date of this ruling letter to recharacterize their Roth IRAs to traditional IRAs.With respect to your request for relief under section 301.9100-3 of the regulations, section 408A(d)(6) of the Internal Revenue Code and section 1.408A-5 of the Income Tax Regulations provide that, except as otherwise provided by the Secretary, a taxpayer may elect to recharacterize an IRA contribution made to one type of IRA as having been made to another type of IRA by making a trustee-to-trustee transfer of the IRA contribution, plus earnings, to the other type of IRA. In a recharacterization, the IRA contribution is treated as having been made to the transferee IRA and not the transferor IRA. Under section 408A(d)(6) and section 1.408A-5 , this recharacterization election generally must occur on or before the date prescribed by law, including extensions, for filing the taxpayer's federal income tax returns for the year of contributions.Section 1.408A-5 , Question and Answer-6, describes how a taxpayer makes the election to recharacterize the IRA contribution. To recharacterize an amount that has been converted from a traditional IRA to a Roth IRA: (1) the taxpayer must notify the Roth IRA trustee of the taxpayer's intent to recharacterize the amount, (2) the taxpayer must provide the trustee (and the transferee trustee, if different from the transferor trustee) with specified information that is sufficient to effect the recharacterization, and (3) the trustee must make the transfer.Section 1.408A-4 , Q&A-2, provides, in summary, that an individual with modified adjusted gross income in excess of $100,000 for a taxable year is not permitted to convert an amount to a Roth IRA during that taxable year. Section 1.408A-4 , Q&A-2, further provides, in summary, that an individual and his spouse must file a joint Federal Tax Return to convert a traditional IRA to a Roth IRA, and that the modified adjusted gross income subject to the $100,000 limit for a taxable year is the modified AGI derived from the joint return using the couple's combined income.Sections 301.9100-1 , 301.9100-2 , and 301.9100-3 of the Procedure and Administration Regulations, in general, provide guidance concerning requests for relief submitted to the Service on or after December 31, 1997. Section 301.9100-1© of the regulations provides that the Commissioner of the Internal Revenue Service, in his discretion, may grant a reasonable extension of the time fixed by a regulation, a revenue ruling, a revenue procedure, a notice, or an announcement published in the Internal Revenue Bulletin for the making of an election or application for relief in respect of tax under, among others, Subtitle A of the Code.Section 301.9100-2 lists certain elections for which automatic extensions of time to file are granted. Section 301.9100-3 of the regulations generally provides guidance with respect to the granting of relief with respect to those elections not referenced in section 301.9100-2 . The relief requested in this case is not referenced in section 301.9100-2 .Section 301.9100-3 of the regulations provides that applications for relief that fall within section 301.9100-3 will be granted when the taxpayer provides sufficient evidence (including affidavits described in section 301.9100-3(e)(2) ) to establish that (1) the taxpayer acted reasonably and in good faith, and (2) granting relief would not prejudice the interests of the government.Section 301.9100-3(B)(1) of the temporary regulations provides that a taxpayer will be deemed to have acted reasonably and in good faith (i) if its request for section 301.9100-1 relief is filed before the failure to make a timely election is discovered by the Service; (ii) if the taxpayer inadvertently failed to make the election because of intervening events beyond the taxpayer's control; (iii) if the taxpayer failed to make the election because, after exercising reasonable diligence, the taxpayer was unaware of the necessity for the election; (iv) the taxpayer reasonably relied upon the written advice of the Service; or (v) the taxpayer reasonably relied on a qualified tax professional, including a tax professional employed by the taxpayer, and the tax professional failed to make, or advise the taxpayer to make, the election.Section 301.9100-3©(1) (ii) of the temporary regulations provides that ordinarily the interests of the government will be treated as prejudiced and that ordinarily the Service will not grant relief when tax years that would have been affected by the election had it been timely made are closed by the statute of limitations before the taxpayer's receipt of a ruling granting relief under this section. 

cONTINUED- MESSAGE TOO LONG FOR ONE MESSAGE

Noticifcation to individual of period of preexisting condition exclusion as required under HIPPA. Section 2590.701-5(d).

Does anyone have a sample of this Notice that they would be willing to share. The Notice is given to an employee to notify them of the waiting period for preexisting condition. The DOL is citing an Employer pension client of mine for not furnishing this notice to their employees. HIPPA enforcement regulations call for the enforcement of HIPPA by the state for insured Health Plans . I'm not sure why the DOL is chasing this employer for this notice, and not the Insurance Health Provider, which in this case is a Blue Cross Insurer.

Thanks

Jim

A client of mine currently has a self administered 403(B) with 18 different vendors. They are freezing the contributions to those vendors and starting a new 403(B) with a single vendor who will also provide administration. Are there any requirements of the new administrator regarding the 403(B) assets already in place with the 18 prior vendors? Is there any recordkeeping or administration requirements for these outside assets.

Joe P.

I have been asked to speak at a seminar for the board of a government sponsored retirement plan and need some presentation materials.

The topics are "The role of the board and the investment policy" and "Conflicts of interest facing a fiduciary".

Does anyone have any sources?

A friend told me of an orginization that sponsors seminars for public plans called Nez Perce. Has anyone heard of this group.

Thanks.