Another question: If the plan year and limitation year for a defined contribution plan are both 4/1/01 to 3/31/02, is the maximum annual addition limitation for the plan $35,000 or $40,000? It sounds as if EGTRRA states that the new limitation is for years beginning in 2002, thus not including non-calendar year plans ending in 2002?

Can anyone verify what the 415 limit is for a 4/1/01-3/31/02 plan year??

Thanks.

I'm sure this has been discussed before, but would appreciate any comments.

Starting a 401(k) plan mid year(2001) and making the effective date 1-1-2001. This is a small group consisting of husband & wife with 3 ee's. The Husband makes well over the 170K limit. If the enrollment does not get done until late in year and lets assume none of the ee's participate, we can assume a 3% for the NHCE and therfore the husband & wife can contribute an average of 5%. Assume no Match.

My question is, can we use current year testing in 2002 or do we use prior year testing? Does the assumption of using the 3% average constitute prior year?

Thanks!

A plan which has Joint & Survivor Annuities as the normal form of benefit - is there any good language to provide to a layman on the reason they are required (especially unmarried) to complete the J&S Beneficiary Form. Any suggestions would be appreciated.

Two corporations (A and b) form a brother-sister control group. Each corporation has a 401(k) plan that benefits only it's employees. Each plan is identical. Each plan has the same employer contribution rates. Each plan will pass 410(B) on it's own or aggregated.

Must the plans be aggregated for the ADP test or may they be tested separately. If they may be tested separately, are only the employees of Corp A in the ADP test of Corp A.

Our interpretation of the instructions of last year's W-2 forms has come under fire from participants, and having reviewed the 2001 forms and instructions, I expect that to happen again next January/February.

Our main defined benefit plan specifies participation at the entry date following attainment of age 21, and one year of Eligibility Service (where one year of eligibility service is an employment anniversary with 1000 hours of service). It excludes union employees,but not temporary or seasonal employees.

Up through 1999, our interpretation had been that if they did not work enough hours to meet the eligibility criteria, then the Pension Box would not be checked.

All the guidance that we have found says that someone who has met the age and service requirements and an entry date, but who has not met the hours requirement should be coded as a Pension Plan (or Retirement Plan for 2001) participant. Tax Management for example says" Even a participant who accrues no benefit because he or she has not completed the required number of hourswill be considered an active participant."

We have a group of employees who work for us and other similar employers on a "substitute" basis. They might only work one day in a given year, or many more days, but probably not 1000 hours.

They claim that even if they receive 8 or 10 W-2's for a given year, we are the only ones that are checking the Pension Plan box on the form.

Continuing to check the Pension Plan box will interfere with our ability to hire and retain these people.

Anyone with comments/clarifications?

RCK

I've heard that the new tax bill has repealed the exclusion allowance limitation of 403(B)(2) but have not been able to confirm it yet. Would appreciate any comments and or references.

Plan sponsor funds and allocates its profit sharing contribution monthly. However, plan requires employment on last day as a condition for receiving an allocation. What are the pitfalls of which sponsor needs to be aware?

We have a prospective client who's prior company had a money purchase plan that terminated (maybe) with a deficiency for at least the final year and maybe more. He is interested in setting up a new plan with his new company. What must be done regarding the original company and plan in order to set up a new plan with the current company??? Thanks.

For a short plan year the DOL allows plan sponsors to defer attaching the auditor's report until the subsequent year. My question is, does this deferral also apply to the Schedules of Reportable Transactions and Assets Held for Investment which are usually included as part of the auditor's report?

Can a Rabbi Trust be assigned to another employer (a subsidiary of the original plan sponsor/grantor)? Would this situation be any diffenrent then the assignment of a qualified plan trust?

Are there opinions out there about a plan which flunks the ADP but whose HCEs are 50 y.o. and get a match on their catch-up contribution. Isn't it likely the plan would flunk ACP as well?

Exactly when do the new top heavy rules kick in for calendar year plans? Since the determination is made at year-end for the next plan year, would the new calculation actually affect the 2003 plan year rather than the 2003 plan year?

I've seen numerous banks and mutual fund companies through their trust banks, offering "full service" pension plans, particularly 401K's. They provide trust or custodial services and TPA services, and offer various mutual funds of money market funds which are sponsored and administered by related companies. Given a relationship of mutual fund and trustee, shouldn't an asterisk appear in column (a). Further, I would assume with so many such arrangements being offered that there is an exemption from prohibited transactions for such investments. I've seen First Union/Evergreen Fds, Fidelity/numerous Fidelity funds and Dreyfus/again numerous funds, and assume there would be more. I would appreciate any insight into this reporting issue.

Where are the requirements for the privacy notice being sent by banks, etc. prior to June 30? I'm trying to determine if a TPA is required to provide one. Or, if anyone has looked at this already, please provide answer...!

Thanks.

The company pays all the administrative fees for their 401(k) plan. They have several terminated participants with balances in excess of $5,000 who will not take a distribution. May the company charge the accounts of the terminated employees a quarterly fee without charging the accounts of active participants?

Can a paired standardized money purchase plan be merged into a profit sharing plan after amending the contribution in the MP plan to 0% of compensation?

Or should the MP plan be terminated, and then the assets transferred to the profit sharing plan?

With the new tax law, can a 90-24 transfer from a 403b annuity be placed in an IRA account or does it still have to be transfered to another 403b account?

I recently have been looking at the ERISA plan asset issues that arise when a plan enters into a derivative contract whereby the investment return to the plan is indexed, in part, to investments held by the counterparty to the derivative contract. The derivative is a type of equity swap (not a total return swap) which would mix and match the returns on several reference hedge fund interests owned by the counterparty. The returns are mixed and matched in a complicated manner so as to match investment diversification goals desired by the plan in order to diversify risks in the plan's investment portfolio. As such, the derivative contract is not a total return swap but rather returns (and losses) to the plan are determined based on a formula that takes into account various apsects of the gain or loss on the hedge fund interests held by the counterparty.

Under paragraph (g) of the plan asset regulations, where a plan jointly owns property with others, or where the value of a plan's equity interest relates solely to identified property of the entity, such property is treated as the sole property of a separate entity. Example 10 in the plan asset regulations involves a plan that acquires a 30% participation in a debt instrument that is held by a bank. The example states that since the value of the participation certificate relates solely to the debt instrument, the debt instrument is, under paragraph (g) of the plan asset regulations, treated as the sole asset of a separate entity. Since the benefit plan investor in Example 10 owns 25% or more of the value of the equity interest in the deemed separate entity (i.e., the participation certificate), the look-through rule under the plan asset regulations applies and the plan's assets are deemed to include the participation certificate and an undivided interest in the debt instrument. Consequently, the bank becomes a fiduciary with respect to the plan and the bank's actions with respect to the debt instrument are subject to ERISA's prohibited transaction rules of ERISA.

Depending how derivative contracts are structured, a similar result may apply to the property held by the coutnerparty thereby subjecting the counterparty to ERISA fiduciary and prohibited transaction rules. There appears to be little published authortiy concerning the application of the plan asset regulations to derivative contracts. I would be intersted in hearing from anyone who is aware of any authority or articles on the issue (or similar types of contracts). Thanks.

Is it discriminatory or against DOL regulations for a local govt to offer employees with single coverage and those with family coverage different fixed rates to apply toward their health insurance premiums? Obviously, the fixed rate for family coverage is higher and some employees on single coverage feel they should be afforded the same amount to apply toward other plans, e.g., dental vision, etc.

When borrowing from your 401k, does this "loan" appear on your credit reports?

Thank You