Is permitting rollovers optional to the employer? Does the plan have to be amended to permit rollovers to an IRA?

Is anyone familiar with the 20/50 Rule?:confused:

IRC §411(a)(7)©, and the regulations thereunder, provide for the repayment of prior distributions by participants when they are re-hired. When this is done, previously forfeited amounts must be restored to the participant's account under the plan (assumes "buy-back" occurs timely). Are there any restrictions on the source of the repayment? Specifically, if the participant took a cash distribution and paid taxes on thje original distribution, the individual could repay the amounts with "after-tax" dollars that could come from any source of assets owned by the individual and this would then create a "basis" in the participant's account. If the individual "rolled-over" the original distribution, either to an IRA or another employer's qualified plan, and upon re-employment, elects to roll the original money back into the original employer's plan, can these funds be used as the "buy-back" that would trigger the restoration of the participant's previously forfeited balance, or are there restrictions on the source of the cash used for the "buy-back"?

It seems that opinions vary as to what constitutes a "Qualified"

Plan, so I will throw in my 2 cents.

I have always defined a "qualified" plan as one subject to the limitations and restrictions of ERISA.

Any form of deferred compensation arrangement that is not subject to the restrictions and limitations imposed by ERISA would therefore be considered a "non-qualified" plan.

I hope this helps.

Does anyone know what the penalties are for Employers who turn in their employee contributions late? If the form 5500 Schedule I Part II 4a. is marked yes with a dollar amount, what penalties would the employer incur? I would like to let my employers know so they understand what can happen if they are late with their contributions. Thanks! Mike

I need help defining a Master Trust versus a commingled Trust. I have a few clients that invest their PS and MP Plan assets jointly. To date we have allocated the investment performance and underlying assets between the two plans on a consistent and reasonable basis for purposes of participant allocations and Form 5500 reporting. Recently an auditor (CPA, not IRS or DOL) asserted that these are Master Trusts that must file MTIA 5500s. In none of our situations are the Trust documents written as Master Trusts, but they do allow for the commingling of investments. While the investments may be placed with brokerage firms or mutual funds, the brokers or mutual fund families are not acting as Trustee or Custodian for the plans. The Plans are Trusteed by the shareholders. What insight can anyone out there offer?

I need help defining a Master Trust versus a comingled Trust. I have a few clients that invest their PS and MP Plan assets jointly. To date we have allocated the investment performance and underlying assets between the two plans on a consistent and reasonable basis for purposes of participant allocations and Form 5500 reporting. Recently an auditor (CPA, not IRS or DOL) asserted that these are Master Trusts that must file MTIA 5500s. In none of our situations are the Trust documents written as Master Trusts, but they do allow for the comingling of investments. While the investments may be placed with brokerage firms or mutual funds, the brokers or mutual fund families are not acting as Trustee or Custodian for the plans. The Plans are Trusteed by the shareholders. What insight can anyone out there offer?

I have a 401k plan that will only have been in existence from 2-00 to 7-01. It's a std prototype. Do I need to update it for GUST?

Thank you.

I am looking for the specific language in IRC Sec 408 regarding establishment of an IRA with a custodian. The IRS website's search engine is not very helpful. Can someone tell me where I can locate the it online? thank you

It was always my understanding that for partnerships and LLCs that did not use W-2s that the earned income would be the partners' net K-1 income. What i was recently made aware of is that net K-1 income is net of any Unreimbursed partnership expenses from the Schedule E (Form 1040). I was wondering if this is correct and if i should be requesting the Schedule E info in addtion to the K-1 income?? thanks.

On July 26, 2001, the president ( Bush) signed into law a measure that in effect changes the name of the Education IRA to "Coverdell Education Savings Accounts" . The new name is in honor of the late Paul Coverdell, who served as senator from Georgia from January, 1993 until his death in July, 2000.

Under EGTRRA, the contribution limit for Education was increased to $2,000, effective for tax years beginning 2002.

I seem to recall that there was a provision that did not make it into EGTRRA that would have provided for reduced PBGC premiums to certain plans.

Was it plans with 100 or less or 500 or less participants?

Does anyone remember what the reduced premium was?

Thanks.

Employee elects participation in his employer's Cafeteria Plan and contributes $260 per month in pre-tax dollars to cover the cost to insure his dependent spouse and children.

During the plan year the employee wants to revoke the election and delete dependent coverage because his spouse's employer changes insurance companies and she could insure herself and the dependent children for $130 per month through her employer's plan. The husband's contributions would then decrease from $260 per month to 0 because his employer pays 100% of the employee cost.

I'm thinking that this would be permitted as a family status change because the spouse has a new coverage option (because of the change in insurance companies) and the significant decrease in cost would fall under the cost and coverage rules.

Agree or disagree?

When the employer (Plan Sponsor) changes mid-year because of an acquisition and the plan is retained by the new employer, do you use the name, address and EIN of the new employer to file a 5558? Also, if answer is yes, I assume you file the 5558 with the IRS office based on the location of the new employer.

Can plan assets be used to pay for a fund search?

Can plan assets be used to pay for a recordkeeper search?

If the party that has been hired to do the searches is a fiduciary to the plan, how will this impact your answer?

Joel / Carolyn,

I have been told that if a person chose period certain rearding their retirement choices that there still would be the availability to rollover the balance to an IRA. This choice would include all current retirees thus there is a huge grapevine of possible clients. Hoever, if a person chose the life annuity choice then the funds would have been retitled in the name of the insurance company or annuity company and all future hopes of a rollover to an IRA are null and void.

I have been made aware of though that if a person has chosen a period certain payout that it is essentially a contract similar to the life annuity contract just with a definite ending point, thus the money is not available rollover.

If you have some insight or answers to the contrary please let me know, otherwise the only money we will have access to as compared to before, are the fresh rollovers from retirees as the older retirees it would all be a dead issue?

I look forward to your answers?

Shawn

800-628-5770

to protect the actual company involved, I will change the name to something similar.

This is a true story!

we process a plan for 'SUPER WOMEN of AMERICA'

its a 401k, self directed.

the plan is top heavy

the profit sharing portion is integrated.

and it was a prototype.

so on the old 5500 forms, we had to indicate this with the following codes:

CHIK

Truly, a CHIK plan.

Did EGTRRA (or anything else) change the requirements for eliminating optional forms that were spelled out in the final 411(d)(6) regs released about a year ago?

That is, is it still necessary that:

1) after the amendment takes effect for a participant, the alternative payment forms that are still available to the participant must include payment in a single-sum distribution form that is “otherwise identical” to the eliminated or restricted optional form of benefit, and

2) an amendment eliminating or restricting a participant's right to receive payment of accrued benefits under a particular optional form of benefit cannot apply to a participant for any distribution with an annuity starting date that's effective before the earlier of (1) the 90th day after the participant receives a summary that reflects the plan amendment and that satisfies DOL's requirements for an SMM, or (2) the first day of the second plan year following the plan year in which the amendment is adopted?

Our client ("Buyer") is purchasing a company maintaining a KSOP. The KSOP is to be terminated. Buyer, for a number of reasons, wants to terminate the KSOP shortly after closing, but wants the newly-acquired employees to begin participating in Buyer's 401(k) plan immediatley following closing. To avoid a deemed merger of the KSOP and the buyer's 401(k) plan and to avoid a one-year hold-out of the newly-acquired employees' participation in the Buyer's 401(k) plan, will it suffice to terminate only the (k) portion of the KSOP prior to closing and terminate the ESOP after closing?

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.