Is the federal retirement system (for Title 5 and Title 38 employees) subject to the anti cutback rule in the Code (or any equivelent?)

I received a call from an employee that stated he needed to add his child onto our plan, and he thought he did during Annual Enrollment, but he did not do it. His ex-wife who covered the child has now lost her job, and he is just now telling us that he was mandated by the court(in the divorce decree) to cover the child along with his ex-wife. I have asked the EE to provide us with a copy of the divorce decree and a copy of his ex's HIPAA statement. My feeling is that since he is just notifying us of this, if the documents support his position, that I only add the child effective the date the coverage ends under the ex-spouse(mother). Please any insight. Thank you.

Many years ago, a newly referred prospective client wanted a fairly complex study done involving present values of future renewal commissions. When he asked me to estimate the cost, I told him I could not do so because there were too many variables.

He decided to use us anyway, signed the retainer agreement and paid the $500 retainer.

The study was complete, and the client was satisfied (as my mother, of blessed memory, would say - "of course!") with the end result.

I presented a bill for the work done - $1,700 less the $500 retainer, for a net of $1,200.

[by noting the total fee, you can tell it really was many years ago!!]

The client balked and insisted I was entitled to only an additonal $500.

When I asked him how he could justify that, his argument was:

"I will pay you only another $500. Larry, you remember I asked you how much it would cost? you answered 'I don't know, but I will take $500 as half.'"

The story was worth the difference in fee, and I accepted the offer.

Using a distribution of Employer Securities (NUA) and Post-tax dollars for an Emergency Stock Swap

A 55 year old employee retired today and must come up with $266K in cash in the next 90 days to exercise an expiring block of stock options. In place of cash, the client could conduct a "stock swap" if he owned employer shares outright (not in an IRA or 401(k)). As one might expect the client has no liquid cash or shares.

As a 55 year old, the client wanted to withdraw $300k from his Cash Balance plan (mentioned below) or 401(k) plan to avoid the 10% early withdrawal penalty - - NOT! His other sources of income for the next few years will keep him in the highest tax bracket.

However, he a Cash Balance Plan which he will probably roll to an IRA and 401(k) loaded with employer securities. The ultimate goal is to generate $266k in after-tax cash or securities prior to the upcoming stock option expiration date with the least amount of taxes - - hence, the In-Kind Distribution strategy.

$800,000 - Cash Balance Plan (not aggregated with 401(k))

$325,000 - 401(k) held as follows:

$75k in Mutual Funds - Employee Contributions

$150k in Employer Stock - Employee Contributions (NUA 120k)

$100k in Employer Stock ESOP - Employer Contributions (NUA 80k)

He has made $52k in Employee After-Tax contributions (post 86)

The plan does not specify where the $52k was invested (in funds or employer securities).

The client has a total basis of $50k in his $250k of employer securities.

INQUIRY #1:

Can he distribute the all of the employer securities using the after-tax portion of his plan? If so, does this mean that the client just used 50k in after-tax plan assets to distribute $250k in employer securities and did not have to report the distribution as income? Does he avoid the 10% early withdrawal on the basis of the securities? What about 20% withholding? Any ideas?

INQUIRY #2:

As mentioned above, this client has $150k in employer securities attributable to empolyee contributions (potentially pre-tax and post-tax) *AND* $100k in employer securities attributable to employer contributions (ESOP). With regards to a distribution of employer securities, can someone please describe the differences between distributions that:

1) Qualify as a LSD (not for forward averaging purposes)

2) Do not as a LSD

Thank you.

Can anyone tell me what documentation is necessary to terminate a Premium Only Plan? Thanks.

I'm liquidating my Roth IRA to buy a home. What do I need to produce to satisfy the IRS so I'm not assessed a penality?

If a participant defaults on a 401k loan (by missing payments) and receives a 1099R for the distibution and then begins to repay the reammortized loan after the default how is this handled? For example, I assume if they default again it is not taxable again but I'm not sure how that situation would be treated. What happens if they quit or are laid off before loan is repayed. Are there other issues associated with such an arrangement?

If a participant defaults on a 401k loan (by missing payments) and receives a 1099R for the distibution and then begins to repay the reammortized loan after the default how is this handled? For example, I assume if they default again it is not taxable again but I'm not sure how that situation would be treated. What happens if they quit or are laid off before loan is repayed. Are there other issues associated with such an arrangement?

I have a client that was employed by a company registered in China. The company made pre-tax contributions on my client's behalf into a retirement plan "Provident Fund" mandated by the Chinese government. The client made a small amount of after tax contributions to the plan. The client has left this firm and has received a letter from his former employer telling him he can move the funds out of the "Provident Fund". The client will continue to live and work in China. The account has a balance of approximately $170,000.

Can the client transfer these assets into an IRA in the United States (and received all the benefits associated with a traditional IRA)?

Are premium only plans subject to the separate trust requirement or can the employer pay any premiums out of their general account.

Is there any way to use elapsed time eligibility (say 6 mos.) and also exclude part-time employees (say those who work less than 20 hours per week) or those who work only seasonally? I realize that the 410(B) Min. Coverage Standards don't apply to gov. plans but I know how IRS feels about excluding part-timers (Microsoft case). Since you don't measure hours for elapsed time, can this be accomplished? Thanks for the feedback.

It appears that an employer that fails to timely remit elective deferrals must, among other things, answer Lines 4a and 4d of Schedule H to Form 5500 in the affirmative and supply an "amount" for each line.

My question is about the "amount" (which I gather would be the same for each line). Is this amount equal to (1) the amount of the late elective deferrals or (2) the fair market value of the use of those late deferrals from the time they were late to the time they were deposited (i.e., the "interest" due on the prohibited "loan" from the plan to the employer) as with the amount listed in Line 26b, Column © of the Form 5330?

Any thoughts would be very much appreciated.

A terminated, retired employee is entitled to a "bonus" three months after the severance from employment date. The individual wantes to defer a portion of the "bonus" in accordance with the salary deferral election that was made when he was actually an employee. Can this be done?

Company wants to adopt a statutory Incentive Stock Option plan under section 422. Company will also adopt a Non-statutory incentive stock option plan for some non-managment employees. If too many employees participate in the plan,won't that subject the plan to ERISA? Don't the plans have to be limited solely to key managment employees in order to be exempt from ERISA? Can anyone list the

statutory exemption for an ISO and also a non-statutory plan to fall outside of ERISA? Any resources to look at?:confused:

If I am making refunds today for a 2000 ACP test failure, would I use the vesting as of today or the vesting as of 12/31/00?

Reg. §1.401(m)-1(e)(1) which provides that "[M]atching contributions (and the income allocable to matching contributions) that are not vested (determined without regard to any increase in vesting that may occur after the date of the forfeiture) may also be forfeited to correct excess aggregate contributions."

I interpret this to mean that if the correction is made today, I would need to consider the vested status as of today.

Anyone have a different opinion and a cite for same?

Is the RP-2000 Table automatically to be used for purposes of 412(l),or is the Service required to make it official by regulation,ruling,etc.?

'Bout time Dave!

I am sure we all have some amusing pension stories.

Once I took a call from someone asking for help regarding a new comparability/cross tested plan- If I recall, it was whether the plan passed testing. The plan was for a lawyer and his employees.

Upon 'prying' for more info, I discovered the allocation used $500,000 (or some obnoxious figure) in comp for the lawyer. I told the person you can't do that but the individual insisted the lawyer knew what he was doing. (I suppose that in itself is a funny thought)

I asked the individual just how are they going to answer the question of the 5500, 'was comp limited to 150,000'?

The response was that the filing would be a 5500-R for the current year, and that question does not appear on the 5500-R, so you don't have to worry about it.

Can't argue with that logic can you? I am still laughung inside over that one.

I've been trying to discover a way to streamline our 401(k)'s QDRO procedures. In particular, I want to amend our policy to specifically include a limitation on "lookback" language in proposed QDROs such that the Plan will not "qualify" any that requires historical account valuations more than twelve months prior to the actual benefit division date. The rationale for this tack is described below.

As you probably know, QDROs on DC plan participant accounts will often establish the "base" award to the alternate payee as of a certain point in time and may require that such account value be adjusted for (a) gains or losses from that point to the actual benefit "division date" and (B) exclude any investment exchanges, loans or withdrawal activity that transacted in that same period.

Unfortunately due to frequent recordkeeper changes in the past and limited access to historical data, we frequently faces three challenges along the above lines:

1. The point in time for the base award is as of a date other than a quarter-end. We have historical quarterly statement data, but very limited access to post-October 1997 daily valuation data.

2. The point in time for the base award is as of a date prior to the start of the IP's current recordkeeper's tenure - roughly October 1997. This requires we access old records at a significant cost with virtually no access to nonquarter-end valuations.

3. Because of the often heavy transaction volume on participant accounts, constructing gains or losses from the base award date to the actual division date can require a large expenses of time and money. In some cases that require gain-loss contruction from a base award date prior to October 1997, the work becomes very imprecise.

Given that ERISA and the Code charge plan administrators with establishing clear, cost-effective and reasonable procedures for determining if a domestic relations order is a QDRO, it would seem that my proposed change should not be a problem.

Any reactions or comments will be appreciated

I was hoping someone could clear up the confusion regarding the change in distribution rules effective 01/01/02. My understanding is that a 457 participant is permitted to receive distributions after termination of service at any age and not be subject to the 10% early withdrawal penalty (under current rules). What will happen in 2002? Some are saying that the participant would be penalized 10% if distributions are received prior to 59 1/2, while others are saying that if the participant leaves the funds in the 457 (and not rollover to an IRA) the 10% would not apply. Any insight would be helpful.

Thank-you.

Under Rule 701, if the aggregate sale price of securities sold in reliance on the Rule exceeds $5,000,000 in a 12-month period, the issuer becomes subject to certain disclosure requirements. One of these requirements is that the issuer deliver to the investors financial statements "no more than 180 days before the sale of the securities" in reliance on Rule 701.

With respect to a stock option granted in reliance on Rule 701 by a company subject to the above-mentioned disclosure requirements, when does the 180 day disclosure reqt for financial statements start? 180 days before the option exercise date? Or 180 days before the option grant date? In other words, which is the "sale" triggering the 180 day reqt -- the grant or the exercise of the option?