Our plan had the 401(k) discrimination testing completed for 12/31/00 and they stated that we are top heavy - the percentage was over 60% by a small amount. May we have one of our NHCE roll over her money into the Plan to avoid being top heavy for this year or is it too late? Will this rollover work for next year?

HELP!

1. I am with an International Organization and we have a Money Purchase Pension Plan with an appointed "TRUSTEE" and with the Vanguard Group as well as a CPA firm that facilitates the necessary paper work required for terminations (Retirement or resignations).

2. One of our employees retired on 31 October 2000 and requested to close his Money Purchase Pension Plan.

3. Approximately 10 December 2000 he received the options available to him from an Actuarial Service firm hired by the CPA firm.

4. The employee completed the forms and had a Notary verified both his signature and his wife's and FedEx the form back to our organization.

5. The CPA was provided the notarized selection form which requested a "lump-sum" payment.

6. He was not prvided the money from the Vanguard Funds until 22 March 2001.

7. QUESTION: Does the employee have a case against the International Organization or the CPA firm or BOTH?

8. If so what Federal Law or Statute or Governmental Agency is the "watch dog" for this type of problem.

9. If the answer is too long, I can be reached at (212) 455-0217 or e-mail: jjohnson@kedo.org.

Thanks!

Jim Johnson

We have a client that owns several auto dealerships. Recently, they just bought another dealership. This dealership that they bought had there own 401(k) plan. I am not sure what has happened with that 401(k)plan. The only thing that has changed is ownership. The employees will still be working for the dealership under the new ownership doing the same job. My question is when can these employees participate in the employers plan? Would they be immediately eligible to particiate under the same desk rule. Our clients eligiblity is a 3 month wait with semi-annual entry.

Any thoughts would be appreciated.

Schedule I, Line 4(i) asks if the plan held 20% or more of its assets in a single security...In the instructions it specifically states that you do not check "Yes" for securities held as a result of participant directed transactions. Does this mean that if participant accounts are self directed we will not consider the value of such self directed accounts as being held in a single security? It seems that way to me, but this a pretty siginificant change from prior years so I am just looking for verification.

In the past, whenever we have received a notice from the IRS indicating that a 5500 was not filed, we simply filed the return and hoped that no penalties would be assessed. I have heard that this is the approach many of us have taken. Now that forms are filed with the DOL, I think we may not be so lucky in escaping penalties. How are you handling delinquent returns from 1999 and forward (we might as well plan to fail!)? Are most practitioners using the DFVC?

Every now and then when printing a report writer report in 6.0 I get a blue screen/system crash. After rebooting, the report will print okay. Is this a bug in the report module in this version or a random error. Its happened a few times with other users in the office too.

I have two entities that provide services to another entity and am trying to figure out of an ASG exists.

I know that all three are service organizations, but it does not appear that I have an FSO. The regs state that if the FSO is a corporation, it must be a professional service corporation. Treas. Reg 1.414(m)-1© defines professional service corporation to be "a corporation organized under state law for the principal purpose of providing professional services...." "Professional services means services preformed by certified or other public accountants, actuaries, architects, attorneys, chiropodists, chiropractors, medical doctors, dentist, professional engineers, optometrists, osteopaths, podiatrits, psychologists, and veternarians."

Insurance is not listed. Does this mean that unless my "FSO" is an entity form other than a corporation, that I really do not have an "FSO"? If I do not have an FSO then I do not have an ASG, outside of the Management Organization Test, which does not apply to this situation.

Here are my facts:

Entity 1 - owned 100% by Owner A, sole prop

Entity 2 - owned 100% by Owner B, corporation

Entity 3 - owned 50% by Owner A, 50% by Owner B, corporation

All three entiteis in business of insurance. Entity 1 and Entity 2 provide services to Entity 3. The service receipts for these services to Entity 3 exceed 10% of the total service receipts for both Entity 1 and Entity 2. I am looking at the B-org test. I don't think the A-org test applies here since none of the entities are shareholders of the other entities directly. If Entity 3 is not an FSO due to being a corporation, and insurance not being listed in the regs, I don't see how we can have an ASG.

Any other analysis? Thanks.

I have two entities that provide services to another entity and am trying to figure out of an ASG exists.

I know that all three are service organizations, but it does not appear that I have an FSO. The regs state that if the FSO is a corporation, it must be a professional service corporation. Treas. Reg 1.414(m)-1© defines professional service corporation to be "a corporation organized under state law for the principal purpose of providing professional services...." "Professional services means services preformed by certified or other public accountants, actuaries, architects, attorneys, chiropodists, chiropractors, medical doctors, dentist, professional engineers, optometrists, osteopaths, podiatrits, psychologists, and veternarians."

Insurance is not listed. Does this mean that unless my "FSO" is an entity form other than a corporation, that I really do not have an "FSO"? If I do not have an FSO then I do not have an ASG, outside of the Management Organization Test, which does not apply to this situation.

Here are my facts:

Entity 1 - owned 100% by Owner A, sole prop

Entity 2 - owned 100% by Owner B, corporation

Entity 3 - owned 50% by Owner A, 50% by Owner B, corporation

All three entiteis in business of insurance. Entity 1 and Entity 2 provide services to Entity 3. The service receipts for these services to Entity 3 exceed 10% of the total service receipts for both Entity 1 and Entity 2. I am looking at the B-org test. I don't think the A-org test applies here since none of the entities are shareholders of the other entities directly. If Entity 3 is not an FSO due to being a corporation, and insurance not being listed in the regs, I don't see how we can have an ASG.

Any other analysis? Thanks.

if a plan makes an overpayment and then recovers the money over time from a participant, can the plan reduce the amount the participant's taxable income on their future 1099's by the amount of money recovered every year?

Is it true that participants in a 401K cannot withdraw their money as long as they are still employed by the company, irrespective of any IRS penalty? I'm not talking hardship. I am VERY dissatisfied with our plan, not because of fund performance, but because of fees, time it takes for our contributions to be posted, and other factors.

I would rather take my money out and invest it through a traditional account, but if this is not possible, can I roll the balance into my Roth or Traditional IRA, while still in employ at the company?

What other options do I have? Can I demand the money, and if so, what are the retributions, if any?

Carl C

If you are covered by Cobra insurance due to your spouse retiring for 36 months and a year later the plant closes.

Now, you find out that you have not had coverage since end of Feb. however, have paid monthly premiums for Feb., March, April and May to Cobra compliance thinking that you have had coverage all this time. You have not been notified by either the plant (company) or the insurance company that you have not had coverage. Where do I stand?

I thought that was why there was a Continuation of Benefits Reform Act to make sure that people in this situation would have insurance provided. Can anyone tell, where I can get or read a copy of what exactly this Act states and how it works. Can anyone help me with this matter.

Respond to mail 4Lynn

I have a client with a plan that has a 401(k) profit sharing component and a money purchase component. Although the two components share a plan document, they got separate determination letters and the intent was to file separate 5500's. The money purchase component was just added in 2000.

The document provides for only a single (combined) trust. The trust assets are invested in a single group annuity contract (bundled product with separate subaccounts for each money type).

Is the insurance company obligated to provide separate Schedule A's and financial schedules for each plan, or since there is only one group annuity contract, are they required to prepare only a single Schedule A and set of financial schedules? The insurance company feels that their obligation goes to the contract level, whereas the sponsor and recordkeeper do not want to have to split the information out themselves. This can be nasty, as in the case of reportable transactions.

A cite would help. I am attempting to head off a "developing situation". As a last resort, we will try to do something with reporting as a MTIA, but the sponsor really does not want to have to be responsible for 3 5500's.

If an employer offers a Sec. 105(h) self-insured medical expense reimbursement plan to HCEs only but provides a fully flexible Sec. 125 plan for rank and file (which includes a medical expense FSA), can nondiscrimination testing of the Sec. 105(h) plan take into account the rank and file employees' participation in the medical expense FSA?

Has anyone found a smooth work around for the 2000 SAR since the software will not be available until June? We are thinking of setting up something in word as a template and typing in the data for 2000 or using the 1999 and changing. It will take 45 work days to load the upgrade here once we receive it from PEAK1 and really do not want to go back and do this all over again.

Here's a scenario I need some guidance on:

A participant in a 401(k) Plan is here in the USA on a work visa. The work visa expires and they must return home. Does the participant have to take their money out of the plan? What if they have $5,000.00+ in their account can they leave it even though they're returning home? Can they put it into an IRA here in the USA? What does the US Government say about all this????

I am a 21 year old college kid that knows very little about investing and finances (except what I've learned in class), and I am a little intemmidated. I opened a Roth IRA account last year with my mom's small-town bank. I did this so that I could already be earning interest until I decided where I wanted to invest my money more permanently, later. I am currently earning 6.7% interest, and I would like to be able to earn more. I was wondering which type of fund or bank I should transfer my money to in order to get a higher rate of return on my investment with a low amount of risk (no stocks) and no annual fees. I would appreciate your advise.

Thanks,

Paige

Employer currently has both a Money Purchase Plan and a 401(k) Plan. They use the MPP to satisfy safe harbor requirements for the 401(k) Plan. Plan years are the calendar year. As of 7-1-01 (mid plan year) they now say they only want 1 plan and want to merge the MPP into the 401(k).

The MPP requires funding the 3% for all eligible employees for the total plan year's compensation. Can they (maybe should is better) even merge the 2 Plans mid-year without jeopardizing safe harbor status for the 401(k)?

Can they fund the 3% nonelective via the MPP up to 6-30-01 and if they do merge, transfer the 3% contribution obligation they had under the MPP for safe harbor, to the 401(k) Plan and still have the 401(k) be considered a safe harbor plan (provided all other requirements continue to be met)? Amendments, final 5500s, 204(h) etc. to be done for the MPP. Change the Safe Harbor Notice to reflect being made to the 401(k) now. Would creating a short plan year for the MPP and the 3% contribution to all eligibles preclude this?

Or, too late - must keep the MPP for the remainder of 2001, use it to satisfy Safe Harbor for the 401(k) and then effective 1-1-02 merge the 2 plans and go Safe Harbor strictly via the 401(k).

2000-3 says guidance is being developed but wondering if others have come across this in the meantime.

If Company A buys Company B in the middle of the year, what compensation is used for employees of Company B now with Company A for 415 purposes in Company A's DC plan?? Can I use total comp between both compies or must I only use comp from Company A. Company B is not an adopting employer and did have a SEP in place. Thanks.

My understanding is that the deduction is available for fiscal year in which plan year ends.

With a safe harbor contribution, since it accrues as employees get paid, can a 6/30/01 fiscal yr end return claim safe harbor amount for the first 6 mos of year?

Maybe the answer is no since employer can back out up to commitment notice in November? Is the answer different for a plan subject to 412?

thanks

What are the legal responsibilities of an employer in regards to "orphan" account. Example: ER has 401(k) plan. He has several employees who have left the company but have not made any effort to contact the company about their vested retirement money. The company has mailed a notification but many of the notifications have been returned because of a bad address (i.e. they have moved). What can the employer do? Does the ER have to keep these accounts and continue paying the per participant charge? Can he forfeit the money? What are his legal responsibilities and limitations? How long does he/she have to wait?