Can anyone please direct me to a comprehensive reference for understanding

ESOP's?

I have a client who desires to sell his interest (24%) of a closely held

business, controlled by his parents. A fourth shareholder, my client's

sister-in-law, also desires to sell her interest (also 24%). The parents

(52% shareholders) have proposed a leveraged ESOP to allow both kids to

sell their shares and exit the business (neither one has been currently

employed with the business for at least two years).

I am aware there are significant tax advantages to the seller of stock, but

I am most concerned with ensuring my client doesn't unwittingly place

himself in a difficult situation. There are significant trust concerns

between all family members.

Thank you in advance for your help.

Now that FDP's Contact Partner will no longer be maintained, I would like to know what client databases any of you may be using and if you like it or not.

Profit sharing plan not amended for TRA 86, etc.... No 5500's filed since 1986. Sole shareholder of professional corporation which sponsored the PSP passed away 18 months ago. Decedent had a beneficiary designation naming A and B. Insurance company has advised that A and B can advise trustee, which is a bank, to purchase a non-transferable annuity with A and B as the beneficiaries. Ins. co. says that the annuity purchase/distribution is not required to be reported in any manner since the trustee is purchasing the annuity??? Ins. co. has also advised that, once done, the insurance company maintaining the annuity can report payments under the annuity as A and B receive them.

Seems to me as if there is a potential that the annuity is fuly taxable to A and B on date of purchase under Reg Sec. 1.402(B)-1©(1). Anyone run into this type of situation before???

Does anyone know of good websites that explain the different methods of funding health plans, describe how premiums are set up differently, etc... Something that discusses HMOs, self-funding arrangements, intermediate risk sharing arrangements, risk pool type arrangements, etc... Thanks!

401(k) Plan has made participant loans as a "pooled investment" rather than "earmarking" the loans as part of the borrower's account balance.The loans are secured by participant's vested account balance, however, the participant's account balance does not reflect the loan balance. The loans are taken from and paid back to a bond fund option. All participants invested in this fund share in the loan interest payments. One of the basic concerns is the potential for paying out a participant their entire vested balance forgetting to offset by the outstanding loan balance. Another concern is that participants with outstanding loans are able to direct the investment of their entire account balance. Should they be mandated to invest an amount equal to their loan balance in the bond (loan) fund or is that a fiduciary decision?

If possible the client would like to convert the loans to earmarked loans as part of the participant account balance. Any thoughts, comments, recommendations about the conversion and potential problems would be appreciated. I have not been able to find much guidance in this area. Thanks.

A shareholder has elected non-recognition under IRC 1042. The shareholder remains an active employee and a participant in the ESOP and does not share in the allocation of stock subject to the 1042 election. Shares allocated to terminated vested participants are distributed to and reregistered in the name of the terminated vested participant. If the ESOP reacquires this same stock, is the selling shareholder prohibited from receiving an allocation of the reacquired stock?

Cites?

I have a client who has a top-hat plan that includes 11 of the 40 employees. (I was not involved in setting it up or running it, and just heard about it now) They have done some reading, and now fear that they are including too many people for the definition of "select group". Does anyone have any ideas on acceptable correction methods to get them back in compliance? What issues does this raise on the historical operation of the plan? Thanks for any feedback.

If we as recordkeepers make a mistake & lose money, we make it up from our profits. But when an error correction results in a gain, it's less clear what should be done with that money.

In this instance we were sent a contribution with the wrong SSN associated with it. Therefore we applied it to the wrong person. Upon discovery & correction, due to the different investment elections the participants had, we find ourselves with a gain of approximately $1700.

This plan uses daily recordkeeping. It seems fair to fix this by reversing the shares purchased by the erronious contribution, thus the gain is not kept by the person who accidently received extra contribution.

Since we'd be making this right out of our pocket if the market had gone the other direction, it does seem reasonable to put this aside to offset errors that do result in a loss. Traditionally, we've never done this, instead allocating this gain somehow to the plan, perhaps thru a reduction in fees.

Does anyone have any thoughts on the proper way to handle these situations? Any references to IRS/DOL documentation would be great.

Thanks.

Can a plan's document limit the maximum loan to something less than 50% of the vested account balance, for example 20% of the vested account balance?

Our LTD is fully insured and the insurer wants us to move to a new contract which requires mandatory rehabilitaion for any job, not just the occupation the clamaint had. The contract also has multiple proof of loss provisions that the employee must follow to continue receiving benefits and the employee must follow their physicians recommended treatment plan including medication and therapy. The premium rate for the benefits under the new contract is not significantly lower. My question is: Is this the standard type of LTD contact now being offered and are there any legal ramifications to requiring mandatory rehabilition and treatment?

A person worked until age 65 1/12. Is the Plan required to provide suspension of benefits notice in this situation (so close to age 65)?

The plan did not provide for an actuarial increase of benefit and the person's accd ben did not increase after age 65.

Takeover plan was determined to be top heavy for 1998 and 1999 but not all non keys received minimum contribution for 1998 (liberal eligiblity requirements for 401(k) feature)and no profit sharing contribution was made for 1999. Regarding the deductibility of these contributions, it is my understanding that the employer would be able the deduct part of these contributions for the 2000 plan year as long as the 404 deduction limit is not exceeded for the 2000 plan year. Can someone cite a regulation or revenue ruling that addresses this?

I am looking for a sample policy or guidelines on vehicle leasing for our employees in Germany. From our policy in Belgium, there probably will be many factors that go into the policy design: lease vs. allowance in salary, taxes, mileage reimbursement, fuel, maximum kms per year, lease term, maintenance, insurance, registration, etc...any help or direction (ie. website suggestion) would be very much appreciated.

An employer sponsoring a self-funded plan (stop loss coverage only) subsidizes 15% of premiums for active employees, and 0% of premiums for COBRA recipients.

The employer recalculated its group health premiums and found it had to raise them substantially. In order to prevent passing this increase on to the active employees it is increasing the percentage it will subsidize to 20% of the increased premium. However it is passing on the increase to the COBRA recipients.

Since the premium amount is the same for actives and COBRA recipients, this still meets the "similarly situated" requirement, does it not?

I'm a DB guy and don't work on 401k plans, but need to know the following:

Where on a tax return does an employer deduct 401k elective deferrals? Are they treated as compensation, and deducted as such? Or, since they are technically employer contributions arising out of a participant's voluntary salary reduction, are they deducted as employer contributions on a tax return? Assume a corporate tax entity.

Mr X took a hardship distribution of $50,000 from his account. Now his account balance is only $2,000. $6,000 needs to be returned to him due to non-discrimination test failure.

What do you do in such a case where there is not enough money in the account left to do the test refunds?

Our firm is a small 401(k) consulting/recordkeeping/legal firm, and we have always used custom Plan documents for our clients. We are not looking forward to incorporating the GUST changes into our existing documents, even though we have seen some good GUST checklists. Instead, we are looking for recommendations for a source for a new Plan document that includes all the latest goodies including GUST. In our ideal world someone would e-mail us a sample document (that we would pay for, of course). We're not looking for some big system of CDs and manuals and classes and on-going updates - we just need a Plan document. Any ideas?!

Thanks.

An employer has a profit sharing plan with 401(k) feature that includes all classes of employees. One of those class of employees is not permitted to receive overtime pay. The employer would like to establish another profit sharing plan only for that class of employees. This plan would allow the employer to fund it with what they would have received in overtime pay. Is such an arrangement (plan) permissible and would there be any problems with having different rate groups since none of these employees would be highly compensated?

If we as recordkeepers make a mistake & lose money, we make it up from our profits. But when an error correction results in a gain, it's less clear what should be done with that money.

In this instance we were sent a contribution with the wrong SSN associated with it. Therefore we applied it to the wrong person. Upon discovery & correction, due to the different investment elections the participants had, we find ourselves with a gain of approximately $1700.

This plan uses daily recordkeeping. It seems fair to fix this by reversing the shares purchased by the erronious contribution, thus the gain is not kept by the person who accidently received extra contribution.

Since we'd be making this right out of our pocket if the market had gone the other direction, it does seem reasonable to put this aside to offset errors that do result in a loss. Traditionally, we've never done this, instead allocating this gain somehow to the plan, perhaps thru a reduction in fees.

Does anyone have any thoughts on the proper way to handle these situations? Any references to IRS/DOL documentation would be great.

Thanks.

I have been off work for months with a drug induced myositis caused by a pseudocholinesterase deficiency that was aggravated by a beta blocker I was taking for high blood pressure. My employer's disability plan is carried through Liberty Mutual and they refuse to pay me benefits even after several letters from my doctor. Liberty wants a test and there is none for my present condition. Guess they need a code that matches one in their computer and it is non-existant. Meanwhile I have been without a disability check and other benefits with my company have been terminated because Liberty has not officially approved me for disability and denied my appeal. I have contacted the Ohio Dept. of Insurance and the Dept. of Labor but have been told that my employer is self insured and they cannot help me. Any suggestions?? Thanks!