In a general tested profit sharing plan where an HCE who meets the eligiblilty requirements waives participation, is he/she in the general test as a 0% (as opposed to being out of the test)?

Can his comp be used for 404?

I think the answers are yes and no. Agree? Disagree?

But if so, if he/she were instead to get a contribution of $1, the comp could be used for 404, correct?

What needs to be done to reinstate a 401K plan?

The engineering company I work for makes it's money by the hours that the employees work. When the employees don't work we in turn are not making any money. We offer a four day work week and then in turn don't pay our employees for any holidays or sick time. They are basically paid for the time that they are here. Does anyone have any suggestions I can take to the President of the company to get better benefits for the employees?

a client has been making contributions to his company retirement plan but does not have compensation to justify the contributions. He has K1 income and thus is not entitled to make contributions to the Plan.

What should he do to remedy the situation?

should this be handled in one of the correction programs?

Participant has taken a loan from her 401(k) for eighteen months, and is later terminated. Plan allows her to continue making repayments, rather than making the entire balance payable right then and there. Does it seem wise or practical to allow the participant to re-amortize the loan to spread out the payments, say, to the five year maximum, at a lower per payment amount? More importantly, since the plan allows active employees to do this, does it *have* to allow the ex-employee (who, rumor has it, may return to work for the employer in a few months) this option?

If a plan document says that forfeitures will be restored upon repayment of full amount distributed to participant, how is a 0% vested participant treated? Is the participant automatically assumed to have repaid a $0 distribution, or is this dependent on the plan document? Does it make a difference if the plan does or does not have language about a 0% vested participant being deemed to have receive a distribution?

Do you have plans that do not restore forfeitures to 0% vested participants that are rehired prior to 5 consecutive 1-year breaks in service?

The employer of a calendar year 401k plan made a $15,000 discretionary contribution 12/08/00 for 2000. The salary deferrals made by employees for 12/00 (paychecks are issued twice a month) of $2450 were not deposited until 5/15/01. Other monthly deferrals were tranmitted on time. Should the schedule H question "Did the employer fail to transmit to the plan any participant contributions within the maximum time period" described in the DOL regulations? be marked yes or no?

Also should a 5330 be filed and an excise tax paid for this situation? Thanks for your input!

Previous threads have dealt with the issue of"carving out' otherwise excludables from the various nondiscrim tests,but what about plans with multiple eligibility provisions? Specifically ,I have a 401(k) plan that requires 21/1 month for deferrals,and 21/1 year for the PS.The PS allocation is tiered, and there is a 1000 hr/last day requirement to get an allocation. The plan is top-heavy,so the 1-monthers get the 3% minimum.How are these folks considered for ratio%,average benefit,and general tests? Thanks for your help.

Are there any employer contributions that are "disregarded" when calculating a top-heavy mimumum contribution?

I was told a matching contribution should not be used to reduce the TH mim. However, I cannot find any documentation to that.

In regards to calculating the maximum loan limit (IRC 72(p)) when there are multiple savings plans and more than one loan offered in each plan, after finding the adjusted $50,000 limit (Part 1) and finding the maximum vested balance (Part 2), would the maximum loan amount be reduced by outstanding loan balances in the particular plan where the loan request is being applied or reduced by outstanding loan balances across all plans? So Line 7 below is where I have issue (all plans vs specific plan at this point in the calculation). I will illustrate with the following example for clarification:

3 loans allowed in each plan not to exceed 72(p) limits.

PART 1: FIND THE ADJUSTED $50,000 LIMIT

1.) Maximum amount (IRC Section 72(p)) $50,000

2a.) Highest outstanding loan balance(s)

during the last 12 months; this includes

all outstanding loan balances in all of

XYZ Corporation's savings plans:

Salaried 401(k) Plan:

Loan #01 $1,000

Loan #02 $2,000

Loan #03 $3,000

Supplemental Savings Plan/SSRP (After-Tax EE Contributions with annual 2% ER

Contribution):

Loan #01 $4,000

Loan #02 $5,000

Loan #03 $6,000

Highest outstanding loan balances

across all plans: $21,000

2b.) Less current outstanding loan balances

across all XYZ Corporation's savings plans:

Salaried 401(k) Plan:

Loan #01 $Paid Off

Loan #02 $ 300

Loan #03 $1,500

SSRP

Loan #01 $2,500

Loan #02 $Paid off

Loan #03 $5,000

Current outstanding loan balances

across all plans: $9,300

2c.) Highest outstanding loan balances minus

current outstanding loan balamces across

all savings plans: $11,700

3.) Reduced maximum statutory loan amount

subtract Line 2c from Line 1: $38,300

PART 2: FIND THE MAXIMUM VESTED BALANCE

4.) Participant's vested account balance (which

includes outstanding loan amount(s) in the

XYZ Corporation Salaried 401(k) Plan): $85,000

5.) Multiply by 50% which results in: $42,500

MAXIMUM LOAN AMOUNT

6.) Enter the LESSER of Line 3 or Line 5 $38,300

7.) Reduced by the participant's current

outstanding loan balance(s):

Salaried 401(k):

Loan #01 $Paid Off

Loan #02 $ 300

Loan #03 $1,500

SSRP:

Loan #01 $2,500

Loan #02 $Paid off

Loan #03 $5,000

Current outstanding loan balances across

all plans: $ 9,300

8.) Subtract Line 7 from Line 6 (maximum

amount available for loan): $29,000

Comments would be appreciated. Thanks.

Tim Cahoon

Client thought plan was terminated in 1996. Client says TPA was to handle everything. No 5500's filed since then. We are considering DFVC with the DOL. Question is whether it's possible to file a request for waiver of penalties based on reasonable cause and reserve the right to utilize DFVC program if DOL finds the facts alleged do not amount to reasonable cause? The request for waiver will be filed with the IRS as well. It appears that the IRS is currently asking for the 1997 and 1998 5500's. May be that the sentiment is that it will be less costly and burdensome to go ahead and pay 6,000 for the non-filed 5500's than to try to deal with DOL as to reasonable cause and possibly lose the ability to use DFVC???? Welcome your comments.

Client thought plan was terminated in 1996. Client says TPA was to handle everything. No 5500's filed since then. We are considering DFVC with the DOL. Question is whether it's possible to file a request for waiver of penalties based on reasonable cause and reserve the right to utilize DFVC program if DOL finds the facts alleged do not amount to reasonable cause? The request for waiver will be filed with the IRS as well. It appears that the IRS is currently asking for the 1997 and 1998 5500's. May be that the sentiment is that it will be less costly and burdensome to go ahead and pay 6,000 for the non-filed 5500's than to try to deal with DOL as to reasonable cause and possibly lose the ability to use DFVC???? Welcome your comments.

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.