In a small SARSEP one NHCE defers 12% of pay. The SARSEP is deemed top heavy, so 3% must be contributed for each non-key employee. This puts our NHCE who defers 12% at the 15% limit for contributions. Does this mean that no additional "Employer contributions" may be made on behalf of the HCE, whose only contribution is a $10,500 deferral? He is at $170,000 compensation limit. My other question: is the 15% limit on contributions for each employee computed as 15% of gross wages including salary deferrals, or 15% of gross wages minus salary deferrals? Thanks for all help on this matter.

If an employee of a corp. earns $170,000 and defers $10,500 in a 401(k) plan; can the same person start his own profit sharing plan and contribute $25,500 if his net earned income from self employment is $200,00?

In the case of an unforeseen emergency withdrawal from a 457 plan, who would be acceptable as a dependent and what would be acceptable proof of dependency? We have a request due to funeral expenses for a parent. Would the employee have to have been providing at least 50% of the parent's financial support in order to consider the parent a dependent? Does the IRC provide an acceptable definition of dependent for these purposes?

In April of 2000 I had to remove excess contributions from my Roth IRA. My custodian figured up the amount with the earnings attributed to the excess contribution. However I choose for the withdrawal to be in mutual fund shares. They forwarded on the request to the mutual fund company, but by the time the mutual fund got around to the actual transfer the value of those shares had dropped.

So today on my 1099-R form my custodian claims I should pay tax on the amount they figured up, not the actual dollar value transferred 3 weeks later into the mutual fund.

My custodian claims for tax purposes I should use there "as of" date calculation. Is this correct?

Example: Custodian figures and reports $2,000 plus say $800 in earnings on the 1099-R.

The actual amount (transferred 3 weeks later) was $2,000 plus say $600 in earnings, because the value of the shares they were told to transfer has dropped.

So now I owe tax on $800 but only actually received $600 in excess earnings. Is this the correct way to look at a delayed transfer situation like this?

Hi,

I contributed $10500 to my 401K for the year 2000. I just got to know that I am considered as a highly compensated employee and that I can contribute only $7000 to the 401K. In essence my employer said that I will be getting back $3500 and I need to show it as a part of my 2000 income.

Now I know that I need to pay tax on that $3500. Do I need to show this as extra income for year 2000 and pay the tax with the 2000 returns? Or do I need to wait for IRS to let inform me? Basically I want to know how best I can handle this.

Also can I open an IRA and roll this $3500 over to that?

Ram

Can anyone please direct me to an illustration in a stock option agreement showing a paragraph indicating a cashless warrant provision. in other words, the verbiage of a cashless warrant provision.

would greatly appreciate any help.

thank you.

A friend of mine asked me for advice on a complicated problem she is having with her own COBRA coverage. She was laid off from a company that as part of the layoff package gave her two months salary and told her that during that time period her health coverage would be continued. After the two months she would be able to elect COBRA if she wished. The whole layoff was quite confused as the only HR person for the company was sick for the last few days of the laidoff workers' employment.

Six weeks later my friend had several health claims denied and it turned out that her company had meant that upon termination she could elect COBRA and they would pay the COBRA premiums for two months. So, she was without health coverage but was never notified of her loss of coverage. She can still elect COBRA now (though since she's about to move out of the service area probably won't) but seems to be stuck for the expenses she incurred while believing herself to be still covered by her insurance.

Obviously the company handled this very badly, but are they actually in violation of COBRA or other regs in any way? Or is the only possible legal argument here a breach of contract? She isn't sure whether she had any of this agreement in writing-- though she remembers signing a few waivers before she left the company.

Thanks,

Liss

Participant has an outstanding loan balance of $4,000 and wants to take a second loan of $1,500 - is spousal consent required for the loan? Would spousal consent be required if the second loan was $1,000?

When a corporation sells its entire interest in a subsidiary (which I believe is a distributable event under 401(k)(10)), and there was a 401(k)plan which covered only the employees of the subsidiary, is it better to pay everyone out and then terminate the plan? Or is it better to terminate the plan first? Or doesn't it matter?

I am in the midst of terminating client's PSP. The PSP is the survivor of a plan merger with client's former MPPP in 1991. No 204(h) notice was distributed when the plans merged. I am aware of a small number of court cases which seem to say that a 204(h) notice would be required in the merger context. I am considering the extent to which I may need to address the 204(h) notice issue with respect to the termination of the PSP. Specifically, if a 204(h) notice was required upon the merger, then technically the MPPP is still alive. Giving a 204(h) notice with respect to the termination of the PSP would seem to at least cut off the obligation under the MPPP as of the termination date. I understand that giving the notice may invite participant questions. Anyone dealt with this before or have any comments???? Thanks.

I opened a Roth IRA in 1998 with $32,000 and amortized tax payment over four years. With the 2000 taxes, I have paid taxes on $24,000. Because of poor stock performance, the Roth is now worth $24,000. I would like to avoid paying the fourth tax installment but would like to maintain the Roth. Can I recharacterize as a regular IRA and then convert back to a Roth without incurring additional tax liability? If I need to ask for an IRS ruling, how do I contact them? Thanks!

I am a British National, I have been working in the US for seven years. I have a 401K. I am returning to the UK for good. What are my options with my 401K? Do I have to retain it in the US till I retire or can I cash it in now?

I would like to begin making contributions to a Roth IRA. Is there anything wrong with investing in a small cap fund (growth or value) as compared to a large cap fund? I have 35 years until retirement. Thanks

COBRA question. If a QB's coverage ends 12/31 and they enroll in COBRA on 1-29 and pay for the month of January when they turn in their enrollment form when is their next payment due? Do they have 45 days from the date they enroll, can they make partial payments?

Please advise me if the addition to income of the 25% of a four year conversion (IRA to Roth IRA)counts when considering eligibilty to contribute to my Roth.

I live overseas and am a US citizen. All of my income is reported on a W-2 but being out of the US I do not pay income tax for what I make. Can I still contribute $2000 to a Roth. I make over 20K per year.

Hi,

I'm interested in starting an Roth IRA and one of the things that I might like to do with it is to save for a house. As I was reading on the topic, I saw that for first time homebuyers you could use the money you contribute and earn without penalty for not only a traditional home, but also something like a houseboat, as long as that will be the principal residence. If this is so, does owning a non-traditional home now (mobile home in park) make me ineligible to use the first-time homebuyer option?

Thanks

Lisa

How long does an employee have to be covered by health insurance before he becomes eligible for COBRA benefits? I have been employed for six months but at termination will have been covered by insurance only three months.

I have an employer that is considering allowing employees to make a one-time, irrevocable election between participating in a 401(k) and defined benefit plan versus a 401(k) plan only with a much more generous match.

I know that an employee can elect not to participate in a plan and that it must be voluntary and irrevocable (unless it is a 401(k)), but what will this do to the testing situation? Do all of the employees get counted for every plan for coverage and nondiscrimination?

Assume a transaction is determined to be a merger under 409 and pass through voting is required to ESOP participants. Must a complete prospectus be provided to each participant or is something less sufficient.