I have a new client who is a sole proprietor. However, a portion of his Schedule C income is derived from compensation from an insurance company. He is covered under the insurance company's profit sharing plan and has received a contribution as a statutory employee.

The prior TPA has used total Schedule C income in determining the 404 maximum deductible contribution for the client's own profit sharing plan, and then subtracted out the contribution made to the insurance company's plan.

It seems to me that the correct way to handle this would be to eliminate all income from the insurance company from the calculation. However, I can't find any specific authority for this. Any thoughts?

I am looking for some guidance regarding "contructive receipt" rules in the context of a participant's ability to direct his invesments in the daily envionment for a non-qualified plan. Can anyone point me to some regs., rulings, procedures, etc. Example: If a participant is allowed to change his investmets daily, would he/she be in constructive receipt of that money? What about weekly? Monthly? Thanks for your help.

A sole proprietorship wants to incorporate mid-year and continue to maintain its SIMPLE plan. In other qualified plans I simply have the corporation adopt the sole proprietorship's plan.

However, is there a a "successor plan" issue under Notice 97-6 in having the corporation adopt the SIMPLE mid-year as opposed to January 1?

There have been previous threads talking about what to do when an employee has been permitted to make elective deferrals before meeting the eligibility requirements. The concensus of practitioners seems to say that you distribute the deferrals plus earnings back to the employee. Up until recently, you didn't need to worry about losses. If there are investment losses on the amounts improperly deferred, should you adjust the distribution to take into account losses?

Same question regarding excess 415 contributions. The regs (1.415-6(B)(6)(iv)) only mention distributing excess deferrals and gains. Should deferrals that are distributed in order to satisfy 415© be adjusted for losses? We are getting conflicting opinions from document and software providers.

Any input would be helpful.

I have a question about Credit Unions and a post I just read. I was unaware of the federal chartering/federal instrumentality connection. We are trying to coordinate benefits with an employer plan offered by a CU. The plan insists that it offers primary coverage to its employees only if they have no other coverage, but if their spouse has coverage the plan becomes a supplemental plan only. We have requested plan language and an explanation. Something doesn't sound right to me.

Does anyone have any good resources concerning an HMO's obligation (if any) to comply with ERISA mandates such as COBRA and the Mental Health Parity Act? While the law appears to apply only to employers, participants sometimes go after the deeper pocket. Are there cases, statutes or regs out there that would impose vicarious liability on the HMO if the employer doest not implement a plan that does not measure up?

Employer sponsors a 401(k) plan. Effective 3/1/01, the employer is also sponsoring a money purchase plan to cover a prevailing wage contract (davis-bacon) for their hourly employees. The money purchase plan has a 15% contribution. The Employer now wants to amend the 401(k) to exclude the hourly employees, who are the ones covered by the prevailing wage contract, since the hourly employees participation rates have always been poor and is likely to decline once they begin receiving the money purchase plan contribution.

The 401(k) plan itself would not pass coverage if these employees were excluded. However does it make a difference that they are the ones eligible under the money purchase plan? does the money purchase plan correct the coverage issue? Would allowing the hourly employees to opt out be a better option? (Or would they then still be included on the APD test?)

I appreciate any insight you may have.

If the Spouse changes jobs and the new company doesn't offer an FSA account, but he did have one under the old company, would this be a qualifying event so the insured could now elect into her companies FSA plan?

A large 401(k)plan does not currently allow for loans, and does not intend to add a loan feature. (The plan is already a nightmare administratively with its hardship provisions.) A participant is in bankruptcy (since 1996). The Plan Administrator received a copy of a ruling on a motion to borrow money from the 401(k) plan from the bankruptcy court. The order approves the request to borrow from the 401(k). Does the plan have to allow the loan?

If the plan is to allow the loan for this individual, doesn't it have to incorporate a loan policy and make loans to all participants on a reasonably equivalent basis?

Does ERISA (and the plan's choice not to allow loans) pre-empt the bankruptcy court's order in this case?

Can anyone point me to some legal authority for the proposition that when an employer amends a plan, the plan amendment will not apply to those persons who have terminated employment prior to the plan amendment. In our situation the plan document was silent on this issue, but I would assume there are cases or something of the like out there that would support this finding that an amendment would not apply to former employees.

The real issue is that the term "compensation" was amended to include several more items than the plan originally did (which was in effect when the employee terminated employment). The employee is now ready to begin receiving benefits under the plan and wants to include in "compensation" the items that the new plan permits, as opposed to what the original plan permitted while he was employed.

Thanks to all who respond!

A plan has life insurance policies as part of the assets of the profit sharing plan. Can an individual elect to cash out his life insurance policy into the profit sharing source of the plan? The profit sharing source is participant-directed. Does this depend on the plan document, or is this action prohibited? If the action could be acceptable, would the plan document have to specifically provide for it?

Here's my story. Can anyone tell me what to do now? I can't afford to hire a lawyer, and I need the distribution soon. I would be forever grateful--I am at my wits end!

My mom died in October of 1999. I have been trying to get a distribution on her account since November of 1999. In November of 1999, I wrote to an HR person in the Fortune 500 company she worked for. I informed him of my mom's death and enclosed a certified copy of my mom's death certificate. He responded with a letter advising me that I am the beneficiary of my mom's account, and enclosing a distribution election form. He also advised that I get tax advice before distribution. I did that in January 2000.

My financial advisor began calling both this HR person and another in that company, trying to get distribution information. They were unable to provide plan guidelines, and unable to answer my financial advisor's questions regarding distribution. My financial advisor called and left numerous messages from February through the middle to latter part of the year. At that point we decided to just leave the money in the account, since I didn't really need it, and I had other financial matters to handle at the time.

In January of this year, I decided that I would buy a house by summertime, and would use the money for a down payment. My financial advisor called the HR department once again. We knew that the company had gone through a merger last year, so he just kept trying, and leaving messages, etc. The correspondence that had been sent to my mom indicated that the retirement accounts would be accessible once the conversion was complete in early January. Finally, he called and spoke to the head of HR.

The head of HR was both courteous and helpful, and said the matter would be resolved. We sent him a letter with a certified copy of my mom's death certificate, on January 21st, requesting a full distribution, as per his phone discussion with my financial advisor. At that point, the date of distribution was the end of February. No check arrived. No letter confirming distribution by a certain date, arrived either. So we called again. Again, another answer saying it's coming, it should be there by the end of the week. (That would make it March 9th) It's been almost 6 weeks since we sent the distribution request. Thusfar, the head of HR keeps extending the date the check should arrive, citing computer problems associated with the merger. We've left messages with him again.

The head of HR finally called me back. He was unable to tell me whether or not the computer problem was resolved, and if my distribution check was coming. He believed that the employees’ “blackout period” was over. I asked if I could get verification in writing as to when that money is coming for mortgage purposes. He said he didn't think that he could do that. He also said that he wasn't sure if my paperwork was in order, or, if the beneficiary forms were complete. I told him that was news to me, since we had sent him a letter in January requesting distribution, because that was what he told my financial advisor. He said he would check into things and call me back (i.e. Tuesday, the 13th).

Today, I heard that yes, the beneficiary form is on file, my paperwork is in order, the blackout period is indeed over for the computer systems, so I should be getting my money. However, he's unable to tell me when exactly that will be, because that's dependent on the bank. He's checking with his supervisor if he can send me a letter confirming that, I am the beneficiary, and that I will receive this money, for my mortgage application.

What should I do? I can't believe this guy anymore, and something seems fishy here. Again, I can't afford an attorney! And I need the distribution soon or I can't close on my house! Any advice would be wonderful. Thanks so much to anyone willing to help me out.

A plan document has a provision in the participant loan section about terminated participants. Terminated participants are allowed to get a loan from the plan only if they are a "party-in-interest" as defined in ERISA. Is this an allowable provision in a qualified plan? The provision seems like it would be discriminatory in favor of Highly Compensated Employees. If a terminated HCE requests a loan, does it have to be given to them due to how the plan document reads, or should the plan sponsor refuse to give the terminated HCE the loan because it would be discriminatory?

I have a client that went bankrupt. Everything was turned over to a bankruptcy attorney who appointed a bankruptcy trustee. The bankrupt client has no assets. The bankruptcy trustee did not know the employer even had a 401(k) plan until we called him. The trustee of the plan is no where to be found. In the meantime, the participants are knocking down our door wanting their money. We have no aurthorization to distribute. How do we go about terminating this plan and distributing the assets when we can not find the trustee and the bankruptcy trustee is of no help??? Not to mention the several payrolls that never went into the plan.

I have a client who is submitting a VCR for a large plan. Has anyone ever requested/been granted a "pre-submission" conference with an examiner concurrent with the application's submission?

I have a client who is submitting a VCR application. Have you ever requested or been granted a "pre-submission" conference with an examiner in the National office?

X opened and funded a SEP for himself in 1997, not understanding that employees had to be covered. Rather than retroactively covering them, he wishes to remove the contribution he made for himself.

It appears to me from Code section 408(d) that, once his 1997 1040 is amended to eliminate the SEP deduction, he can remove the excess without paying tax on it. It does not appear that income need be withdrawn.

Is this analysis correct? And will the 6% excess contribution excise tax of section 4973 apply rather than the 10% excise tax of section 4972?

Thanks for your help.

I am performing a cross-test, including contributions under a money purchase pension plan and profit sharing plan. I've run the test excluding benfitting employees with less than the statutory 1 YOS and/or age 21 from the rate group and the ABT. I am trying to find guidance on this in the regs. There are no HCEs in the "otherwise excludable" group so this part is passing 401(a)(4) and 401(B) automatically. Is this considered a "component plan" and is that why I am able to carve this group out of the main test?

I remebering hearing quite a bit last year about the government chainging the maximum investing amounts for IRAs. Eventually getting to $5000 a year instead of the $2000 currently. Anybody have some good info?

Thanks, P

Other than TD Waterhouse, does anyone know any other brokerage house(s) that charges the least fees in terms of up-front fees to open the IRA/Roth IRA

account, yearly maintenance fees, and any transfer fees?